Intrinsic value of Potash Corporation of Saskatchewan Inc. - POT

Previous Close

$24.31

  Intrinsic Value

$3.26

stock screener

  Rating & Target

str. sell

-87%

Previous close

$24.31

 
Intrinsic value

$3.26

 
Up/down potential

-87%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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 20.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   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, %
  -29.03
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  6,020
  6,399
  6,794
  7,205
  7,634
  8,081
  8,547
  9,033
  9,541
  10,071
  10,626
  11,205
  11,811
  12,445
  13,108
  13,803
  14,530
  15,291
  16,089
  16,925
  17,801
  18,719
  19,682
  20,691
  21,749
  22,859
  24,024
  25,245
  26,526
  27,871
  29,281
Variable operating expenses, $m
 
  1,727
  1,833
  1,943
  2,058
  2,177
  2,302
  2,432
  2,568
  2,710
  2,859
  3,001
  3,163
  3,333
  3,511
  3,697
  3,891
  4,095
  4,309
  4,533
  4,768
  5,013
  5,271
  5,542
  5,825
  6,122
  6,434
  6,761
  7,104
  7,464
  7,842
Fixed operating expenses, $m
 
  3,791
  3,886
  3,983
  4,083
  4,185
  4,290
  4,397
  4,507
  4,620
  4,735
  4,853
  4,975
  5,099
  5,227
  5,357
  5,491
  5,628
  5,769
  5,913
  6,061
  6,213
  6,368
  6,527
  6,690
  6,858
  7,029
  7,205
  7,385
  7,570
  7,759
Total operating expenses, $m
  5,234
  5,518
  5,719
  5,926
  6,141
  6,362
  6,592
  6,829
  7,075
  7,330
  7,594
  7,854
  8,138
  8,432
  8,738
  9,054
  9,382
  9,723
  10,078
  10,446
  10,829
  11,226
  11,639
  12,069
  12,515
  12,980
  13,463
  13,966
  14,489
  15,034
  15,601
Operating income, $m
  786
  881
  1,075
  1,279
  1,493
  1,718
  1,955
  2,204
  2,466
  2,741
  3,032
  3,351
  3,673
  4,013
  4,371
  4,749
  5,147
  5,568
  6,011
  6,479
  6,972
  7,493
  8,042
  8,622
  9,234
  9,879
  10,560
  11,279
  12,037
  12,837
  13,680
EBITDA, $m
  1,725
  1,883
  2,139
  2,406
  2,687
  2,981
  3,289
  3,614
  3,954
  4,312
  4,688
  5,083
  5,499
  5,937
  6,398
  6,883
  7,394
  7,932
  8,499
  9,096
  9,725
  10,387
  11,085
  11,821
  12,597
  13,414
  14,275
  15,182
  16,138
  17,146
  18,208
Interest expense (income), $m
  255
  265
  297
  332
  367
  405
  444
  484
  526
  571
  617
  665
  715
  768
  823
  881
  941
  1,005
  1,071
  1,140
  1,213
  1,289
  1,369
  1,453
  1,541
  1,633
  1,729
  1,831
  1,937
  2,048
  2,165
Earnings before tax, $m
  494
  616
  778
  947
  1,126
  1,314
  1,511
  1,720
  1,939
  2,171
  2,415
  2,686
  2,958
  3,245
  3,548
  3,868
  4,206
  4,563
  4,940
  5,338
  5,759
  6,204
  6,673
  7,169
  7,693
  8,247
  8,831
  9,448
  10,100
  10,788
  11,515
Tax expense, $m
  58
  166
  210
  256
  304
  355
  408
  464
  524
  586
  652
  725
  799
  876
  958
  1,044
  1,136
  1,232
  1,334
  1,441
  1,555
  1,675
  1,802
  1,936
  2,077
  2,227
  2,384
  2,551
  2,727
  2,913
  3,109
Net income, $m
  436
  450
  568
  692
  822
  959
  1,103
  1,255
  1,416
  1,585
  1,763
  1,961
  2,159
  2,369
  2,590
  2,824
  3,070
  3,331
  3,606
  3,897
  4,204
  4,529
  4,871
  5,234
  5,616
  6,020
  6,447
  6,897
  7,373
  7,875
  8,406

