Intrinsic value of NuVasive, Inc. - NUVA

Previous Close

$57.07

  Intrinsic Value

$25.08

stock screener

  Rating & Target

str. sell

-56%

Previous close

$57.07

 
Intrinsic value

$25.08

 
Up/down potential

-56%

 
Rating

str. sell

We calculate the intrinsic value of NUVA 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 2.9

 

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, %
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  1,171
  1,244
  1,319
  1,397
  1,479
  1,565
  1,654
  1,747
  1,844
  1,945
  2,051
  2,162
  2,278
  2,400
  2,527
  2,660
  2,799
  2,945
  3,098
  3,259
  3,427
  3,603
  3,788
  3,981
  4,185
  4,398
  4,621
  4,856
  5,102
  5,360
Variable operating expenses, $m
  1,039
  1,098
  1,159
  1,223
  1,290
  1,360
  1,433
  1,509
  1,588
  1,671
  1,676
  1,767
  1,862
  1,961
  2,065
  2,174
  2,288
  2,407
  2,532
  2,663
  2,800
  2,944
  3,095
  3,254
  3,420
  3,594
  3,777
  3,968
  4,169
  4,380
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
  1,039
  1,098
  1,159
  1,223
  1,290
  1,360
  1,433
  1,509
  1,588
  1,671
  1,676
  1,767
  1,862
  1,961
  2,065
  2,174
  2,288
  2,407
  2,532
  2,663
  2,800
  2,944
  3,095
  3,254
  3,420
  3,594
  3,777
  3,968
  4,169
  4,380
Operating income, $m
  133
  146
  160
  174
  189
  205
  221
  238
  256
  274
  375
  395
  416
  439
  462
  486
  512
  538
  566
  596
  626
  659
  692
  728
  765
  804
  845
  888
  933
  980
EBITDA, $m
  298
  317
  336
  356
  377
  399
  421
  445
  470
  496
  523
  551
  580
  611
  644
  678
  713
  750
  789
  830
  873
  918
  965
  1,014
  1,066
  1,120
  1,177
  1,237
  1,300
  1,366
Interest expense (income), $m
  13
  39
  42
  46
  50
  54
  58
  62
  67
  71
  76
  81
  87
  92
  98
  104
  111
  118
  125
  132
  140
  148
  156
  165
  175
  185
  195
  206
  217
  229
  241
Earnings before tax, $m
  94
  104
  114
  125
  136
  147
  159
  171
  184
  198
  294
  309
  324
  340
  357
  375
  394
  414
  434
  456
  478
  502
  527
  553
  580
  609
  639
  671
  704
  738
Tax expense, $m
  25
  28
  31
  34
  37
  40
  43
  46
  50
  53
  79
  83
  88
  92
  97
  101
  106
  112
  117
  123
  129
  136
  142
  149
  157
  164
  173
  181
  190
  199
Net income, $m
  69
  76
  83
  91
  99
  107
  116
  125
  135
  145
  214
  225
  237
  248
  261
  274
  288
  302
  317
  333
  349
  367
  385
  404
  424
  445
  466
  489
  514
  539

