Intrinsic value of Premier, Inc. - PINC

Previous Close

$38.20

  Intrinsic Value

$35.76

stock screener

  Rating & Target

hold

-6%

Previous close

$38.20

 
Intrinsic value

$35.76

 
Up/down potential

-6%

 
Rating

hold

We calculate the intrinsic value of PINC 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 2.4

 

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, %
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  1,703
  1,749
  1,801
  1,859
  1,921
  1,989
  2,062
  2,140
  2,224
  2,314
  2,409
  2,511
  2,619
  2,733
  2,854
  2,982
  3,117
  3,260
  3,411
  3,570
  3,738
  3,914
  4,100
  4,296
  4,503
  4,720
  4,948
  5,188
  5,441
  5,707
Variable operating expenses, $m
  1,327
  1,360
  1,396
  1,437
  1,481
  1,529
  1,581
  1,636
  1,695
  1,759
  1,703
  1,775
  1,851
  1,932
  2,018
  2,108
  2,204
  2,305
  2,412
  2,524
  2,643
  2,768
  2,899
  3,038
  3,183
  3,337
  3,498
  3,668
  3,847
  4,035
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
  1,327
  1,360
  1,396
  1,437
  1,481
  1,529
  1,581
  1,636
  1,695
  1,759
  1,703
  1,775
  1,851
  1,932
  2,018
  2,108
  2,204
  2,305
  2,412
  2,524
  2,643
  2,768
  2,899
  3,038
  3,183
  3,337
  3,498
  3,668
  3,847
  4,035
Operating income, $m
  376
  390
  405
  422
  440
  460
  481
  504
  529
  555
  706
  736
  767
  801
  836
  874
  913
  955
  999
  1,046
  1,095
  1,147
  1,201
  1,259
  1,319
  1,383
  1,450
  1,520
  1,594
  1,672
EBITDA, $m
  572
  588
  606
  625
  646
  669
  693
  720
  748
  778
  810
  844
  880
  919
  960
  1,003
  1,048
  1,096
  1,147
  1,200
  1,257
  1,316
  1,379
  1,444
  1,514
  1,587
  1,664
  1,744
  1,829
  1,919
Interest expense (income), $m
  0
  6
  -81
  -78
  -74
  -70
  -66
  -62
  -57
  -51
  -46
  -40
  -33
  -26
  -19
  -11
  -3
  6
  15
  25
  35
  46
  57
  69
  81
  95
  109
  123
  139
  155
  172
Earnings before tax, $m
  370
  471
  483
  496
  510
  526
  543
  561
  580
  601
  745
  769
  793
  820
  847
  877
  908
  940
  975
  1,011
  1,050
  1,090
  1,133
  1,177
  1,225
  1,274
  1,326
  1,381
  1,439
  1,500
Tax expense, $m
  100
  127
  130
  134
  138
  142
  147
  151
  157
  162
  201
  208
  214
  221
  229
  237
  245
  254
  263
  273
  283
  294
  306
  318
  331
  344
  358
  373
  389
  405
Net income, $m
  270
  343
  352
  362
  373
  384
  396
  409
  423
  438
  544
  561
  579
  598
  619
  640
  663
  686
  712
  738
  766
  796
  827
  859
  894
  930
  968
  1,008
  1,051
  1,095

