Intrinsic value of Cliffs Natural Resources - CLF

Previous Close

$7.73

  Intrinsic Value

$23.90

stock screener

  Rating & Target

str. buy

+209%

  Value-price divergence*

+1337%

Previous close

$7.73

 
Intrinsic value

$23.90

 
Up/down potential

+209%

 
Rating

str. buy

 
Value-price divergence*

+1337%

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

We calculate the intrinsic value of CLF 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 2.2

 

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, %
  4.77
  51.00
  46.40
  42.26
  38.53
  35.18
  32.16
  29.45
  27.00
  24.80
  22.82
  21.04
  19.44
  17.99
  16.69
  15.52
  14.47
  13.52
  12.67
  11.90
  11.21
  10.59
  10.03
  9.53
  9.08
  8.67
  8.30
  7.97
  7.67
  7.41
  7.17
Revenue, $m
  2,109
  3,185
  4,662
  6,633
  9,188
  12,421
  16,416
  21,249
  26,987
  33,680
  41,367
  50,070
  59,801
  70,560
  82,338
  95,120
  108,885
  123,610
  139,274
  155,853
  173,331
  191,691
  210,924
  231,025
  251,995
  273,841
  296,576
  320,219
  344,795
  370,336
  396,877
Variable operating expenses, $m
 
  2,325
  3,403
  4,842
  6,707
  9,067
  11,983
  15,512
  19,701
  24,587
  30,198
  36,551
  43,655
  51,509
  60,107
  69,438
  79,486
  90,236
  101,670
  113,773
  126,531
  139,934
  153,974
  168,648
  183,956
  199,904
  216,500
  233,760
  251,701
  270,345
  289,720
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
  1,702
  2,325
  3,403
  4,842
  6,707
  9,067
  11,983
  15,512
  19,701
  24,587
  30,198
  36,551
  43,655
  51,509
  60,107
  69,438
  79,486
  90,236
  101,670
  113,773
  126,531
  139,934
  153,974
  168,648
  183,956
  199,904
  216,500
  233,760
  251,701
  270,345
  289,720
Operating income, $m
  407
  860
  1,259
  1,791
  2,481
  3,354
  4,432
  5,737
  7,287
  9,094
  11,169
  13,519
  16,146
  19,051
  22,231
  25,682
  29,399
  33,375
  37,604
  42,080
  46,799
  51,757
  56,949
  62,377
  68,039
  73,937
  80,075
  86,459
  93,095
  99,991
  107,157
EBITDA, $m
  522
  1,027
  1,503
  2,138
  2,962
  4,004
  5,292
  6,851
  8,701
  10,859
  13,337
  16,142
  19,280
  22,749
  26,546
  30,667
  35,105
  39,852
  44,902
  50,247
  55,882
  61,801
  68,002
  74,482
  81,243
  88,286
  95,616
  103,239
  111,162
  119,396
  127,953
Interest expense (income), $m
  184
  165
  107
  199
  322
  481
  683
  932
  1,234
  1,592
  2,010
  2,489
  3,033
  3,640
  4,311
  5,046
  5,844
  6,703
  7,622
  8,600
  9,634
  10,725
  11,871
  13,071
  14,326
  15,634
  16,998
  18,417
  19,892
  21,426
  23,020
Earnings before tax, $m
  207
  695
  1,152
  1,592
  2,159
  2,872
  3,749
  4,805
  6,053
  7,502
  9,159
  11,029
  13,114
  15,411
  17,920
  20,636
  23,555
  26,672
  29,982
  33,481
  37,165
  41,031
  45,078
  49,305
  53,713
  58,302
  63,078
  68,042
  73,202
  78,565
  84,137
Tax expense, $m
  -12
  188
  311
  430
  583
  776
  1,012
  1,297
  1,634
  2,025
  2,473
  2,978
  3,541
  4,161
  4,838
  5,572
  6,360
  7,201
  8,095
  9,040
  10,035
  11,078
  12,171
  13,312
  14,502
  15,742
  17,031
  18,371
  19,765
  21,212
  22,717
Net income, $m
  174
  507
  841
  1,162
  1,576
  2,097
  2,737
  3,508
  4,418
  5,476
  6,686
  8,051
  9,573
  11,250
  13,082
  15,064
  17,195
  19,470
  21,887
  24,441
  27,130
  29,953
  32,907
  35,993
  39,210
  42,561
  46,047
  49,671
  53,438
  57,352
  61,420

