Intrinsic value of Tactile Systems Technology, Inc. - TCMD

Previous Close

$55.57

  Intrinsic Value

$1.13

stock screener

  Rating & Target

str. sell

-98%

Previous close

$55.57

 
Intrinsic value

$1.13

 
Up/down potential

-98%

 
Rating

str. sell

We calculate the intrinsic value of TCMD 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 1.0

 

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, %
  33.10
  30.29
  27.76
  25.48
  23.44
  21.59
  19.93
  18.44
  17.10
  15.89
  14.80
  13.82
  12.94
  12.14
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.07
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
Revenue, $m
  192
  250
  319
  400
  494
  601
  721
  854
  999
  1,158
  1,330
  1,513
  1,709
  1,917
  2,136
  2,366
  2,608
  2,860
  3,124
  3,399
  3,685
  3,982
  4,291
  4,613
  4,947
  5,294
  5,655
  6,030
  6,420
  6,826
Variable operating expenses, $m
  185
  241
  307
  385
  476
  578
  693
  821
  962
  1,114
  1,279
  1,455
  1,643
  1,843
  2,054
  2,275
  2,507
  2,750
  3,004
  3,268
  3,543
  3,829
  4,126
  4,435
  4,757
  5,090
  5,437
  5,798
  6,173
  6,564
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
  185
  241
  307
  385
  476
  578
  693
  821
  962
  1,114
  1,279
  1,455
  1,643
  1,843
  2,054
  2,275
  2,507
  2,750
  3,004
  3,268
  3,543
  3,829
  4,126
  4,435
  4,757
  5,090
  5,437
  5,798
  6,173
  6,564
Operating income, $m
  7
  9
  12
  15
  19
  23
  27
  32
  38
  44
  51
  58
  66
  74
  82
  91
  100
  110
  120
  131
  142
  153
  165
  177
  190
  204
  218
  232
  247
  263
EBITDA, $m
  9
  12
  15
  19
  23
  28
  34
  40
  47
  55
  63
  71
  80
  90
  101
  111
  123
  135
  147
  160
  173
  187
  202
  217
  233
  249
  266
  284
  302
  321
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
Earnings before tax, $m
  7
  9
  11
  14
  17
  20
  24
  28
  33
  38
  44
  50
  57
  63
  70
  78
  86
  94
  102
  111
  120
  130
  140
  150
  161
  172
  183
  195
  208
  221
Tax expense, $m
  2
  2
  3
  4
  5
  5
  7
  8
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  28
  30
  32
  35
  38
  40
  43
  46
  49
  53
  56
  60
Net income, $m
  5
  6
  8
  10
  12
  15
  18
  21
  24
  28
  32
  37
  41
  46
  51
  57
  62
  68
  75
  81
  88
  95
  102
  109
  117
  125
  134
  143
  152
  161

