Intrinsic value of SeaSpine Holdings Corporation - SPNE

Previous Close

$10.75

  Intrinsic Value

$1.50

stock screener

  Rating & Target

str. sell

-86%

Previous close

$10.75

 
Intrinsic value

$1.50

 
Up/down potential

-86%

 
Rating

str. sell

We calculate the intrinsic value of SPNE 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 0.2

 

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, %
  11.90
  11.21
  10.59
  10.03
  9.53
  9.07
  8.67
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
Revenue, $m
  160
  178
  197
  217
  237
  259
  281
  304
  329
  354
  380
  407
  436
  465
  496
  528
  561
  595
  631
  669
  708
  748
  791
  835
  881
  930
  981
  1,034
  1,089
  1,147
Variable operating expenses, $m
  173
  192
  212
  233
  255
  278
  302
  327
  353
  379
  404
  433
  463
  495
  527
  561
  596
  633
  671
  711
  753
  796
  841
  888
  938
  989
  1,043
  1,099
  1,158
  1,220
Fixed operating expenses, $m
  21
  22
  22
  23
  23
  24
  24
  25
  26
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
  35
  36
  37
  38
  39
  39
  40
Total operating expenses, $m
  194
  214
  234
  256
  278
  302
  326
  352
  379
  405
  431
  460
  491
  523
  556
  591
  626
  664
  703
  743
  786
  830
  876
  923
  974
  1,026
  1,081
  1,138
  1,197
  1,260
Operating income, $m
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -52
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -85
  -89
  -92
  -96
  -100
  -104
  -109
  -113
EBITDA, $m
  -23
  -24
  -25
  -25
  -26
  -27
  -28
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -39
  -40
  -41
  -42
  -43
  -45
  -46
  -47
  -49
  -50
  -52
  -53
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
Earnings before tax, $m
  -35
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -53
  -56
  -59
  -61
  -64
  -67
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -124
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
  -35
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -53
  -56
  -59
  -61
  -64
  -67
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -124

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
  162
  180
  199
  219
  240
  262
  285
  308
  333
  359
  385
  413
  441
  471
  502
  534
  568
  603
  639
  677
  717
  758
  801
  846
  893
  942
  993
  1,047
  1,103
  1,162
Adjusted assets (=assets-cash), $m
  162
  180
  199
  219
  240
  262
  285
  308
  333
  359
  385
  413
  441
  471
  502
  534
  568
  603
  639
  677
  717
  758
  801
  846
  893
  942
  993
  1,047
  1,103
  1,162
Revenue / Adjusted assets
  0.988
  0.989
  0.990
  0.991
  0.988
  0.989
  0.986
  0.987
  0.988
  0.986
  0.987
  0.985
  0.989
  0.987
  0.988
  0.989
  0.988
  0.987
  0.987
  0.988
  0.987
  0.987
  0.988
  0.987
  0.987
  0.987
  0.988
  0.988
  0.987
  0.987
Average production assets, $m
  43
  48
  53
  58
  64
  69
  75
  82
  88
  95
  102
  109
  117
  125
  133
  141
  150
  159
  169
  179
  190
  201
  212
  224
  236
  249
  263
  277
  292
  307
Working capital, $m
  44
  49
  54
  60
  65
  71
  78
  84
  91
  98
  105
  112
  120
  128
  137
  146
  155
  164
  174
  185
  195
  207
  218
  230
  243
  257
  271
  285
  301
  317
Total debt, $m
  4
  7
  11
  16
  20
  25
  29
  34
  39
  45
  50
  56
  62
  68
  75
  81
  88
  96
  103
  111
  120
  128
  137
  147
  156
  167
  177
  189
  200
  213
Total liabilities, $m
  34
  38
  42
  46
  50
  55
  60
  64
  70
  75
  80
  86
  92
  98
  105
  112
  119
  126
  134
  142
  150
  158
  167
  177
  187
  197
  208
  219
  231
  243
Total equity, $m
  128
  143
  158
  174
  190
  207
  225
  244
  263
  284
  305
  326
  349
  373
  397
  423
  449
  477
  506
  536
  567
  600
  634
  669
  706
  745
  786
  828
  873
  919
Total liabilities and equity, $m
  162
  181
  200
  220
  240
  262
  285
  308
  333
  359
  385
  412
  441
  471
  502
  535
  568
  603
  640
  678
  717
  758
  801
  846
  893
  942
  994
  1,047
  1,104
  1,162
Debt-to-equity ratio
  0.030
  0.050
  0.070
  0.090
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.160
  0.170
  0.180
  0.180
  0.190
  0.190
  0.200
  0.200
  0.200
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
Adjusted equity ratio
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -35
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -53
  -56
  -59
  -61
  -64
  -67
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -124
Depreciation, amort., depletion, $m
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  42
  44
  46
  49
  52
  54
  57
  60
Funds from operations, $m
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -38
  -40
  -41
  -42
  -44
  -46
  -47
  -49
  -50
  -52
  -54
  -56
  -58
  -60
  -62
  -64
Change in working capital, $m
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Cash from operations, $m
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -62
  -64
  -67
  -69
  -72
  -74
  -77
  -80
Maintenance CAPEX, $m
  -8
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -52
  -54
  -57
New CAPEX, $m
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
Cash from investing activities, $m
  -13
  -13
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -35
  -37
  -38
  -41
  -43
  -45
  -48
  -50
  -54
  -56
  -59
  -63
  -66
  -69
  -73
Free cash flow, $m
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -123
  -128
  -134
  -140
  -146
  -153
Issuance/(repayment) of debt, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
Issuance/(repurchase) of shares, $m
  48
  51
  53
  56
  59
  62
  65
  68
  71
  74
  74
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
  121
  126
  132
  137
  143
  150
  157
  163
  171
Cash from financing (excl. dividends), $m  
  52
  55
  57
  60
  63
  67
  70
  73
  76
  79
  80
  84
  87
  91
  95
  100
  104
  108
  114
  119
  124
  130
  135
  141
  147
  153
  161
  168
  175
  183
Total cash flow (excl. dividends), $m
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
Retained Cash Flow (-), $m
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -74
  -74
  -78
  -81
  -85
  -89
  -93
  -97
  -101
  -106
  -111
  -116
  -121
  -126
  -132
  -137
  -143
  -150
  -157
  -163
  -171
Prev. year cash balance distribution, $m
  27
  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
  -9
  -38
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -95
  -99
  -104
  -108
  -113
  -118
  -123
  -129
  -135
  -140
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
  -9
  -35
  -35
  -35
  -35
  -34
  -34
  -33
  -32
  -30
  -29
  -27
  -25
  -23
  -21
  -19
  -17
  -15
  -13
  -12
  -10
  -8
  -7
  -6
  -4
  -3
  -3
  -2
  -1
  -1
Current shareholders' claim on cash, %
  77.3
  60.5
  47.9
  38.4
  31.0
  25.3
  20.8
  17.2
  14.3
  11.9
  10.1
  8.5
  7.3
  6.2
  5.3
  4.6
  3.9
  3.4
  2.9
  2.6
  2.2
  1.9
  1.7
  1.5
  1.3
  1.1
  1.0
  0.9
  0.8
  0.7

