Intrinsic value of Cabot - CBT

Previous Close

$51.66

  Intrinsic Value

$4.53

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

-24%

Previous close

$51.66

 
Intrinsic value

$4.53

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

-24%

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

We calculate the intrinsic value of CBT 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 3.2

 

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, %
  -16.02
  19.40
  17.96
  16.66
  15.50
  14.45
  13.50
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.96
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
Revenue, $m
  2,411
  2,879
  3,396
  3,962
  4,576
  5,237
  5,944
  6,696
  7,492
  8,331
  9,212
  10,135
  11,100
  12,106
  13,155
  14,246
  15,381
  16,560
  17,786
  19,059
  20,383
  21,759
  23,190
  24,678
  26,227
  27,840
  29,520
  31,270
  33,096
  35,000
  36,987
Variable operating expenses, $m
 
  3,192
  3,763
  4,388
  5,065
  5,795
  6,575
  7,405
  8,284
  9,210
  10,183
  11,186
  12,251
  13,362
  14,519
  15,723
  16,975
  18,277
  19,630
  21,036
  22,497
  24,015
  25,595
  27,237
  28,947
  30,727
  32,581
  34,513
  36,527
  38,629
  40,823
Fixed operating expenses, $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 operating expenses, $m
  2,161
  3,192
  3,763
  4,388
  5,065
  5,795
  6,575
  7,405
  8,284
  9,210
  10,183
  11,186
  12,251
  13,362
  14,519
  15,723
  16,975
  18,277
  19,630
  21,036
  22,497
  24,015
  25,595
  27,237
  28,947
  30,727
  32,581
  34,513
  36,527
  38,629
  40,823
Operating income, $m
  250
  -314
  -367
  -426
  -490
  -558
  -632
  -710
  -792
  -879
  -970
  -1,051
  -1,151
  -1,255
  -1,364
  -1,477
  -1,595
  -1,717
  -1,844
  -1,976
  -2,114
  -2,256
  -2,405
  -2,559
  -2,720
  -2,887
  -3,061
  -3,243
  -3,432
  -3,629
  -3,835
EBITDA, $m
  411
  -198
  -234
  -273
  -315
  -361
  -409
  -461
  -516
  -574
  -635
  -698
  -765
  -834
  -906
  -981
  -1,060
  -1,141
  -1,225
  -1,313
  -1,404
  -1,499
  -1,598
  -1,700
  -1,807
  -1,918
  -2,034
  -2,154
  -2,280
  -2,411
  -2,548
Interest expense (income), $m
  51
  49
  67
  86
  108
  131
  156
  182
  211
  241
  273
  306
  341
  377
  415
  455
  496
  539
  584
  630
  678
  728
  780
  834
  891
  949
  1,010
  1,074
  1,140
  1,209
  1,281
Earnings before tax, $m
  194
  -363
  -434
  -512
  -597
  -689
  -787
  -892
  -1,003
  -1,120
  -1,243
  -1,357
  -1,492
  -1,633
  -1,780
  -1,932
  -2,091
  -2,256
  -2,428
  -2,607
  -2,792
  -2,985
  -3,185
  -3,393
  -3,610
  -3,836
  -4,071
  -4,316
  -4,572
  -4,838
  -5,116
Tax expense, $m
  34
  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
Net income, $m
  149
  -363
  -434
  -512
  -597
  -689
  -787
  -892
  -1,003
  -1,120
  -1,243
  -1,357
  -1,492
  -1,633
  -1,780
  -1,932
  -2,091
  -2,256
  -2,428
  -2,607
  -2,792
  -2,985
  -3,185
  -3,393
  -3,610
  -3,836
  -4,071
  -4,316
  -4,572
  -4,838
  -5,116

