Intrinsic value of Orthofix International - OFIX

Previous Close

$59.07

  Intrinsic Value

$32.95

stock screener

  Rating & Target

sell

-44%

Previous close

$59.07

 
Intrinsic value

$32.95

 
Up/down potential

-44%

 
Rating

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 1.1

 

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
  444
  456
  469
  484
  500
  517
  536
  556
  577
  601
  625
  651
  679
  709
  740
  773
  808
  845
  883
  925
  968
  1,014
  1,062
  1,112
  1,166
  1,222
  1,281
  1,343
  1,408
  1,477
Variable operating expenses, $m
  84
  86
  88
  91
  93
  96
  100
  103
  107
  111
  109
  113
  118
  123
  129
  135
  141
  147
  154
  161
  169
  177
  185
  194
  203
  213
  223
  234
  245
  257
Fixed operating expenses, $m
  325
  332
  339
  347
  355
  362
  370
  378
  387
  395
  404
  413
  422
  431
  441
  450
  460
  470
  481
  491
  502
  513
  525
  536
  548
  560
  572
  585
  598
  611
Total operating expenses, $m
  409
  418
  427
  438
  448
  458
  470
  481
  494
  506
  513
  526
  540
  554
  570
  585
  601
  617
  635
  652
  671
  690
  710
  730
  751
  773
  795
  819
  843
  868
Operating income, $m
  35
  38
  42
  46
  52
  58
  66
  74
  84
  94
  112
  125
  139
  154
  170
  188
  207
  227
  249
  272
  297
  324
  352
  382
  415
  449
  485
  524
  565
  609
EBITDA, $m
  57
  60
  64
  69
  75
  82
  90
  99
  109
  121
  133
  147
  161
  177
  195
  213
  234
  255
  278
  303
  329
  357
  387
  419
  453
  490
  528
  569
  612
  658
Interest expense (income), $m
  1
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
Earnings before tax, $m
  35
  38
  41
  46
  51
  57
  65
  73
  82
  92
  110
  122
  136
  151
  166
  184
  202
  222
  243
  266
  290
  316
  344
  374
  405
  439
  475
  512
  553
  595
Tax expense, $m
  10
  10
  11
  12
  14
  15
  17
  20
  22
  25
  30
  33
  37
  41
  45
  50
  55
  60
  66
  72
  78
  85
  93
  101
  109
  119
  128
  138
  149
  161
Net income, $m
  26
  28
  30
  33
  37
  42
  47
  53
  60
  67
  80
  89
  99
  110
  121
  134
  147
  162
  178
  194
  212
  231
  251
  273
  296
  320
  346
  374
  403
  435

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
  413
  424
  437
  450
  465
  481
  498
  517
  537
  559
  582
  606
  632
  659
  688
  719
  751
  786
  822
  860
  900
  943
  988
  1,035
  1,084
  1,136
  1,191
  1,249
  1,310
  1,374
Adjusted assets (=assets-cash), $m
  413
  424
  437
  450
  465
  481
  498
  517
  537
  559
  582
  606
  632
  659
  688
  719
  751
  786
  822
  860
  900
  943
  988
  1,035
  1,084
  1,136
  1,191
  1,249
  1,310
  1,374
Revenue / Adjusted assets
  1.075
  1.075
  1.073
  1.076
  1.075
  1.075
  1.076
  1.075
  1.074
  1.075
  1.074
  1.074
  1.074
  1.076
  1.076
  1.075
  1.076
  1.075
  1.074
  1.076
  1.076
  1.075
  1.075
  1.074
  1.076
  1.076
  1.076
  1.075
  1.075
  1.075
Average production assets, $m
  80
  82
  84
  87
  90
  93
  96
  100
  104
  108
  113
  117
  122
  128
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  231
  242
  253
  266
Working capital, $m
  93
  96
  99
  102
  105
  109
  113
  117
  121
  126
  131
  137
  143
  149
  155
  162
  170
  177
  186
  194
  203
  213
  223
  234
  245
  257
  269
  282
  296
  310
Total debt, $m
  2
  5
  9
  12
  16
  21
  25
  30
  36
  42
  48
  54
  61
  69
  76
  85
  93
  103
  112
  123
  133
  145
  157
  170
  183
  197
  212
  227
  244
  261
Total liabilities, $m
  111
  114
  117
  121
  125
  129
  134
  139
  145
  150
  156
  163
  170
  177
  185
  193
  202
  211
  221
  231
  242
  254
  266
  278
  292
  306
  320
  336
  352
  370
Total equity, $m
  302
  310
  319
  329
  340
  352
  364
  378
  393
  408
  425
  443
  462
  482
  503
  525
  549
  574
  601
  629
  658
  689
  722
  756
  793
  831
  871
  913
  957
  1,004
Total liabilities and equity, $m
  413
  424
  436
  450
  465
  481
  498
  517
  538
  558
  581
  606
  632
  659
  688
  718
  751
  785
  822
  860
  900
  943
  988
  1,034
  1,085
  1,137
  1,191
  1,249
  1,309
  1,374
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.240
  0.240
  0.250
  0.250
  0.260
Adjusted equity ratio
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731
  0.731

