Intrinsic value of Mednax - MD

Previous Close

$46.79

  Intrinsic Value

$101.68

stock screener

  Rating & Target

str. buy

+117%

Previous close

$46.79

 
Intrinsic value

$101.68

 
Up/down potential

+117%

 
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 4.4

 

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, %
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
Revenue, $m
  3,759
  4,072
  4,398
  4,737
  5,088
  5,454
  5,834
  6,229
  6,639
  7,067
  7,511
  7,974
  8,456
  8,958
  9,482
  10,028
  10,598
  11,194
  11,816
  12,465
  13,145
  13,855
  14,598
  15,376
  16,190
  17,043
  17,936
  18,871
  19,851
  20,878
Variable operating expenses, $m
  3,040
  3,252
  3,473
  3,702
  3,940
  4,188
  4,446
  4,713
  4,991
  5,281
  5,090
  5,403
  5,730
  6,070
  6,425
  6,795
  7,182
  7,585
  8,006
  8,447
  8,907
  9,389
  9,892
  10,419
  10,971
  11,549
  12,154
  12,788
  13,452
  14,148
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
  3,040
  3,252
  3,473
  3,702
  3,940
  4,188
  4,446
  4,713
  4,991
  5,281
  5,090
  5,403
  5,730
  6,070
  6,425
  6,795
  7,182
  7,585
  8,006
  8,447
  8,907
  9,389
  9,892
  10,419
  10,971
  11,549
  12,154
  12,788
  13,452
  14,148
Operating income, $m
  719
  820
  925
  1,035
  1,148
  1,266
  1,388
  1,516
  1,648
  1,786
  2,421
  2,571
  2,726
  2,888
  3,057
  3,233
  3,417
  3,609
  3,809
  4,019
  4,238
  4,467
  4,706
  4,957
  5,219
  5,494
  5,782
  6,084
  6,400
  6,731
EBITDA, $m
  1,301
  1,410
  1,523
  1,640
  1,762
  1,888
  2,020
  2,156
  2,299
  2,447
  2,600
  2,761
  2,928
  3,101
  3,283
  3,472
  3,669
  3,875
  4,091
  4,316
  4,551
  4,797
  5,054
  5,323
  5,605
  5,900
  6,210
  6,533
  6,873
  7,228
Interest expense (income), $m
  60
  100
  113
  127
  141
  156
  171
  187
  204
  221
  239
  258
  277
  298
  319
  341
  363
  387
  412
  438
  466
  494
  524
  555
  587
  621
  657
  694
  733
  774
  817
Earnings before tax, $m
  619
  707
  799
  893
  992
  1,095
  1,201
  1,312
  1,427
  1,547
  2,164
  2,293
  2,428
  2,569
  2,716
  2,869
  3,029
  3,196
  3,371
  3,553
  3,744
  3,943
  4,152
  4,370
  4,598
  4,837
  5,088
  5,351
  5,626
  5,914
Tax expense, $m
  167
  191
  216
  241
  268
  296
  324
  354
  385
  418
  584
  619
  656
  694
  733
  775
  818
  863
  910
  959
  1,011
  1,065
  1,121
  1,180
  1,242
  1,306
  1,374
  1,445
  1,519
  1,597
Net income, $m
  452
  516
  583
  652
  724
  799
  877
  958
  1,042
  1,129
  1,579
  1,674
  1,773
  1,876
  1,983
  2,095
  2,211
  2,333
  2,461
  2,594
  2,733
  2,878
  3,031
  3,190
  3,357
  3,531
  3,714
  3,906
  4,107
  4,317

