Intrinsic value of SeaSpine Holdings - SPNE

Previous Close

$16.13

  Intrinsic Value

$1.20

stock screener

  Rating & Target

str. sell

-93%

Previous close

$16.13

 
Intrinsic value

$1.20

 
Up/down potential

-93%

 
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, %
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
Revenue, $m
  140
  149
  159
  168
  178
  189
  200
  211
  223
  236
  249
  262
  276
  291
  307
  323
  340
  358
  377
  396
  417
  438
  461
  485
  509
  535
  563
  591
  621
  653
Variable operating expenses, $m
  188
  200
  212
  225
  238
  252
  266
  281
  297
  313
  327
  345
  363
  383
  403
  425
  447
  471
  495
  521
  548
  576
  606
  637
  669
  704
  740
  777
  817
  858
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
  188
  200
  212
  225
  238
  252
  266
  281
  297
  313
  327
  345
  363
  383
  403
  425
  447
  471
  495
  521
  548
  576
  606
  637
  669
  704
  740
  777
  817
  858
Operating income, $m
  -48
  -50
  -53
  -56
  -60
  -63
  -66
  -70
  -74
  -78
  -78
  -82
  -87
  -92
  -96
  -102
  -107
  -113
  -118
  -125
  -131
  -138
  -145
  -152
  -160
  -168
  -177
  -186
  -195
  -205
EBITDA, $m
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -84
  -88
  -93
  -97
  -102
  -108
  -113
  -119
  -125
  -132
  -138
  -146
  -153
  -161
  -169
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
Earnings before tax, $m
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -79
  -84
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -127
  -134
  -141
  -148
  -156
  -164
  -173
  -182
  -191
  -201
  -211
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
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -79
  -84
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -127
  -134
  -141
  -148
  -156
  -164
  -173
  -182
  -191
  -201
  -211

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
  143
  152
  161
  171
  182
  192
  203
  215
  227
  240
  253
  267
  281
  297
  312
  329
  346
  365
  384
  404
  424
  446
  469
  493
  519
  545
  573
  602
  633
  665
Adjusted assets (=assets-cash), $m
  143
  152
  161
  171
  182
  192
  203
  215
  227
  240
  253
  267
  281
  297
  312
  329
  346
  365
  384
  404
  424
  446
  469
  493
  519
  545
  573
  602
  633
  665
Revenue / Adjusted assets
  0.979
  0.980
  0.988
  0.982
  0.978
  0.984
  0.985
  0.981
  0.982
  0.983
  0.984
  0.981
  0.982
  0.980
  0.984
  0.982
  0.983
  0.981
  0.982
  0.980
  0.983
  0.982
  0.983
  0.984
  0.981
  0.982
  0.983
  0.982
  0.981
  0.982
Average production assets, $m
  44
  47
  49
  52
  56
  59
  62
  66
  70
  73
  78
  82
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  167
  176
  184
  194
  204
Working capital, $m
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  115
  121
  128
  134
  141
  148
  156
  164
  172
  181
  190
  200
  210
Total debt, $m
  2
  4
  6
  8
  10
  12
  15
  17
  20
  23
  25
  28
  31
  35
  38
  42
  45
  49
  53
  58
  62
  67
  72
  77
  82
  88
  94
  100
  107
  113
Total liabilities, $m
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  91
  96
  100
  106
  111
  117
  123
  129
  135
  142
Total equity, $m
  112
  119
  127
  135
  143
  151
  160
  169
  179
  189
  199
  210
  221
  233
  246
  259
  272
  287
  302
  317
  334
  351
  369
  388
  408
  429
  450
  473
  497
  523
Total liabilities and equity, $m
  143
  152
  162
  172
  182
  192
  204
  215
  228
  240
  253
  267
  281
  296
  313
  329
  346
  365
  384
  403
  425
  447
  469
  494
  519
  546
  573
  602
  632
  665
Debt-to-equity ratio
  0.020
  0.030
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.130
  0.140
  0.150
  0.150
  0.160
  0.170
  0.170
  0.180
  0.180
  0.190
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.210
  0.210
  0.220
Adjusted equity ratio
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -79
  -84
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -127
  -134
  -141
  -148
  -156
  -164
  -173
  -182
  -191
  -201
  -211
Depreciation, amort., depletion, $m
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  36
Funds from operations, $m
  -36
  -39
  -41
  -44
  -47
  -49
  -52
  -55
  -59
  -62
  -65
  -69
  -73
  -77
  -81
  -86
  -90
  -95
  -100
  -105
  -111
  -117
  -123
  -129
  -136
  -143
  -150
  -158
  -166
  -175
Change in working capital, $m
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
Cash from operations, $m
  -39
  -42
  -44
  -47
  -50
  -53
  -56
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -167
  -176
  -185
Maintenance CAPEX, $m
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
New CAPEX, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
Cash from investing activities, $m
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -39
  -40
  -42
  -45
Free cash flow, $m
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -132
  -139
  -146
  -154
  -162
  -170
  -179
  -188
  -197
  -207
  -218
  -229
Issuance/(repayment) of debt, $m
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
Issuance/(repurchase) of shares, $m
  54
  58
  61
  64
  68
  72
  76
  80
  84
  89
  90
  95
  100
  105
  111
  117
  123
  129
  136
  143
  151
  158
  167
  175
  184
  194
  203
  214
  225
  236
Cash from financing (excl. dividends), $m  
  56
  60
  63
  66
  70
  74
  78
  82
  87
  92
  93
  98
  103
  108
  114
  121
  127
  133
  140
  147
  155
  163
  172
  180
  189
  200
  209
  220
  232
  243
Total cash flow (excl. dividends), $m
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
Retained Cash Flow (-), $m
  -54
  -58
  -61
  -64
  -68
  -72
  -76
  -80
  -84
  -89
  -90
  -95
  -100
  -105
  -111
  -117
  -123
  -129
  -136
  -143
  -151
  -158
  -167
  -175
  -184
  -194
  -203
  -214
  -225
  -236
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
  -47
  -50
  -53
  -57
  -60
  -64
  -67
  -71
  -75
  -80
  -84
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -128
  -134
  -142
  -149
  -157
  -165
  -173
  -182
  -191
  -201
  -212
  -222
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
  -45
  -46
  -46
  -47
  -47
  -46
  -46
  -45
  -43
  -42
  -40
  -38
  -36
  -33
  -31
  -28
  -25
  -22
  -20
  -17
  -15
  -12
  -10
  -8
  -7
  -5
  -4
  -3
  -2
  -2
Current shareholders' claim on cash, %
  81.4
  66.3
  54.0
  44.1
  36.0
  29.4
  24.1
  19.7
  16.1
  13.2
  10.9
  9.0
  7.4
  6.1
  5.1
  4.2
  3.5
  2.9
  2.4
  1.9
  1.6
  1.3
  1.1
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3

