Intrinsic value of LivaNova - LIVN

Previous Close

$102.80

  Intrinsic Value

$11.86

stock screener

  Rating & Target

str. sell

-88%

Previous close

$102.80

 
Intrinsic value

$11.86

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of LIVN 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 2017), $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 4.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  5.00
Revenue, $m
  1,062
  1,114
  1,168
  1,226
  1,287
  1,350
  1,417
  1,487
  1,561
  1,638
  1,720
  1,805
  1,895
  1,989
  2,088
  2,192
  2,301
  2,416
  2,536
  2,663
  2,796
  2,935
  3,082
  3,235
  3,397
  3,566
  3,745
  3,932
  4,128
  4,334
Variable operating expenses, $m
  1,020
  1,064
  1,110
  1,158
  1,208
  1,261
  1,317
  1,376
  1,438
  1,502
  1,439
  1,510
  1,585
  1,664
  1,747
  1,834
  1,925
  2,021
  2,122
  2,228
  2,339
  2,455
  2,578
  2,707
  2,842
  2,984
  3,133
  3,289
  3,453
  3,626
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
  1,020
  1,064
  1,110
  1,158
  1,208
  1,261
  1,317
  1,376
  1,438
  1,502
  1,439
  1,510
  1,585
  1,664
  1,747
  1,834
  1,925
  2,021
  2,122
  2,228
  2,339
  2,455
  2,578
  2,707
  2,842
  2,984
  3,133
  3,289
  3,453
  3,626
Operating income, $m
  42
  50
  59
  68
  78
  89
  100
  111
  123
  136
  281
  295
  310
  325
  341
  358
  376
  395
  415
  435
  457
  480
  504
  529
  555
  583
  612
  643
  675
  708
EBITDA, $m
  323
  339
  355
  373
  391
  411
  431
  452
  475
  498
  523
  549
  576
  605
  635
  667
  700
  735
  771
  810
  850
  893
  937
  984
  1,033
  1,085
  1,139
  1,196
  1,255
  1,318
Interest expense (income), $m
  0
  8
  10
  12
  15
  17
  19
  22
  24
  27
  30
  33
  36
  40
  43
  47
  51
  55
  59
  64
  69
  74
  79
  84
  90
  96
  103
  109
  116
  124
  131
Earnings before tax, $m
  33
  40
  46
  54
  61
  69
  78
  87
  96
  106
  248
  259
  270
  282
  294
  307
  321
  335
  351
  367
  383
  401
  419
  439
  459
  480
  503
  526
  551
  577
Tax expense, $m
  9
  11
  13
  15
  17
  19
  21
  23
  26
  29
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
Net income, $m
  24
  29
  34
  39
  45
  51
  57
  63
  70
  77
  181
  189
  197
  206
  215
  224
  234
  245
  256
  268
  280
  293
  306
  320
  335
  351
  367
  384
  402
  421