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  43
  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
  23,313
  24,708
  26,232
  27,820
  29,474
  31,200
  32,999
  34,877
  36,838
  38,886
  41,026
  43,263
  45,603
  48,050
  50,612
  53,293
  56,100
  59,040
  62,120
  65,347
  68,730
  72,275
  75,991
  79,888
  83,975
  88,260
  92,756
  97,471
  102,419
  107,609
  113,056
Adjusted assets (=assets-cash), $m
  23,270
  24,708
  26,232
  27,820
  29,474
  31,200
  32,999
  34,877
  36,838
  38,886
  41,026
  43,263
  45,603
  48,050
  50,612
  53,293
  56,100
  59,040
  62,120
  65,347
  68,730
  72,275
  75,991
  79,888
  83,975
  88,260
  92,756
  97,471
  102,419
  107,609
  113,056
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
  0.259
Average production assets, $m
  18,149
  19,294
  20,484
  21,724
  23,016
  24,363
  25,768
  27,235
  28,766
  30,365
  32,037
  33,784
  35,611
  37,522
  39,522
  41,616
  43,808
  46,104
  48,509
  51,029
  53,670
  56,438
  59,340
  62,383
  65,574
  68,921
  72,432
  76,114
  79,977
  84,030
  88,283
Working capital, $m
  -410
  787
  836
  886
  939
  994
  1,051
  1,111
  1,174
  1,239
  1,307
  1,378
  1,453
  1,531
  1,612
  1,698
  1,787
  1,881
  1,979
  2,082
  2,190
  2,302
  2,421
  2,545
  2,675
  2,812
  2,955
  3,105
  3,263
  3,428
  3,602
Total debt, $m
  6,203
  6,915
  7,714
  8,546
  9,413
  10,317
  11,260
  12,244
  13,271
  14,344
  15,466
  16,638
  17,864
  19,146
  20,489
  21,893
  23,364
  24,905
  26,519
  28,210
  29,982
  31,840
  33,787
  35,829
  37,971
  40,216
  42,572
  45,043
  47,635
  50,355
  53,209
Total liabilities, $m
  12,235
  12,947
  13,746
  14,578
  15,445
  16,349
  17,292
  18,276
  19,303
  20,376
  21,498
  22,670
  23,896
  25,178
  26,521
  27,925
  29,396
  30,937
  32,551
  34,242
  36,014
  37,872
  39,819
  41,861
  44,003
  46,248
  48,604
  51,075
  53,667
  56,387
  59,241
Total equity, $m
  11,078
  11,761
  12,486
  13,242
  14,030
  14,851
  15,708
  16,601
  17,535
  18,510
  19,528
  20,593
  21,707
  22,872
  24,091
  25,367
  26,704
  28,103
  29,569
  31,105
  32,715
  34,403
  36,172
  38,027
  39,972
  42,012
  44,152
  46,396
  48,751
  51,222
  53,814
Total liabilities and equity, $m
  23,313
  24,708
  26,232
  27,820
  29,475
  31,200
  33,000
  34,877
  36,838
  38,886
  41,026
  43,263
  45,603
  48,050
  50,612
  53,292
  56,100
  59,040
  62,120
  65,347
  68,729
  72,275
  75,991
  79,888
  83,975
  88,260
  92,756
  97,471
  102,418
  107,609
  113,055
Debt-to-equity ratio
  0.560
  0.590
  0.620
  0.650
  0.670
  0.690
  0.720
  0.740
  0.760
  0.770
  0.790
  0.810
  0.820
  0.840
  0.850
  0.860
  0.870
  0.890
  0.900
  0.910
  0.920
  0.930
  0.930
  0.940
  0.950
  0.960
  0.960
  0.970
  0.980
  0.980
  0.990
Adjusted equity ratio
  0.474
  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
  436
  450
  568
  692
  822
  959
  1,103
  1,255
  1,416
  1,585
  1,763
  1,961
  2,159
  2,369
  2,590
  2,824
  3,070
  3,331
  3,606
  3,897
  4,204
  4,529
  4,871
  5,234
  5,616
  6,020
  6,447
  6,897
  7,373
  7,875
  8,406
Depreciation, amort., depletion, $m
  939
  1,003
  1,064
  1,127
  1,193
  1,263
  1,335
  1,410
  1,488
  1,570
  1,656
  1,732
  1,826
  1,924
  2,027
  2,134
  2,247
  2,364
  2,488
  2,617
  2,752
  2,894
  3,043
  3,199
  3,363
  3,534
  3,714
  3,903
  4,101
  4,309
  4,527
Funds from operations, $m
  1,783
  1,452
  1,631
  1,819
  2,015
  2,221
  2,438
  2,665
  2,904
  3,155
  3,419
  3,693
  3,985
  4,293
  4,617
  4,958
  5,317
  5,695
  6,094
  6,514
  6,956
  7,423
  7,915
  8,433
  8,979
  9,554
  10,161
  10,801
  11,474
  12,185
  12,933
Change in working capital, $m
  81
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  85
  89
  94
  98
  103
  108
  113
  118
