Intrinsic value of Mednax, Inc - MD

Previous Close

$30.90

  Intrinsic Value

$71.88

stock screener

  Rating & Target

str. buy

+133%

Previous close

$30.90

 
Intrinsic value

$71.88

 
Up/down potential

+133%

 
Rating

str. buy

We calculate the intrinsic value of MD 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 2.7

 

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, %
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
Revenue, $m
  3,735
  3,834
  3,945
  4,067
  4,201
  4,347
  4,504
  4,673
  4,855
  5,049
  5,255
  5,475
  5,709
  5,956
  6,219
  6,496
  6,790
  7,100
  7,427
  7,772
  8,137
  8,520
  8,924
  9,350
  9,798
  10,270
  10,766
  11,288
  11,837
  12,414
Variable operating expenses, $m
  3,203
  3,275
  3,356
  3,445
  3,542
  3,647
  3,761
  3,884
  4,015
  4,156
  3,808
  3,968
  4,137
  4,316
  4,507
  4,708
  4,921
  5,145
  5,382
  5,633
  5,896
  6,175
  6,467
  6,776
  7,101
  7,442
  7,802
  8,180
  8,578
  8,997
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
  3,203
  3,275
  3,356
  3,445
  3,542
  3,647
  3,761
  3,884
  4,015
  4,156
  3,808
  3,968
  4,137
  4,316
  4,507
  4,708
  4,921
  5,145
  5,382
  5,633
  5,896
  6,175
  6,467
  6,776
  7,101
  7,442
  7,802
  8,180
  8,578
  8,997
Operating income, $m
  531
  558
  589
  623
  660
  700
  743
  789
  839
  893
  1,447
  1,507
  1,572
  1,640
  1,712
  1,788
  1,869
  1,955
  2,045
  2,140
  2,240
  2,346
  2,457
  2,574
  2,697
  2,827
  2,964
  3,108
  3,259
  3,418
EBITDA, $m
  1,117
  1,147
  1,180
  1,216
  1,256
  1,300
  1,347
  1,398
  1,452
  1,510
  1,572
  1,637
  1,707
  1,781
  1,860
  1,943
  2,031
  2,123
  2,221
  2,325
  2,433
  2,548
  2,669
  2,796
  2,930
  3,071
  3,220
  3,376
  3,540
  3,713
Interest expense (income), $m
  60
  107
  111
  115
  119
  125
  130
  136
  143
  150
  158
  166
  175
  184
  194
  204
  215
  227
  240
  253
  266
  281
  296
  313
  330
  348
  367
  386
  407
  429
  453
Earnings before tax, $m
  424
  448
  474
  503
  535
  569
  607
  646
  689
  735
  1,281
  1,333
  1,388
  1,446
  1,508
  1,573
  1,642
  1,715
  1,792
  1,873
  1,959
  2,049
  2,144
  2,244
  2,350
  2,461
  2,577
  2,700
  2,829
  2,965
Tax expense, $m
  115
  121
  128
  136
  144
  154
  164
  175
  186
  198
  346
  360
  375
  390
  407
  425
  443
  463
  484
  506
  529
  553
  579
  606
  634
  664
  696
  729
  764
  801
Net income, $m
  310
  327
  346
  367
  391
  416
  443
  472
  503
  537
  935
  973
  1,013
  1,056
  1,101
  1,148
  1,199
  1,252
  1,308
  1,368
  1,430
  1,496
  1,565
  1,638
  1,715
  1,796
  1,882
  1,971
  2,065
  2,165