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  200
  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
  3,035
  3,387
  3,995
  4,661
  5,383
  6,161
  6,993
  7,877
  8,814
  9,801
  10,838
  11,924
  13,059
  14,243
  15,476
  16,760
  18,095
  19,482
  20,924
  22,423
  23,980
  25,599
  27,282
  29,033
  30,855
  32,753
  34,729
  36,788
  38,936
  41,176
  43,514
Adjusted assets (=assets-cash), $m
  2,835
  3,387
  3,995
  4,661
  5,383
  6,161
  6,993
  7,877
  8,814
  9,801
  10,838
  11,924
  13,059
  14,243
  15,476
  16,760
  18,095
  19,482
  20,924
  22,423
  23,980
  25,599
  27,282
  29,033
  30,855
  32,753
  34,729
  36,788
  38,936
  41,176
  43,514
Revenue / Adjusted assets
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
Average production assets, $m
  838
  1,002
  1,182
  1,379
  1,592
  1,822
  2,068
  2,330
  2,607
  2,899
  3,206
  3,527
  3,863
  4,213
  4,578
  4,958
  5,352
  5,763
  6,189
  6,633
  7,093
  7,572
  8,070
  8,588
  9,127
  9,688
  10,273
  10,882
  11,517
  12,180
  12,872
Working capital, $m
  650
  547
  645
  753
  869
  995
  1,129
  1,272
  1,423
  1,583
  1,750
  1,926
  2,109
  2,300
  2,499
  2,707
  2,922
  3,146
  3,379
  3,621
  3,873
  4,134
  4,406
  4,689
  4,983
  5,290
  5,609
  5,941
  6,288
  6,650
  7,028
Total debt, $m
  948
  1,280
  1,656
  2,067
  2,514
  2,994
  3,508
  4,055
  4,634
  5,244
  5,885
  6,556
  7,257
  7,989
  8,751
  9,545
  10,370
  11,227
  12,118
  13,044
  14,007
  15,007
  16,047
  17,130
  18,256
  19,428
  20,649
  21,922
  23,249
  24,634
  26,079
Total liabilities, $m
  1,761
  2,093
  2,469
  2,880
  3,327
  3,807
  4,321
  4,868
  5,447
  6,057
  6,698
  7,369
  8,070
  8,802
  9,564
  10,358
  11,183
  12,040
  12,931
  13,857
  14,820
  15,820
  16,860
  17,943
  19,069
  20,241
  21,462
  22,735
  24,062
  25,447
  26,892
Total equity, $m
  1,274
  1,294
  1,526
  1,780
  2,056
  2,353
  2,671
  3,009
  3,367
  3,744
  4,140
  4,555
  4,988
  5,441
  5,912
  6,402
  6,912
  7,442
  7,993
  8,566
  9,160
  9,779
  10,422
  11,091
  11,787
  12,512
  13,266
  14,053
  14,874
  15,729
  16,622
Total liabilities and equity, $m
  3,035
  3,387
  3,995
  4,660
  5,383
  6,160
  6,992
  7,877
  8,814
  9,801
  10,838
  11,924
  13,058
  14,243
  15,476
  16,760
  18,095
  19,482
  20,924
  22,423
  23,980
  25,599
  27,282
  29,034
  30,856
  32,753
  34,728
  36,788
  38,936
  41,176
  43,514
Debt-to-equity ratio
  0.744
  0.990
  1.090
  1.160
  1.220
  1.270
  1.310
  1.350
  1.380
  1.400
  1.420
  1.440
  1.450
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.520
  1.530
  1.530
  1.540
  1.540
  1.550
  1.550
  1.560
  1.560
  1.560
  1.570
  1.570
Adjusted equity ratio
  0.381
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  149
  -363
  -434
  -512
  -597
  -689
  -787
  -892
  -1,003
  -1,120
  -1,243
  -1,357
  -1,492
  -1,633
  -1,780
  -1,932
  -2,091
  -2,256
  -2,428
  -2,607
  -2,792
  -2,985
  -3,185
  -3,393
  -3,610
  -3,836
  -4,071
  -4,316
  -4,572
  -4,838
  -5,116
Depreciation, amort., depletion, $m
  161
  115
  133
  153
  174
  197
  222
  248
  276
  305
  336
  353
  386
  421
  458
  496
  535
  576
  619
  663
  709
  757
  807
  859
