Option Care Health, Inc.'s (NASDAQ:OPCH) Intrinsic Value Is Potentially 78% Above Its Share Price
Option Care Health, Inc.'s (NASDAQ:OPCH) Intrinsic Value Is Potentially 78% Above Its Share Price
Key Insights
- The projected fair value for Option Care Health is US$56.90 based on 2 Stage Free Cash Flow to Equity
- Current share price of US$32.02 suggests Option Care Health is potentially 44% undervalued
- The US$39.57 analyst price target for OPCH is 30% less than our estimate of fair value
Does the April share price for Option Care Health, Inc. (NASDAQ:OPCH) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by estimating the company's future cash flows and discounting them to their present value. This will be done using the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
The Method
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) estimate
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$284.1m | US$307.2m | US$372.0m | US$385.7m | US$398.3m | US$410.1m | US$421.5m | US$432.5m | US$443.4m | US$454.3m |
Growth Rate Estimate Source | Analyst x2 | Analyst x2 | Analyst x1 | Est @ 3.68% | Est @ 3.26% | Est @ 2.97% | Est @ 2.77% | Est @ 2.62% | Est @ 2.52% | Est @ 2.45% |
Present Value ($, Millions) Discounted @ 6.0% | US$268 | US$274 | US$313 | US$306 | US$298 | US$290 | US$281 | US$272 | US$263 | US$254 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$2.8b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.0%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$454m× (1 + 2.3%) ÷ (6.0%– 2.3%) = US$13b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$13b÷ ( 1 + 6.0%)10= US$7.1b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$9.9b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$32.0, the company appears quite undervalued at a 44% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.
Important Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Option Care Health as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.0%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for Option Care Health
- Earnings growth over the past year exceeded the industry.
- Debt is well covered by earnings and cashflows.
- Balance sheet summary for OPCH.
- No major weaknesses identified for OPCH.
- Annual revenue is forecast to grow faster than the American market.
- Good value based on P/E ratio and estimated fair value.
- Significant insider buying over the past 3 months.
- Annual earnings are forecast to decline for the next 3 years.
- What else are analysts forecasting for OPCH?
Next Steps:
Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For Option Care Health, we've put together three pertinent elements you should further examine:
- Risks: Be aware that Option Care Health is showing 3 warning signs in our investment analysis , and 1 of those is concerning...
- Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for OPCH's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
關鍵見解
- 根據兩階段自由現金流向股本計算,Option Care Health的預計公允價值爲56.90美元
- 當前股價爲32.02美元,表明Option Care Health可能被低估了44%
- 分析師對OPCH的目標股價爲39.57美元,比我們對公允價值的估計低30%
Option Care Health, Inc.(納斯達克股票代碼:OPCH)4月份的股價是否反映了其真正價值?今天,我們將通過估算公司未來的現金流並將其折現爲現值來估算股票的內在價值。這將使用折扣現金流 (DCF) 模型來完成。像這樣的模型可能看起來超出外行人的理解,但它們很容易理解。
但請記住,估算公司價值的方法有很多,而差價合約只是一種方法。如果您想了解有關折扣現金流的更多信息,可以在Simply Wall St分析模型中詳細了解此計算背後的理由。
該方法
我們使用的是兩階段增長模型,這只是意味着我們考慮了公司增長的兩個階段。在初始階段,公司的增長率可能更高,而第二階段通常被認爲具有穩定的增長率。在第一階段,我們需要估算未來十年的業務現金流。在可能的情況下,我們會使用分析師的估計值,但是當這些估計值不可用時,我們會從最新的估計值或報告的價值中推斷出之前的自由現金流(FCF)。我們假設自由現金流萎縮的公司將減緩其萎縮速度,而自由現金流不斷增長的公司在此期間的增長率將放緩。我們這樣做是爲了反映早期增長的放緩幅度往往比後來的幾年更大。
差價合約就是關於未來一美元的價值低於今天一美元的概念,因此我們將這些未來現金流的價值折現爲以今天的美元計算的估計價值:
10 年自由現金流 (FCF) 估計
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 2.841 億美元 | 3.072 億美元 | 372.0 億美元 | 385.7 億美元 | 398.3 億美元 | 410.1 億美元 | 421.5 億美元 | 432.5 億美元 | 4.434 億美元 | 4.543 億美元 |
增長率估算來源 | 分析師 x2 | 分析師 x2 | 分析師 x1 | Est @ 3.68% | Est @ 3.26% | Est @ 2.97% | Est @ 2.77% | Est @ 2.62% | 東部時間 @ 2.52% | Est @ 2.45% |
折扣現值(美元,百萬)@ 6.0% | 268 美元 | 274 美元 | 313 美元 | 306 美元 | 298 美元 | 290 美元 | 281 美元 | 272 美元 | 263 美元 | 254 美元 |
(“Est” = Simply Wall St估計的FCF增長率)
十年期現金流(PVCF)的現值 = 28億美元
我們現在需要計算終值,該值涵蓋了這十年之後的所有未來現金流。出於多種原因,使用的增長率非常保守,不能超過一個國家的GDP增長率。在這種情況下,我們使用10年期國債收益率的5年平均值(2.3%)來估計未來的增長。與10年 “增長” 期一樣,我們使用6.0%的股本成本將未來的現金流折現爲今天的價值。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 4.54億美元× (1 + 2.3%) ÷ (6.0% — 2.3%) = 130億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 130億美元÷ (1 + 6.0%)10= 71 億美元
因此,總價值或權益價值是未來現金流現值的總和,在本例中爲99億美元。最後一步是將股票價值除以已發行股票的數量。相對於目前的32.0美元的股價,該公司的估值似乎被嚴重低估,與目前的股價相比折扣了44%。但請記住,這只是一個近似的估值,就像任何複雜的公式一樣,垃圾進出。
重要假設
現在,貼現現金流的最重要輸入是貼現率,當然還有實際現金流。如果你不同意這些結果,那就自己計算一下,試一試假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮公司未來的資本需求,因此它沒有全面反映公司的潛在表現。鑑於我們將Option Care Health視爲潛在股東,因此使用權益成本作爲貼現率,而不是構成債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了6.0%,這是基於0.800的槓桿測試版。Beta是衡量股票與整個市場相比波動性的指標。我們的測試版來自全球可比公司的行業平均貝塔值,設定在0.8到2.0之間,這是一個穩定的業務的合理範圍。
期權醫療健康的 SWOT 分析
- 過去一年的收益增長超過了該行業。
- 收益和現金流足以彌補債務。
- OPCH 的資產負債表摘要。
- 沒有發現OPCH的主要弱點。
- 預計年收入的增長速度將快於美國市場。
- 根據市盈率和估計的公允價值,物有所值。
- 在過去的3個月中進行了大量的內幕收購。
- 預計未來三年的年收入將下降。
- 分析師對OPCH還有什麼預測?
後續步驟:
儘管公司的估值很重要,但它只是公司需要評估的衆多因素之一。DCF模型不是完美的股票估值工具。相反,它應該被視爲 “需要哪些假設才能低估/高估這隻股票的價值?” 的指南例如,公司權益成本或無風險利率的變化會對估值產生重大影響。爲什麼內在價值高於當前股價?對於 Option Care Health,我們彙總了三個相關要素,您應該進一步研究:
- 風險:請注意,Option Care Health在我們的投資分析中顯示出3個警告信號,其中一個與...
- 管理層:內部人士是否一直在增加股價以利用市場對OPCH未來前景的情緒?查看我們的管理層和董事會分析,了解首席執行官薪酬和治理因素。
- 其他穩健的業務:低債務、高股本回報率和良好的過去表現是強大業務的基礎。爲什麼不瀏覽我們具有堅實業務基礎的股票互動清單,看看是否還有其他你可能沒有考慮過的公司!
PS。Simply Wall St應用程序每天對納斯達克證券交易所的每隻股票進行折扣現金流估值。如果您想找到其他股票的計算方法,請在此處搜索。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
風險及免責聲明
- 分享到weixin
- 分享到qq
- 分享到facebook
- 分享到twitter
- 分享到微博
- 粘贴板
使用瀏覽器的分享功能,分享給你的好友吧