Intrinsic value of STAAR Surgical Company - STAA

Previous Close

$31.05

  Intrinsic Value

$19.37

stock screener

  Rating & Target

sell

-38%

Previous close

$31.05

 
Intrinsic value

$19.37

 
Up/down potential

-38%

 
Rating

sell

We calculate the intrinsic value of STAA 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 1.4

 

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, %
  25.50
  23.45
  21.61
  19.94
  18.45
  17.11
  15.89
  14.81
  13.82
  12.94
  12.15
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
Revenue, $m
  156
  192
  234
  280
  332
  389
  450
  517
  589
  665
  746
  831
  920
  1,014
  1,113
  1,215
  1,322
  1,434
  1,549
  1,670
  1,795
  1,925
  2,060
  2,200
  2,346
  2,498
  2,656
  2,821
  2,992
  3,171
Variable operating expenses, $m
  108
  133
  162
  194
  230
  269
  312
  358
  408
  461
  516
  575
  637
  702
  770
  842
  916
  993
  1,073
  1,156
  1,243
  1,333
  1,426
  1,524
  1,625
  1,730
  1,839
  1,953
  2,072
  2,195
Fixed operating expenses, $m
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  41
  42
  42
  43
  44
  45
  46
  47
  48
  49
  51
  52
  53
  54
  55
  56
  58
  59
  60
  61
Total operating expenses, $m
  141
  166
  196
  229
  266
  305
  349
  396
  447
  501
  557
  617
  679
  745
  814
  887
  962
  1,040
  1,121
  1,205
  1,294
  1,385
  1,479
  1,578
  1,680
  1,786
  1,897
  2,012
  2,132
  2,256
Operating income, $m
  15
  25
  38
  51
  66
  83
  101
  121
  142
  165
  189
  214
  241
  269
  298
  329
  360
  394
  428
  464
  502
  540
  581
  623
  667
  712
  760
  809
  860
  914
EBITDA, $m
  18
  29
  42
  56
  73
  90
  110
  131
  153
  177
  202
  229
  258
  287
  318
  351
  385
  420
  457
  495
  535
  576
  619
  664
  710
  758
  809
  861
  915
  972
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  4
  5
  5
  6
  7
  8
  10
  11
  12
  13
  15
  16
  17
  19
  21
  22
  24
  26
  27
  29
  31
  33
  36
  38
Earnings before tax, $m
  15
  25
  36
  49
  64
  80
  97
  116
  137
  158
  181
  206
  231
  258
  286
  315
  346
  378
  411
  445
  481
  518
  557
  597
  639
  683
  728
  775
  825
  876
Tax expense, $m
  4
  7
  10
  13
  17
  22
  26
  31
  37
  43
  49
  56
  62
  70
  77
  85
  93
  102
  111
  120
  130
  140
  150
  161
  173
  184
  197
  209
  223
  237
Net income, $m
  11
  18
  27
  36
  47
  58
  71
  85
  100
  115
  132
  150
  169
  188
  209
  230
  252
  276
  300
  325
  351
  378
  407
  436
  467
  498
  532
  566
  602
  640

