Intrinsic value of Nevro Corp. - NVRO

Previous Close

$64.03

  Intrinsic Value

$2.02

stock screener

  Rating & Target

str. sell

-97%

Previous close

$64.03

 
Intrinsic value

$2.02

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of NVRO 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, %
  10.20
  9.68
  9.21
  8.79
  8.41
  8.07
  7.76
  7.49
  7.24
  7.01
  6.81
  6.63
  6.47
  6.32
  6.19
  6.07
  5.96
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.34
  5.30
  5.27
  5.24
Revenue, $m
  426
  468
  511
  556
  603
  651
  702
  754
  809
  866
  925
  986
  1,050
  1,116
  1,185
  1,257
  1,332
  1,410
  1,492
  1,577
  1,665
  1,758
  1,855
  1,956
  2,062
  2,173
  2,289
  2,410
  2,538
  2,671
Variable operating expenses, $m
  465
  510
  557
  606
  657
  710
  765
  822
  882
  943
  1,008
  1,075
  1,144
  1,216
  1,292
  1,370
  1,452
  1,537
  1,626
  1,719
  1,815
  1,916
  2,022
  2,132
  2,248
  2,369
  2,495
  2,627
  2,766
  2,911
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
  465
  510
  557
  606
  657
  710
  765
  822
  882
  943
  1,008
  1,075
  1,144
  1,216
  1,292
  1,370
  1,452
  1,537
  1,626
  1,719
  1,815
  1,916
  2,022
  2,132
  2,248
  2,369
  2,495
  2,627
  2,766
  2,911
Operating income, $m
  -38
  -42
  -46
  -50
  -54
  -59
  -63
  -68
  -73
  -78
  -83
  -89
  -94
  -100
  -107
  -113
  -120
  -127
  -134
  -142
  -150
  -158
  -167
  -176
  -186
  -196
  -206
  -217
  -228
  -240
EBITDA, $m
  -36
  -39
  -43
  -47
  -51
  -55
  -59
  -64
  -68
  -73
  -78
  -83
  -89
  -94
  -100
  -106
  -112
  -119
  -126
  -133
  -141
  -148
  -157
  -165
  -174
  -183
  -193
  -203
  -214
  -225
Interest expense (income), $m
  2
  11
  12
  14
  16
  17
  19
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  68
  72
  77
  81
  86
  90
  95
Earnings before tax, $m
  -49
  -54
  -60
  -66
  -72
  -78
  -84
  -91
  -98
  -105
  -113
  -121
  -129
  -137
  -146
  -155
  -165
  -175
  -185
  -196
  -207
  -219
  -232
  -245
  -258
  -272
  -287
  -303
  -319
  -336
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
  -49
  -54
  -60
  -66
  -72
  -78
  -84
  -91
  -98
  -105
  -113
  -121
  -129
  -137
  -146
  -155
  -165
  -175
  -185
  -196
  -207
  -219
  -232
  -245
  -258
  -272
  -287
  -303
  -319
  -336