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
  6,382
  6,914
  7,467
  8,042
  8,639
  9,260
  9,905
  10,575
  11,272
  11,998
  12,752
  13,538
  14,356
  15,209
  16,098
  17,026
  17,994
  19,005
  20,060
  21,164
  22,317
  23,523
  24,785
  26,106
  27,488
  28,935
  30,451
  32,039
  33,703
  35,447
Adjusted assets (=assets-cash), $m
  6,382
  6,914
  7,467
  8,042
  8,639
  9,260
  9,905
  10,575
  11,272
  11,998
  12,752
  13,538
  14,356
  15,209
  16,098
  17,026
  17,994
  19,005
  20,060
  21,164
  22,317
  23,523
  24,785
  26,106
  27,488
  28,935
  30,451
  32,039
  33,703
  35,447
Revenue / Adjusted assets
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
Average production assets, $m
  2,688
  2,912
  3,145
  3,387
  3,638
  3,900
  4,171
  4,454
  4,747
  5,053
  5,370
  5,701
  6,046
  6,405
  6,780
  7,170
  7,578
  8,004
  8,448
  8,913
  9,398
  9,906
  10,438
  10,994
  11,576
  12,186
  12,824
  13,493
  14,194
  14,928
Working capital, $m
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
Total debt, $m
  2,096
  2,350
  2,614
  2,888
  3,173
  3,469
  3,777
  4,096
  4,429
  4,775
  5,135
  5,510
  5,900
  6,307
  6,731
  7,173
  7,635
  8,117
  8,621
  9,147
  9,697
  10,273
  10,875
  11,504
  12,164
  12,854
  13,577
  14,335
  15,129
  15,960
Total liabilities, $m
  3,044
  3,298
  3,562
  3,836
  4,121
  4,417
  4,725
  5,044
  5,377
  5,723
  6,083
  6,458
  6,848
  7,255
  7,679
  8,121
  8,583
  9,065
  9,569
  10,095
  10,645
  11,221
  11,823
  12,452
  13,112
  13,802
  14,525
  15,283
  16,077
  16,908
Total equity, $m
  3,338
  3,616
  3,905
  4,206
  4,518
  4,843
  5,180
  5,531
  5,895
  6,275
  6,669
  7,080
  7,508
  7,954
  8,419
  8,905
  9,411
  9,939
  10,492
  11,069
  11,672
  12,303
  12,963
  13,653
  14,376
  15,133
  15,926
  16,757
  17,627
  18,539
Total liabilities and equity, $m
  6,382
  6,914
  7,467
  8,042
  8,639
  9,260
  9,905
  10,575
  11,272
  11,998
  12,752
  13,538
  14,356
  15,209
  16,098
  17,026
  17,994
  19,004
  20,061
  21,164
  22,317
  23,524
  24,786
  26,105
  27,488
  28,935
  30,451
  32,040
  33,704
  35,447
Debt-to-equity ratio
  0.630
  0.650
  0.670
  0.690
  0.700
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.790
  0.800
  0.810
  0.810
  0.820
  0.820
  0.830
  0.830
  0.830
  0.840
  0.840
  0.850
  0.850
  0.850
  0.860
  0.860
  0.860
Adjusted equity ratio
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  452
  516
  583
  652
  724
  799
  877
  958
  1,042
  1,129
  1,579
  1,674
  1,773
  1,876
  1,983
  2,095
  2,211
  2,333
  2,461
  2,594
  2,733
  2,878
  3,031
  3,190
  3,357
  3,531
  3,714
  3,906
  4,107
  4,317
Depreciation, amort., depletion, $m
  582
  589
  597
  605
  614
  622
  631
  641
  651
  661
  179
  190
  202
  214
  226
  239
  253
  267
  282
  297
  313
  330
  348
  366
  386
  406
  427
  450
  473
  498
Funds from operations, $m
  1,034
  1,106
  1,180
  1,257
  1,338
  1,421
  1,508
  1,598
  1,692
  1,790
  1,758
  1,864
  1,974
  2,089
  2,209
  2,334
  2,464
  2,600
  2,742
  2,891
  3,046
  3,209
  3,379
  3,556
  3,743
  3,938
  4,142
  4,356
  4,580
  4,815
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  1,034
  1,105
  1,179
  1,257
  1,337
  1,421
  1,507
  1,598
  1,691
  1,789
  1,758
  1,863
  1,973
  2,088
  2,208
  2,333
  2,463
  2,599
  2,741
  2,890
  3,045
  3,207
  3,377
  3,555
  3,741
  3,936
  4,140
  4,354
  4,578
  4,813
Maintenance CAPEX, $m
  -82
  -90
  -97
  -105
  -113
  -121
  -130
  -139
  -148
  -158
  -168
  -179
  -190
  -202
  -214
  -226
  -239
  -253
  -267
  -282
  -297
  -313
  -330
  -348
  -366
  -386
  -406
  -427
  -450
  -473
New CAPEX, $m
  -215
  -224
  -233
  -242
  -252
  -261
  -272
  -282
  -294
  -305
  -318
  -331
  -345