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
  6,082
  6,244
  6,425
  6,624
  6,842
  7,080
  7,336
  7,611
  7,907
  8,222
  8,559
  8,917
  9,297
  9,701
  10,128
  10,580
  11,058
  11,563
  12,096
  12,659
  13,252
  13,877
  14,535
  15,228
  15,958
  16,726
  17,534
  18,384
  19,279
  20,219
Adjusted assets (=assets-cash), $m
  6,082
  6,244
  6,425
  6,624
  6,842
  7,080
  7,336
  7,611
  7,907
  8,222
  8,559
  8,917
  9,297
  9,701
  10,128
  10,580
  11,058
  11,563
  12,096
  12,659
  13,252
  13,877
  14,535
  15,228
  15,958
  16,726
  17,534
  18,384
  19,279
  20,219
Revenue / Adjusted assets
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
Average production assets, $m
  2,663
  2,734
  2,813
  2,900
  2,996
  3,099
  3,211
  3,332
  3,461
  3,600
  3,747
  3,904
  4,070
  4,247
  4,434
  4,632
  4,841
  5,062
  5,296
  5,542
  5,801
  6,075
  6,363
  6,667
  6,986
  7,322
  7,676
  8,048
  8,440
  8,851
Working capital, $m
  82
  84
  87
  89
  92
  96
  99
  103
  107
  111
  116
  120
  126
  131
  137
  143
  149
  156
  163
  171
  179
  187
  196
  206
  216
  226
  237
  248
  260
  273
Total debt, $m
  2,047
  2,125
  2,211
  2,307
  2,412
  2,526
  2,649
  2,781
  2,923
  3,074
  3,236
  3,408
  3,590
  3,784
  3,989
  4,206
  4,436
  4,678
  4,934
  5,204
  5,488
  5,788
  6,104
  6,437
  6,787
  7,156
  7,544
  7,952
  8,381
  8,833
Total liabilities, $m
  2,920
  2,997
  3,084
  3,180
  3,284
  3,398
  3,521
  3,653
  3,795
  3,947
  4,108
  4,280
  4,463
  4,656
  4,862
  5,079
  5,308
  5,550
  5,806
  6,076
  6,361
  6,661
  6,977
  7,309
  7,660
  8,028
  8,416
  8,825
  9,254
  9,705
Total equity, $m
  3,163
  3,247
  3,341
  3,445
  3,558
  3,681
  3,815
  3,958
  4,111
  4,276
  4,451
  4,637
  4,835
  5,044
  5,267
  5,502
  5,750
  6,013
  6,290
  6,583
  6,891
  7,216
  7,558
  7,919
  8,298
  8,698
  9,118
  9,560
  10,025
  10,514
Total liabilities and equity, $m
  6,083
  6,244
  6,425
  6,625
  6,842
  7,079
  7,336
  7,611
  7,906
  8,223
  8,559
  8,917
  9,298
  9,700
  10,129
  10,581
  11,058
  11,563
  12,096
  12,659
  13,252
  13,877
  14,535
  15,228
  15,958
  16,726
  17,534
  18,385
  19,279
  20,219
Debt-to-equity ratio
  0.650
  0.650
  0.660
  0.670
  0.680
  0.690
  0.690
  0.700
  0.710
  0.720
  0.730
  0.730
  0.740
  0.750
  0.760
  0.760
  0.770
  0.780
  0.780
  0.790
  0.800
  0.800
  0.810
  0.810
  0.820
  0.820
  0.830
  0.830
  0.840
  0.840
Adjusted equity ratio
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  310
  327
  346
  367
  391
  416
  443
  472
  503
  537
  935
  973
  1,013
  1,056
  1,101
  1,148
  1,199
  1,252
  1,308
  1,368
  1,430
  1,496
  1,565
  1,638
  1,715
  1,796
  1,882
  1,971
  2,065
  2,165
Depreciation, amort., depletion, $m
  586
  588
  591
  594
  597
  600
  604
  608
  612
  617
  125
  130
  136
  142
  148
  154
  161
  169
  177
  185
  193
  202
  212
  222
  233
  244
  256
  268
  281
  295
Funds from operations, $m
  896
  915
  937
  961
  987
  1,016
  1,047
  1,080
  1,116
  1,154
  1,060
  1,103
  1,149
  1,197
  1,248
  1,303
  1,360
  1,421
  1,485
  1,552
  1,623
  1,698
  1,777
  1,861
  1,948
  2,040
  2,137
  2,239
  2,347
  2,460
Change in working capital, $m
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
Cash from operations, $m
  894
  913
  935
  958
  985
  1,013
  1,043
  1,076
  1,112
  1,149
  1,055
  1,098
  1,143
  1,192
  1,243
  1,297
  1,354
  1,414
  1,478
  1,545
  1,615
  1,690
  1,769
  1,851
  1,938
  2,030
  2,127
  2,228
  2,335
  2,447
Maintenance CAPEX, $m
  -87
  -89
  -91
  -94
  -97
  -100
  -103
  -107
  -111
  -115
  -120
  -125
  -130
  -136
  -142
  -148
  -154
  -161
  -169
  -177
  -185
  -193
  -202
  -212
  -222
  -233
  -244
  -256
  -268
  -281
New CAPEX, $m
  -61
  -71
  -79
  -87
  -96
  -104
  -112
  -121
  -129
  -138
  -147
  -157
  -167
  -177
  -187
  -198
  -209
  -221
  -233
  -246
  -260
  -274
  -288
  -303
  -320
  -336
  -354
  -372
  -391
  -412
Cash from investing activities, $m
  -148
  -160
  -170
  -181
  -193
  -204
  -215
  -228
  -240
  -253
  -267
  -282
  -297
  -313
  -329
  -346
  -363
  -382
  -402
  -423
  -445
  -467
  -490
  -515
  -542
  -569
  -598
  -628
  -659
  -693
Free cash flow, $m
  746
  753
  764
  777
  792
  809
  828
  849
  871
  896
  788
  816
  847
  879
  914
  951
  990
  1,032
  1,075
  1,122
  1,171
  1,223
  1,278
  1,336
  1,397
  1,461
  1,529
  1,600
  1,675
  1,754
Issuance/(repayment) of debt, $m
  72
  78
  87
  96
  105
  114
  123
  132
  142
  152
  162
  172
  183
  194
  205
  217
  229
  242
  256
  270
  285
  300
  316
  333
  350
  369
  388
  408
  429
  451
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  72
  78
  87
  96
  105
  114
  123
  132
  142
  152
  162
  172
  183
  194
  205
  217
  229
  242
  256
  270
  285
  300
  316
  333
  350
  369
  388
  408
  429
  451
Total cash flow (excl. dividends), $m
  819
  831
  851
  873
  897
  923
  951
  981
  1,013
  1,047
  950
  988
  1,029
  1,073
  1,119
  1,168
  1,219
  1,274
  1,331
  1,392
  1,456
  1,523
  1,594
  1,668
  1,747
  1,830
  1,917
  2,008
  2,104
  2,205
Retained Cash Flow (-), $m
  -75
  -84
  -94
  -104
  -113
  -123
  -133
  -143
  -154
  -164
  -175
  -186
  -198
  -210
  -222
  -235
  -249
  -263
  -277
  -292
  -308
  -325
  -342
  -360
  -380
  -399
  -420
  -442
  -465
  -489
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
  744
  747
  757
  769
  784
  800
  818
  838
  859
  883
  775
  802
  832
  863
  897
  933
  971
  1,011
  1,054
  1,099
  1,147
  1,198
  1,252
  1,308
  1,367
  1,430
  1,496
  1,566
  1,639
  1,716
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  695
  647
  604
  561
  518
  475
  433
  391
  350
  311
  232
  203
  175
  149
  125
  103
  84
  67
  53
  41
  31
  23
  16
  11
  8
  5
  3
  2
  1
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

