Intrinsic value of Calgon Carbon - CCC

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$14.20

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$14.20

 
Intrinsic value

$7.32

 
Up/down potential

-48%

 
Rating

sell

 
Value-price divergence* premium content

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*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 0.7

 

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
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.85
  4.86
  4.87
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
Revenue, $m
  514
  538
  563
  589
  617
  646
  677
  709
  743
  779
  817
  856
  898
  942
  988
  1,037
  1,088
  1,141
  1,198
  1,257
  1,319
  1,384
  1,453
  1,525
  1,601
  1,680
  1,764
  1,851
  1,943
  2,040
  2,142
Variable operating expenses, $m
 
  472
  494
  517
  541
  566
  593
  621
  650
  681
  714
  742
  778
  816
  856
  898
  942
  989
  1,037
  1,089
  1,142
  1,199
  1,258
  1,321
  1,386
  1,455
  1,528
  1,604
  1,683
  1,767
  1,855
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
  472
  494
  517
  541
  566
  593
  621
  650
  681
  714
  742
  778
  816
  856
  898
  942
  989
  1,037
  1,089
  1,142
  1,199
  1,258
  1,321
  1,386
  1,455
  1,528
  1,604
  1,683
  1,767
  1,855
Operating income, $m
  25
  65
  69
  72
  76
  80
  84
  88
  93
  98
  103
  115
  120
  126
  132
  139
  146
  153
  160
  168
  177
  185
  194
  204
  214
  225
  236
  248
  260
  273
  287
EBITDA, $m
  63
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
  179
  188
  197
  206
  217
  227
  238
  250
  263
  276
  289
  304
  319
  335
  351
  369
  387
  406
  426
Interest expense (income), $m
  3
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
Earnings before tax, $m
  20
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  99
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
  164
  171
  180
  188
  197
  207
  217
  227
  238
Tax expense, $m
  6
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  49
  51
  53
  56
  59
  61
  64
Net income, $m
  14
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  72
  75
  79
  83
  86
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174

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
  771
  807
  845
  885
  927
  971
  1,017
  1,066
  1,118
  1,172
  1,229
  1,289
  1,352
  1,418
  1,487
  1,561
  1,637
  1,718
  1,803
  1,892
  1,986
  2,084
  2,188
  2,296
  2,410
  2,530
  2,656
  2,788
  2,927
  3,073
Adjusted assets (=assets-cash), $m
  737
  771
  807
  845
  885
  927
  971
  1,017
  1,066
  1,118
  1,172
  1,229
  1,289
  1,352
  1,418
  1,487
  1,561
  1,637
  1,718
  1,803
  1,892
  1,986
  2,084
  2,188
  2,296
  2,410
  2,530
  2,656
  2,788
  2,927
  3,073
Revenue / Adjusted assets
  0.697
  0.698
  0.698
  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
  379
  397
  415
  435
  455
  477
  500
  524
  549
  576
  604
  633
  664
  697
  731
  767
  805
  844
  886
  930
  976
  1,024
  1,075
  1,128
  1,184
  1,243
  1,305
  1,370
  1,438
  1,510
Working capital, $m
  191
  165
  173
  181
  189
  198
  208
  218
  228
  239
  251
  263
  276
  289
  303
  318
  334
  350
  368
  386
  405
  425
  446
  468
  491
  516
  541
  568
  597
  626
  658
Total debt, $m
  225
  238
  257
  277
  298
  320
  344
  368
  394
  421
  450
  480
  511
  545
  580
  616
  655
  696
  738
  783
  830
  880
  932
  986
  1,043
  1,104
  1,167
  1,233
  1,303
  1,377
  1,453
Total liabilities, $m
  394
  407
  426
  446
  467
  489
  513
  537
  563
  590
  619
  649
  680
  714
  749
  785
  824
  865
  907
  952
  999
  1,049
  1,101
  1,155
  1,212
  1,273
  1,336
  1,402
  1,472
  1,546
  1,622
Total equity, $m
  381
  364
  381
  399
  418
  437
  458
  480
  503
  528
  553
  580
  608
  638
  669
  702
  737
  773
  811
  851
  893
  937
  984
  1,033
  1,084
  1,138
  1,194
  1,254
  1,316
  1,382
  1,450
Total liabilities and equity, $m
  775
  771
  807
  845
  885
  926
  971
  1,017
  1,066
  1,118
  1,172
  1,229
  1,288
  1,352
  1,418
  1,487
  1,561
  1,638
  1,718
  1,803
  1,892
  1,986
  2,085
  2,188
  2,296
  2,411
  2,530
  2,656
  2,788
  2,928
  3,072
Debt-to-equity ratio
  0.591
  0.650
  0.680
  0.690
  0.710
  0.730
  0.750
  0.770
  0.780
  0.800
  0.810
  0.830
  0.840
  0.850
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.950
  0.960
  0.970
  0.980
  0.980
  0.990
  1.000
  1.000
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
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  72
  75
  79
  83
  86
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174
Depreciation, amort., depletion, $m
  38
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
  56
  59
  61
  65
  68
  71
  74
  78
  82
  86
  90
  95
  100
  104
  110
  115
  121
  127
  133
  140
Funds from operations, $m
  83
  84
  87
  91
  95
  99
  104
  109
  113
  119
  124
  128
  134
  140
  147
  154
  162
  169
  177
  186
  195
  204
  214
  225
  236
  247
  259
  272
  285
  299
  314
Change in working capital, $m
  14
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
Cash from operations, $m
  69
  122
  80
  83
  87
  90
  94
  99
  103
  108
  113
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  184
  193
  203
  212
  223
  234
  245
  257
  270
  283
Maintenance CAPEX, $m
  0
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -61
  -65
  -68
  -71
  -74
  -78
  -82
  -86
  -90
  -95
  -100
  -104
  -110
  -115
  -121
  -127
  -133
New CAPEX, $m
  -32
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -72
Cash from investing activities, $m
  -184
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -81
  -85
  -90
  -94
  -99
  -104
  -109
  -114
  -120
  -126
  -132
  -138
  -146
  -153
  -160
  -169
  -177
  -186
  -195
  -205
Free cash flow, $m
  -115
  72
  27
  28
  29
  30
  31
  32
  33
  34
  35
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  74
  78
Issuance/(repayment) of debt, $m
  114
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  55
  57
  60
  63
  66
  70
  73
  77
Issuance/(repurchase) of shares, $m
  -8
  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 from financing (excl. dividends), $m  
  111
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  55
  57
  60
  63
  66
  70
  73
  77
Total cash flow (excl. dividends), $m
  -6
  90
  46
  48
  50
  52
  54
  56
  59
  61
  64
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  106
  112
  117
  122
  128
  134
  141
  148
  155
Retained Cash Flow (-), $m
  13
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -59
  -62
  -66
  -69
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
 
