Intrinsic value of U.S. Physical Therapy - USPH

Previous Close

$111.63

  Intrinsic Value

$92.76

stock screener

  Rating & Target

hold

-17%

Previous close

$111.63

 
Intrinsic value

$92.76

 
Up/down potential

-17%

 
Rating

hold

We calculate the intrinsic value of USPH 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, %
  10.40
  9.86
  9.37
  8.94
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
Revenue, $m
  457
  502
  549
  598
  649
  703
  758
  815
  875
  937
  1,002
  1,069
  1,139
  1,211
  1,287
  1,365
  1,447
  1,533
  1,622
  1,714
  1,811
  1,913
  2,019
  2,129
  2,245
  2,366
  2,492
  2,625
  2,763
  2,909
Variable operating expenses, $m
  390
  425
  462
  500
  540
  582
  625
  670
  717
  766
  784
  836
  891
  948
  1,007
  1,068
  1,133
  1,199
  1,269
  1,342
  1,418
  1,497
  1,580
  1,666
  1,757
  1,851
  1,951
  2,054
  2,163
  2,276
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
  390
  425
  462
  500
  540
  582
  625
  670
  717
  766
  784
  836
  891
  948
  1,007
  1,068
  1,133
  1,199
  1,269
  1,342
  1,418
  1,497
  1,580
  1,666
  1,757
  1,851
  1,951
  2,054
  2,163
  2,276
Operating income, $m
  67
  77
  87
  98
  109
  121
  133
  145
  158
  172
  218
  232
  247
  263
  280
  297
  315
  333
  352
  373
  394
  416
  439
  463
  488
  514
  542
  570
  601
  632
EBITDA, $m
  105
  116
  127
  138
  150
  162
  175
  188
  202
  216
  231
  247
  263
  279
  297
  315
  334
  354
  374
  396
  418
  441
  466
  491
  518
  546
  575
  606
  638
  671
Interest expense (income), $m
  1
  3
  4
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  58
  61
  65
  69
Earnings before tax, $m
  64
  73
  82
  91
  101
  111
  121
  132
  144
  156
  200
  213
  226
  240
  254
  269
  285
  301
  318
  336
  354
  373
  394
  415
  437
  460
  484
  509
  536
  563
Tax expense, $m
  17
  20
  22
  25
  27
  30
  33
  36
  39
  42
  54
  57
  61
  65
  69
  73
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  131
  137
  145
  152
Net income, $m
  47
  53
  60
  66
  74
  81
  89
  97
  105
  114
  146
  155
  165
  175
  185
  196
  208
  220
  232
  245
  259
  273
  287
  303
  319
  336
  353
  372
  391
  411

