Intrinsic value of Inovalon Holdings, Inc. - INOV

Previous Close

$12.26

  Intrinsic Value

$3.70

stock screener

  Rating & Target

str. sell

-70%

Previous close

$12.26

 
Intrinsic value

$3.70

 
Up/down potential

-70%

 
Rating

str. sell

We calculate the intrinsic value of INOV stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  18.90
  17.51
  16.26
  15.13
  14.12
  13.21
  12.39
  11.65
  10.98
  10.39
  9.85
  9.36
  8.93
  8.53
  8.18
  7.86
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.65
Revenue, $m
  628
  738
  858
  987
  1,127
  1,276
  1,434
  1,601
  1,777
  1,961
  2,154
  2,356
  2,566
  2,785
  3,013
  3,250
  3,496
  3,752
  4,018
  4,294
  4,581
  4,880
  5,191
  5,514
  5,851
  6,202
  6,568
  6,949
  7,347
  7,763
Variable operating expenses, $m
  577
  676
  784
  900
  1,025
  1,159
  1,300
  1,450
  1,608
  1,773
  1,933
  2,113
  2,302
  2,499
  2,703
  2,915
  3,136
  3,366
  3,604
  3,852
  4,110
  4,378
  4,657
  4,947
  5,249
  5,564
  5,892
  6,234
  6,591
  6,964
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  577
  676
  784
  900
  1,025
  1,159
  1,300
  1,450
  1,608
  1,773
  1,933
  2,113
  2,302
  2,499
  2,703
  2,915
  3,136
  3,366
  3,604
  3,852
  4,110
  4,378
  4,657
  4,947
  5,249
  5,564
  5,892
  6,234
  6,591
  6,964
Operating income, $m
  50
  62
  74
  87
  102
  117
  133
  151
  169
  188
  222
  242
  264
  287
  310
  334
  360
  386
  413
  442
  471
  502
  534
  567
  602
  638
  676
  715
  756
  799
EBITDA, $m
  130
  152
  177
  204
  233
  264
  296
  331
  367
  405
  445
  487
  530
  575
  622
  671
  722
  775
  830
  887
  947
  1,008
  1,072
  1,139
  1,209
  1,281
  1,357
  1,436
  1,518
  1,604
Interest expense (income), $m
  5
  81
  101
  122
  146
  172
  199
  228
  260
  292
  327
  363
  402
  441
  483
  526
  571
  617
  666
  716
  769
  823
  880
  939
  1,000
  1,064
  1,130
  1,199
  1,271
  1,346
  1,425
Earnings before tax, $m
  -31
  -39
  -48
  -59
  -70
  -82
  -95
  -109
  -124
  -140
  -142
  -159
  -177
  -196
  -216
  -236
  -258
  -280
  -303
  -327
  -352
  -378
  -404
  -432
  -461
  -492
  -523
  -556
  -590
  -626
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -31
  -39
  -48
  -59
  -70
  -82
  -95
  -109
  -124
  -140
  -142
  -159
  -177
  -196
  -216
  -236
  -258
  -280
  -303
  -327
  -352
  -378
  -404
  -432
  -461
  -492
  -523
  -556
  -590
  -626

