Coventry Health Care, (FRA:HCA) Intrinsic Value: DCF (FCF Based) : €12.23 (As of May. 18, 2024)

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What is Coventry Health Care, Intrinsic Value: DCF (FCF Based)?

As of today (2024-05-18), Coventry Health Care,'s intrinsic value calculated from the Discounted Cash Flow model is €12.23.

Note: Discounted Cash Flow model is only suitable for predictable companies (Business Predictability Rank higher than 1-Star). If the company's predictability rank is 1-Star or Not Rated, result may not be accurate due to the low predictability of business and the data will not be stored into our database.

Coventry Health Care,'s Predictability Rank is Not Rated. Thus, this page is only used for demonstration purposes and the DCF related results in the screener and portfolio will appear as zero.

Margin of Safety (FCF Based) using Discounted Cash Flow model for Coventry Health Care, is -209.16%.

The industry rank for Coventry Health Care,'s Intrinsic Value: DCF (FCF Based) or its related term are showing as below:

FRA:HCA's Price-to-DCF (FCF Based) is not ranked ^*
in the Healthcare Plans industry.
Industry Median: 1.66
* Ranked among companies with meaningful Price-to-DCF (FCF Based) only.

Coventry Health Care, Intrinsic Value: DCF (FCF Based) Historical Data

The historical data trend for Coventry Health Care,'s Intrinsic Value: DCF (FCF Based) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Coventry Health Care, Intrinsic Value: DCF (FCF Based) Chart

Coventry Health Care, Annual Data

Trend

Dec03

Dec04

Dec05

Dec06

Dec07

Dec08

Dec09

Dec10

Dec11

Dec12

Intrinsic Value: DCF (FCF Based)

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Coventry Health Care, Quarterly Data
	Jun08	Sep08	Dec08	Mar09	Jun09	Sep09	Dec09	Mar10	Jun10	Sep10	Dec10	Mar11	Jun11	Sep11	Dec11	Mar12	Jun12	Sep12	Dec12	Mar13
Intrinsic Value: DCF (FCF Based)	Get a 7-Day Free Trial															-	-	-	-	-

Competitive Comparison of Coventry Health Care,'s Intrinsic Value: DCF (FCF Based)

For the Healthcare Plans subindustry, Coventry Health Care,'s Price-to-DCF (FCF Based), along with its competitors' market caps and Price-to-DCF (FCF Based) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

Coventry Health Care,'s Price-to-DCF (FCF Based) Distribution in the Healthcare Plans Industry

For the Healthcare Plans industry and Healthcare sector, Coventry Health Care,'s Price-to-DCF (FCF Based) distribution charts can be found below:

* The bar in red indicates where Coventry Health Care,'s Price-to-DCF (FCF Based) falls into.

Coventry Health Care, Intrinsic Value: DCF (FCF Based) Calculation

This is the intrinsic value calculated from the Discounted Cash Flow model with default parameters. In a discounted cash flow model, the future cash flow is estimated based on a cash flow growth rate and a discount rate. The cash flow of the future is discounted to its current value at the discount rate. All of the discounted future cash flow is added together to get the current intrinsic value of the company.

Usually a two-stage model is used when calculating a stock's intrinsic value using a discounted cash flow model. The first stage is called the growth stage; the second is called the terminal stage. In the growth stage the company grows at a faster rate. Because it cannot grow at that rate forever, a lower rate is used for the terminal stage.

GuruFocus DCF calculator is a two-stage model. The default values are defined as:

1. Discount Rate: d = 11%
A reasonable discount rate assumption should be at least the long term average return of the stock market, which can be estimated from risk free rate plus risk premium of stock market. GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate and rounded up to the nearest integer. It is updated daily. The current risk-free rate is 4.42%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default. Then we added a risk premium of 6% to get the estimated discount rate. Some investors use their expected rate of return, which is also reasonable. A typical discount rate can be anywhere between 6% - 20%.

2. Growth Rate in the growth stage: g1 = 5%
The Growth Rate in the growth stage is initially set as the default 10-Year FCF Growth Rate (Per Share). In cases where the 10-year growth rate is unavailable, it defaults to using the 5-Year FCF Growth Rate (Per Share). If both the 10-year and 5-year growth rates are unavailable, the system defaults to the 3-Year FCF Growth Rate (Per Share).
However, it's important to note that there is a growth rate range. If the calculated growth rate exceeds 20%, it will be capped at 20%. Conversely, if the calculated growth rate falls below 5%, it will be adjusted to 5% to maintain a reasonable range.
=> Coventry Health Care,'s average Free Cash Flow Growth Rate in the past 3 years was 0.00%, which is less than 5%. GuruFocus defaults => Growth Rate: 5%

3. Years of Growth Stage: y1 = 10

4. Terminal Growth Rate: g2 = 4%

5. Years of Terminal Growth: y2 = 10

6. Free Cash Flow per Share: fcf = €1.060.
However, GuruFocus DCF calculator is actually a Discounted Earnings calculator, the EPS without NRI is used as the default. The reason we are doing this is we found that historically stock prices are more correlated with earnings than free cash flow.