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
  1,816
  1,928
  2,045
  2,167
  2,293
  2,426
  2,564
  2,708
  2,858
  3,016
  3,180
  3,352
  3,532
  3,720
  3,917
  4,124
  4,340
  4,566
  4,803
  5,052
  5,313
  5,586
  5,872
  6,173
  6,488
  6,818
  7,165
  7,528
  7,910
  8,310
Adjusted assets (=assets-cash), $m
  1,816
  1,928
  2,045
  2,167
  2,293
  2,426
  2,564
  2,708
  2,858
  3,016
  3,180
  3,352
  3,532
  3,720
  3,917
  4,124
  4,340
  4,566
  4,803
  5,052
  5,313
  5,586
  5,872
  6,173
  6,488
  6,818
  7,165
  7,528
  7,910
  8,310
Revenue / Adjusted assets
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
  0.645
Average production assets, $m
  675
  716
  760
  805
  852
  901
  952
  1,006
  1,062
  1,120
  1,181
  1,245
  1,312
  1,382
  1,455
  1,532
  1,612
  1,696
  1,785
  1,877
  1,974
  2,075
  2,182
  2,293
  2,410
  2,533
  2,662
  2,797
  2,939
  3,087
Working capital, $m
  339
  359
  381
  404
  427
  452
  478
  505
  533
  562
  593
  625
  658
  693
  730
  769
  809
  851
  895
  942
  990
  1,041
  1,095
  1,151
  1,209
  1,271
  1,336
  1,403
  1,474
  1,549
Total debt, $m
  657
  715
  774
  836
  901
  969
  1,039
  1,113
  1,190
  1,270
  1,354
  1,442
  1,534
  1,630
  1,731
  1,836
  1,947
  2,063
  2,184
  2,311
  2,444
  2,584
  2,730
  2,883
  3,044
  3,213
  3,390
  3,576
  3,771
  3,976
Total liabilities, $m
  928
  985
  1,045
  1,107
  1,172
  1,240
  1,310
  1,384
  1,461
  1,541
  1,625
  1,713
  1,805
  1,901
  2,002
  2,107
  2,218
  2,333
  2,455
  2,582
  2,715
  2,854
  3,001
  3,154
  3,315
  3,484
  3,661
  3,847
  4,042
  4,247
Total equity, $m
  888
  943
  1,000
  1,059
  1,121
  1,186
  1,254
  1,324
  1,398
  1,475
  1,555
  1,639
  1,727
  1,819
  1,916
  2,016
  2,122
  2,233
  2,349
  2,470
  2,598
  2,731
  2,872
  3,018
  3,172
  3,334
  3,504
  3,681
  3,868
  4,064
Total liabilities and equity, $m
  1,816
  1,928
  2,045
  2,166
  2,293
  2,426
  2,564
  2,708
  2,859
  3,016
  3,180
  3,352
  3,532
  3,720
  3,918
  4,123
  4,340
  4,566
  4,804
  5,052
  5,313
  5,585
  5,873
  6,172
  6,487
  6,818
  7,165
  7,528
  7,910
  8,311
Debt-to-equity ratio
  0.740
  0.760
  0.770
  0.790
  0.800
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.900
  0.910
  0.920
  0.920
  0.930
  0.940
  0.940
  0.950
  0.950
  0.960
  0.960
  0.960
  0.970
  0.970
  0.970
  0.980
Adjusted equity ratio
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  69
  76
  83
  91
  99
  107
  116
  125
  135
  145
  214
  225
  237
  248
  261
  274
  288
  302
  317
  333
  349
  367
  385
  404
  424
  445
  466
  489
  514
  539
Depreciation, amort., depletion, $m
  166
  171
  176
  182
  188
  194
  200
  207
  214
  221
  148
  156
  164
  173
  182
  192
  202
  212
  223
  235
  247
  259
  273
  287
  301
  317
  333
  350
  367
  386
Funds from operations, $m
  234
  247
  260
  273
  287
  301
  316
  332
  349
  366
  362
  381
  401
  421
  443
  466
  489
  514
  540
  567
  596
  626
  657
  690
  725
  761
  799
  839
  881
  925
Change in working capital, $m
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  49
  51
  53
  56
  59
  62
  65
  68
  71
  75
Cash from operations, $m
  214
  226
  238
  250
  263
  277
  291
  305
  321
  337
  331
  349
  367
  386
  406
  427
  449
  472
  496
  521
  547
  575
  604
  634
  666
  700
  735
  771
  810
  850
Maintenance CAPEX, $m
  -79
  -84
  -90
  -95
  -101
  -107
  -113
  -119
  -126
  -133
  -140
  -148
  -156
  -164
  -173
  -182
  -192
  -202
  -212
  -223
  -235
  -247
  -259
  -273
  -287
  -301
  -317
  -333
  -350
  -367
New CAPEX, $m
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -112
  -117
  -123
  -129
  -135
  -142
  -149
Cash from investing activities, $m
  -119
  -126
  -133
  -140
  -148
  -156
  -164
  -173
  -182
  -191
  -201
  -212
  -223
  -234
  -246
  -259
  -272
  -286
  -300
  -315
  -332
  -348
  -365
  -385
  -404
  -424
  -446
  -468
  -492
  -516
Free cash flow, $m
  95
  100
  105
  110
  115
  121
  127
  133
  139
  145
  130
  137
  145
  152
  160
  168
  177
  186
  196
  206
  216
  227
  238
  250
  262
  276
  289
  303
  318
  334
Issuance/(repayment) of debt, $m
  55
  57
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  140
  146
  153
  161
  169
  177
  186
  195
  205
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  
  55
  57
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  140
  146
  153
  161
  169
  177
  186
  195
  205
Total cash flow (excl. dividends), $m
  150
  157
  164
  172
  180
  189
  197
  206
  216
  226
  214
  225
  237
  248
  261
  274
  288
  302
  317
  333
  349
  366
  385
  404
  423
  444
  466
  489
  513
  539
Retained Cash Flow (-), $m
  -54
  -55
  -57
  -59
  -62
  -65
  -68
  -70
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
  -127
  -134
  -140
  -147
  -154
  -162
  -170
  -178
  -187
  -196
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
  96
  102
  107
  113
  118
  124
  130
  136
  142
  149
  134
  141
  149
  156
  164
  173
  182
  191
  201
  211
  222
  233
  244
  257
  269
  283
  297
  311
  327
  343
Discount rate, %
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
  92
  92
  91
  90
  88
  85
  82
  79
  75
  71
  57
  53
  49
  44
  40
  36
  31
  27
  23
  20
  16
  13
  11
  8
  6
  5
  4
  3
  2
  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

