Intrinsic value of Tactile Systems Technology - TCMD

Previous Close

$58.57

  Intrinsic Value

$0.96

stock screener

  Rating & Target

str. sell

-98%

Previous close

$58.57

 
Intrinsic value

$0.96

 
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 1.1

 

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, %
  30.00
  27.50
  25.25
  23.23
  21.40
  19.76
  18.29
  16.96
  15.76
  14.69
  13.72
  12.85
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
Revenue, $m
  142
  181
  227
  280
  339
  406
  481
  562
  651
  747
  849
  958
  1,074
  1,195
  1,324
  1,458
  1,598
  1,745
  1,898
  2,057
  2,222
  2,394
  2,572
  2,758
  2,951
  3,151
  3,360
  3,577
  3,802
  4,037
Variable operating expenses, $m
  134
  171
  214
  264
  320
  384
  454
  530
  614
  704
  801
  903
  1,012
  1,127
  1,248
  1,375
  1,507
  1,645
  1,789
  1,939
  2,095
  2,257
  2,426
  2,601
  2,783
  2,972
  3,168
  3,373
  3,586
  3,807
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
  134
  171
  214
  264
  320
  384
  454
  530
  614
  704
  801
  903
  1,012
  1,127
  1,248
  1,375
  1,507
  1,645
  1,789
  1,939
  2,095
  2,257
  2,426
  2,601
  2,783
  2,972
  3,168
  3,373
  3,586
  3,807
Operating income, $m
  8
  10
  13
  16
  19
  23
  27
  32
  37
  42
  48
  55
  61
  68
  75
  83
  91
  100
  108
  117
  127
  137
  147
  157
  168
  180
  192
  204
  217
  230
EBITDA, $m
  9
  12
  15
  18
  22
  26
  31
  36
  42
  48
  54
  61
  69
  77
  85
  93
  102
  112
  122
  132
  142
  153
  165
  177
  189
  202
  215
  229
  243
  259
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
Earnings before tax, $m
  8
  10
  12
  15
  18
  21
  25
  29
  33
  38
  43
  49
  55
  61
  67
  74
  81
  88
  96
  103
  112
  120
  129
  138
  148
  158
  168
  179
  190
  202
Tax expense, $m
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  43
  45
  48
  51
  54
Net income, $m
  6
  7
  9
  11
  13
  15
  18
  21
  24
  28
  32
  36
  40
  44
  49
  54
  59
  64
  70
  75
  81
  88
  94
  101
  108
  115
  123
  131
  139
  147

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
  77
  98
  123
  151
  184
  220
  260
  305
  353
  404
  460
  519
  582
  648
  717
  790
  866
  945
  1,028
  1,114
  1,204
  1,297
  1,394
  1,494
  1,599
  1,707
  1,820
  1,938
  2,060
  2,187
Adjusted assets (=assets-cash), $m
  77
  98
  123
  151
  184
  220
  260
  305
  353
  404
  460
  519
  582
  648
  717
  790
  866
  945
  1,028
  1,114
  1,204
  1,297
  1,394
  1,494
  1,599
  1,707
  1,820
  1,938
  2,060
  2,187
Revenue / Adjusted assets
  1.844
  1.847
  1.846
  1.854
  1.842
  1.845
  1.850
  1.843
  1.844
  1.849
  1.846
  1.846
  1.845
  1.844
  1.847
  1.846
  1.845
  1.847
  1.846
  1.846
  1.846
  1.846
  1.845
  1.846
  1.846
  1.846
  1.846
  1.846
  1.846
  1.846
Average production assets, $m
  5
  6
  8
  10
  12
  14
  17
  20
  23
  26
  30
  34
  38
  42
  46
  51
  56
  61
  66
  72
  78
  84
  90
  97
  103
  110
  118
  125
  133
  141
Working capital, $m
  24
  31
  38
  47
  57
  69
  81
  95
  110
  126
  143
  162
  181
  202
  224
  246
  270
  295
  321
  348
  376
  405
  435
  466
  499
  533
  568
  604
  643
  682
Total debt, $m
  5
  10
  17
  24
  33
  43
  53
  65
  78
  92
  106
  122
  138
  156
  174
  194
  214
  235
  257
  280
  303
  328
  354
  380
  408
  437
  467
  498
  530
  564
Total liabilities, $m
  20
  26
  33
  40
  49
  58
  69
  81
  93
  107
  122
  138
  154
  172
  190
  209
  229
  250
  272
  295
  319
  344
  369
  396
  424
  452
  482
  513
  546
  580
Total equity, $m
  57
  72
  90
  111
  135
  162
  191
  224
  259
  297
  338
  381
  427
  476
  527
  580
  636
  695
  756
  819
  885
  953
  1,024
  1,098
  1,175
  1,255
  1,338
  1,424
  1,514
  1,607
Total liabilities and equity, $m
  77
  98
  123
  151
  184
  220
  260
  305
  352
  404
  460
  519
  581
  648
  717
  789
  865
  945
  1,028
  1,114
  1,204
  1,297
  1,393
  1,494
  1,599
  1,707
  1,820
  1,937
  2,060
  2,187
Debt-to-equity ratio
  0.080
  0.140
  0.190
  0.220
  0.240
  0.260
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
Adjusted equity ratio
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735
  0.735