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  2,283
  2,683
  3,119
  3,591
  4,098
  4,639
  5,214
  5,821
  6,460
  7,131
  7,833
  8,567
  9,331
  10,128
  10,956
  11,817
  12,713
  13,643
  14,610
  15,615
  16,659
  17,745
  18,876
  20,052
  21,277
  22,553
  23,883
  25,270
  26,718
  28,229
Adjusted assets (=assets-cash), $m
  2,283
  2,683
  3,119
  3,591
  4,098
  4,639
  5,214
  5,821
  6,460
  7,131
  7,833
  8,567
  9,331
  10,128
  10,956
  11,817
  12,713
  13,643
  14,610
  15,615
  16,659
  17,745
  18,876
  20,052
  21,277
  22,553
  23,883
  25,270
  26,718
  28,229
Revenue / Adjusted assets
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
Average production assets, $m
  684
  803
  934
  1,075
  1,227
  1,389
  1,561
  1,743
  1,935
  2,136
  2,346
  2,566
  2,794
  3,033
  3,281
  3,539
  3,807
  4,086
  4,375
  4,676
  4,989
  5,314
  5,653
  6,005
  6,372
  6,754
  7,152
  7,568
  8,001
  8,454
Working capital, $m
  25
  30
  34
  39
  45
  51
  57
  64
  71
  78
  86
  94
  103
  111
  121
  130
  140
  150
  161
  172
  183
  195
  208
  221
  234
  248
  263
  278
  294
  311
Total debt, $m
  1,200
  1,458
  1,739
  2,043
  2,370
  2,719
  3,090
  3,482
  3,894
  4,327
  4,780
  5,253
  5,746
  6,260
  6,794
  7,350
  7,927
  8,527
  9,151
  9,799
  10,472
  11,173
  11,902
  12,661
  13,451
  14,274
  15,132
  16,027
  16,960
  17,935
Total liabilities, $m
  1,472
  1,730
  2,012
  2,316
  2,643
  2,992
  3,363
  3,754
  4,167
  4,600
  5,052
  5,526
  6,019
  6,532
  7,067
  7,622
  8,200
  8,800
  9,423
  10,071
  10,745
  11,446
  12,175
  12,933
  13,724
  14,547
  15,405
  16,299
  17,233
  18,207
Total equity, $m
  810
  952
  1,107
  1,275
  1,455
  1,647
  1,851
  2,066
  2,293
  2,532
  2,781
  3,041
  3,313
  3,595
  3,889
  4,195
  4,513
  4,843
  5,186
  5,543
  5,914
  6,300
  6,701
  7,118
  7,553
  8,006
  8,479
  8,971
  9,485
  10,021
Total liabilities and equity, $m
  2,282
  2,682
  3,119
  3,591
  4,098
  4,639
  5,214
  5,820
  6,460
  7,132
  7,833
  8,567
  9,332
  10,127
  10,956
  11,817
  12,713
  13,643
  14,609
  15,614
  16,659
  17,746
  18,876
  20,051
  21,277
  22,553
  23,884
  25,270
  26,718
  28,228
Debt-to-equity ratio
  1.480
  1.530
  1.570
  1.600
  1.630
  1.650
  1.670
  1.680
  1.700
  1.710
  1.720
  1.730
  1.730
  1.740
  1.750
  1.750
  1.760
  1.760
  1.760
  1.770
  1.770
  1.770
  1.780
  1.780
  1.780
  1.780
  1.780
  1.790
  1.790
  1.790
Adjusted equity ratio
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -31
  -39
  -48
  -59
  -70
  -82
  -95
  -109
  -124
  -140
  -142
  -159
  -177
  -196
  -216
  -236
  -258
  -280
  -303
  -327
  -352
  -378
  -404
  -432
  -461
  -492
  -523
  -556
  -590
  -626
Depreciation, amort., depletion, $m
  79
  91
  103
  117
  131
  147
  163
  180
  198
  218
  223
  244
  266
  289
  312
  337
  363
  389
  417
  445
  475
  506
  538
  572
  607
  643
  681
  721
  762
  805
Funds from operations, $m
  49
  52
  55
  58
  61
  64
  68
  71
  75
  78
  82
  85
  89
  93
  97
  101
  105
  109
  114
  119
  123
  129
  134
  140
  145
  152
  158
  165
  172
  179
Change in working capital, $m
  4
  4
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
Cash from operations, $m
  45
  47
  50
  53
  56
  59
  61
  64
  68
  71
  74
  77
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  121
  127
  132
  137
  143
  149
  156
  163
Maintenance CAPEX, $m
  -55
  -65
  -77
  -89
  -102
  -117
  -132
  -149
  -166
  -184
  -203
  -223
  -244
  -266
  -289
  -312
  -337
  -363
  -389
  -417
  -445
  -475
  -506
  -538
  -572
  -607
  -643
  -681
  -721
  -762
New CAPEX, $m
  -108
  -120
  -131
  -141
  -152
  -162
  -172
  -182
  -191
  -201
  -210
  -220
  -229
  -238
  -248
  -258
  -268
  -279
  -290
  -301
  -313
  -325
  -338
  -352
  -367
  -382
  -398
  -415
  -433
  -452
Cash from investing activities, $m
  -163
  -185
  -208
  -230
  -254
  -279
  -304
  -331
  -357
  -385
  -413
  -443
  -473
  -504
  -537
  -570
  -605
  -642
  -679
  -718
  -758
  -800
  -844
  -890
  -939
  -989
  -1,041
  -1,096
  -1,154
  -1,214
Free cash flow, $m
  -119
  -138
  -157
  -178
  -199
  -220
  -243
  -266
  -290
  -314
  -340
  -366
  -393
  -421
  -449
  -479
  -510
  -542
  -575
  -610
  -646
  -684
  -723
  -764
  -807
  -852
  -898
  -947
  -998
  -1,052
Issuance/(repayment) of debt, $m
  234
  258
  281
  304
  327
  349
  371
  392
  412
  433
  453
  473
  493
  514
  534
  556
  577
  600
  624
  648
  674
  701
  729
  759
  790
  823
  858
  895
  934
  974
Issuance/(repurchase) of shares, $m
  159
  181
  203
  226
  250
  274
  299
  325
  351
  378
  391
  419
  449
  479
  510
  542
  575
  610
  646
  684
  723
  763
  806
  850
  896
  945
  995
  1,048
  1,104
  1,162
Cash from financing (excl. dividends), $m  
  393
  439
  484
  530
  577
  623
  670
  717
  763
  811
  844
  892
  942
  993
  1,044
  1,098
  1,152
  1,210
  1,270
  1,332
  1,397
  1,464
  1,535
  1,609
  1,686
  1,768
  1,853
  1,943
  2,038
  2,136
Total cash flow (excl. dividends), $m
  274
  301
  327
  353
  378
  403
  427
  450
  473
  496
  504
  527
  549
  572
  595
  618
  643
  668
  694
  721
  750
  780
  812
  845
  880
  916
  955
  996
  1,039
  1,085
Retained Cash Flow (-), $m
  -159
  -181
  -203
  -226
  -250
  -274
  -299
  -325
  -351
  -378
  -391
  -419
  -449
  -479
  -510
  -542
  -575
  -610
  -646
  -684
  -723
  -763
  -806
  -850
  -896
  -945
  -995
  -1,048
  -1,104
  -1,162
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  115
  120
  124
  127
  128
  129
  128
  126
  122
  118
  113
  107
  100
  93
  85
  76
  67
  58
  48
  38
  28
  17
  6
  -5
  -17
  -28
  -40
  -52
  -65
  -77
Discount rate, %
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
  106
  101
  95
  87
  78
  69
  60
  50
  42
  34
  27
  21
  16
  11
  8
  5
  4
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  92.2
  85.3
  79.1
  73.7
  68.7
  64.3
  60.3
  56.7
  53.4
  50.4
  47.7
  45.2
  42.9
  40.8
  38.8
  36.9
  35.2
  33.5
  32.0
  30.5
  29.1
  27.8
  26.6
  25.4
  24.3
  23.2
  22.2
  21.3
  20.4
  19.5