MEDNAX, Inc. is a provider of physician services, including newborn, anesthesia, maternal-fetal, teleradiology, pediatric cardiology and other pediatric subspecialty care. As of December 31, 2016, the Company's national network consisted of over 3,600 affiliated physicians, including over 1,130 physicians providing neonatal clinical care, in 35 states and Puerto Rico, primarily within hospital-based neonatal intensive care units (NICUs), to babies born prematurely or with medical complications. As of December 31, 2016, the Company had over 1,390 affiliated physicians providing anesthesia care to patients in connection with surgical and other procedures, as well as pain management. As of December 31, 2016, the Company had 270 affiliated physicians providing maternal-fetal and obstetrical medical care to expectant mothers experiencing complicated pregnancies primarily in areas where its affiliated neonatal physicians practice.

FINANCIAL RATIOS  of  Mednax, Inc (MD)

Valuation Ratios
P/E Ratio 8.9
Price to Sales 0.9
Price to Book 1
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow 7.2
Growth Rates
Sales Growth Rate 14.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 44.4%
Cap. Spend. - 3 Yr. Gr. Rate 19.5%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 61%
Total Debt to Equity 61.8%
Interest Coverage 10
Management Effectiveness
Return On Assets 7.3%
Ret/ On Assets - 3 Yr. Avg. 8.5%
Return On Total Capital 7.9%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 12.5%
Return On Equity - 3 Yr. Avg. 13.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 20.8%
EBITDA Margin - 3 Yr. Avg. 22.1%
Operating Margin 18%
Oper. Margin - 3 Yr. Avg. 19.7%
Pre-Tax Margin 16.1%
Pre-Tax Margin - 3 Yr. Avg. 18.8%
Net Profit Margin 10.2%
Net Profit Margin - 3 Yr. Avg. 11.8%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.4%
Payout Ratio 0%

MD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MD stock intrinsic value calculation we used $3647 million for the last fiscal year's total revenue generated by Mednax, Inc. The default revenue input number comes from 0001 income statement of Mednax, 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 MD stock valuation model: a) initial revenue growth rate of 2.4% 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 7.1%, whose default value for MD is calculated based on our internal credit rating of Mednax, 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 Mednax, 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 MD stock the variable cost ratio is equal to 86.1%.

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 MD 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 5.4% for Mednax, Inc.

Corporate tax rate of 27% is the nominal tax rate for Mednax, 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 MD 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 MD are equal to 71.3%.

Life of production assets of 45.6 years is the average useful life of capital assets used in Mednax, 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 MD is equal to 2.2%. 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 - $3087.884 million for Mednax, 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 87.883 million for Mednax, 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 Mednax, Inc at the current share price and the inputted number of shares is $2.7 billion.

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