  913
  969
  1,027
  1,088
  1,152
  1,218
  1,287
Funds from operations, $m
  452
  -247
  -301
  -359
  -423
  -491
  -565
  -644
  -727
  -815
  -907
  -1,004
  -1,106
  -1,211
  -1,322
  -1,437
  -1,556
  -1,680
  -1,809
  -1,943
  -2,083
  -2,227
  -2,378
  -2,535
  -2,698
  -2,867
  -3,044
  -3,228
  -3,420
  -3,620
  -3,829
Change in working capital, $m
  60
  89
  98
  108
  117
  126
  134
  143
  151
  159
  167
  175
  183
  191
  199
  207
  216
  224
  233
  242
  252
  261
  272
  283
  294
  306
  319
  333
  347
  362
  378
Cash from operations, $m
  392
  -336
  -399
  -467
  -539
  -617
  -700
  -787
  -878
  -974
  -1,075
  -1,180
  -1,289
  -1,403
  -1,521
  -1,644
  -1,772
  -1,904
  -2,042
  -2,185
  -2,334
  -2,489
  -2,650
  -2,817
  -2,992
  -3,174
  -3,363
  -3,561
  -3,767
  -3,982
  -4,207
Maintenance CAPEX, $m
  0
  -84
  -100
  -118
  -138
  -159
  -182
  -207
  -233
  -261
  -290
  -321
  -353
  -386
  -421
  -458
  -496
  -535
  -576
  -619
  -663
  -709
  -757
  -807
  -859
  -913
  -969
  -1,027
  -1,088
  -1,152
  -1,218
New CAPEX, $m
  -112
  -164
  -180
  -197
  -214
  -230
  -246
  -262
  -277
  -292
  -307
  -321
  -336
  -350
  -365
  -380
  -395
  -410
  -427
  -443
  -461
  -479
  -498
  -518
  -539
  -561
  -585
  -609
  -635
  -663
  -692
Cash from investing activities, $m
  -104
  -248
  -280
  -315
  -352
  -389
  -428
  -469
  -510
  -553
  -597
  -642
  -689
  -736
  -786
  -838
  -891
  -945
  -1,003
  -1,062
  -1,124
  -1,188
  -1,255
  -1,325
  -1,398
  -1,474
  -1,554
  -1,636
  -1,723
  -1,815
  -1,910
Free cash flow, $m
  288
  -584
  -679
  -782
  -891
  -1,006
  -1,128
  -1,255
  -1,388
  -1,527
  -1,671
  -1,822
  -1,977
  -2,139
  -2,307
  -2,481
  -2,662
  -2,850
  -3,045
  -3,247
  -3,458
  -3,677
  -3,905
  -4,142
  -4,390
  -4,648
  -4,917
  -5,197
  -5,490
  -5,796
  -6,116
Issuance/(repayment) of debt, $m
  -68
  340
  376
  411
  446
  481
  514
  547
  579
  610
  641
  671
  701
  732
  762
  793
  825
  858
  891
  926
  962
  1,000
  1,040
  1,082
  1,126
  1,172
  1,221
  1,273
  1,327
  1,384
  1,445
Issuance/(repurchase) of shares, $m
  -35
  574
  666
  766
  873
  986
  1,105
  1,230
  1,361
  1,497
  1,639
  1,772
  1,925
  2,085
  2,251
  2,423
  2,601
  2,786
  2,979
  3,179
  3,387
  3,603
  3,828
  4,062
  4,306
  4,561
  4,826
  5,103
  5,392
  5,694
  6,010
Cash from financing (excl. dividends), $m  
  -119
  914
  1,042
  1,177
  1,319
  1,467
  1,619
  1,777
  1,940
  2,107
  2,280
  2,443
  2,626
  2,817
  3,013
  3,216
  3,426
  3,644
  3,870
  4,105
  4,349
  4,603
  4,868
  5,144
  5,432
  5,733
  6,047
  6,376
  6,719
  7,078
  7,455
Total cash flow (excl. dividends), $m
  188
  331
  363
  396
  429
  460
  491
  522
  551
  580
  609
  622
  650
  678
  706
  735
  764
  794
  825
  858
  891
  926
  963
  1,002
  1,043
  1,086
  1,131
  1,179
  1,229
  1,282
  1,338
Retained Cash Flow (-), $m
  -40
  -574
  -666
  -766
  -873
  -986
  -1,105
  -1,230
  -1,361
  -1,497
  -1,639
  -1,772
  -1,925
  -2,085
  -2,251
  -2,423
  -2,601
  -2,786
  -2,979
  -3,179
  -3,387
  -3,603
  -3,828
  -4,062
  -4,306
  -4,561
  -4,826
  -5,103
  -5,392
  -5,694
  -6,010
Prev. year cash balance distribution, $m
 