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
  2,628
  2,757
  2,892
  3,035
  3,185
  3,342
  3,507
  3,681
  3,863
  4,055
  4,256
  4,468
  4,690
  4,923
  5,168
  5,426
  5,696
  5,980
  6,278
  6,591
  6,920
  7,265
  7,628
  8,008
  8,408
  8,828
  9,269
  9,731
  10,218
  10,728
Adjusted assets (=assets-cash), $m
  2,628
  2,757
  2,892
  3,035
  3,185
  3,342
  3,507
  3,681
  3,863
  4,055
  4,256
  4,468
  4,690
  4,923
  5,168
  5,426
  5,696
  5,980
  6,278
  6,591
  6,920
  7,265
  7,628
  8,008
  8,408
  8,828
  9,269
  9,731
  10,218
  10,728
Revenue / Adjusted assets
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
  0.404
Average production assets, $m
  1,494
  1,567
  1,644
  1,725
  1,810
  1,900
  1,994
  2,092
  2,196
  2,305
  2,419
  2,540
  2,666
  2,799
  2,938
  3,084
  3,238
  3,399
  3,569
  3,747
  3,933
  4,130
  4,336
  4,552
  4,779
  5,018
  5,269
  5,532
  5,808
  6,098
Working capital, $m
  62
  65
  68
  71
  75
  78
  82
  86
  91
  95
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
  162
  170
  179
  188
  197
  207
  217
  228
  239
  251
Total debt, $m
  180
  215
  252
  292
  333
  376
  422
  469
  520
  572
  628
  686
  747
  811
  878
  949
  1,024
  1,102
  1,184
  1,270
  1,360
  1,455
  1,555
  1,659
  1,769
  1,885
  2,006
  2,133
  2,267
  2,407
Total liabilities, $m
  723
  758
  795
  835
  876
  919
  964
  1,012
  1,062
  1,115
  1,171
  1,229
  1,290
  1,354
  1,421
  1,492
  1,566
  1,644
  1,726
  1,813
  1,903
  1,998
  2,098
  2,202
  2,312
  2,428
  2,549
  2,676
  2,810
  2,950
Total equity, $m
  1,905
  1,999
  2,097
  2,200
  2,309
  2,423
  2,543
  2,669
  2,801
  2,940
  3,086
  3,239
  3,400
  3,569
  3,747
  3,934
  4,130
  4,335
  4,552
  4,778
  5,017
  5,267
  5,530
  5,806
  6,096
  6,400
  6,720
  7,055
  7,408
  7,778
Total liabilities and equity, $m
  2,628
  2,757
  2,892
  3,035
  3,185
  3,342
  3,507
  3,681
  3,863
  4,055
  4,257
  4,468
  4,690
  4,923
  5,168
  5,426
  5,696
  5,979
  6,278
  6,591
  6,920
  7,265
  7,628
  8,008
  8,408
  8,828
  9,269
  9,731
  10,218
  10,728
Debt-to-equity ratio
  0.090
  0.110
  0.120
  0.130
  0.140
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.310
  0.310
Adjusted equity ratio
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  24
  29
  34
  39
  45
  51
  57
  63
  70
  77
  181
  189
  197
  206
  215
  224
  234
  245
  256
  268
  280
  293
  306
  320
  335
  351
  367
  384
  402
  421
Depreciation, amort., depletion, $m
  281
  289
  296
  305
  313
  322
  331
  341
  352
  363
  242
  254
  267
  280
  294
  308
  324
  340
  357
  375
  393
  413
  434
  455
  478
  502
  527
  553
  581
  610
Funds from operations, $m
  305
  318
  330
  344
  358
  373
  388
  404
  422
  440
  423
  443
  464
  486
  509
  533
  558
  585
  613
  642
  673
  706
  740
  775
  813
  852
  894
  937
  983
  1,031
Change in working capital, $m
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Cash from operations, $m
  303
  315
  327
  340
  354
  369
  384
  400
  417
  435
  418
  438
  458
  480
  503
  527
  552
  578
  606
  635
  665
  697
  731
  766
  804
  843
  883
  926
  972
  1,019
Maintenance CAPEX, $m
  -142
  -149
  -157
  -164
  -173
  -181
  -190
  -199
  -209
  -220
  -231
  -242
  -254
  -267
  -280
  -294
  -308
  -324
  -340
  -357
  -375
  -393
  -413
  -434
  -455
  -478
  -502
  -527
  -553
  -581
New CAPEX, $m
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -114
  -120
  -126
  -133
  -139
  -146
  -154
  -161
  -169
  -178
  -187
  -196
  -206
  -216
  -227
  -239
  -251
  -263
  -276
  -290
Cash from investing activities, $m
  -211
  -222
  -234
  -245
  -258
  -270
  -284
  -298
  -313
  -329
  -345
  -362
  -380
  -400
  -419
  -440
  -462
  -485
  -509
  -535
  -562
  -589
  -619
  -650
  -682
  -717
  -753
  -790
  -829
  -871
Free cash flow, $m
  91
  92
  93
  95
  97
  98
  100
  102
  104
  107
  73
  76
  78
  81
  84
  87
  90
  93
  96
  100
  104
  108
  112
  116
  121
  126
  131
  136
  142
  148
Issuance/(repayment) of debt, $m
  34
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
  105
  110
  115
  121
  127
  134
  140
Issuance/(repurchase) of shares, $m
  66
  65
  64
  64
  64
  63
  63
  63
  62
  62
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  100
  100
  101
  103
  105
  106
  108
  111
  112
  115
  55
  58
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
  105
  110
  115
  121
  127
  134
  140
Total cash flow (excl. dividends), $m
  191
  192
  195
  198
  202
  205
  209
  213
  217
  221
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  194
  203
  212
  221
  231
  241
  252
  264
  276
  288
Retained Cash Flow (-), $m
  -90
  -94
  -98
  -103
  -109
  -114
  -120
  -126
  -132
  -139
  -146
  -153
  -161
  -169
  -178
  -187
  -196
  -206
  -216
  -227
  -238
  -250
  -263
  -276
  -290
  -304
  -320
  -336
  -352
  -370
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
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  61
  65
  68
  71
  75
  78
Cash available for distribution, $m
  101
  98
  97
  95
  93
  91
  89
  87
  85
  82
  -17
  -20
  -22
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -44
  -47
  -51
  -55
  -59
  -63
  -67
  -72
  -77
  -82
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  96
  90
  84
  78
  72
  66
  60
  54
  49
  43
  -8
  -8
  -8
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
Current shareholders' claim on cash, %
  98.7
  97.5
  96.3
  95.3
  94.2
  93.3
  92.4
  91.6
  90.8
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1

