Intrinsic value of Orthofix Medical Inc. - OFIX

Previous Close

$52.27

  Intrinsic Value

$20.66

stock screener

  Rating & Target

str. sell

-60%

Previous close

$52.27

 
Intrinsic value

$20.66

 
Up/down potential

-60%

 
Rating

str. sell

We calculate the intrinsic value of OFIX 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 1.0

 

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, %
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  469
  487
  506
  526
  547
  570
  594
  620
  647
  676
  707
  739
  773
  809
  847
  887
  929
  973
  1,020
  1,069
  1,120
  1,175
  1,232
  1,292
  1,355
  1,421
  1,491
  1,564
  1,641
  1,722
Variable operating expenses, $m
  424
  440
  456
  474
  493
  513
  534
  557
  581
  606
  620
  649
  678
  710
  743
  778
  815
  854
  895
  938
  983
  1,031
  1,081
  1,134
  1,189
  1,247
  1,309
  1,373
  1,441
  1,512
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
  424
  440
  456
  474
  493
  513
  534
  557
  581
  606
  620
  649
  678
  710
  743
  778
  815
  854
  895
  938
  983
  1,031
  1,081
  1,134
  1,189
  1,247
  1,309
  1,373
  1,441
  1,512
Operating income, $m
  45
  47
  49
  52
  55
  57
  60
  63
  67
  70
  86
  90
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
  201
  211
EBITDA, $m
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  145
  152
  160
  168
  176
  184
  193
  203
  213
  223
  234
  245
  258
Interest expense (income), $m
  1
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  19
Earnings before tax, $m
  45
  47
  49
  51
  53
  56
  59
  61
  64
  67
  83
  86
  90
  94
  98
  102
  107
  112
  117
  122
  127
  133
  139
  146
  153
  160
  167
  175
  184
  192
Tax expense, $m
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
Net income, $m
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  107
  111
  117
  122
  128
  134
  140

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
  483
  501
  521
  542
  564
  587
  612
  639
  667
  696
  728
  761
  796
  833
  872
  913
  956
  1,002
  1,050
  1,101
  1,154
  1,210
  1,268
  1,330
  1,395
  1,464
  1,535
  1,611
  1,690
  1,774
Adjusted assets (=assets-cash), $m
  483
  501
  521
  542
  564
  587
  612
  639
  667
  696
  728
  761
  796
  833
  872
  913
  956
  1,002
  1,050
  1,101
  1,154
  1,210
  1,268
  1,330
  1,395
  1,464
  1,535
  1,611
  1,690
  1,774
Revenue / Adjusted assets
  0.971
  0.972
  0.971
  0.970
  0.970
  0.971
  0.971
  0.970
  0.970
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.972
  0.972
  0.971
  0.971
  0.971
  0.971
  0.971
  0.972
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
  0.971
Average production assets, $m
  94
  98
  102
  106
  110
  115
  119
  125
  130
  136
  142
  149
  155
  163
  170
  178
  187
  196
  205
  215
  225
  236
  248
  260
  272
  286
  300
  314
  330
  346
Working capital, $m
  90
  93
  97
  100
  105
  109
  114
  118
  124
  129
  135
  141
  148
  155
  162
  169
  177
  186
  195
  204
  214
  224
  235
  247
  259
  271
  285
  299
  314
  329
Total debt, $m
  5
  10
  15
  21
  27
  34
  41
  48
  56
  64
  73
  83
  92
  103
  114
  125
  138
  150
  164
  178
  193
  209
  225
  243
  261
  280
  300
  321
  344
  367
Total liabilities, $m
  136
  141
  146
  152
  158
  165
  172
  179
  187
  196
  205
  214
  224
  234
  245
  257
  269
  282
  295
  309
  324
  340
  356
  374
  392
  411
  431
  453
  475
  498
Total equity, $m
  348
  361
  374
  389
  405
  422
  440
  459
  479
  501
  523
  547
  572
  599
  627
  657
  688
  720
  755
  791
  829
  870
  912
  956
  1,003
  1,052
  1,104
  1,158
  1,215
  1,275
Total liabilities and equity, $m
  484
  502
  520
  541
  563
  587
  612
  638
  666
  697
  728
  761
  796
  833
  872
  914
  957
  1,002
  1,050
  1,100
  1,153
  1,210
  1,268
  1,330
  1,395
  1,463
  1,535
  1,611
  1,690
  1,773
Debt-to-equity ratio
  0.010
  0.030
  0.040
  0.050
  0.070
  0.080
  0.090
  0.100
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.220
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
Adjusted equity ratio
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  107
  111
  117
  122
  128
  134
  140
Depreciation, amort., depletion, $m
  25
  26
  26
  27
  27
  28
  29
  29
  30
  31
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  39
  40
  42
  45
  47
Funds from operations, $m
  58
  60
  62
  64
  66
  69
  71
  74
  77
  80
  80
  83
  87
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
  142
  148
  155
  163
  170
  179
  187
Change in working capital, $m
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Cash from operations, $m
  55
  57
  58
  60
  62
  64
  67
  69
  72
  74
  74
  77
  80
  84
  87
  91
  95
  99
  104
  109
  114
  119
  124
  130
  136
  143
  149
  156
  164
  172
Maintenance CAPEX, $m
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -40
  -42
  -45
New CAPEX, $m
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
Cash from investing activities, $m
  -15
  -17
  -17
  -18
  -18
  -20
  -20
  -21
  -22
  -24
  -24
  -25
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -38
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -57
  -61
Free cash flow, $m
  39
  40
  41
  42
  44
  45
  46
  48
  49
  51
  49
  51
  53
  56
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  88
  92
  97
  101
  106
  111
Issuance/(repayment) of debt, $m
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
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  
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
Total cash flow (excl. dividends), $m
  44
  45
  47
  48
  50
  51
  53
  55
  57
  59
  58
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  107
  112
  117
  122
  128
  134
Retained Cash Flow (-), $m
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -54
  -57
  -60
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
  32
  32
  33
  33
  34
  35
  35
  36
  37
  38
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
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
  30
  30
  29
  27
  26
  25
  24
  23
  21
  20
  17
  16
  14
  13
  12
  11
  10
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  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

