Intrinsic value of Tivity Health - TVTY

Previous Close

$36.84

  Intrinsic Value

$71.20

stock screener

  Rating & Target

str. buy

+93%

Previous close

$36.84

 
Intrinsic value

$71.20

 
Up/down potential

+93%

 
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 1.5

 

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, %
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  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
Revenue, $m
  609
  663
  719
  777
  838
  901
  967
  1,035
  1,106
  1,180
  1,257
  1,337
  1,420
  1,506
  1,596
  1,690
  1,788
  1,890
  1,997
  2,109
  2,225
  2,347
  2,474
  2,607
  2,746
  2,892
  3,045
  3,205
  3,372
  3,548
Variable operating expenses, $m
  333
  360
  387
  416
  445
  476
  508
  541
  576
  612
  613
  652
  692
  734
  778
  824
  872
  922
  974
  1,028
  1,085
  1,144
  1,207
  1,271
  1,339
  1,410
  1,485
  1,563
  1,645
  1,730
Fixed operating expenses, $m
  135
  138
  141
  144
  147
  150
  154
  157
  161
  164
  168
  171
  175
  179
  183
  187
  191
  195
  200
  204
  208
  213
  218
  223
  227
  232
  238
  243
  248
  254
Total operating expenses, $m
  468
  498
  528
  560
  592
  626
  662
  698
  737
  776
  781
  823
  867
  913
  961
  1,011
  1,063
  1,117
  1,174
  1,232
  1,293
  1,357
  1,425
  1,494
  1,566
  1,642
  1,723
  1,806
  1,893
  1,984
Operating income, $m
  141
  165
  191
  218
  246
  275
  305
  337
  370
  404
  476
  513
  552
  593
  635
  679
  725
  773
  824
  876
  931
  989
  1,050
  1,113
  1,180
  1,249
  1,322
  1,399
  1,479
  1,564
EBITDA, $m
  184
  209
  236
  263
  292
  322
  353
  385
  419
  454
  491
  529
  568
  610
  653
  698
  745
  795
  846
  900
  957
  1,016
  1,078
  1,143
  1,211
  1,282
  1,357
  1,436
  1,518
  1,605
Interest expense (income), $m
  0
  13
  16
  19
  22
  26
  29
  33
  36
  40
  44
  49
  53
  58
  63
  67
  73
  78
  84
  90
  96
  102
  109
  116
  123
  131
  139
  147
  156
  165
  175
Earnings before tax, $m
  128
  149
  172
  196
  220
  246
  273
  300
  329
  360
  427
  460
  494
  530
  567
  606
  647
  689
  734
  780
  829
  880
  934
  990
  1,049
  1,110
  1,175
  1,243
  1,314
  1,389
Tax expense, $m
  34
  40
  46
  53
  59
  66
  74
  81
  89
  97
  115
  124
  133
  143
  153
  164
  175
  186
  198
  211
  224
  238
  252
  267
  283
  300
  317
  336
  355
  375
Net income, $m
  93
  109
  126
  143
  161
  180
  199
  219
  240
  263
  312
  336
  361
  387
  414
  443
  472
  503
  536
  570
  605
  643
  682
  723
  766
  811
  858
  907
  959
  1,014

