Intrinsic value of Calgon Carbon - CCC

Previous Close

$21.40

  Intrinsic Value

$2.39

stock screener

  Rating & Target

str. sell

-89%

  Value-price divergence*

-66%

Previous close

$21.40

 
Intrinsic value

$2.39

 
Up/down potential

-89%

 
Rating

str. sell

 
Value-price divergence*

-66%

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

We calculate the intrinsic value of CCC 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 1.1

 

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, %
  -3.93
  15.00
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
Revenue, $m
  514
  591
  674
  762
  856
  955
  1,059
  1,168
  1,282
  1,402
  1,526
  1,656
  1,790
  1,930
  2,076
  2,227
  2,384
  2,548
  2,718
  2,894
  3,078
  3,270
  3,469
  3,676
  3,893
  4,119
  4,354
  4,600
  4,857
  5,125
  5,405
Variable operating expenses, $m
 
  519
  590
  667
  748
  834
  924
  1,018
  1,117
  1,221
  1,328
  1,434
  1,551
  1,672
  1,798
  1,929
  2,065
  2,207
  2,354
  2,507
  2,666
  2,832
  3,005
  3,184
  3,372
  3,567
  3,771
  3,984
  4,207
  4,439
  4,682
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
  490
  519
  590
  667
  748
  834
  924
  1,018
  1,117
  1,221
  1,328
  1,434
  1,551
  1,672
  1,798
  1,929
  2,065
  2,207
  2,354
  2,507
  2,666
  2,832
  3,005
  3,184
  3,372
  3,567
  3,771
  3,984
  4,207
  4,439
  4,682
Operating income, $m
  25
  73
  84
  95
  108
  121
  135
  150
  165
  181
  198
  222
  240
  258
  278
  298
  319
  341
  364
  387
  412
  438
  464
  492
  521
  551
  583
  616
  650
  686
  723
EBITDA, $m
  63
  118
  134
  152
  170
  190
  211
  233
  255
  279
  304
  330
  356
  384
  413
  443
  475
  507
  541
  576
  613
  651
  691
  732
  775
  820
  867
  916
  967
  1,020
  1,076
Interest expense (income), $m
  3
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  35
  38
  42
  45
  49
  53
  57
  62
  66
  71
  76
  81
  86
  92
  97
  103
  110
  116
  123
  130
Earnings before tax, $m
  20
  65
  74
  83
  94
  104
  116
  128
  140
  153
  166
  187
  202
  217
  233
  249
  266
  284
  302
  321
  341
  362
  383
  406
  429
  454
  479
  506
  534
  563
  593
Tax expense, $m
  6
  17
  20
  23
  25
  28
  31
  34
  38
  41
  45
  50
  54
  59
  63
  67
  72
  77
  82
  87
  92
  98
  104
  110
  116
  123
  129
  137
  144
  152
  160
Net income, $m
  14
  47
  54
  61
  68
  76
  84
  93
  102
  112
  121
  137
  147
  158
  170
  182
  194
  207
  221
  235
  249
  264
  280
  296
  314
  331
  350
  369
  390
  411
  433