Orthofix International N.V. (Orthofix) is a global medical device company. The Company is focused on providing reconstructive and regenerative orthopedic and spine solutions to physicians. The company operates in four segments: BioStim, Biologics, Extremity Fixation and Spine Fixation. Its BioStim solutions products include Cervical-Stim, Spinal-Stim and Physio-Stim. The Biologics products include AlloQuent Structural Allografts, Trinity ELITE, Trinity Evolution and VersaShield. The Extremity Fixation products include Fixator, Eight-Plate Guided Growth System and Contours VPS Volar Plating System III. The Spine Fixation products include Hallmark Anterior Cervical Plate System, Ascent LE Posterior Occipital Cervico-Thoracic (POCT) System, Firebird Deformity Correction System, Phoenix Minimally Invasive Spinal Fixation System, Samba-Screw System, LONESTAR Cervical Stand Alone (CSA), SKYHAWK Lateral Interbody Fusion System & Lateral Plate System and CENTURION POCT System.

FINANCIAL RATIOS  of  Orthofix Medical Inc. (OFIX)

Valuation Ratios
P/E Ratio 310.7
Price to Sales 2.3
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 20.7
Price to Free Cash Flow 34.5
Growth Rates
Sales Growth Rate 3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35.7%
Cap. Spend. - 3 Yr. Gr. Rate -9.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 20
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. -0.8%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. -1%
Return On Equity 1.1%
Return On Equity - 3 Yr. Avg. -1%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 78.5%
Gross Margin - 3 Yr. Avg. 77.4%
EBITDA Margin 10%
EBITDA Margin - 3 Yr. Avg. 8.9%
Operating Margin 5.1%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 4.6%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 0.7%
Net Profit Margin - 3 Yr. Avg. -0.8%
Effective Tax Rate 78.9%
Eff/ Tax Rate - 3 Yr. Avg. 111.5%
Payout Ratio 0%

OFIX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OFIX stock intrinsic value calculation we used $453 million for the last fiscal year's total revenue generated by Orthofix Medical Inc.. The default revenue input number comes from 0001 income statement of Orthofix Medical 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 OFIX stock valuation model: a) initial revenue growth rate of 3.6% 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 OFIX is calculated based on our internal credit rating of Orthofix Medical 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 Orthofix Medical 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 OFIX stock the variable cost ratio is equal to 90.5%.

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 OFIX 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 Orthofix Medical Inc..

Corporate tax rate of 27% is the nominal tax rate for Orthofix Medical 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 OFIX 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 OFIX are equal to 20.1%.

Life of production assets of 7.4 years is the average useful life of capital assets used in Orthofix Medical 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 OFIX is equal to 19.1%. 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 - $335.397 million for Orthofix Medical 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 19.108 million for Orthofix Medical 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 Orthofix Medical Inc. at the current share price and the inputted number of shares is $1.0 billion.

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