  -359
  -374
  -391
  -408
  -426
  -445
  -465
  -486
  -508
  -531
  -556
  -582
  -610
  -638
  -669
  -701
  -734
Cash from investing activities, $m
  -297
  -314
  -330
  -347
  -365
  -382
  -402
  -421
  -442
  -463
  -486
  -510
  -535
  -561
  -588
  -617
  -647
  -679
  -712
  -747
  -783
  -821
  -861
  -904
  -948
  -996
  -1,044
  -1,096
  -1,151
  -1,207
Free cash flow, $m
  736
  792
  850
  910
  973
  1,038
  1,106
  1,176
  1,249
  1,325
  1,271
  1,353
  1,439
  1,527
  1,620
  1,716
  1,816
  1,921
  2,030
  2,143
  2,262
  2,386
  2,515
  2,651
  2,792
  2,940
  3,095
  3,257
  3,427
  3,605
Issuance/(repayment) of debt, $m
  244
  254
  264
  274
  285
  296
  308
  320
  333
  346
  360
  375
  390
  407
  424
  442
  462
  482
  504
  526
  550
  575
  602
  630
  659
  690
  723
  758
  794
  832
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  
  244
  254
  264
  274
  285
  296
  308
  320
  333
  346
  360
  375
  390
  407
  424
  442
  462
  482
  504
  526
  550
  575
  602
  630
  659
  690
  723
  758
  794
  832
Total cash flow (excl. dividends), $m
  980
  1,045
  1,113
  1,184
  1,258
  1,334
  1,413
  1,496
  1,582
  1,671
  1,631
  1,728
  1,829
  1,934
  2,044
  2,158
  2,278
  2,403
  2,533
  2,670
  2,812
  2,961
  3,117
  3,281
  3,452
  3,631
  3,818
  4,015
  4,221
  4,437
Retained Cash Flow (-), $m
  -271
  -278
  -289
  -301
  -312
  -325
  -337
  -351
  -365
  -379
  -395
  -411
  -428
  -446
  -465
  -485
  -506
  -529
  -552
  -577
  -603
  -631
  -660
  -691
  -723
  -757
  -793
  -831
  -870
  -912
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
  708
  767
  824
  883
  945
  1,009
  1,076
  1,145
  1,217
  1,292
  1,237
  1,317
  1,401
  1,488
  1,579
  1,673
  1,772
  1,874
  1,981
  2,093
  2,209
  2,330
  2,457
  2,590
  2,729
  2,874
  3,026
  3,184
  3,351
  3,525
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  668
  679
  680
  675
  665
  648
  626
  599
  567
  531
  443
  408
  370
  332
  293
  255
  219
  184
  153
  124
  99
  78
  60
  45
  33
  23
  16
  11
  7
  5
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 (MD)

Valuation Ratios
P/E Ratio 13.5
Price to Sales 1.4
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 9.9
Price to Free Cash Flow 10.8
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 $3458.312 million for the last fiscal year's total revenue generated by Mednax. The default revenue input number comes from 0001 income statement of Mednax. 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 8.7% 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 6%, whose default value for MD is calculated based on our internal credit rating of Mednax, 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.
    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 82%.

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.

Corporate tax rate of 27% is the nominal tax rate for Mednax. 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 71.5%.

Life of production assets of 47 years is the average useful life of capital assets used in Mednax 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 0.2%. 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 - $3066.454 million for Mednax - 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 93.467 million for Mednax 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 at the current share price and the inputted number of shares is $4.4 billion.

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COMPANY NEWS

▶ 3 Top Healthcare Stocks to Buy Right Now   [Sep-18-18 06:32AM  Motley Fool]
▶ Longtime CFO of Mednax to retire   [09:35AM  American City Business Journals]
▶ Mednax: 2Q Earnings Snapshot   [07:29AM  Associated Press]

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