Intrinsic value of Potash Corporation of Saskatchewan Inc. - POT

Previous Close

$25.78

  Intrinsic Value

$3.26

stock screener

  Rating & Target

str. sell

-87%

Previous close

$25.78

 
Intrinsic value

$3.26

 
Up/down potential

-87%

 
Rating

str. sell

We calculate the intrinsic value of POT 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 2016), $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 21.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  6,538
  7,076
  7,637
  8,219
  8,824
  9,453
  10,106
  10,785
  11,492
  12,227
  12,992
  13,788
  14,618
  15,482
  16,384
  17,324
  18,306
  19,331
  20,402
  21,522
  22,692
  23,916
  25,197
  26,537
  27,940
  29,409
  30,948
  32,560
  34,250
  36,020
Variable operating expenses, $m
  1,764
  1,908
  2,058
  2,214
  2,376
  2,545
  2,720
  2,902
  3,091
  3,288
  3,479
  3,693
  3,915
  4,146
  4,388
  4,640
  4,903
  5,177
  5,464
  5,764
  6,077
  6,405
  6,748
  7,107
  7,483
  7,876
  8,289
  8,720
  9,173
  9,647
Fixed operating expenses, $m
  3,780
  3,864
  3,949
  4,035
  4,124
  4,215
  4,308
  4,402
  4,499
  4,598
  4,699
  4,803
  4,908
  5,016
  5,127
  5,240
  5,355
  5,473
  5,593
  5,716
  5,842
  5,970
  6,102
  6,236
  6,373
  6,513
  6,657
  6,803
  6,953
  7,106
Total operating expenses, $m
  5,544
  5,772
  6,007
  6,249
  6,500
  6,760
  7,028
  7,304
  7,590
  7,886
  8,178
  8,496
  8,823
  9,162
  9,515
  9,880
  10,258
  10,650
  11,057
  11,480
  11,919
  12,375
  12,850
  13,343
  13,856
  14,389
  14,946
  15,523
  16,126
  16,753
Operating income, $m
  993
  1,305
  1,630
  1,969
  2,323
  2,693
  3,079
  3,481
  3,902
  4,341
  4,813
  5,292
  5,794
  6,319
  6,869
  7,445
  8,048
  8,681
  9,345
  10,042
  10,773
  11,540
  12,347
  13,194
  14,084
  15,019
  16,003
  17,037
  18,124
  19,267
EBITDA, $m
  2,017
  2,412
  2,824
  3,253
  3,701
  4,168
  4,654
  5,162
  5,692
  6,244
  6,821
  7,424
  8,054
  8,713
  9,402
  10,124
  10,879
  11,670
  12,500
  13,369
  14,281
  15,238
  16,242
  17,297
  18,404
  19,566
  20,788
  22,071
  23,419
  24,837
Interest expense (income), $m
  255
  265
  309
  356
  405
  456
  508
  563
  620
  679
  740
  804
  871
  940
  1,012
  1,088
  1,166
  1,248
  1,333
  1,422
  1,516
  1,613
  1,715
  1,821
  1,933
  2,049
  2,171
  2,299
  2,433
  2,573
  2,720
Earnings before tax, $m
  728
  995
  1,273
  1,564
  1,868
  2,185
  2,516
  2,862
  3,223
  3,600
  4,008
  4,422
  4,854
  5,307
  5,781
  6,279
  6,801
  7,348
  7,923
  8,526
  9,160
  9,826
  10,525
  11,261
  12,035
  12,848
  13,704
  14,604
  15,551
  16,547
Tax expense, $m
  197
  269
  344
  422
  504
  590
  679
  773
  870
  972
  1,082
  1,194
  1,311
  1,433
  1,561
  1,695
  1,836
  1,984
  2,139
  2,302
  2,473
  2,653
  2,842
  3,040
  3,249
  3,469
  3,700
  3,943
  4,199
  4,468
Net income, $m
  532
  726
  930
  1,142
  1,363
  1,595
  1,837
  2,089
  2,353
  2,628
  2,926
  3,228
  3,543
  3,874
  4,220
  4,584
  4,965
  5,364
  5,784
  6,224
  6,687
  7,173
  7,684
  8,221
  8,785
  9,379
  10,004
  10,661
  11,352
  12,079