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
  463
  508
  556
  606
  657
  711
  767
  825
  886
  949
  1,014
  1,082
  1,152
  1,226
  1,302
  1,382
  1,465
  1,551
  1,641
  1,735
  1,833
  1,936
  2,043
  2,155
  2,272
  2,394
  2,522
  2,657
  2,797
  2,944
Adjusted assets (=assets-cash), $m
  463
  508
  556
  606
  657
  711
  767
  825
  886
  949
  1,014
  1,082
  1,152
  1,226
  1,302
  1,382
  1,465
  1,551
  1,641
  1,735
  1,833
  1,936
  2,043
  2,155
  2,272
  2,394
  2,522
  2,657
  2,797
  2,944
Revenue / Adjusted assets
  0.987
  0.988
  0.987
  0.987
  0.988
  0.989
  0.988
  0.988
  0.988
  0.987
  0.988
  0.988
  0.989
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
Average production assets, $m
  183
  201
  220
  240
  260
  282
  304
  327
  351
  376
  402
  429
  457
  486
  516
  547
  580
  615
  650
  688
  726
  767
  809
  854
  900
  949
  999
  1,052
  1,108
  1,166
Working capital, $m
  21
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  54
  57
  60
  64
  68
  72
  76
  81
  85
  90
  95
  100
  106
  111
  117
  123
  130
  137
Total debt, $m
  83
  106
  131
  156
  183
  210
  239
  268
  299
  331
  365
  399
  435
  473
  512
  553
  595
  639
  685
  733
  784
  836
  891
  948
  1,008
  1,070
  1,136
  1,204
  1,276
  1,351
Total liabilities, $m
  236
  260
  284
  309
  336
  363
  392
  422
  453
  485
  518
  553
  589
  626
  665
  706
  748
  793
  839
  887
  937
  989
  1,044
  1,101
  1,161
  1,224
  1,289
  1,357
  1,429
  1,504
Total equity, $m
  226
  249
  272
  296
  321
  348
  375
  404
  433
  464
  496
  529
  563
  599
  637
  676
  716
  759
  803
  849
  897
  947
  999
  1,054
  1,111
  1,171
  1,233
  1,299
  1,368
  1,440
Total liabilities and equity, $m
  462
  509
  556
  605
  657
  711
  767
  826
  886
  949
  1,014
  1,082
  1,152
  1,225
  1,302
  1,382
  1,464
  1,552
  1,642
  1,736
  1,834
  1,936
  2,043
  2,155
  2,272
  2,395
  2,522
  2,656
  2,797
  2,944
Debt-to-equity ratio
  0.370
  0.430
  0.480
  0.530
  0.570
  0.600
  0.640
  0.670
  0.690
  0.710
  0.740
  0.760
  0.770
  0.790
  0.800
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.910
  0.920
  0.930
  0.930
  0.940
Adjusted equity ratio
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  47
  53
  60
  66
  74
  81
  89
  97
  105
  114
  146
  155
  165
  175
  185
  196
  208
  220
  232
  245
  259
  273
  287
  303
  319
  336
  353
  372
  391
  411
Depreciation, amort., depletion, $m
  38
  39
  39
  40
  41
  41
  42
  43
  44
  45
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
Funds from operations, $m
  85
  92
  99
  106
  114
  122
  131
  140
  149
  158
  159
  169
  180
  191
  203
  215
  227
  240
  254
  268
  283
  298
  314
  331
  349
  367
  387
  407
  428
  450
Change in working capital, $m
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
Cash from operations, $m
  83
  90
  97
  104
  112
  120
  128
  137
  146
  155
  156
  166
  177
  188
  199
  211
  223
  236
  250
  264
  278
  293
  309
  326
  343
  362
  381
  401
  421
  443
Maintenance CAPEX, $m
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
New CAPEX, $m
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
Cash from investing activities, $m
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -83
  -86
  -91
  -95
Free cash flow, $m
  60
  65
  71
  77
  83
  90
  97
  104
  111
  119
  118
  126
  135
  143
  153
  162
  172
  183
  193
  205
  216
  229
  241
  255
  269
  283
  298
  314
  331
  348
Issuance/(repayment) of debt, $m
  22
  23
  24
  25
  26
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  65
  68
  72
  75
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  
  22
  23
  24
  25
  26
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  65
  68
  72
  75
Total cash flow (excl. dividends), $m
  82
  89
  95
  102
  110
  117
  125
  133
  142
  151
  151
  161
  171
  181
  192
  203
  215
  227
  239
  253
  267
  281
  296
  312
  328
  346
  364
  383
  402
  423
Retained Cash Flow (-), $m
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
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
  61
  66
  72
  78
  84
  91
  98
  105
  112
  120
  119
  128
  136
  145
  154
  164
  174
  184
  195
  207
  219
  231
  244
  257
  271
  286
  301
  317
  334
  351
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
  59
  61
  63
  64
  65
  66
  66
  66
  65
  63
  57
  54
  52
  49
  45
  42
  38
  34
  30
  26
  23
  19
  16
  13
  11
  8
  6
  5
  4
  3
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
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U.S. Physical Therapy, Inc., through its subsidiaries, operates outpatient physical therapy clinics that provide pre-and post-operative care, and treatment for orthopedic-related disorders, sports-related injuries, preventative care, rehabilitation of injured workers and neurological-related injuries. The Company's segment is made up of various clinics within partnerships. The Company primarily operates through subsidiary clinic partnerships, in which it owns a general partnership interest and a limited partnership interest, and the managing therapists of the clinics owns the remaining limited partnership interest in the clinics. The Company operates 562 physical therapy clinics in 42 states. There are approximately 380 clinics operated under Clinic Partnerships and over 100 operated as Company-owned Facilities. In addition to its owned clinics, it also manages physical therapy facilities for third parties, primarily physicians, with over 29 third-party facilities under management.