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  7
  9
  11
  13
  15
  18
  21
  24
  28
  32
  36
  40
  44
  49
  54
  59
  64
  70
  75
  81
  88
  94
  101
  108
  115
  123
  131
  139
  147
Depreciation, amort., depletion, $m
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
Funds from operations, $m
  7
  9
  11
  13
  16
  19
  22
  25
  29
  33
  38
  42
  47
  53
  58
  64
  70
  76
  83
  90
  97
  104
  112
  120
  129
  137
  146
  156
  165
  175
Change in working capital, $m
  6
  7
  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
Cash from operations, $m
  1
  2
  3
  4
  5
  7
  9
  12
  14
  17
  20
  24
  28
  32
  37
  41
  46
  52
  57
  63
  69
  75
  82
  89
  96
  103
  111
  119
  127
  136
Maintenance CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
Cash from investing activities, $m
  -2
  -2
  -3
  -4
  -4
  -4
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -12
  -14
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -24
  -26
  -28
  -29
  -32
  -33
  -35
Free cash flow, $m
  0
  0
  0
  1
  1
  2
  4
  5
  7
  9
  12
  14
  17
  20
  24
  27
  31
  35
  40
  44
  49
  54
  59
  64
  70
  76
  82
  88
  94
  101
Issuance/(repayment) of debt, $m
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
Issuance/(repurchase) of shares, $m
  7
  8
  9
  10
  11
  11
  11
  11
  11
  10
  9
  8
  6
  4
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  12
  14
  16
  18
  20
  21
  22
  23
  24
  24
  24
  24
  23
  21
  20
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
Total cash flow (excl. dividends), $m
  12
  14
  16
  18
  21
  23
  26
  28
  31
  33
  35
  38
  40
  42
  44
  47
  51
  56
  62
  67
  73
  79
  85
  91
  98
  104
  112
  119
  127
  135
Retained Cash Flow (-), $m
  -13
  -16
  -18
  -21
  -24
  -27
  -30
  -32
  -35
  -38
  -41
  -43
  -46
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -94
Prev. year cash balance distribution, $m
  29
  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
  28
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -5
  -2
  1
  4
  7
  10
  13
  17
  21
  25
  29
  33
  37
  41
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
  27
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -2
  -2
  -1
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  98.3
  96.9
  95.6
  94.6
  93.7
  92.9
  92.2
  91.7
  91.3
  90.9
  90.6
  90.4
  90.3
  90.2
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
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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 (TCMD)

Valuation Ratios
P/E Ratio 328.6
Price to Sales 11.6
Price to Book 16.4
Price to Tangible Book
Price to Cash Flow 140.8
Price to Free Cash Flow 164.3
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 $109.283 million for the last fiscal year's total revenue generated by Tactile Systems Technology. The default revenue input number comes from 0001 income statement of Tactile Systems Technology. 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 30% 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, 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.
    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 94.5%.

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.

Corporate tax rate of 27% is the nominal tax rate for Tactile Systems Technology. 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 3.5%.

Life of production assets of 2.7 years is the average useful life of capital assets used in Tactile Systems Technology 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 16.9%. 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 - $72.787 million for Tactile Systems Technology - 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 18.331 million for Tactile Systems Technology 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 at the current share price and the inputted number of shares is $1.1 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Tactile Systems Technology: 3Q Earnings Snapshot   [06:22PM  Associated Press]
▶ Tactile Systems Technology: 2Q Earnings Snapshot   [06:23PM  Associated Press]
▶ Tactile Systems Technology: 1Q Earnings Snapshot   [May-07-18 05:34PM  Associated Press]
▶ Tactile Systems Technology posts 4Q profit   [Feb-26-18 05:57PM  Associated Press]
▶ Stocks Flashing Renewed Technical Strength: Tactile Systems Technology   [Jan-09-18 03:00AM  Investor's Business Daily]
▶ Tactile Systems Technology Gets IBD Stock Rating Upgrade   [03:00AM  Investor's Business Daily]
▶ Tactile Systems Technology posts 3Q profit   [Nov-07-17 06:30PM  Associated Press]
▶ Tactile Systems Technology posts 2Q profit   [Aug-07-17 10:44PM  Associated Press]
▶ Tactile Systems Technology posts 1Q loss   [May-08-17 05:25PM  Associated Press]

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