  192
  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
 
  -52
  -303
  -370
  -445
  -526
  -614
  -708
  -810
  -917
  -1,031
  -1,150
  -1,276
  -1,407
  -1,545
  -1,688
  -1,837
  -1,992
  -2,154
  -2,321
  -2,496
  -2,677
  -2,865
  -3,060
  -3,264
  -3,475
  -3,695
  -3,924
  -4,163
  -4,412
  -4,671
Discount rate, %
 
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
 
  -49
  -272
  -312
  -350
  -385
  -414
  -438
  -455
  -465
  -468
  -463
  -450
  -432
  -407
  -378
  -345
  -310
  -274
  -237
  -202
  -169
  -138
  -111
  -87
  -67
  -51
  -37
  -27
  -18
  -13
Current shareholders' claim on cash, %
  100
  82.5
  68.5
  57.1
  47.7
  40.1
  33.8
  28.5
  24.2
  20.5
  17.5
  14.9
  12.8
  11.0
  9.4
  8.1
  7.0
  6.0
  5.2
  4.5
  3.9
  3.3
  2.9
  2.5
  2.2
  1.9
  1.6
  1.4
  1.2
  1.1
  0.9

Cabot Corporation operates as a specialty chemicals and performance materials company. The company offers carbon black, a form of elemental carbon used to enhance the physical properties of the systems and applications in which it is incorporated; and rubber blacks for use as a rubber reinforcing agent and performance additive in tires, hoses, belts, extruded profiles, and molded goods. It also provides compounds of carbon black and rubber primarily for tire applications; and cesium formate, a drilling and completion fluid for use in high pressure and high temperature oil and gas well construction. In addition, the company offers specialty grades of carbon black used in inks, coatings, plastics, adhesives, toners, batteries, and displays applications; masterbatch and conductive compound products for use in automotive, industrial, packaging, consumer products, and electronics industries; inkjet colorants used in the inkjet printing applications; and fumed silica, fumed alumina, and dispersions for automotive, construction, microelectronics, batteries, and consumer products industries, as well as aerogel, a hydrophobic, silica-based particle for use in various thermal insulation and specialty chemical applications. Further, it provides activated carbon products used for the purification of water, air, food and beverages, pharmaceuticals, and other liquids and gases; as a chemical carrier; and as a colorant or a decolorizing agent. The company sells its products primarily through distributors and sales representatives in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. Cabot Corporation was founded in 1882 and is headquartered in Boston, Massachusetts.