All of the default settings can be changed and the results are calculated automatically.

Coventry Health Care,'s Intrinsic Value: DCF (FCF Based) for today is calculated as

Intrinsic Value: DCF (FCF Based)	=	Free Cash Flow per Share	*	{[(1+g1)/(1+d)	+	(1+g1)^2/(1+d)^2	+	...	+	(1+g1)^10/(1+d)^10]
	+	(1+g1)^10/(1+d)^10	*	[(1+g2)/(1+d)	+	(1+g2)^2/(1+d)^2	+	...	+	(1+g2)^10/(1+d)^10]}

set x = (1+g1)/(1+d) = (1+0.05)/(1+0.11) = 0.94594594594595
and y = (1+g2)/(1+d) = (1+0.04)/(1+0.11) = 0.93693693693694

Intrinsic Value: DCF (FCF Based)

Free Cash Flow per Share

{[x

x^2

...

x^10]

x^10

y^2

...

y^10]}

Free Cash Flow per Share

(1-x^10)

(1-x)

x^10

(1-y^10)

(1-y)]

1.060

11.5406

12.23

Margin of Safety (FCF Based)	=	(Intrinsic Value: DCF (FCF Based)	-	Current Price)	/	Intrinsic Value: DCF (FCF Based)
	=	(12.23	-	37.81)	/	12.23
	=	-209.16 %

Coventry Health Care, (FRA:HCA) Intrinsic Value: DCF (FCF Based) Explanation

Unlike valuation methods such as Net Current Asset Value, Tangible Book per Share, Graham Number, Median PS Value etc, discounted Cash Flow model evaluates the companies based on their future earnings power instead of their assets.

Be Aware

What you need to know about the DCF model:

1. The DCF model evaluates a company based on its future earnings power
2. Growth is taken into account; therefore a faster growth company is worth more if everything else is the same.
3. Since we are projecting future growth, it is assumed that the company will grow at the same rate as it did during the past 10 years. Therefore this model works better for the companies that have relatively consistent performance.
4. The DCF model works poorly for inconsistent performers such as cyclicals.
5. What discount rate should you use? Your expected return from the investment is a good discount rate assumption.
6. A larger margin of safety should be required for companies with less predictable businesses.

You can screen for stocks that trade below their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) with the GuruFocus All-in-One Screener. Companies with a high Predictability Rank that trade at a discount to their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) can be found in the screen of Undervalued Predictable Companies.

Coventry Health Care, Intrinsic Value: DCF (FCF Based) Related Terms

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Coventry Health Care, (FRA:HCA) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Healthcare Plans » Coventry Health Care, Inc. (FRA:HCA) » Definitions » Intrinsic Value: DCF (FCF Based)

Comparable Companies

Traded in Other Exchanges

N/A

Address

Website

Coventry Health Care, Inc. was incorporated under the laws of the State of Delaware on December 17, 1997 and is the successor to Coventry Corporation, which was incorporated on November 21, 1986. The Company provides risk and fee-based managed care products and services to a cross section of individuals, employer and government-funded groups, government agencies, and other insurance carriers and administrators. Its operations are segmented into three - Commercial Products, Government Programs and Workers' Compensation. The Commercial Products segment provides health plan commercial risk, commercial management services, Medicare Advantage Coordinated Care Plans, and Medicaid products. Its health plans offer commercial risk products, including health maintenance organization, preferred provider organization, and point of service products to individuals and employer groups. This segment also provides health insurance benefits under the Federal Employees Health Benefits Program; and administrative services only products, such as medical claims administration, pharmacy benefits management, and utilization management and quality assurance programs. In addition, it offers consumer-directed benefit options comprising health reimbursement and savings accounts to commercial customers; provider network rental services through a PPO network to national, regional, and local third-party administrators, as well as insurance carriers; and coordination of mental health and substance abuse treatment services. The Government Programs segment offers Medicare Part D program that provides access to prescription drug coverage for eligible beneficiaries; and comprehensive health benefits on a risk basis to members participating in the Medicare Advantage CCP and Medicaid programs. Its Workers Compensation segment offers fee-based managed care services, such as provider network access, bill review, pharmacy benefit management, durable medical equipment and ancillary services, and care management services to underwriters and administrators of workers compensation insurance. The company serves individuals, employer and government-funded groups, government agencies, and other insurance carriers and administrators through direct sales staff, and independent insurance brokers and agents.