  107
  29
  30
  31
  32
  33
  34
  35
  37
  38
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  82
  86
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
 
  101
  26
  25
  24
  22
  21
  20
  19
  17
  16
  14
  12
  11
  10
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Calgon Carbon Corporation provides services and solutions for purifying water and air, food, beverage, and industrial process streams primarily in the United States, Europe, and Japan. It operates in three segments: Activated Carbon and Service, Equipment, and Consumer. The Activated Carbon and Service segment manufactures and markets granular and powdered activated carbon to remove organic compounds from water, air, and other liquids and gases. It also offers services related to activated carbon, including reactivation of spent carbon; and leasing, monitoring, and maintenance of carbon fills, as well as the ion exchange technologies for treatment of groundwater and process streams. The Equipment segment offers adsorption systems that are used to control volatile organic compound emissions, off gases from air strippers, and landfill gas production; and liquid phase equipment systems for use in water treatment, process purification, wastewater treatment, groundwater remediation, and de-chlorination applications. This segment also provides UV oxidation equipment for taste and odor removal in municipal drinking water and for water reuse; Ionic Separator used for the purification, separation, and recovery of products in the food, pharmaceutical, mining, chemical, and biotechnology industries; UV disinfection systems to inactivate cryptosporidium, giardia, and other pathogens in surface water; and a water management solution. The Consumer segment offers carbon cloth that is activated carbon in cloth form for medical, military, and specialty markets. The company sells its products and services through a direct sales force and sales offices, as well as through a network of agents and distributors to potable water, industrial process, environmental water, environmental air, food, and specialty markets. It also operates in Africa, Canada, India, Latin America, and other parts of Asia. The company was founded in 1942 and is headquartered in Moon Township, Pennsylvania.

FINANCIAL RATIOS  of  Calgon Carbon (CCC)

Valuation Ratios
P/E Ratio 51.5
Price to Sales 1.4
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow 19.5
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 4.6% 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%, 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 51.821 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 $0.7 billion.


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COMPANY NEWS

▶ 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]
▶ Do Hedge Funds Love Calgon Carbon Corporation (CCC)?   [Dec-09-16 05:42AM  at Insider Monkey]
▶ Calgon Carbon First Quarter 2016 Results Conference Call   [Apr-22-16 09:07AM  Business Wire]
Stock chart of CCC Financial statements of CCC Annual reports 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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