Yahoo Finance Calculating The Fair Value Of USANA Health Sciences Inc (NYSE:USNA)
Does the share price for USANA Health Sciences Inc (NYSE:USNA) reflect it’s really worth? Today, I will calculate the stock’s intrinsic value using the discounted cash flow (DCF) method. If you want to learn more about this method, the basis for my calculations can be found in detail in the Simply Wall St analysis model. Also note that this article was written in May 2018 so be sure check the latest calculation for USANA Health Sciences here.
What’s the value?
We are going to use a two-stage DCF model, which takes into account the initial higher growth stage of a company’s life cycle and the steadier growth phase over the long run. Firstly, I pulled together the analyst consensus estimates of USNA’s levered free cash flow (FCF) over the next five years and discounted these values at the rate of 8.49%. When estimates weren’t available, I’ve extrapolated the average annual growth rate over the previous five years, capped at a reasonable level. This resulted in a present value of 5-year cash flow of US$559.06M. Want to know how I calculated this value? Check out our detailed analysis here.
Above is a visual representation of how USNA’s top and bottom lines are expected to move going forward, which should give you some color on USNA’s outlook. Now we need to determine the terminal value, which is the business’s cash flow after the first stage. I think it’s suitable to use the 10-year government bond rate of 2.8% as the perpetual growth rate, which is rightly below GDP growth, but more towards the conservative side. The present value of the terminal value after discounting it back five years is US$2.01B.
The total value, or equity value, is then the sum of the present value of the cash flows, which in this case is US$2.57B. To get the intrinsic value per share, we divide this by the total number of shares outstanding. This results in an intrinsic value of $106.37, which, compared to the current share price of $112.6, we find that USANA Health Sciences is fair value, maybe slightly overvalued and not available at a discount at this time.
Next Steps:
Although the valuation of a company is important, it shouldn’t be the only metric you look at when researching a company.
For USNA, there are three pertinent factors you should further examine:
Financial Health: Does USNA have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Future Earnings: How does USNA’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of USNA? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
PS. The Simply Wall St app conducts a discounted cash flow for every stock on the NYSE every 6 hours. If you want to find the calculation for other stocks just search here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