FINANCIAL RATIOS  of  Cabot (CBT)

Valuation Ratios
P/E Ratio 21.6
Price to Sales 1.3
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 8.2
Price to Free Cash Flow 11.5
Growth Rates
Sales Growth Rate -16%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20.6%
Cap. Spend. - 3 Yr. Gr. Rate -15.8%
Financial Strength
Quick Ratio 25
Current Ratio 0
LT Debt to Equity 73.8%
Total Debt to Equity 74.4%
Interest Coverage 5
Management Effectiveness
Return On Assets 6.3%
Ret/ On Assets - 3 Yr. Avg. 1.2%
Return On Total Capital 6.7%
Ret/ On T. Cap. - 3 Yr. Avg. 0.1%
Return On Equity 11.9%
Return On Equity - 3 Yr. Avg. 0.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 25.3%
Gross Margin - 3 Yr. Avg. 22.1%
EBITDA Margin 16.8%
EBITDA Margin - 3 Yr. Avg. 8.9%
Operating Margin 10.4%
Oper. Margin - 3 Yr. Avg. 2.8%
Pre-Tax Margin 8%
Pre-Tax Margin - 3 Yr. Avg. 1.1%
Net Profit Margin 6.2%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 17.5%
Eff/ Tax Rate - 3 Yr. Avg. 19.8%
Payout Ratio 43.6%

CBT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CBT stock intrinsic value calculation we used $2411 million for the last fiscal year's total revenue generated by Cabot. The default revenue input number comes from 2016 income statement of Cabot. 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 CBT stock valuation model: a) initial revenue growth rate of 19.4% 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 5.3%, whose default value for CBT is calculated based on our internal credit rating of Cabot, 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 Cabot.
    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 CBT stock the variable cost ratio is equal to 111%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CBT 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 5.2% for Cabot.

Corporate tax rate of 27% is the nominal tax rate for Cabot. 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 CBT 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 CBT are equal to 34.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Cabot 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 CBT is equal to 19%. 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 - $1274 million for Cabot - 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 61.877 million for Cabot 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 Cabot at the current share price and the inputted number of shares is $3.2 billion.

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COMPANY NEWS

▶ Cabot Corp. Value Analysis (NYSE:CBT) : August 17, 2017   [Aug-16-17 08:07PM  Capital Cube]
▶ Cabot misses 3Q profit forecasts   [Aug-01-17 11:54PM  Associated Press]
▶ ETFs with exposure to Cabot Corp. : July 13, 2017   [Jul-13-17 03:43PM  Capital Cube]
▶ Is Cabot a Great Stock for Value Investors?   [Jun-28-17 09:30AM  Zacks]
▶ ETFs with exposure to Cabot Corp. : June 26, 2017   [Jun-26-17 03:33PM  Capital Cube]
▶ ETFs with exposure to Cabot Corp. : June 9, 2017   [Jun-09-17 01:21PM  Capital Cube]
▶ Jim Cramer on Trading Natural Gas Stocks Cabot, Chesapeake   [May-19-17 11:53AM  TheStreet.com]
▶ Cabot Corporation Board Increases Dividend   [May-10-17 04:47PM  Business Wire]
▶ Cabot tops Street 2Q forecasts   [May-01-17 04:58PM  Associated Press]
▶ Cabot Corp. Value Analysis (NYSE:CBT) : April 17, 2017   [Apr-17-17 01:24PM  Capital Cube]
▶ Cabot Corporation to Webcast Annual Meeting of Stockholders   [Feb-23-17 08:41AM  Business Wire]
▶ Cabot beats 1Q profit forecasts   [Feb-01-17 05:54PM  Associated Press]
▶ Cabot Corporation Board Declares Dividend   [Jan-13-17 06:00PM  Business Wire]
▶ Should You Invest In Graphene Stocks?   [Dec-08-16 12:34PM  at Motley Fool]
▶ Is Cabot Corp (CBT) A Good Stock to Buy?   [Dec-07-16 10:32PM  at Insider Monkey]
▶ Cabot Corporation Board Declares Dividend   [Nov-11-16 12:19PM  Business Wire]
Stock chart of CBT Financial statements of CBT
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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