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
  287
  315
  344
  374
  405
  438
  472
  508
  544
  582
  622
  663
  706
  751
  797
  846
  896
  949
  1,004
  1,061
  1,121
  1,183
  1,248
  1,317
  1,388
  1,462
  1,540
  1,622
  1,708
  1,797
Adjusted assets (=assets-cash), $m
  287
  315
  344
  374
  405
  438
  472
  508
  544
  582
  622
  663
  706
  751
  797
  846
  896
  949
  1,004
  1,061
  1,121
  1,183
  1,248
  1,317
  1,388
  1,462
  1,540
  1,622
  1,708
  1,797
Revenue / Adjusted assets
  1.484
  1.486
  1.485
  1.487
  1.489
  1.486
  1.487
  1.484
  1.487
  1.488
  1.487
  1.487
  1.487
  1.486
  1.487
  1.486
  1.487
  1.486
  1.486
  1.486
  1.485
  1.486
  1.486
  1.485
  1.486
  1.486
  1.486
  1.486
  1.486
  1.486
Average production assets, $m
  12
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  64
  67
  71
  75
Working capital, $m
  128
  140
  153
  167
  181
  195
  211
  226
  243
  260
  277
  296
  315
  335
  356
  377
  400
  423
  447
  473
  500
  527
  557
  587
  619
  652
  687
  723
  761
  801
Total debt, $m
  175
  198
  222
  247
  274
  301
  330
  359
  390
  422
  455
  489
  525
  563
  601
  642
  684
  728
  774
  822
  872
  924
  978
  1,035
  1,095
  1,157
  1,223
  1,291
  1,362
  1,437
Total liabilities, $m
  240
  263
  287
  313
  339
  366
  395
  424
  455
  487
  520
  555
  590
  628
  667
  707
  749
  793
  839
  887
  937
  989
  1,044
  1,101
  1,160
  1,223
  1,288
  1,356
  1,428
  1,502
Total equity, $m
  47
  52
  56
  61
  66
  72
  77
  83
  89
  96
  102
  109
  116
  123
  131
  139
  147
  156
  165
  174
  184
  194
  205
  216
  228
  240
  253
  266
  280
  295
Total liabilities and equity, $m
  287
  315
  343
  374
  405
  438
  472
  507
  544
  583
  622
  664
  706
  751
  798
  846
  896
  949
  1,004
  1,061
  1,121
  1,183
  1,249
  1,317
  1,388
  1,463
  1,541
  1,622
  1,708
  1,797
Debt-to-equity ratio
  3.710
  3.830
  3.940
  4.030
  4.120
  4.190
  4.260
  4.310
  4.370
  4.410
  4.460
  4.500
  4.530
  4.570
  4.600
  4.630
  4.650
  4.680
  4.700
  4.720
  4.740
  4.760
  4.780
  4.800
  4.810
  4.830
  4.840
  4.850
  4.860
  4.880
Adjusted equity ratio
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -49
  -54
  -60
  -66
  -72
  -78
  -84
  -91
  -98
  -105
  -113
  -121
  -129
  -137
  -146
  -155
  -165
  -175
  -185
  -196
  -207
  -219
  -232
  -245
  -258
  -272
  -287
  -303
  -319
  -336
Depreciation, amort., depletion, $m
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
Funds from operations, $m
  -47
  -52
  -57
  -62
  -68
  -74
  -80
  -87
  -93
  -100
  -108
  -115
  -123
  -131
  -139
  -148
  -157
  -167
  -177
  -187
  -198
  -209
  -221
  -234
  -247
  -260
  -274
  -289
  -305
  -321
Change in working capital, $m
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
Cash from operations, $m
  -59
  -64
  -70
  -76
  -82
  -89
  -95
  -102
  -110
  -117
  -125
  -133
  -142
  -151
  -160
  -170
  -180
  -190
  -201
  -213
  -225
  -237
  -250
  -264
  -278
  -293
  -309
  -325
  -343
  -361
Maintenance CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
Cash from investing activities, $m
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
Free cash flow, $m
  -62
  -68
  -74
  -80
  -87
  -93
  -101
  -108
  -116
  -123
  -132
  -140
  -149
  -159
  -168
  -178
  -189
  -200
  -211
  -223
  -236
  -249
  -263
  -277
  -292
  -308
  -324
  -342
  -360
  -379
Issuance/(repayment) of debt, $m
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  75
Issuance/(repurchase) of shares, $m
  53
  59
  65
  71
  77
  83
  90
  97
  104
  111
  119
  127
  136
  145
  154
  163
  173
  183
  194
  205
  217
  229
  242
  256
  270
  284
  300
  316
  333
  350
Cash from financing (excl. dividends), $m  
  75
  82
  89
  96
  103
  110
  118
  127
  135
  143
  152
  161
  172
  182
  193
  203
  215
  227
  240
  253
  267
  281
  297
  313
  330
  346
  365
  384
  404
  425
Total cash flow (excl. dividends), $m
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
Retained Cash Flow (-), $m
  -53
  -59
  -65
  -71
  -77
  -83
  -90
  -97
  -104
  -111
  -119
  -127
  -136
  -145
  -154
  -163
  -173
  -183
  -194
  -205
  -217
  -229
  -242
  -256
  -270
  -284
  -300
  -316
  -333
  -350
Prev. year cash balance distribution, $m
  203
  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
  163
  -44
  -49
  -55
  -60
  -66
  -72
  -78
  -85
  -92
  -99
  -106
  -113
  -121
  -129
  -138
  -147
  -156
  -166
  -176
  -186
  -197
  -208
  -220
  -233
  -246
  -259
  -273
  -288
  -304
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
  157
  -41
  -43
  -45
  -47
  -48
  -49
  -49
  -49
  -48
  -47
  -45
  -43
  -41
  -38
  -35
  -32
  -29
  -26
  -22
  -19
  -16
  -14
  -11
  -9
  -7
  -6
  -4
  -3
  -2
Current shareholders' claim on cash, %
  86.4
  74.6
  64.5
  55.7
  48.1
  41.6
  35.9
  31.0
  26.8
  23.2
  20.0
  17.3
  15.0
  12.9
  11.2
  9.7
  8.3
  7.2
  6.2
  5.4
  4.7
  4.0
  3.5
  3.0
  2.6
  2.2
  1.9
  1.7
  1.4
  1.2