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  26
  28
  30
  33
  37
  42
  47
  53
  60
  67
  80
  89
  99
  110
  121
  134
  147
  162
  178
  194
  212
  231
  251
  273
  296
  320
  346
  374
  403
  435
Depreciation, amort., depletion, $m
  21
  22
  22
  23
  23
  24
  24
  25
  26
  26
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
Funds from operations, $m
  47
  49
  52
  56
  60
  65
  71
  78
  86
  94
  101
  111
  122
  133
  146
  160
  174
  190
  207
  225
  244
  265
  287
  310
  335
  361
  389
  419
  450
  484
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Cash from operations, $m
  45
  47
  49
  53
  57
  62
  67
  74
  81
  89
  96
  106
  116
  127
  140
  153
  167
  182
  199
  216
  235
  255
  277
  299
  324
  349
  377
  406
  437
  469
Maintenance CAPEX, $m
  -14
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
New CAPEX, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
Cash from investing activities, $m
  -16
  -17
  -17
  -19
  -19
  -20
  -20
  -22
  -23
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -36
  -39
  -40
  -43
  -44
  -47
  -49
  -52
  -54
  -57
  -59
Free cash flow, $m
  29
  30
  32
  35
  38
  42
  47
  52
  59
  66
  71
  80
  89
  99
  110
  122
  135
  149
  164
  180
  197
  215
  234
  255
  277
  300
  325
  352
  380
  410
Issuance/(repayment) of debt, $m
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
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  
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
Total cash flow (excl. dividends), $m
  31
  33
  35
  38
  42
  46
  52
  57
  64
  71
  78
  87
  96
  107
  118
  130
  144
  158
  173
  190
  207
  226
  246
  268
  290
  314
  340
  368
  397
  427
Retained Cash Flow (-), $m
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
Prev. year cash balance distribution, $m
  2
  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
  26
  25
  26
  28
  31
  35
  39
  44
  49
  56
  61
  69
  77
  87
  97
  108
  120
  133
  147
  162
  178
  195
  213
  233
  254
  276
  300
  325
  352
  381
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
  25
  23
  23
  23
  24
  25
  26
  27
  28
  29
  29
  29
  29
  29
  28
  27
  26
  24
  23
  21
  18
  16
  14
  12
  10
  8
  6
  5
  4
  3
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 International (OFIX)

Valuation Ratios
P/E Ratio 351.1
Price to Sales 2.6
Price to Book 4
Price to Tangible Book
Price to Cash Flow 23.4
Price to Free Cash Flow 39
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 $433.823 million for the last fiscal year's total revenue generated by Orthofix International. The default revenue input number comes from 0001 income statement of Orthofix International. 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 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 4.3%, whose default value for OFIX is calculated based on our internal credit rating of Orthofix International, 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 International.
    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 18.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $318 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 International.

Corporate tax rate of 27% is the nominal tax rate for Orthofix International. 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 18%.

Life of production assets of 5.4 years is the average useful life of capital assets used in Orthofix International 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 21%. 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 - $296.608 million for Orthofix International - 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 18.911 million for Orthofix International 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 International at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ Orthofix: 3Q Earnings Snapshot   [04:38PM  Associated Press]
▶ Orthofix: 2Q Earnings Snapshot   [Aug-06-18 04:35PM  Associated Press]
▶ Orthofix to Present at Canaccord Genuity Growth Conference   [Jul-31-18 04:04PM  Business Wire]
▶ Cantor Fitzgerald Taps Spinal Stocks: 4 Top Picks   [Jun-03-18 06:06PM  Benzinga]
▶ New Strong Sell Stocks for June 1st   [Jun-01-18 08:18AM  Zacks]
▶ Orthofix: 1Q Earnings Snapshot   [Apr-30-18 04:42PM  Associated Press]
▶ [$$] Orthofix Acquires Spinal Kinetics   [Mar-16-18 11:52AM  The Wall Street Journal]
▶ Orthofix Announces Agreement to Acquire Spinal Kinetics   [Mar-15-18 04:05PM  Business Wire]
▶ Orthofix posts 4Q profit   [Feb-26-18 05:07PM  Associated Press]
▶ Orthofix to Present at J.P. Morgan Healthcare Conference   [Jan-02-18 04:30PM  Business Wire]
▶ Orthofix beats 3Q profit forecasts   [Oct-30-17 04:11PM  Associated Press]
▶ Orthofix posts 2Q profit   [12:00AM  Associated Press]

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