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
  2,371
  2,436
  2,509
  2,589
  2,676
  2,770
  2,872
  2,981
  3,098
  3,223
  3,356
  3,497
  3,647
  3,807
  3,975
  4,153
  4,342
  4,541
  4,751
  4,972
  5,206
  5,452
  5,711
  5,984
  6,271
  6,573
  6,891
  7,226
  7,578
  7,948
Adjusted assets (=assets-cash), $m
  2,371
  2,436
  2,509
  2,589
  2,676
  2,770
  2,872
  2,981
  3,098
  3,223
  3,356
  3,497
  3,647
  3,807
  3,975
  4,153
  4,342
  4,541
  4,751
  4,972
  5,206
  5,452
  5,711
  5,984
  6,271
  6,573
  6,891
  7,226
  7,578
  7,948
Revenue / Adjusted assets
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
  0.718
Average production assets, $m
  846
  869
  895
  924
  955
  988
  1,025
  1,064
  1,105
  1,150
  1,197
  1,248
  1,302
  1,358
  1,418
  1,482
  1,549
  1,620
  1,695
  1,774
  1,858
  1,945
  2,038
  2,135
  2,238
  2,346
  2,459
  2,579
  2,704
  2,836
Working capital, $m
  -75
  -77
  -79
  -82
  -85
  -88
  -91
  -94
  -98
  -102
  -106
  -110
  -115
  -120
  -126
  -131
  -137
  -143
  -150
  -157
  -164
  -172
  -180
  -189
  -198
  -208
  -218
  -228
  -239
  -251
Total debt, $m
  -1,498
  -1,439
  -1,374
  -1,302
  -1,224
  -1,139
  -1,048
  -949
  -844
  -732
  -612
  -485
  -349
  -206
  -55
  106
  276
  455
  644
  843
  1,053
  1,275
  1,508
  1,753
  2,012
  2,284
  2,570
  2,871
  3,188
  3,521
Total liabilities, $m
  2,134
  2,193
  2,258
  2,330
  2,408
  2,493
  2,584
  2,683
  2,788
  2,900
  3,020
  3,147
  3,283
  3,426
  3,578
  3,738
  3,908
  4,087
  4,276
  4,475
  4,685
  4,907
  5,140
  5,385
  5,644
  5,916
  6,202
  6,503
  6,820
  7,153
Total equity, $m
  237
  244
  251
  259
  268
  277
  287
  298
  310
  322
  336
  350
  365
  381
  398
  415
  434
  454
  475
  497
  521
  545
  571
  598
  627
  657
  689
  723
  758
  795
Total liabilities and equity, $m
  2,371
  2,437
  2,509
  2,589
  2,676
  2,770
  2,871
  2,981
  3,098
  3,222
  3,356
  3,497
  3,648
  3,807
  3,976
  4,153
  4,342
  4,541
  4,751
  4,972
  5,206
  5,452
  5,711
  5,983
  6,271
  6,573
  6,891
  7,226
  7,578
  7,948
Debt-to-equity ratio
  -6.320
  -5.910
  -5.480
  -5.030
  -4.570
  -4.110
  -3.650
  -3.180
  -2.720
  -2.270
  -1.820
  -1.390
  -0.960
  -0.540
  -0.140
  0.260
  0.630
  1.000
  1.350
  1.700
  2.020
  2.340
  2.640
  2.930
  3.210
  3.470
  3.730
  3.970
  4.210
  4.430
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  270
  343
  352
  362
  373
  384
  396
  409
  423
  438
  544
  561
  579
  598
  619
  640
  663
  686
  712
  738
  766
  796
  827
  859
  894
  930
  968
  1,008
  1,051
  1,095
Depreciation, amort., depletion, $m
  196
  199
  201
  203
  206
  209
  212
  215
  219
  223
  104
  109
  113
  118
  123
  129
  135
  141
  147
  154
  162
  169
  177
  186
  195
  204
  214
  224
  235
  247
Funds from operations, $m
  467
  542
  553
  565
  578
  593
  608
  625
  642
  661
  648
  670
  692
  716
  742
  769
  797
  827
  859
  893
  928
  965
  1,004
  1,045
  1,089
  1,134
  1,182
  1,233
  1,286
  1,341
Change in working capital, $m
  -2
  -2
  -2
  -3
  -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
Cash from operations, $m
  469
  544
  555
  568
  581
  596
  611
  628
  646
  665
  653
  674
  697
  721
  747
  774
  803
  834
  866
  899
  935
  973
  1,012
  1,054
  1,098
  1,144
  1,192
  1,243
  1,297
  1,353
Maintenance CAPEX, $m
  -72
  -74
  -76
  -78
  -80
  -83
  -86
  -89
  -92
  -96
  -100
  -104
  -109
  -113
  -118
  -123
  -129
  -135
  -141
  -147
  -154
  -162
  -169
  -177
  -186
  -195
  -204
  -214
  -224
  -235
New CAPEX, $m
  -21
  -23
  -26
  -28
  -31
  -34
  -36
  -39
  -42
  -45
  -47
  -50
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -103
  -108
  -113
  -119
  -126
  -132
Cash from investing activities, $m
  -93
  -97
  -102
  -106
  -111
  -117
  -122
  -128
  -134
  -141
  -147
  -154
  -163
  -170
  -178
  -187
  -196
  -206
  -216
  -226
  -237
  -250
  -261
  -274
  -289
  -303
  -317
  -333
  -350
  -367
Free cash flow, $m
  376
  447
  454
  461
  470
  479
  489
  500
  512
  525
  505
  520
  535
  551
  569
  588
  607
  628
  650
  673
  698
  723
  751
  779
  809
  841
  875
  910
  947
  986
Issuance/(repayment) of debt, $m
  -1,605
  59
  65
  72
  78
  85
  92
  98
  105
  112
  120
  127
  135
  143
  152
  160
  170
  179
  189
  199
  210
  221
  233
  246
  259
  272
  286
  301
  317
  333
Issuance/(repurchase) of shares, $m
  1,394
  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  
  -211
  59
  65
  72
  78
  85
  92
  98
  105
  112
  120
  127
  135
  143
  152
  160
  170
  179
  189
  199
  210
  221
  233
  246
  259
  272
  286
  301
  317
  333
Total cash flow (excl. dividends), $m
  165
  506
  519
  533
  548
  564
  581
  598
  617
  637
  625
  647
  670
  695
  721
  748
  777
  807
  839
  872
  908
  945
  984
  1,025
  1,068
  1,113
  1,161
  1,211
  1,264
  1,319
Retained Cash Flow (-), $m
  -1,664
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
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
  -1,499
  499
  512
  525
  539
  554
  571
  587
  605
  625
  611
  633
  655
  679
  704
  730
  758
  787
  818
  850
  884
  920
  958
  998
  1,039
  1,083
  1,129
  1,178
  1,228
  1,282
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
  -1,438
  457
  445
  432
  418
  402
  385
  367
  348
  327
  290
  270
  249
  228
  207
  186
  165
  145
  126
  108
  91
  76
  63
  51
  40
  32
  24
  18
  13
  10
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Premier, Inc. is a healthcare improvement company. The Company is uniting an alliance of approximately 3,900 United States hospitals and health systems and approximately 150,000 other providers and organizations to transform healthcare. The Company operates healthcare group purchasing organizations and also provides integrated data and analytics, supply chain solutions, advisory services, performance improvement collaborative and other services. The Company plays a role in the healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide.

