Intrinsic value of Tivity Health, Inc. - TVTY

Previous Close

$18.09

  Intrinsic Value

$46.69

stock screener

  Rating & Target

str. buy

+158%

Previous close

$18.09

 
Intrinsic value

$46.69

 
Up/down potential

+158%

 
Rating

str. buy

We calculate the intrinsic value of TVTY 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 0.9

 

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, %
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
Revenue, $m
  665
  727
  792
  859
  929
  1,002
  1,078
  1,157
  1,238
  1,323
  1,412
  1,503
  1,599
  1,698
  1,802
  1,910
  2,022
  2,140
  2,262
  2,390
  2,523
  2,663
  2,808
  2,961
  3,120
  3,287
  3,461
  3,644
  3,835
  4,036
Variable operating expenses, $m
  486
  528
  572
  617
  665
  714
  765
  818
  873
  931
  954
  1,016
  1,081
  1,148
  1,218
  1,291
  1,367
  1,446
  1,529
  1,615
  1,706
  1,800
  1,898
  2,001
  2,109
  2,222
  2,340
  2,463
  2,592
  2,728
Fixed operating expenses, $m
  29
  29
  30
  31
  31
  32
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  41
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  53
  54
Total operating expenses, $m
  515
  557
  602
  648
  696
  746
  798
  851
  907
  966
  990
  1,052
  1,118
  1,186
  1,257
  1,331
  1,408
  1,487
  1,571
  1,658
  1,750
  1,845
  1,944
  2,048
  2,157
  2,271
  2,390
  2,514
  2,645
  2,782
Operating income, $m
  151
  170
  190
  212
  234
  256
  280
  305
  331
  358
  422
  451
  481
  512
  545
  579
  615
  652
  691
  731
  773
  818
  864
  912
  963
  1,016
  1,071
  1,129
  1,190
  1,254
EBITDA, $m
  194
  214
  235
  257
  280
  304
  328
  354
  381
  408
  437
  467
  498
  531
  564
  600
  637
  675
  715
  757
  801
  846
  894
  944
  996
  1,051
  1,108
  1,169
  1,231
  1,297
Interest expense (income), $m
  0
  3
  4
  5
  6
  8
  9
  10
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
  63
Earnings before tax, $m
  148
  166
  185
  205
  226
  247
  270
  293
  318
  343
  406
  433
  461
  491
  522
  554
  588
  623
  659
  697
  737
  779
  823
  868
  916
  966
  1,019
  1,074
  1,131
  1,191
Tax expense, $m
  40
  45
  50
  55
  61
  67
  73
  79
  86
  93
  109
  117
  125
  133
  141
  150
  159
  168
  178
  188
  199
  210
  222
  234
  247
  261
  275
  290
  305
  322
Net income, $m
  108
  121
  135
  150
  165
  181
  197
  214
  232
  250
  296
  316
  337
  358
  381
  404
  429
  455
  481
  509
  538
  569
  601
  634
  669
  705
  744
  784
  826
  870