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  38
  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
  775
  848
  967
  1,093
  1,228
  1,370
  1,519
  1,676
  1,840
  2,011
  2,189
  2,375
  2,569
  2,770
  2,978
  3,195
  3,421
  3,655
  3,899
  4,153
  4,416
  4,691
  4,977
  5,275
  5,585
  5,909
  6,247
  6,599
  6,968
  7,353
  7,755
Adjusted assets (=assets-cash), $m
  737
  848
  967
  1,093
  1,228
  1,370
  1,519
  1,676
  1,840
  2,011
  2,189
  2,375
  2,569
  2,770
  2,978
  3,195
  3,421
  3,655
  3,899
  4,153
  4,416
  4,691
  4,977
  5,275
  5,585
  5,909
  6,247
  6,599
  6,968
  7,353
  7,755
Revenue / Adjusted assets
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
  0.697
Average production assets, $m
  363
  417
  475
  537
  603
  673
  746
  823
  904
  988
  1,076
  1,167
  1,262
  1,361
  1,464
  1,570
  1,681
  1,796
  1,916
  2,041
  2,170
  2,305
  2,446
  2,592
  2,744
  2,904
  3,070
  3,243
  3,424
  3,613
  3,811
Working capital, $m
  191
  181
  207
  234
  263
  293
  325
  359
  394
  430
  468
  508
  550
  593
  637
  684
  732
  782
  834
  889
  945
  1,004
  1,065
  1,129
  1,195
  1,264
  1,337
  1,412
  1,491
  1,573
  1,659
Total debt, $m
  225
  279
  341
  408
  479
  554
  633
  716
  802
  893
  987
  1,085
  1,187
  1,293
  1,404
  1,518
  1,637
  1,761
  1,890
  2,024
  2,163
  2,308
  2,459
  2,616
  2,780
  2,951
  3,129
  3,316
  3,510
  3,713
  3,926
Total liabilities, $m
  394
  448
  510
  577
  648
  723
  802
  885
  971
  1,062
  1,156
  1,254
  1,356
  1,462
  1,573
  1,687
  1,806
  1,930
  2,059
  2,193
  2,332
  2,477
  2,628
  2,785
  2,949
  3,120
  3,298
  3,485
  3,679
  3,882
  4,095
Total equity, $m
  381
  400
  456
  516
  580
  647
  717
  791
  868
  949
  1,033
  1,121
  1,212
  1,307
  1,406
  1,508
  1,615
  1,725
  1,840
  1,960
  2,085
  2,214
  2,349
  2,490
  2,636
  2,789
  2,948
  3,115
  3,289
  3,470
  3,660
Total liabilities and equity, $m
  775
  848
  966
  1,093
  1,228
  1,370
  1,519
  1,676
  1,839
  2,011
  2,189
  2,375
  2,568
  2,769
  2,979
  3,195
  3,421
  3,655
  3,899
  4,153
  4,417
  4,691
  4,977
  5,275
  5,585
  5,909
  6,246
  6,600
  6,968
  7,352
  7,755
Debt-to-equity ratio
  0.591
  0.700
  0.750
  0.790
  0.830
  0.860
  0.880
  0.900
  0.920
  0.940
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.010
  1.020
  1.030
  1.030
  1.040
  1.040
  1.050
  1.050
  1.050
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
Adjusted equity ratio
  0.465
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  47
  54
  61
  68
  76
  84
  93
  102
  112
  121
  137
  147
  158
  170
  182
  194
  207
  221
  235
  249
  264
  280
  296
  314
  331
  350
  369
  390
  411
  433
Depreciation, amort., depletion, $m
  38
  45
  51
  56
  62
  69
  76
  83
  90
  98
  106
  108
  117
  126
  136
  145
  156
  166
  177
  189
  201
  213
  226
  240
  254
  269
  284
  300
  317
  335
  353
Funds from operations, $m
  83
  92
  104
  117
  131
  145
  160
  176
  192
  210
  228
  245
  264
  284
  305
  327
  350
  373
  398
  423
  450
  478
  506
  536
  568
  600
  634
  670
  707
  746
  786
Change in working capital, $m
  14
  24
  25
  27
  29
  30
  32
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  64
  66
  69
  72
  75
  79
  82
  86
Cash from operations, $m
  69
  69
  79
  90
  102
  115
  128
  142
  157
  173
  189
  205
  223
  241
  261
  281
  302
  323
  346
  369
  394
  419
  445
  473
  501
  531
  562
  594
  628
  663
  700
Maintenance CAPEX, $m
  0
  -34
  -39
  -44
  -50
  -56
  -62
  -69
  -76
  -84
  -91
  -100
  -108
  -117
  -126
  -136
  -145
  -156
  -166
  -177
  -189
  -201
  -213
  -226
  -240
  -254
  -269
  -284
  -300
  -317
  -335
New CAPEX, $m
  -32
  -54
  -58
  -62
  -66
  -70
  -73
  -77
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -115
  -120
  -125
  -130
  -135
  -140
  -146
  -153
  -159
  -166
  -173
  -181
  -189
  -198
Cash from investing activities, $m
  -184
  -88
  -97
  -106
  -116
  -126
  -135
  -146
  -157
  -168
  -179
  -191
  -203
  -216
  -229
  -243
  -256
  -271
  -286
  -302
  -319
  -336
  -353
  -372
  -393
  -413
  -435
  -457
  -481
  -506
  -533
Free cash flow, $m
  -115
  -19
  -18
  -16
  -14
  -11
  -7
  -4
  1
  5
  10
  14
  20
  26
  32
  39
  45
  52
  60
  67
  75
  83
  91
  100
  109
  118
  127
  137
  147
  157
  168
Issuance/(repayment) of debt, $m
  114
  59
  63
  67
  71
  75
  79
  83
  87
  90
  94
  98
  102
  106
  110
  115
  119
  124
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  194
  203
  212
Issuance/(repurchase) of shares, $m
  -8
  5
  2
  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 from financing (excl. dividends), $m  
  111
  64
  65
  67
  71
  75
  79
  83
  87
  90
  94
  98
  102
  106
  110
  115
  119
  124
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  194
  203
  212
Total cash flow (excl. dividends), $m
  -6
  45
  47
  51
  57
  64
  71
  79
  87
  96
  105
  112
  122
  132
  142
  153
  164
  176
  188
  201
  214
  228
  242
  257
  273
  289
  305
  323
  341
  360
  380
Retained Cash Flow (-), $m
  13
  -52
  -56
  -60
  -63
  -67
  -71
  -74
  -77
  -81
  -84
  -88
  -91
  -95
  -99
  -102
  -106
  -111
  -115
  -120
  -124
  -130
  -135
  -141
  -147
  -153
  -159
  -166
  -174
  -182
  -190
Prev. year cash balance distribution, $m
 