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
  25,242
  27,322
  29,485
  31,733
  34,069
  36,497
  39,020
  41,643
  44,370
  47,208
  50,161
  53,235
  56,438
  59,777
  63,258
  66,890
  70,680
  74,639
  78,774
  83,096
  87,614
  92,340
  97,284
  102,459
  107,876
  113,549
  119,490
  125,715
  132,237
  139,074
Adjusted assets (=assets-cash), $m
  25,242
  27,322
  29,485
  31,733
  34,069
  36,497
  39,020
  41,643
  44,370
  47,208
  50,161
  53,235
  56,438
  59,777
  63,258
  66,890
  70,680
  74,639
  78,774
  83,096
  87,614
  92,340
  97,284
  102,459
  107,876
  113,549
  119,490
  125,715
  132,237
  139,074
Revenue / Adjusted assets
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
Average production assets, $m
  19,711
  21,335
  23,024
  24,780
  26,604
  28,500
  30,470
  32,518
  34,648
  36,864
  39,170
  41,571
  44,072
  46,679
  49,397
  52,233
  55,193
  58,284
  61,513
  64,888
  68,417
  72,107
  75,968
  80,009
  84,239
  88,668
  93,308
  98,169
  103,262
  108,600
Working capital, $m
  804
  870
  939
  1,011
  1,085
  1,163
  1,243
  1,327
  1,414
  1,504
  1,598
  1,696
  1,798
  1,904
  2,015
  2,131
  2,252
  2,378
  2,509
  2,647
  2,791
  2,942
  3,099
  3,264
  3,437
  3,617
  3,807
  4,005
  4,213
  4,430
Total debt, $m
  7,195
  8,285
  9,418
  10,596
  11,820
  13,092
  14,414
  15,789
  17,218
  18,705
  20,252
  21,863
  23,542
  25,291
  27,115
  29,018
  31,004
  33,079
  35,246
  37,510
  39,878
  42,354
  44,945
  47,656
  50,495
  53,468
  56,581
  59,843
  63,260
  66,843
Total liabilities, $m
  13,227
  14,317
  15,450
  16,628
  17,852
  19,124
  20,446
  21,821
  23,250
  24,737
  26,284
  27,895
  29,574
  31,323
  33,147
  35,050
  37,036
  39,111
  41,278
  43,542
  45,910
  48,386
  50,977
  53,688
  56,527
  59,500
  62,613
  65,875
  69,292
  72,875
Total equity, $m
  12,015
  13,005
  14,035
  15,105
  16,217
  17,372
  18,573
  19,822
  21,120
  22,471
  23,876
  25,340
  26,865
  28,454
  30,111
  31,839
  33,644
  35,528
  37,496
  39,554
  41,704
  43,954
  46,307
  48,770
  51,349
  54,049
  56,877
  59,840
  62,945
  66,199
Total liabilities and equity, $m
  25,242
  27,322
  29,485
  31,733
  34,069
  36,496
  39,019
  41,643
  44,370
  47,208
  50,160
  53,235
  56,439
  59,777
  63,258
  66,889
  70,680
  74,639
  78,774
  83,096
  87,614
  92,340
  97,284
  102,458
  107,876
  113,549
  119,490
  125,715
  132,237
  139,074
Debt-to-equity ratio
  0.600
  0.640
  0.670
  0.700
  0.730
  0.750
  0.780
  0.800
  0.820
  0.830
  0.850
  0.860
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.960
  0.970
  0.980
  0.980
  0.990
  0.990
  1.000
  1.010
  1.010
Adjusted equity ratio
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476
  0.476