Nevro Corp. is a global medical device company. The Company focuses on providing products that improve the quality of life of patients suffering from chronic pain. The Company has developed and commercialized the Senza spinal cord stimulation (SCS) system, an evidence-based neuromodulation platform for the treatment of chronic pain. Its HF10 therapy is designed to deliver neuromodulation solutions for treating chronic pain. HF10 therapy enables patients to achieve sustained pain relief without paresthesia, thus enabling its patients to avoid the uncomfortable shocking or jolting sensations commonly associated with paresthesia. HF10 therapy relies on consistent anatomical lead placement. As of December 31, 2016, it was investigating the use of HF10 therapy to address additional indications, such as chronic upper limb and neck pain, painful neuropathies and non-surgical refractory back pain. The Senza system is approved to create electrical impulses from 2 hertz (Hz) to 10,000 Hz.

FINANCIAL RATIOS  of  Nevro Corp. (NVRO)

Valuation Ratios
P/E Ratio -57.8
Price to Sales 8.1
Price to Book 7.4
Price to Tangible Book
Price to Cash Flow -31.4
Price to Free Cash Flow -29.8
Growth Rates
Sales Growth Rate 227.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 55.4%
Total Debt to Equity 55.4%
Interest Coverage -14
Management Effectiveness
Return On Assets -8.3%
Ret/ On Assets - 3 Yr. Avg. -19%
Return On Total Capital -10%
Ret/ On T. Cap. - 3 Yr. Avg. -21.3%
Return On Equity -13.2%
Return On Equity - 3 Yr. Avg. -24%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 66.8%
Gross Margin - 3 Yr. Avg. 63%
EBITDA Margin -11.4%
EBITDA Margin - 3 Yr. Avg. -64.1%
Operating Margin -10.5%
Oper. Margin - 3 Yr. Avg. -61.3%
Pre-Tax Margin -13.1%
Pre-Tax Margin - 3 Yr. Avg. -66.1%
Net Profit Margin -14%
Net Profit Margin - 3 Yr. Avg. -67.9%
Effective Tax Rate -6.7%
Eff/ Tax Rate - 3 Yr. Avg. -3.8%
Payout Ratio 0%

NVRO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NVRO stock intrinsic value calculation we used $387 million for the last fiscal year's total revenue generated by Nevro Corp.. The default revenue input number comes from 0001 income statement of Nevro Corp.. 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 NVRO stock valuation model: a) initial revenue growth rate of 10.2% 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 NVRO is calculated based on our internal credit rating of Nevro Corp., 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 Nevro Corp..
    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 NVRO stock the variable cost ratio is equal to 109%.

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 NVRO 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 7% for Nevro Corp..

Corporate tax rate of 27% is the nominal tax rate for Nevro Corp.. 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 NVRO 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 NVRO are equal to 2.8%.

Life of production assets of 2.8 years is the average useful life of capital assets used in Nevro Corp. 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 NVRO is equal to 30%. 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 - $245.483 million for Nevro Corp. - 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 30.442 million for Nevro Corp. 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 Nevro Corp. at the current share price and the inputted number of shares is $1.9 billion.

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