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
  108
  134
  163
  195
  231
  270
  313
  360
  410
  463
  519
  578
  641
  706
  774
  846
  920
  998
  1,078
  1,162
  1,249
  1,340
  1,434
  1,531
  1,633
  1,739
  1,849
  1,963
  2,082
  2,206
Adjusted assets (=assets-cash), $m
  108
  134
  163
  195
  231
  270
  313
  360
  410
  463
  519
  578
  641
  706
  774
  846
  920
  998
  1,078
  1,162
  1,249
  1,340
  1,434
  1,531
  1,633
  1,739
  1,849
  1,963
  2,082
  2,206
Revenue / Adjusted assets
  1.444
  1.433
  1.436
  1.436
  1.437
  1.441
  1.438
  1.436
  1.437
  1.436
  1.437
  1.438
  1.435
  1.436
  1.438
  1.436
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.436
  1.436
  1.437
  1.437
  1.437
Average production assets, $m
  15
  18
  22
  26
  31
  37
  42
  49
  55
  62
  70
  78
  87
  95
  105
  114
  124
  135
  146
  157
  169
  181
  194
  207
  221
  235
  250
  265
  281
  298
Working capital, $m
  31
  38
  47
  56
  66
  78
  90
  103
  118
  133
  149
  166
  184
  203
  223
  243
  264
  287
  310
  334
  359
  385
  412
  440
  469
  500
  531
  564
  598
  634
Total debt, $m
  13
  22
  32
  43
  56
  69
  84
  101
  118
  136
  156
  177
  198
  221
  245
  270
  296
  322
  351
  380
  410
  441
  474
  508
  544
  580
  619
  658
  700
  743
Total liabilities, $m
  38
  47
  57
  68
  80
  94
  109
  125
  143
  161
  181
  201
  223
  246
  269
  294
  320
  347
  375
  404
  435
  466
  499
  533
  568
  605
  643
  683
  725
  768
Total equity, $m
  71
  87
  106
  127
  151
  176
  204
  235
  267
  302
  338
  377
  418
  460
  505
  551
  600
  650
  703
  758
  814
  873
  935
  998
  1,065
  1,134
  1,205
  1,280
  1,358
  1,439
Total liabilities and equity, $m
  109
  134
  163
  195
  231
  270
  313
  360
  410
  463
  519
  578
  641
  706
  774
  845
  920
  997
  1,078
  1,162
  1,249
  1,339
  1,434
  1,531
  1,633
  1,739
  1,848
  1,963
  2,083
  2,207
Debt-to-equity ratio
  0.180
  0.250
  0.300
  0.340
  0.370
  0.390
  0.410
  0.430
  0.440
  0.450
  0.460
  0.470
  0.470
  0.480
  0.480
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.520
  0.520
Adjusted equity ratio
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  18
  27
  36
  47
  58
  71
  85
  100
  115
  132
  150
  169
  188
  209
  230
  252
  276
  300
  325
  351
  378
  407
  436
  467
  498
  532
  566
  602
  640
Depreciation, amort., depletion, $m
  3
  4
  5
  5
  6
  7
  9
  10
  11
  12
  14
  15
  17
  19
  21
  22
  24
  26
  29
  31
  33
  35
  38
  41
  43
  46
  49
  52
  55
  58
Funds from operations, $m
  14
  22
  31
  41
  53
  66
  80
  95
  111
  128
  146
  165
  186
  207
  229
  253
  277
  302
  328
  356
  384
  414
  445
  477
  510
  545
  581
  618
  657
  698
Change in working capital, $m
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
Cash from operations, $m
  7
  15
  23
  32
  43
  54
  67
  81
  96
  113
  130
  148
  168
  188
  210
  232
  255
  280
  305
  332
  359
  388
  418
  449
  481
  514
  549
  585
  623
  662
Maintenance CAPEX, $m
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -10
  -11
  -12
  -14
  -15
  -17
  -19
  -21
  -22
  -24
  -26
  -29
  -31
  -33
  -35
  -38
  -41
  -43
  -46
  -49
  -52
  -55
New CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
Cash from investing activities, $m
  -5
  -6
  -8
  -8
  -10
  -11
  -13
  -14
  -17
  -18
  -20
  -22
  -23
  -26
  -28
  -31
  -32
  -34
  -37
  -40
  -43
  -45
  -48
  -51
  -55
  -57
  -61
  -64
  -68
  -72
Free cash flow, $m
  2
  8
  15
  23
  33
  43
  54
  67
  80
  95
  110
  127
  144
  162
  182
  202
  223
  245
  268
  292
  317
  343
  369
  397
  426
  457
  488
  521
  555
  590
Issuance/(repayment) of debt, $m
  8
  9
  10
  11
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
Issuance/(repurchase) of shares, $m
  4
  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  
  12
  9
  10
  11
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
Total cash flow (excl. dividends), $m
  14
  17
  25
  35
  45
  57
  69
  83
  97
  113
  130
  147
  166
  185
  206
  227
  249
  272
  296
  321
  347
  374
  402
  431
  462
  493
  526
  561
  596
  634
Retained Cash Flow (-), $m
  -14
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -32
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -81
Prev. year cash balance distribution, $m
  76
  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
  75
  1
  7
  14
  22
  31
  41
  53
  65
  79
  93
  109
  125
  143
  161
  180
  200
  221
  243
  266
  290
  315
  341
  368
  396
  424
  455
  486
  519
  553
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
  72
  0
  6
  11
  17
  22
  28
  33
  37
  41
  44
  46
  48
  48
  47
  46
  44
  41
  37
  34
  30
  26
  22
  19
  15
  12
  10
  8
  6
  4
Current shareholders' claim on cash, %
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4