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  355
  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
  1,924
  2,906
  4,254
  6,052
  8,383
  11,333
  14,978
  19,388
  24,623
  30,730
  37,743
  45,684
  54,563
  64,380
  75,126
  86,788
  99,348
  112,783
  127,075
  142,202
  158,148
  174,900
  192,449
  210,789
  229,922
  249,855
  270,598
  292,171
  314,594
  337,898
  362,114
Adjusted assets (=assets-cash), $m
  1,569
  2,906
  4,254
  6,052
  8,383
  11,333
  14,978
  19,388
  24,623
  30,730
  37,743
  45,684
  54,563
  64,380
  75,126
  86,788
  99,348
  112,783
  127,075
  142,202
  158,148
  174,900
  192,449
  210,789
  229,922
  249,855
  270,598
  292,171
  314,594
  337,898
  362,114
Revenue / Adjusted assets
  1.344
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
  1.096
Average production assets, $m
  1,105
  1,669
  2,443
  3,475
  4,815
  6,508
  8,602
  11,135
  14,141
  17,648
  21,676
  26,237
  31,336
  36,974
  43,145
  49,843
  57,056
  64,772
  72,979
  81,667
  90,825
  100,446
  110,524
  121,057
  132,045
  143,492
  155,406
  167,795
  180,673
  194,056
  207,963
Working capital, $m
  434
  118
  173
  245
  340
  460
  607
  786
  999
  1,246
  1,531
  1,853
  2,213
  2,611
  3,047
  3,519
  4,029
  4,574
  5,153
  5,767
  6,413
  7,093
  7,804
  8,548
  9,324
  10,132
  10,973
  11,848
  12,757
  13,702
  14,684
Total debt, $m
  2,175
  1,402
  2,615
  4,233
  6,332
  8,987
  12,267
  16,236
  20,948
  26,444
  32,756
  39,903
  47,894
  56,729
  66,401
  76,897
  88,200
  100,292
  113,154
  126,769
  141,121
  156,197
  171,991
  188,497
  205,717
  223,656
  242,325
  261,741
  281,922
  302,895
  324,689
Total liabilities, $m
  3,388
  2,615
  3,828
  5,446
  7,545
  10,200
  13,480
  17,449
  22,161
  27,657
  33,969
  41,116
  49,107
  57,942
  67,614
  78,110
  89,413
  101,505
  114,367
  127,982
  142,334
  157,410
  173,204
  189,710
  206,930
  224,869
  243,538
  262,954
  283,135
  304,108
  325,902
Total equity, $m
  -1,464
  291
  425
  605
  838
  1,133
  1,498
  1,939
  2,462
  3,073
  3,774
  4,568
  5,456
  6,438
  7,513
  8,679
  9,935
  11,278
  12,707
  14,220
  15,815
  17,490
  19,245
  21,079
  22,992
  24,985
  27,060
  29,217
  31,459
  33,790
  36,211
Total liabilities and equity, $m
  1,924
  2,906
  4,253
  6,051
  8,383
  11,333
  14,978
  19,388
  24,623
  30,730
  37,743
  45,684
  54,563
  64,380
  75,127
  86,789
  99,348
  112,783
  127,074
  142,202
  158,149
  174,900
  192,449
  210,789
  229,922
  249,854
  270,598
  292,171
  314,594
  337,898
  362,113
Debt-to-equity ratio
  -1.486
  4.830
  6.150
  7.000
  7.550
  7.930
  8.190
  8.370
  8.510
  8.610
  8.680
  8.730
  8.780
  8.810
  8.840
  8.860
  8.880
  8.890
  8.900
  8.910
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.960
  8.960
  8.960
  8.960
  8.970
Adjusted equity ratio
  -1.159