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 (SPNE)

Valuation Ratios
P/E Ratio -4.2
Price to Sales 1.4
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow -13
Price to Free Cash Flow -7.9
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 $131.814 million for the last fiscal year's total revenue generated by SeaSpine Holdings. The default revenue input number comes from 0001 income statement of SeaSpine Holdings. 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 6.5% 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 SPNE is calculated based on our internal credit rating of SeaSpine Holdings, 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.
    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 134.1%.

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 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.

Corporate tax rate of 27% is the nominal tax rate for SeaSpine Holdings. 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 31.2%.

Life of production assets of 5.6 years is the average useful life of capital assets used in SeaSpine Holdings 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 32.2%. 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 - $105.653 million for SeaSpine Holdings - 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 14.743 million for SeaSpine Holdings 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 at the current share price and the inputted number of shares is $0.2 billion.

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KTWO K2M Group Hold 27.50 0.61  str.sell
GMED Globus Medical 51.22 28.58  sell
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COMPANY NEWS

▶ SeaSpine Prices Public Offering of Common Stock   [Oct-11-18 08:57AM  GlobeNewswire]
▶ SeaSpine Commences Public Offering of Common Stock   [Oct-10-18 04:24PM  GlobeNewswire]
▶ SeaSpine to Present at Upcoming Investor Conferences   [Sep-28-18 04:05PM  GlobeNewswire]
▶ SeaSpine Announces Launch of Regatta Lateral System   [Sep-26-18 08:15AM  GlobeNewswire]
▶ SeaSpine Reports Granting of Inducement Awards   [Aug-03-18 04:05PM  GlobeNewswire]
▶ SeaSpine Reports Second Quarter 2018 Financial Results   [Jul-30-18 04:05PM  GlobeNewswire]
▶ SeaSpine Reports First Quarter 2018 Financial Results   [May-03-18 04:05PM  GlobeNewswire]
▶ SeaSpine Reports Third Quarter 2017 Financial Results   [Nov-02-17 04:03PM  GlobeNewswire]
▶ SeaSpine Reports Second Quarter 2017 Financial Results   [Aug-03-17 04:05PM  GlobeNewswire]
▶ SeaSpine to Present at Upcoming Investor Conferences   [May-10-17 09:05AM  GlobeNewswire]
▶ SeaSpine Reports First Quarter 2017 Financial Results   [May-04-17 04:05PM  GlobeNewswire]
▶ SeaSpine to Present at Upcoming Investor Conferences   [Feb-28-17 04:15PM  GlobeNewswire]

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