FINANCIAL RATIOS  of  U.S. Physical Therapy (USPH)

Valuation Ratios
P/E Ratio 66.6
Price to Sales 3.9
Price to Book 7.4
Price to Tangible Book
Price to Cash Flow 27.4
Price to Free Cash Flow 32.5
Growth Rates
Sales Growth Rate 7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 9.9%
Financial Strength
Quick Ratio 20
Current Ratio 0.2
LT Debt to Equity 27.1%
Total Debt to Equity 27.7%
Interest Coverage 39
Management Effectiveness
Return On Assets 6.6%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 11.7%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 23%
Gross Margin - 3 Yr. Avg. 23.9%
EBITDA Margin 13.4%
EBITDA Margin - 3 Yr. Avg. 14.4%
Operating Margin 14%
Oper. Margin - 3 Yr. Avg. 14.4%
Pre-Tax Margin 10.6%
Pre-Tax Margin - 3 Yr. Avg. 11.7%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. 6.2%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 33.6%
Payout Ratio 42.9%

USPH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the USPH stock intrinsic value calculation we used $414.051 million for the last fiscal year's total revenue generated by U.S. Physical Therapy. The default revenue input number comes from 0001 income statement of U.S. Physical Therapy. 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 USPH stock valuation model: a) initial revenue growth rate of 10.4% 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 USPH is calculated based on our internal credit rating of U.S. Physical Therapy, 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 U.S. Physical Therapy.
    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 USPH stock the variable cost ratio is equal to 86%.

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 USPH 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 U.S. Physical Therapy.

Corporate tax rate of 27% is the nominal tax rate for U.S. Physical Therapy. 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 USPH 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 USPH are equal to 40.1%.

Life of production assets of 32.2 years is the average useful life of capital assets used in U.S. Physical Therapy 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 USPH is equal to 4.7%. 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 - $204.866 million for U.S. Physical Therapy - 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 12.686 million for U.S. Physical Therapy 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 U.S. Physical Therapy at the current share price and the inputted number of shares is $1.4 billion.

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COMPANY NEWS

▶ U.S. Physical Therapy: 3Q Earnings Snapshot   [10:48AM  Associated Press]
▶ One of the area's top entrepreneurs is leaving his first big success   [Oct-24-18 12:22PM  American City Business Journals]
▶ U.S. Physical Therapy: 2Q Earnings Snapshot   [10:07AM  Associated Press]
▶ Is It Time To Buy US Physical Therapy Inc (NYSE:USPH)?   [Jun-21-18 11:25AM  Simply Wall St.]
▶ U.S. Physical Therapy: 1Q Earnings Snapshot   [May-03-18 09:19AM  Associated Press]
▶ U.S. Physical Therapy posts 4Q profit   [08:45AM  Associated Press]
▶ U.S. Physical Therapy Adds to Executive Team   [Mar-02-18 08:30AM  Business Wire]
▶ U.S. Physical Therapy misses 3Q profit forecasts   [Nov-02-17 09:16AM  Associated Press]
▶ U.S. Physical Therapy posts 2Q profit   [Aug-03-17 09:55AM  Associated Press]
▶ U.S. Physical Therapy posts 1Q profit   [Jun-29-17 11:16PM  Associated Press]
▶ U.S. Physical Therapy posts 4Q profit   [08:26AM  Associated Press]
▶ U.S. Physical Therapy Reports 2016 Results   [08:00AM  Business Wire]

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