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
  103
  134
  171
  215
  265
  322
  387
  458
  536
  621
  713
  812
  917
  1,028
  1,146
  1,269
  1,399
  1,534
  1,676
  1,823
  1,977
  2,136
  2,302
  2,475
  2,654
  2,840
  3,034
  3,235
  3,444
  3,662
Adjusted assets (=assets-cash), $m
  103
  134
  171
  215
  265
  322
  387
  458
  536
  621
  713
  812
  917
  1,028
  1,146
  1,269
  1,399
  1,534
  1,676
  1,823
  1,977
  2,136
  2,302
  2,475
  2,654
  2,840
  3,034
  3,235
  3,444
  3,662
Revenue / Adjusted assets
  1.864
  1.866
  1.865
  1.860
  1.864
  1.866
  1.863
  1.865
  1.864
  1.865
  1.865
  1.863
  1.864
  1.865
  1.864
  1.864
  1.864
  1.864
  1.864
  1.865
  1.864
  1.864
  1.864
  1.864
  1.864
  1.864
  1.864
  1.864
  1.864
  1.864
Average production assets, $m
  8
  11
  14
  17
  21
  26
  31
  37
  43
  50
  57
  65
  73
  82
  92
  102
  112
  123
  134
  146
  158
  171
  185
  198
  213
  228
  243
  259
  276
  294
Working capital, $m
  31
  40
  51
  64
  79
  96
  115
  137
  160
  185
  213
  242
  273
  307
  342
  379
  417
  458
  500
  544
  590
  637
  687
  738
  792
  847
  905
  965
  1,027
  1,092
Total debt, $m
  6
  13
  22
  32
  43
  56
  71
  88
  106
  125
  146
  169
  193
  219
  246
  274
  304
  335
  368
  402
  437
  474
  512
  551
  593
  635
  680
  726
  774
  824
Total liabilities, $m
  24
  31
  39
  49
  61
  74
  89
  105
  123
  143
  164
  187
  211
  237
  264
  292
  322
  353
  385
  419
  455
  491
  530
  569
  610
  653
  698
  744
  792
  842
Total equity, $m
  79
  103
  132
  165
  204
  248
  298
  353
  413
  478
  549
  625
  706
  792
  882
  977
  1,077
  1,182
  1,290
  1,404
  1,522
  1,645
  1,773
  1,906
  2,044
  2,187
  2,336
  2,491
  2,652
  2,820
Total liabilities and equity, $m
  103
  134
  171
  214
  265
  322
  387
  458
  536
  621
  713
  812
  917
  1,029
  1,146
  1,269
  1,399
  1,535
  1,675
  1,823
  1,977
  2,136
  2,303
  2,475
  2,654
  2,840
  3,034
  3,235
  3,444
  3,662
Debt-to-equity ratio
  0.070
  0.130
  0.160
  0.190
  0.210
  0.230
  0.240
  0.250
  0.260
  0.260
  0.270
  0.270
  0.270
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
Adjusted equity ratio
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  6
  8
  10
  12
  15
  18
  21
  24
  28
  32
  37
  41
  46
  51
  57
  62
  68
  75
  81
  88
  95
  102
  109
  117
  125
  134
  143
  152
  161
Depreciation, amort., depletion, $m
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  15
  16
  18
  20
  22
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  55
  59
Funds from operations, $m
  7
  9
  11
  14
  17
  20
  24
  29
  33
  38
  44
  50
  56
  63
  70
  77
  85
  93
  101
  110
  119
  129
  139
  149
  160
  171
  182
  194
  207
  220
Change in working capital, $m
  8
  9
  11
  13
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  39
  40
  42
  44
  46
  48
  49
  51
  53
  56
  58
  60
  62
  65
Cash from operations, $m
  0
  0
  0
  1
  2
  3
  5
  7
  10
  13
  16
  20
  25
  29
  35
  40
  46
  53
  59
  66
  74
  81
  89
  98
  106
  115
  125
  134
  144
  155
Maintenance CAPEX, $m
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -15
  -16
  -18
  -20
  -22
  -25
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -52
  -55
New CAPEX, $m
  -2
  -2
  -3
  -3
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -17
Cash from investing activities, $m
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -12
  -13
  -16
  -17
  -19
  -21
  -24
  -25
  -28
  -30
  -33
  -36
  -39
  -41
  -45
  -47
  -51
  -54
  -58
  -62
  -65
  -69
  -72
Free cash flow, $m
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -4
  -2
  -1
  1
  3
  6
  9
  12
  15
  19
  23
  28
  32
  37
  42
  47
  52
  58
  64
  70
  76
  82
Issuance/(repayment) of debt, $m
  6
  7
  9
  10
  12
  13
  15
  16
  18
  20
  21
  23
  24
  26
  27
  28
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
Issuance/(repurchase) of shares, $m
  15
  18
  21
  24
  26
  29
  32
  34
  36
  38
  38
  39
  40
  40
  39
  38
  37
  36
  34
  33
  31
  28
  26
  23
  21
  18
  15
  12
  9
  7
Cash from financing (excl. dividends), $m  
  21
  25
  30
  34
  38
  42
  47
  50
  54
  58
  59
  62
  64
  66
  66
  66
  67
  67
  67
  67
  66
  65
  64
  63
  62
  61
  60
  58
  57
  57
Total cash flow (excl. dividends), $m
  17
  20
  24
  28
  33
  37
  41
  46
  50
  55
  59
  63
  67
  71
  75
  79
  83
  86
  90
  94
  98
  102
  106
  110
  114
  119
  123
  128
  133
  139
Retained Cash Flow (-), $m
  -20
  -24
  -29
  -34
  -39
  -44
  -49
  -55
  -60
  -66
  -71
  -76
  -81
  -86
  -90
  -95
  -100
  -104
  -109
  -114
  -118
  -123
  -128
  -133
  -138
  -143
  -149
  -155
  -161
  -168
Prev. year cash balance distribution, $m
  30
  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
  27
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
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
  26
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -5
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  97.6
  95.5
  93.6
  92.0
  90.5
  89.2
  88.1
  87.1
  86.2
  85.4
  84.8
  84.2
  83.6
  83.2
  82.8
  82.4
  82.1
  81.8
  81.6
  81.4
  81.2
  81.0
  80.9
  80.8
  80.7
  80.7
  80.6
  80.6
  80.5
  80.5