SeaSpine Holdings Corporation is a medical technology company. The Company is focused on the design, development and commercialization of surgical solutions for the treatment of patients suffering from spinal disorders. The Company operates through the development, manufacture and marketing of orthobiologics and spinal fusion hardware segment. It has a portfolio of orthobiologics and spinal fusion hardware solutions to meet the varying combinations of products that neurosurgeons and orthopedic spine surgeons need to perform fusion procedures in the lumbar, thoracic and cervical spine. It offers a portfolio of orthobiologics and spinal fusion hardware products for the treatment of patients suffering from spinal and other orthopedic disorders. Its orthobiologics products consist of a range of bone graft substitutes that are designed to improve bone fusion rates following a range of orthopedic surgeries, including spine, hip and extremities procedures.

FINANCIAL RATIOS  of  SeaSpine Holdings Corporation (SPNE)

Valuation Ratios
P/E Ratio -2.8
Price to Sales 0.9
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow -8.6
Price to Free Cash Flow -5.3
Growth Rates
Sales Growth Rate -3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 3.6%
Total Debt to Equity 3.6%
Interest Coverage 0
Management Effectiveness
Return On Assets -26.6%
Ret/ On Assets - 3 Yr. Avg. -26.4%
Return On Total Capital -32.8%
Ret/ On T. Cap. - 3 Yr. Avg. -34.8%
Return On Equity -33.3%
Return On Equity - 3 Yr. Avg. -35%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 56.6%
Gross Margin - 3 Yr. Avg. 56.6%
EBITDA Margin -24.8%
EBITDA Margin - 3 Yr. Avg. -20%
Operating Margin -33.3%
Oper. Margin - 3 Yr. Avg. -28.9%
Pre-Tax Margin -34.1%
Pre-Tax Margin - 3 Yr. Avg. -29.7%
Net Profit Margin -33.3%
Net Profit Margin - 3 Yr. Avg. -31.1%
Effective Tax Rate 2.3%
Eff/ Tax Rate - 3 Yr. Avg. -7.5%
Payout Ratio 0%

SPNE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPNE stock intrinsic value calculation we used $143 million for the last fiscal year's total revenue generated by SeaSpine Holdings Corporation. The default revenue input number comes from 0001 income statement of SeaSpine Holdings Corporation. 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 SPNE stock valuation model: a) initial revenue growth rate of 11.9% 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 SPNE is calculated based on our internal credit rating of SeaSpine Holdings Corporation, 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 SeaSpine Holdings Corporation.
    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 SPNE stock the variable cost ratio is equal to 108.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $21 million in the base year in the intrinsic value calculation for SPNE 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 SeaSpine Holdings Corporation.

Corporate tax rate of 27% is the nominal tax rate for SeaSpine Holdings Corporation. 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 SPNE 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 SPNE are equal to 26.8%.

Life of production assets of 5.1 years is the average useful life of capital assets used in SeaSpine Holdings Corporation 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 SPNE is equal to 27.6%. 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 - $142.085 million for SeaSpine Holdings Corporation - 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 18.880 million for SeaSpine Holdings Corporation 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 SeaSpine Holdings Corporation at the current share price and the inputted number of shares is $0.2 billion.

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