  33
  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
 
  26
  -9
  -9
  -6
  -3
  1
  5
  10
  15
  20
  24
  30
  37
  44
  51
  58
  66
  73
  81
  90
  98
  107
  117
  126
  136
  146
  156
  167
  179
  190
Discount rate, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
 
  24
  -8
  -7
  -5
  -2
  1
  3
  5
  7
  8
  9
  9
  10
  10
  9
  9
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  99.5
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3

Calgon Carbon Corporation is a manufacturer of activated carbon, with capabilities in ultraviolet (UV) light disinfection. The Company provides purification solutions for drinking water, wastewater, pollution abatement, and a range of industrial and commercial manufacturing processes. The Company operates through four segments: Activated Carbon and Service, Equipment, Consumer and Other. The Company's products and services are designed to protect human health and the environment from harmful contaminants in water, and air. The Company provides purification solutions for drinking water, wastewater, pollution abatement, and a range of industrial and commercial manufacturing processes. The Company operates in the United States, Europe, Japan, Africa, Canada, China, India, Latin America, and in other parts of Asia.

FINANCIAL RATIOS  of  Calgon Carbon (CCC)

Valuation Ratios
P/E Ratio 77.6
Price to Sales 2.1
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 15.7
Price to Free Cash Flow 29.4
Growth Rates
Sales Growth Rate -3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -48.4%
Cap. Spend. - 3 Yr. Gr. Rate 1.3%
Financial Strength
Quick Ratio 8
Current Ratio 0.1
LT Debt to Equity 57.7%
Total Debt to Equity 59.1%
Interest Coverage 8
Management Effectiveness
Return On Assets 2.2%
Ret/ On Assets - 3 Yr. Avg. 5.8%
Return On Total Capital 2.5%
Ret/ On T. Cap. - 3 Yr. Avg. 7.3%
Return On Equity 3.6%
Return On Equity - 3 Yr. Avg. 8.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 32.7%
Gross Margin - 3 Yr. Avg. 34.5%
EBITDA Margin 11.9%
EBITDA Margin - 3 Yr. Avg. 16.4%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 10.1%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. 9.6%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 6.5%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. 31.5%
Payout Ratio 71.4%

CCC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CCC stock intrinsic value calculation we used $514 million for the last fiscal year's total revenue generated by Calgon Carbon. The default revenue input number comes from 2016 income statement of Calgon Carbon. 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 CCC stock valuation model: a) initial revenue growth rate of 15% 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%, whose default value for CCC is calculated based on our internal credit rating of Calgon Carbon, 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 Calgon Carbon.
    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 CCC stock the variable cost ratio is equal to 87.9%.

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 CCC 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 3.5% for Calgon Carbon.

Corporate tax rate of 27% is the nominal tax rate for Calgon Carbon. 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 CCC 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 CCC are equal to 70.5%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Calgon Carbon 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 CCC is equal to 30.7%. 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 - $381 million for Calgon Carbon - 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 52.684 million for Calgon Carbon 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 Calgon Carbon at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ Calgon Carbon: Kuraray Pays Up.Big   [11:27AM  Barrons.com]
▶ Calgon meets 2Q profit forecasts   [Aug-04-17 10:38PM  Associated Press]
▶ ETFs with exposure to Calgon Carbon Corp. : July 7, 2017   [Jul-07-17 02:42PM  Capital Cube]
▶ Calgon Carbon wins $15.4M defense contract   [May-30-17 08:20AM  American City Business Journals]
▶ Calgon misses 1Q revenue forecasts   [May-09-17 07:40AM  Associated Press]
▶ Outstanding CEOs and Top Executives Winner: Randy Dearth   [Apr-14-17 09:46AM  American City Business Journals]
▶ Calgon reports 4Q loss   [07:32AM  Associated Press]
Financial statements of CCC
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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