Tactile Systems Technology, Inc. is a medical technology company that develops and provides medical devices for the treatment of chronic diseases at home. The Company is a manufacturer and distributor of the Flexitouch and Entre Systems, medical devices that help control symptoms of lymphedema, a chronic and progressive medical condition that is often an unintended consequence of cancer treatment, and the ACTitouch System, a medical device used to treat venous leg ulcers and chronic venous insufficiency. Its products deliver long-term treatment of chronic diseases. The Company provides its products for use in the home and sells them through vascular, wound and lymphedema clinics throughout the United States. The Company offers a platform to deliver at-home healthcare solutions throughout the United States. Its initial area of therapeutic focus is vascular disease, with a focus on advancing the care in treating lymphedema and chronic venous insufficiency.

FINANCIAL RATIOS  of  Tactile Systems Technology, Inc. (TCMD)

Valuation Ratios
P/E Ratio 311.7
Price to Sales 11
Price to Book 15.6
Price to Tangible Book
Price to Cash Flow 133.6
Price to Free Cash Flow 155.9
Growth Rates
Sales Growth Rate 34.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.4%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 6.9%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity 6.9%
Return On Equity - 3 Yr. Avg. 6.4%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 50.6%
Gross Margin - 3 Yr. Avg. 51.2%
EBITDA Margin 5.9%
EBITDA Margin - 3 Yr. Avg. 7.5%
Operating Margin 5.9%
Oper. Margin - 3 Yr. Avg. 6.9%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 5.9%
Net Profit Margin 3.5%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 47.2%
Payout Ratio 266.7%

TCMD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TCMD stock intrinsic value calculation we used $144 million for the last fiscal year's total revenue generated by Tactile Systems Technology, Inc.. The default revenue input number comes from 0001 income statement of Tactile Systems Technology, 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 TCMD stock valuation model: a) initial revenue growth rate of 33.1% 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 TCMD is calculated based on our internal credit rating of Tactile Systems Technology, 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 Tactile Systems Technology, 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 TCMD stock the variable cost ratio is equal to 96.5%.

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 TCMD 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 Tactile Systems Technology, Inc..

Corporate tax rate of 27% is the nominal tax rate for Tactile Systems Technology, 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 TCMD 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 TCMD are equal to 4.3%.

Life of production assets of 2.2 years is the average useful life of capital assets used in Tactile Systems Technology, 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 TCMD is equal to 16%. 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 - $89.27 million for Tactile Systems Technology, 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 18.674 million for Tactile Systems Technology, 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 Tactile Systems Technology, Inc. at the current share price and the inputted number of shares is $1.0 billion.

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