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
  695
  757
  821
  887
  957
  1,029
  1,104
  1,182
  1,263
  1,347
  1,435
  1,526
  1,621
  1,719
  1,822
  1,929
  2,041
  2,158
  2,280
  2,407
  2,540
  2,679
  2,824
  2,976
  3,135
  3,302
  3,476
  3,658
  3,849
  4,050
Adjusted assets (=assets-cash), $m
  695
  757
  821
  887
  957
  1,029
  1,104
  1,182
  1,263
  1,347
  1,435
  1,526
  1,621
  1,719
  1,822
  1,929
  2,041
  2,158
  2,280
  2,407
  2,540
  2,679
  2,824
  2,976
  3,135
  3,302
  3,476
  3,658
  3,849
  4,050
Revenue / Adjusted assets
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
Average production assets, $m
  209
  228
  247
  267
  288
  310
  333
  356
  381
  406
  432
  460
  488
  518
  549
  581
  615
  650
  687
  725
  765
  807
  851
  897
  945
  995
  1,047
  1,102
  1,160
  1,220
Working capital, $m
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -88
  -93
  -97
  -103
  -108
  -114
Total debt, $m
  180
  215
  252
  290
  330
  371
  414
  459
  505
  554
  604
  656
  710
  767
  826
  887
  951
  1,018
  1,088
  1,161
  1,237
  1,317
  1,400
  1,487
  1,578
  1,674
  1,773
  1,878
  1,987
  2,102
Total liabilities, $m
  398
  433
  470
  509
  548
  590
  633
  677
  724
  772
  822
  874
  929
  985
  1,044
  1,106
  1,170
  1,236
  1,306
  1,379
  1,455
  1,535
  1,618
  1,705
  1,796
  1,892
  1,992
  2,096
  2,206
  2,320
Total equity, $m
  297
  323
  350
  379
  409
  439
  471
  505
  539
  575
  613
  651
  692
  734
  778
  824
  872
  921
  973
  1,028
  1,085
  1,144
  1,206
  1,271
  1,339
  1,410
  1,484
  1,562
  1,644
  1,729
Total liabilities and equity, $m
  695
  756
  820
  888
  957
  1,029
  1,104
  1,182
  1,263
  1,347
  1,435
  1,525
  1,621
  1,719
  1,822
  1,930
  2,042
  2,157
  2,279
  2,407
  2,540
  2,679
  2,824
  2,976
  3,135
  3,302
  3,476
  3,658
  3,850
  4,049
Debt-to-equity ratio
  0.610
  0.670
  0.720
  0.770
  0.810
  0.850
  0.880
  0.910
  0.940
  0.960
  0.990
  1.010
  1.030
  1.040
  1.060
  1.080
  1.090
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.190
  1.200
  1.210
  1.220
Adjusted equity ratio
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  93
  109
  126
  143
  161
  180
  199
  219
  240
  263
  312
  336
  361
  387
  414
  443
  472
  503
  536
  570
  605
  643
  682
  723
  766
  811
  858
  907
  959
  1,014
Depreciation, amort., depletion, $m
  43
  44
  45
  45
  46
  47
  47
  48
  49
  50
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  37
  39
  41
Funds from operations, $m
  137
  153
  170
  188
  207
  226
  247
  268
  290
  312
  326
  351
  377
  404
  432
  462
  493
  525
  559
  594
  631
  670
  710
  753
  797
  844
  893
  944
  998
  1,055
Change in working capital, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Cash from operations, $m
  138
  155
  172
  190
  209
  228
  249
  270
  292
  315
  329
  354
  380
  407
  435
  465
  496
  528
  562
  597
  635
  673
  714
  757
  801
  848
  898
  949
  1,003
  1,060
Maintenance CAPEX, $m
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
New CAPEX, $m
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
Cash from investing activities, $m
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -34
  -36
  -38
  -40
  -41
  -44
  -46
  -48
  -50
  -53
  -56
  -59
  -61
  -64
  -68
  -71
  -74
  -78
  -81
  -86
  -90
  -95
  -99
Free cash flow, $m
  114
  129
  145
  162
  179
  197
  216
  235
  256
  277
  289
  312
  336
  361
  387
  414
  443
  473
  504
  536
  570
  606
  643
  683
  724
  767
  812
  859
  909
  961
Issuance/(repayment) of debt, $m
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  54
  57
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  105
  110
  115
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  
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  54
  57
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  105
  110
  115
Total cash flow (excl. dividends), $m
  148
  165
  182
  200
  219
  238
  259
  280
  302
  325
  339
  364
  390
  418
  446
  476
  507
  539
  573
  609
  647
  686
  727
  770
  815
  862
  912
  964
  1,019
  1,076
Retained Cash Flow (-), $m
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -86
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
  123
  138
  154
  171
  189
  207
  227
  247
  267
  289
  302
  325
  350
  375
  402
  430
  459
  490
  521
  555
  590
  626
  665
  705
  747
  791
  837
  886
  937
  990
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
  118
  127
  134
  141
  147
  151
  153
  154
  154
  152
  143
  139
  133
  126
  118
  109
  100
  90
  80
  71
  61
  52
  44
  36
  29
  23
  18
  14
  10
  7
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 (TVTY)

Valuation Ratios
P/E Ratio -11.1
Price to Sales 2.9
Price to Book 7.6
Price to Tangible Book
Price to Cash Flow 35.9
Price to Free Cash Flow 55.2
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 $556.942 million for the last fiscal year's total revenue generated by Tivity Health. The default revenue input number comes from 0001 income statement of Tivity Health. 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 9.3% 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, 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.
    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 55.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $132 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 8.8% for Tivity Health.

Corporate tax rate of 27% is the nominal tax rate for Tivity Health. 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 34.4%.

Life of production assets of 111.2 years is the average useful life of capital assets used in Tivity Health 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 -3.2%. 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 - $271.953 million for Tivity Health - 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 40.007 million for Tivity Health 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 at the current share price and the inputted number of shares is $1.5 billion.

RELATED COMPANIES Price Int.Val. Rating
TVTY Tivity Health 36.84 73.72  str.buy
CRVL Corvel 64.75 35.50  sell
INFU InfuSystems Ho 3.35 0.93  str.sell
PINC Premier 39.86 84.69  str.buy
UNH UnitedHealth G 264.94 561.84  str.buy

COMPANY NEWS

▶ Tivity Health (TVTY) Tops Q3 Earnings Estimates   [Nov-05-18 06:10PM  Zacks]
▶ Tivity Health: 3Q Earnings Snapshot   [05:05PM  Associated Press]
▶ Scorecard: Report: Franklin health care company could go private   [Sep-28-18 06:00AM  American City Business Journals]
▶ The Boss: Tivity Health's Donato Tramuto is in the ministry of others   [Sep-27-18 08:24AM  American City Business Journals]
▶ This health care CEO got his start selling God   [Sep-24-18 02:49PM  American City Business Journals]
▶ SilverSneakers® Announces National Swanson Award Winner   [Aug-21-18 09:00AM  PR Newswire]
▶ Tivity Health: 2Q Earnings Snapshot   [05:16AM  Associated Press]
▶ What is Behind Tivity Health Incs (NASDAQ:TVTY) Superior ROE?   [Jun-01-18 09:06AM  Simply Wall St.]
▶ SilverSneakers® Launches Million Pound Challenge   [May-30-18 11:00AM  GlobeNewswire]
▶ Tivity Health: 1Q Earnings Snapshot   [Apr-23-18 04:27PM  Associated Press]
▶ Healthways beats Street 4Q forecasts   [Feb-22-18 07:17PM  Associated Press]
▶ Stocks With Rising Relative Strength: Tivity Health   [03:00AM  Investor's Business Daily]
▶ Stocks Showing Improved Relative Strength: Tivity Health   [03:00AM  Investor's Business Daily]

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