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  532
  726
  930
  1,142
  1,363
  1,595
  1,837
  2,089
  2,353
  2,628
  2,926
  3,228
  3,543
  3,874
  4,220
  4,584
  4,965
  5,364
  5,784
  6,224
  6,687
  7,173
  7,684
  8,221
  8,785
  9,379
  10,004
  10,661
  11,352
  12,079
Depreciation, amort., depletion, $m
  1,024
  1,107
  1,194
  1,284
  1,377
  1,475
  1,576
  1,681
  1,790
  1,904
  2,009
  2,132
  2,260
  2,394
  2,533
  2,679
  2,830
  2,989
  3,155
  3,328
  3,509
  3,698
  3,896
  4,103
  4,320
  4,547
  4,785
  5,034
  5,296
  5,569
Funds from operations, $m
  1,556
  1,834
  2,123
  2,426
  2,741
  3,069
  3,412
  3,770
  4,143
  4,532
  4,935
  5,360
  5,804
  6,268
  6,754
  7,262
  7,795
  8,353
  8,938
  9,552
  10,195
  10,870
  11,579
  12,324
  13,105
  13,926
  14,789
  15,695
  16,647
  17,649
Change in working capital, $m
  64
  66
  69
  72
  74
  77
  80
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
  189
  198
  208
  218
Cash from operations, $m
  1,492
  1,767
  2,055
  2,354
  2,666
  2,992
  3,332
  3,686
  4,056
  4,441
  4,841
  5,262
  5,701
  6,161
  6,643
  7,147
  7,674
  8,227
  8,806
  9,414
  10,051
  10,720
  11,422
  12,159
  12,933
  13,745
  14,599
  15,497
  16,440
  17,431
Maintenance CAPEX, $m
  -931
  -1,011
  -1,094
  -1,181
  -1,271
  -1,364
  -1,462
  -1,563
  -1,668
  -1,777
  -1,890
  -2,009
  -2,132
  -2,260
  -2,394
  -2,533
  -2,679
  -2,830
  -2,989
  -3,155
  -3,328
  -3,509
  -3,698
  -3,896
  -4,103
  -4,320
  -4,547
  -4,785
  -5,034
  -5,296
New CAPEX, $m
  -1,563
  -1,624
  -1,689
  -1,755
  -1,824
  -1,896
  -1,970
  -2,048
  -2,130
  -2,216
  -2,306
  -2,401
  -2,501
  -2,607
  -2,718
  -2,836
  -2,960
  -3,091
  -3,229
  -3,375
  -3,528
  -3,690
  -3,861
  -4,041
  -4,230
  -4,430
  -4,640
  -4,861
  -5,093
  -5,338
Cash from investing activities, $m
  -2,494
  -2,635
  -2,783
  -2,936
  -3,095
  -3,260
  -3,432
  -3,611
  -3,798
  -3,993
  -4,196
  -4,410
  -4,633
  -4,867
  -5,112
  -5,369
  -5,639
  -5,921
  -6,218
  -6,530
  -6,856
  -7,199
  -7,559
  -7,937
  -8,333
  -8,750
  -9,187
  -9,646
  -10,127
  -10,634
Free cash flow, $m
  -1,001
  -868
  -728
  -582
  -429
  -268
  -100
  75
  258
  449
  644
  852
  1,068
  1,295
  1,531
  1,777
  2,035
  2,306
  2,588
  2,885
  3,195
  3,521
  3,863
  4,222
  4,599
  4,996
  5,413
  5,851
  6,312
  6,797
Issuance/(repayment) of debt, $m
  1,035
  1,090
  1,133
  1,178
  1,224
  1,272
  1,322
  1,374
  1,429
  1,487
  1,547
  1,611
  1,678
  1,749
  1,824
  1,903
  1,986
  2,074
  2,167
  2,265
  2,368
  2,476
  2,591
  2,711
  2,839
  2,972
  3,113
  3,262
  3,418
  3,582
Issuance/(repurchase) of shares, $m
  406
  264
  100
  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  
  1,441
  1,354
  1,233
  1,178
  1,224
  1,272
  1,322
  1,374
  1,429
  1,487
  1,547
  1,611
  1,678
  1,749
  1,824
  1,903
  1,986
  2,074
  2,167
  2,265
  2,368
  2,476
  2,591
  2,711
  2,839
  2,972
  3,113
  3,262
  3,418
  3,582
Total cash flow (excl. dividends), $m
  439
  486
  505
  596
  796
  1,004
  1,222
  1,450
  1,687
  1,936
  2,192
  2,463
  2,747
  3,044
  3,355
  3,680
  4,022
  4,380
  4,755
  5,149
  5,563
  5,997
  6,454
  6,934
  7,438
  7,968
  8,526
  9,113
  9,730
  10,379
Retained Cash Flow (-), $m
  -937
  -990
  -1,030
  -1,070
  -1,112
  -1,156
  -1,201
  -1,248
  -1,298
  -1,351
  -1,406
  -1,464
  -1,525
  -1,589
  -1,657
  -1,729
  -1,804
  -1,884
  -1,968
  -2,057
  -2,151
  -2,249
  -2,354
  -2,463
  -2,579
  -2,700
  -2,828
  -2,963
  -3,105
  -3,254
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
  -498
  -504
  -525
  -474
  -316
  -151
  21
  201
  389
  585
  786
  1,000
  1,222
  1,455
  1,698
  1,952
  2,217
  2,496
  2,787
  3,092
  3,412
  3,748
  4,100
  4,471
  4,859
  5,268
  5,698
  6,150
  6,625
  7,125
Discount rate, %
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
  -468
  -442
  -426
  -355
  -216
  -94
  12
  100
  170
  224
  260
  282
  291
  288
  276
  257
  232
  205
  176
  148
  121
  96
  75
  57
  42
  30
  21
  14
  9
  6
Current shareholders' claim on cash, %
  98.2
  97.1
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7
  96.7