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
  529
  579
  630
  684
  739
  797
  858
  920
  985
  1,053
  1,123
  1,196
  1,272
  1,351
  1,433
  1,519
  1,609
  1,702
  1,800
  1,901
  2,007
  2,118
  2,234
  2,355
  2,482
  2,615
  2,754
  2,899
  3,051
  3,211
Adjusted assets (=assets-cash), $m
  529
  579
  630
  684
  739
  797
  858
  920
  985
  1,053
  1,123
  1,196
  1,272
  1,351
  1,433
  1,519
  1,609
  1,702
  1,800
  1,901
  2,007
  2,118
  2,234
  2,355
  2,482
  2,615
  2,754
  2,899
  3,051
  3,211
Revenue / Adjusted assets
  1.257
  1.256
  1.257
  1.256
  1.257
  1.257
  1.256
  1.258
  1.257
  1.256
  1.257
  1.257
  1.257
  1.257
  1.258
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
  1.257
Average production assets, $m
  214
  234
  255
  277
  299
  323
  347
  372
  399
  426
  455
  484
  515
  547
  580
  615
  651
  689
  728
  769
  812
  857
  904
  953
  1,005
  1,058
  1,115
  1,173
  1,235
  1,300
Working capital, $m
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
Total debt, $m
  42
  54
  66
  78
  91
  105
  119
  134
  149
  165
  181
  199
  216
  235
  254
  275
  296
  318
  340
  364
  389
  415
  443
  471
  501
  532
  565
  599
  635
  672
Total liabilities, $m
  124
  136
  148
  161
  174
  187
  202
  216
  231
  247
  264
  281
  299
  318
  337
  357
  378
  400
  423
  447
  472
  498
  525
  554
  583
  614
  647
  681
  717
  755
Total equity, $m
  405
  443
  482
  523
  566
  610
  656
  704
  754
  805
  859
  915
  973
  1,034
  1,097
  1,162
  1,231
  1,302
  1,377
  1,454
  1,536
  1,620
  1,709
  1,802
  1,899
  2,000
  2,107
  2,218
  2,334
  2,456
Total liabilities and equity, $m
  529
  579
  630
  684
  740
  797
  858
  920
  985
  1,052
  1,123
  1,196
  1,272
  1,352
  1,434
  1,519
  1,609
  1,702
  1,800
  1,901
  2,008
  2,118
  2,234
  2,356
  2,482
  2,614
  2,754
  2,899
  3,051
  3,211
Debt-to-equity ratio
  0.100
  0.120
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
  0.260
  0.270
  0.270
  0.270
  0.270
  0.270
Adjusted equity ratio
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  108
  121
  135
  150
  165
  181
  197
  214
  232
  250
  296
  316
  337
  358
  381
  404
  429
  455
  481
  509
  538
  569
  601
  634
  669
  705
  744
  784
  826
  870
Depreciation, amort., depletion, $m
  44
  44
  45
  46
  46
  47
  48
  49
  50
  51
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
Funds from operations, $m
  151
  165
  180
  195
  211
  228
  245
  263
  282
  301
  311
  332
  354
  377
  400
  425
  451
  478
  506
  535
  565
  597
  631
  666
  702
  741
  781
  823
  867
  913
Change in working capital, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
Cash from operations, $m
  152
  166
  181
  196
  212
  228
  246
  264
  282
  302
  312
  333
  355
  377
  401
  426
  452
  478
  507
  536
  566
  598
  632
  667
  704
  742
  782
  824
  868
  915
Maintenance CAPEX, $m
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
New CAPEX, $m
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
Cash from investing activities, $m
  -26
  -27
  -29
  -31
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -45
  -47
  -49
  -51
  -54
  -56
  -60
  -62
  -65
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -101
  -106
Free cash flow, $m
  126
  139
  152
  166
  180
  195
  210
  227
  243
  261
  269
  288
  308
  328
  350
  372
  395
  419
  444
  470
  498
  526
  556
  588
  621
  655
  691
  728
  768
  809
Issuance/(repayment) of debt, $m
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
Total cash flow (excl. dividends), $m
  138
  150
  164
  178
  193
  209
  225
  241
  259
  277
  286
  305
  326
  347
  369
  392
  416
  441
  467
  494
  523
  553
  584
  616
  650
  686
  723
  762
  803
  846
Retained Cash Flow (-), $m
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -97
  -101
  -106
  -111
  -116
  -122
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
  102
  113
  125
  137
  150
  164
  179
  193
  209
  225
  232
  249
  268
  286
  306
  326
  347
  370
  393
  417
  442
  468
  495
  524
  553
  584
  617
  651
  687
  724
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
  98
  103
  108
  113
  117
  119
  121
  121
  120
  118
  110
  106
  102
  96
  90
  83
  76
  68
  60
  53
  46
  39
  32
  27
  22
  17
  13
  10
  7
  5
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Tivity Health, Inc., formerly Healthways, Inc., is focused targeted population health for those aged 50 and older. The Company offers three programs: SilverSneakers senior fitness, Prime fitness and WholeHealth Living. The SilverSneakers senior fitness program is offered to members of Medicare Advantage, Medicare Supplement, and Group Retiree plans. The Company also offers Prime fitness, a fitness facility access program, through commercial health plans, employers and insurance exchanges. Its national network of fitness centers delivers both SilverSneakers and Prime fitness. As of December 31, 2016, the Company's fitness networks encompassed approximately 16,000 participating locations and more than 1,000 alternative locations that provide classes outside of traditional fitness centers. As of December 31, 2016, the Company's WholeHealth Living network included over 88,000 complementary, alternative, and physical medicine practitioners to serve individuals through health plans.

FINANCIAL RATIOS  of  Tivity Health, Inc. (TVTY)

Valuation Ratios
P/E Ratio -5.5
Price to Sales 1.4
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow 27.1
Growth Rates
Sales Growth Rate 10.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -19.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 86.8%
Total Debt to Equity 111.1%
Interest Coverage 0
Management Effectiveness
Return On Assets -20.5%
Ret/ On Assets - 3 Yr. Avg. -8.4%
Return On Total Capital -28.3%
Ret/ On T. Cap. - 3 Yr. Avg. -11.7%
Return On Equity -54.9%
Return On Equity - 3 Yr. Avg. -22.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 28.7%
Gross Margin - 3 Yr. Avg. 30.4%
EBITDA Margin 21.8%
EBITDA Margin - 3 Yr. Avg. 26.4%
Operating Margin 19%
Oper. Margin - 3 Yr. Avg. 20.3%
Pre-Tax Margin 15.6%
Pre-Tax Margin - 3 Yr. Avg. 16.3%
Net Profit Margin -25.7%
Net Profit Margin - 3 Yr. Avg. -11.4%
Effective Tax Rate 28.2%
Eff/ Tax Rate - 3 Yr. Avg. 35.5%
Payout Ratio 0%

TVTY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TVTY stock intrinsic value calculation we used $606 million for the last fiscal year's total revenue generated by Tivity Health, Inc.. The default revenue input number comes from 0001 income statement of Tivity Health, 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 TVTY stock valuation model: a) initial revenue growth rate of 9.8% 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 TVTY is calculated based on our internal credit rating of Tivity Health, 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 Tivity Health, 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 TVTY stock the variable cost ratio is equal to 73.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $28 million in the base year in the intrinsic value calculation for TVTY 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 9.9% for Tivity Health, Inc..

Corporate tax rate of 27% is the nominal tax rate for Tivity Health, 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 TVTY 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 TVTY are equal to 32.2%.

Life of production assets of 80.8 years is the average useful life of capital assets used in Tivity Health, 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 TVTY is equal to -0.8%. 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 - $369.001 million for Tivity Health, 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 47.372 million for Tivity Health, 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 Tivity Health, Inc. at the current share price and the inputted number of shares is $0.9 billion.

RELATED COMPANIES Price Int.Val. Rating
TVTY Tivity Health, 18.09 47.18  str.buy
CRVL CorVel Corp. 84.87 29.17  str.sell
PINC Premier, Inc. 38.73 36.08  hold

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