STAAR Surgical Company designs, develops, manufactures and sells implantable lenses for the eye and delivery systems used to deliver the lenses into the eye. It operates in the ophthalmic surgical market segment. Its principal products are intraocular lenses used in cataract surgery and implantable collamer lenses used in refractive surgery. It makes lenses used across the world in corrective or refractive surgery, and makes lenses for use in surgery that treats cataracts. Its refractive surgery corrects the types of visual disorders that glasses or contact lenses have treated (myopia, hyperopia, astigmatism and presbyopia). Its refractive surgery corrects the types of visual disorders that glasses or contact lenses have treated (myopia, hyperopia, astigmatism and presbyopia). As of December 30, 2016, it sold its products in more than 60 countries, with direct distribution in the United States, Canada, Japan and Spain, and independent distribution in the remainder of the world.

FINANCIAL RATIOS  of  STAAR Surgical Company (STAA)

Valuation Ratios
P/E Ratio -105.4
Price to Sales 15.4
Price to Book 33.3
Price to Tangible Book
Price to Cash Flow 1264.7
Price to Free Cash Flow -632.3
Growth Rates
Sales Growth Rate 6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 5.3%
Total Debt to Equity 18.4%
Interest Coverage 0
Management Effectiveness
Return On Assets -18.8%
Ret/ On Assets - 3 Yr. Avg. -14.5%
Return On Total Capital -27%
Ret/ On T. Cap. - 3 Yr. Avg. -20.6%
Return On Equity -31.2%
Return On Equity - 3 Yr. Avg. -23.5%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 70.7%
Gross Margin - 3 Yr. Avg. 68.3%
EBITDA Margin -11%
EBITDA Margin - 3 Yr. Avg. -8.5%
Operating Margin -15.9%
Oper. Margin - 3 Yr. Avg. -11%
Pre-Tax Margin -14.6%
Pre-Tax Margin - 3 Yr. Avg. -11.5%
Net Profit Margin -14.6%
Net Profit Margin - 3 Yr. Avg. -11.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -1.9%
Payout Ratio 0%

STAA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STAA stock intrinsic value calculation we used $124 million for the last fiscal year's total revenue generated by STAAR Surgical Company. The default revenue input number comes from 0001 income statement of STAAR Surgical Company. 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 STAA stock valuation model: a) initial revenue growth rate of 25.5% 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 STAA is calculated based on our internal credit rating of STAAR Surgical Company, 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 STAAR Surgical Company.
    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 STAA stock the variable cost ratio is equal to 69.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $32 million in the base year in the intrinsic value calculation for STAA 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 STAAR Surgical Company.

Corporate tax rate of 27% is the nominal tax rate for STAAR Surgical Company. 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 STAA 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 STAA are equal to 9.4%.

Life of production assets of 5.1 years is the average useful life of capital assets used in STAAR Surgical Company 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 STAA is equal to 20%. 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 - $132.426 million for STAAR Surgical Company - 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 44.286 million for STAAR Surgical Company 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 STAAR Surgical Company at the current share price and the inputted number of shares is $1.4 billion.

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