Inovalon Holdings, Inc. (Inovalon) is a technology company. The Company provides cloud-based platforms empowering a data-driven transformation from volume-based to value-based models to the healthcare industry. Leveraging large-scale data interconnectivity capabilities, unparalleled proprietary data sets, advanced analytics, data-driven intervention systems, and subject matter expertise, Inovalon enables the assessment and improvement of clinical and quality outcomes and financial performance across the healthcare ecosystem. The Company serves clients across the healthcare industry, which includes health plans and provider organizations, pharmaceutical, medical device, and diagnostics companies. It provides technology that supports approximately 500 healthcare organizations. Inovalon's platforms are informed by data pertaining to more than 858,000 physicians, 377,000 clinical facilities, and more than 230 million Americans.

FINANCIAL RATIOS  of  Inovalon Holdings, Inc. (INOV)

Valuation Ratios
P/E Ratio 67.2
Price to Sales 4.2
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 19.5
Price to Free Cash Flow 33.6
Growth Rates
Sales Growth Rate -2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 15.5%
Financial Strength
Quick Ratio 19
Current Ratio 0
LT Debt to Equity 34.6%
Total Debt to Equity 39%
Interest Coverage 9
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 11.1%
Return On Total Capital 2.7%
Ret/ On T. Cap. - 3 Yr. Avg. 12.5%
Return On Equity 3.8%
Return On Equity - 3 Yr. Avg. 26.6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 62.6%
Gross Margin - 3 Yr. Avg. 66%
EBITDA Margin 18.9%
EBITDA Margin - 3 Yr. Avg. 28.9%
Operating Margin 8.9%
Oper. Margin - 3 Yr. Avg. 22%
Pre-Tax Margin 9.1%
Pre-Tax Margin - 3 Yr. Avg. 21.8%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 13.1%
Effective Tax Rate 30.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.9%
Payout Ratio 0%

INOV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INOV stock intrinsic value calculation we used $528 million for the last fiscal year's total revenue generated by Inovalon Holdings, Inc.. The default revenue input number comes from 0001 income statement of Inovalon Holdings, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our INOV stock valuation model: a) initial revenue growth rate of 18.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.6%, whose default value for INOV is calculated based on our internal credit rating of Inovalon Holdings, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Inovalon Holdings, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of INOV stock the variable cost ratio is equal to 92.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for INOV stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 8.4% for Inovalon Holdings, Inc..

Corporate tax rate of 27% is the nominal tax rate for Inovalon Holdings, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the INOV stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for INOV are equal to 108.9%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Inovalon Holdings, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for INOV is equal to 4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $682.589 million for Inovalon Holdings, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 152.988 million for Inovalon Holdings, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Inovalon Holdings, Inc. at the current share price and the inputted number of shares is $1.9 billion.

RELATED COMPANIES Price Int.Val. Rating
HSTM HealthStream, 27.85 20.72  sell
NH NantHealth, In 0.930 0.02  str.sell
MCK McKesson Corpo 118.54 400.79  str.buy
IBM International 139.45 162.95  hold
CERN Cerner Corpora 56.96 31.19  sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.