LivaNova PLC is a medical device company focused on the development and delivery of therapeutic solutions. The Company's segments include Cardiac Surgery, Cardiac Rhythm Management, Neuromodulation and Other. The Cardiac Surgery segment is engaged in the development, production and sale of cardiovascular surgery products. Cardiac Surgery products include oxygenators, heart-lung machines, autotransfusion, mechanical heart valves and tissue heart valves. The Cardiac Rhythm Management segment is engaged in the development, manufacturing and marketing of products for the diagnosis, treatment, and management of heart rhythm disorders and heart failure. Cardiac Rhythm Management products include high-voltage defibrillators Cardiac Resynchronization Therapy device (CRT-D) and low-voltage pacemakers. The Neuromodulation segment is engaged in the design, development and marketing of neuromodulation therapy for the treatment of drug-resistant epilepsy and treatment resistant depression.

FINANCIAL RATIOS  of  LivaNova (LIVN)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

LIVN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LIVN stock intrinsic value calculation we used $1012 million for the last fiscal year's total revenue generated by LivaNova. The default revenue input number comes from 2017 income statement of LivaNova. 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 LIVN stock valuation model: a) initial revenue growth rate of 4.9% 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 4.3%, whose default value for LIVN is calculated based on our internal credit rating of LivaNova, 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 LivaNova.
    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 LIVN stock the variable cost ratio is equal to 96.7%.

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 LIVN 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 5.8% for LivaNova.

Corporate tax rate of 27% is the nominal tax rate for LivaNova. 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 LIVN stock is equal to 1.9%.

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 LIVN are equal to 140.7%.

Life of production assets of 10 years is the average useful life of capital assets used in LivaNova 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 LIVN is equal to 5.8%. 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 - $1815 million for LivaNova - 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 48 million for LivaNova 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 LivaNova at the current share price and the inputted number of shares is $4.9 billion.

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COMPANY NEWS

▶ LivaNova Welcomes William Kozy to Board of Directors   [Jun-13-18 09:00AM  Business Wire]
▶ Here's Why LivaNova Rose as Much as 13% Today   [May-31-18 03:32PM  Motley Fool]
▶ LivaNova: 1Q Earnings Snapshot   [May-02-18 09:01AM  Associated Press]
▶ LivaNova Reports First Quarter 2018 Results   [07:00AM  Business Wire]
▶ LivaNova Completes Acquisition of TandemLife   [Apr-04-18 04:30PM  Business Wire]
▶ LivaNova reports 4Q loss   [Feb-28-18 08:11AM  Associated Press]
▶ Livanova PLC to Host Earnings Call   [06:50AM  ACCESSWIRE]
▶ LivaNova to Present at the Barclays and Cowen Conferences   [Feb-15-18 09:00AM  Business Wire]
▶ LivaNova to Acquire TandemLife   [Feb-14-18 04:05PM  Business Wire]
▶ 4 Growth Stocks to Pick From a Choppy MedTech Market   [Dec-14-17 03:05PM  InvestorPlace]
▶ LivaNova to Acquire ImThera Medical, Inc.   [Dec-05-17 03:01AM  Business Wire]
▶ LivaNova posts 3Q profit   [Nov-02-17 08:25AM  Associated Press]
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