FINANCIAL RATIOS  of  Premier, Inc. (PINC)

Valuation Ratios
P/E Ratio 47.1
Price to Sales 3.7
Price to Book -3.2
Price to Tangible Book
Price to Cash Flow 13.6
Price to Free Cash Flow 16.6
Growth Rates
Sales Growth Rate 25.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.8%
Cap. Spend. - 3 Yr. Gr. Rate 4.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity -189.2%
Total Debt to Equity -202.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.2%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 7.7%
Ret/ On T. Cap. - 3 Yr. Avg. 5.3%
Return On Equity -6.3%
Return On Equity - 3 Yr. Avg. -3.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 53.3%
Gross Margin - 3 Yr. Avg. 58.2%
EBITDA Margin 43.8%
EBITDA Margin - 3 Yr. Avg. 36%
Operating Margin 35.9%
Oper. Margin - 3 Yr. Avg. 28.4%
Pre-Tax Margin 36.5%
Pre-Tax Margin - 3 Yr. Avg. 29.3%
Net Profit Margin 7.8%
Net Profit Margin - 3 Yr. Avg. 5.1%
Effective Tax Rate 15.4%
Eff/ Tax Rate - 3 Yr. Avg. 15.4%
Payout Ratio 0%

PINC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PINC stock intrinsic value calculation we used $1661 million for the last fiscal year's total revenue generated by Premier, Inc.. The default revenue input number comes from 0001 income statement of Premier, 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 PINC stock valuation model: a) initial revenue growth rate of 2.5% 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 PINC is calculated based on our internal credit rating of Premier, 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 Premier, 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 PINC stock the variable cost ratio is equal to 78.1%.

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 PINC 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 Premier, Inc..

Corporate tax rate of 27% is the nominal tax rate for Premier, 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 PINC 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 PINC are equal to 49.7%.

Life of production assets of 11.5 years is the average useful life of capital assets used in Premier, 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 PINC is equal to -4.4%. 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 - $-1427.064 million for Premier, 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 63.731 million for Premier, 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 Premier, Inc. at the current share price and the inputted number of shares is $2.4 billion.

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