Nuvasive, Inc. is a medical device company. The Company focuses on developing minimally-disruptive surgical products and procedurally-integrated solutions for the spine surgery. Its product portfolio focuses on applications for spine fusion surgery, including biologics used to aid in the spinal fusion process. Its principal product offering includes a minimally-disruptive surgical platform called Maximum Access Surgery (MAS). The platform includes its software-driven nerve detection and avoidance systems, including NVM5, and intraoperative monitoring services and support; MaXcess, an integrated split-blade retractor system, and a range of implants and biologics. The platform combines three product categories: its MaXcess retractors, specialized implants and fixation products, and nerve monitoring systems and service offerings that collectively enable surgeons to detect and navigate around nerves, while directing customized access to the spine for implant delivery.

FINANCIAL RATIOS  of  NuVasive, Inc. (NUVA)

Valuation Ratios
P/E Ratio 77.8
Price to Sales 3
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 18.4
Price to Free Cash Flow 46.4
Growth Rates
Sales Growth Rate 18.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13%
Cap. Spend. - 3 Yr. Gr. Rate 14.4%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 81.2%
Total Debt to Equity 90.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 3.1%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 3.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 5.3%
Return On Equity - 3 Yr. Avg. 4.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 75.1%
Gross Margin - 3 Yr. Avg. 75.7%
EBITDA Margin 18.8%
EBITDA Margin - 3 Yr. Avg. 16.9%
Operating Margin 12.8%
Oper. Margin - 3 Yr. Avg. 10.8%
Pre-Tax Margin 6.8%
Pre-Tax Margin - 3 Yr. Avg. 6.4%
Net Profit Margin 3.8%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 46.2%
Eff/ Tax Rate - 3 Yr. Avg. 8.2%
Payout Ratio 0%

NUVA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NUVA stock intrinsic value calculation we used $1102 million for the last fiscal year's total revenue generated by NuVasive, Inc.. The default revenue input number comes from 0001 income statement of NuVasive, 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 NUVA stock valuation model: a) initial revenue growth rate of 6.3% 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 5%, whose default value for NUVA is calculated based on our internal credit rating of NuVasive, 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 NuVasive, 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 NUVA stock the variable cost ratio is equal to 89.1%.

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 NUVA 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 6.4% for NuVasive, Inc..

Corporate tax rate of 27% is the nominal tax rate for NuVasive, 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 NUVA 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 NUVA are equal to 57.6%.

Life of production assets of 8 years is the average useful life of capital assets used in NuVasive, 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 NUVA is equal to 28.9%. 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 - $834.525 million for NuVasive, 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 51.653 million for NuVasive, 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 NuVasive, Inc. at the current share price and the inputted number of shares is $2.9 billion.

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