Potash Corporation of Saskatchewan Inc. (PCS) is a fertilizer producer producing a range of primary crop nutrients, such as potash, nitrogen and phosphate. The Company operates through three segments: potash, nitrogen and phosphate. As of December 31, 2016, it owned and operated five potash operations in Saskatchewan and owned one in New Brunswick. Its nitrogen operations involve the production of nitrogen fertilizers and nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate and nitric acid. It has nitrogen facilities in Georgia, Louisiana, Ohio and Trinidad. Its phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers, phosphate feed and industrial acid, which is used in food products and industrial processes. It has phosphate mines and mineral processing plant complexes in Florida and North Carolina. As of December 31, 2016, the Company had four phosphate feed plants in the United States.

FINANCIAL RATIOS  of  Potash Corporation of Saskatchewan Inc. (POT)

Valuation Ratios
P/E Ratio 49.7
Price to Sales 3.6
Price to Book 2
Price to Tangible Book
Price to Cash Flow 12.7
Price to Free Cash Flow 43.7
Growth Rates
Sales Growth Rate -29%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26.6%
Cap. Spend. - 3 Yr. Gr. Rate -11.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 45.2%
Total Debt to Equity 56%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 6.7%
Return On Total Capital 2.5%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 3.9%
Return On Equity - 3 Yr. Avg. 11.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 18.6%
Gross Margin - 3 Yr. Avg. 30.7%
EBITDA Margin 28%
EBITDA Margin - 3 Yr. Avg. 37.4%
Operating Margin 13.1%
Oper. Margin - 3 Yr. Avg. 25.5%
Pre-Tax Margin 8.2%
Pre-Tax Margin - 3 Yr. Avg. 22%
Net Profit Margin 7.2%
Net Profit Margin - 3 Yr. Avg. 16.4%
Effective Tax Rate 11.7%
Eff/ Tax Rate - 3 Yr. Avg. 22.3%
Payout Ratio 250.7%

POT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the POT stock intrinsic value calculation we used $6020 million for the last fiscal year's total revenue generated by Potash Corporation of Saskatchewan Inc.. The default revenue input number comes from 2016 income statement of Potash Corporation of Saskatchewan Inc.. 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 POT stock valuation model: a) initial revenue growth rate of 8.6% 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 6.5%, whose default value for POT is calculated based on our internal credit rating of Potash Corporation of Saskatchewan Inc., 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 Potash Corporation of Saskatchewan Inc..
    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 POT stock the variable cost ratio is equal to 27%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3699 million in the base year in the intrinsic value calculation for POT 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 4.3% for Potash Corporation of Saskatchewan Inc..

Corporate tax rate of 27% is the nominal tax rate for Potash Corporation of Saskatchewan Inc.. 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 POT 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 POT are equal to 301.5%.

Life of production assets of 19.5 years is the average useful life of capital assets used in Potash Corporation of Saskatchewan Inc. 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 POT is equal to 12.3%. 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 - $11078 million for Potash Corporation of Saskatchewan Inc. - 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 840.186 million for Potash Corporation of Saskatchewan Inc. 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 Potash Corporation of Saskatchewan Inc. at the current share price and the inputted number of shares is $21.7 billion.

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