  124
  130
  137
  143
  150
  158
  165
  174
Cash from operations, $m
  1,702
  1,406
  1,583
  1,768
  1,963
  2,166
  2,380
  2,605
  2,841
  3,090
  3,351
  3,622
  3,911
  4,215
  4,535
  4,872
  5,227
  5,602
  5,996
  6,411
  6,849
  7,310
  7,796
  8,309
  8,849
  9,418
  10,018
  10,650
  11,317
  12,019
  12,760
Maintenance CAPEX, $m
  0
  -931
  -989
  -1,050
  -1,114
  -1,180
  -1,249
  -1,321
  -1,397
  -1,475
  -1,557
  -1,643
  -1,732
  -1,826
  -1,924
  -2,027
  -2,134
  -2,247
  -2,364
  -2,488
  -2,617
  -2,752
  -2,894
  -3,043
  -3,199
  -3,363
  -3,534
  -3,714
  -3,903
  -4,101
  -4,309
New CAPEX, $m
  -1,207
  -1,145
  -1,190
  -1,240
  -1,292
  -1,347
  -1,405
  -1,466
  -1,531
  -1,599
  -1,671
  -1,747
  -1,827
  -1,911
  -2,000
  -2,094
  -2,192
  -2,296
  -2,405
  -2,520
  -2,641
  -2,768
  -2,902
  -3,043
  -3,191
  -3,347
  -3,510
  -3,682
  -3,863
  -4,053
  -4,253
Cash from investing activities, $m
  -1,209
  -2,076
  -2,179
  -2,290
  -2,406
  -2,527
  -2,654
  -2,787
  -2,928
  -3,074
  -3,228
  -3,390
  -3,559
  -3,737
  -3,924
  -4,121
  -4,326
  -4,543
  -4,769
  -5,008
  -5,258
  -5,520
  -5,796
  -6,086
  -6,390
  -6,710
  -7,044
  -7,396
  -7,766
  -8,154
  -8,562
Free cash flow, $m
  493
  -670
  -597
  -522
  -444
  -361
  -274
  -183
  -86
  15
  122
  232
  351
  477
  611
  752
  901
  1,059
  1,226
  1,403
  1,591
  1,789
  2,000
  2,223
  2,458
  2,708
  2,973
  3,253
  3,550
  3,865
  4,198
Issuance/(repayment) of debt, $m
  486
  755
  799
  832
  867
  904
  943
  984
  1,027
  1,073
  1,121
  1,172
  1,226
  1,283
  1,342
  1,405
  1,471
  1,541
  1,614
  1,691
  1,772
  1,858
  1,947
  2,042
  2,141
  2,246
  2,356
  2,471
  2,592
  2,720
  2,854
Issuance/(repurchase) of shares, $m
  34
  233
  158
  64
  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  
  520
  988
  957
  896
  867
  904
  943
  984
  1,027
  1,073
  1,121
  1,172
  1,226
  1,283
  1,342
  1,405
  1,471
  1,541
  1,614
  1,691
  1,772
  1,858
  1,947
  2,042
  2,141
  2,246
  2,356
  2,471
  2,592
  2,720
  2,854
Total cash flow (excl. dividends), $m
  1,013
  317
  360
  374
  423
  543
  669
  801
  941
  1,088
  1,244
  1,404
  1,577
  1,760
  1,953
  2,157
  2,372
  2,600
  2,840
  3,094
  3,363
  3,647
  3,947
  4,264
  4,600
  4,954
  5,329
  5,725
  6,143
  6,585
  7,051
Retained Cash Flow (-), $m
  247
  -683
  -726
  -756
  -788
  -821
  -857
  -894
  -933
  -975
  -1,019
  -1,065
  -1,114
  -1,165
  -1,219
  -1,276
  -1,336
  -1,400
  -1,466
  -1,536
  -1,610
  -1,687
  -1,769
  -1,855
  -1,945
  -2,040
  -2,140
  -2,245
  -2,355
  -2,471
  -2,592
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
 
  -365
  -366
  -382
  -364
  -278
  -188
  -92
  8
  114
  225
  339
  464
  595
  734
  881
  1,036
  1,200
  1,374
  1,558
  1,753
  1,960
  2,178
  2,410
  2,655
  2,914
  3,189
  3,480
  3,788
  4,114
  4,459
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
 
  -343
  -321
  -310
  -272
  -190
  -116
  -52
  4
  50
  86
  112
  131
  142
  145
  143
  136
  126
  113
  98
  84
  69
  56
  44
  34
  25
  18
  13
  9
  6
  4
Current shareholders' claim on cash, %
  100
  98.9
  98.2
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9
  97.9

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 46.8
Price to Sales 3.4
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 12
Price to Free Cash Flow 41.2
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 6.3% 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 839.981 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 $20.4 billion.

RELATED COMPANIES Price Int.Val. Rating
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Financial statements of POT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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