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  174
  507
  841
  1,162
  1,576
  2,097
  2,737
  3,508
  4,418
  5,476
  6,686
  8,051
  9,573
  11,250
  13,082
  15,064
  17,195
  19,470
  21,887
  24,441
  27,130
  29,953
  32,907
  35,993
  39,210
  42,561
  46,047
  49,671
  53,438
  57,352
  61,420
Depreciation, amort., depletion, $m
  115
  167
  244
  348
  481
  651
  860
  1,113
  1,414
  1,765
  2,168
  2,624
  3,134
  3,697
  4,315
  4,984
  5,706
  6,477
  7,298
  8,167
  9,083
  10,045
  11,052
  12,106
  13,205
  14,349
  15,541
  16,779
  18,067
  19,406
  20,796
Funds from operations, $m
  410
  674
  1,085
  1,510
  2,058
  2,748
  3,597
  4,621
  5,832
  7,241
  8,854
  10,675
  12,707
  14,948
  17,396
  20,049
  22,901
  25,947
  29,185
  32,608
  36,213
  39,997
  43,960
  48,099
  52,415
  56,910
  61,587
  66,450
  71,505
  76,758
  82,216
Change in working capital, $m
  107
  40
  55
  73
  95
  120
  148
  179
  212
  248
  284
  322
  360
  398
  436
  473
  509
  545
  580
  613
  647
  679
  712
  744
  776
  808
  841
  875
  909
  945
  982
Cash from operations, $m
  303
  634
  1,031
  1,437
  1,963
  2,628
  3,449
  4,442
  5,620
  6,993
  8,569
  10,353
  12,346
  14,550
  16,960
  19,576
  22,391
  25,403
  28,605
  31,994
  35,566
  39,318
  43,248
  47,355
  51,639
  56,102
  60,746
  65,576
  70,596
  75,813
  81,234
Maintenance CAPEX, $m
  0
  -111
  -167
  -244
  -348
  -481
  -651
  -860
  -1,113
  -1,414
  -1,765
  -2,168
  -2,624
  -3,134
  -3,697
  -4,315
  -4,984
  -5,706
  -6,477
  -7,298
  -8,167
  -9,083
  -10,045
  -11,052
  -12,106
  -13,205
  -14,349
  -15,541
  -16,779
  -18,067
  -19,406
New CAPEX, $m
  -69
  -564
  -774
  -1,032
  -1,339
  -1,694
  -2,093
  -2,533
  -3,007
  -3,507
  -4,028
  -4,560
  -5,099
  -5,638
  -6,172
  -6,698
  -7,213
  -7,716
  -8,208
  -8,688
  -9,158
  -9,621
  -10,078
  -10,533
  -10,988
  -11,447
  -11,913
  -12,389
  -12,878
  -13,383
  -13,907
Cash from investing activities, $m
  -58
  -675
  -941
  -1,276
  -1,687
  -2,175
  -2,744
  -3,393
  -4,120
  -4,921
  -5,793
  -6,728
  -7,723
  -8,772
  -9,869
  -11,013
  -12,197
  -13,422
  -14,685
  -15,986
  -17,325
  -18,704
  -20,123
  -21,585
  -23,094
  -24,652
  -26,262
  -27,930
  -29,657
  -31,450
  -33,313
Free cash flow, $m
  245
  -40
  90
  160
  276
  453
  705
  1,049
  1,500
  2,072
  2,777
  3,625
  4,624
  5,778
  7,091
  8,564
  10,194
  11,981
  13,920
  16,009
  18,241
  20,615
  23,125
  25,770
  28,545
  31,450
  34,484
  37,646
  40,938
  44,362
  47,921
Issuance/(repayment) of debt, $m
  -401
  -773
  1,213
  1,618
  2,099
  2,654
  3,280
  3,969
  4,712
  5,496
  6,312
  7,147
  7,991
  8,835
  9,672
  10,496
  11,303
  12,092
  12,862
  13,615
  14,352
  15,077
  15,793
  16,506
  17,220
  17,939
  18,669
  19,415
  20,181
  20,973
  21,794
Issuance/(repurchase) of shares, $m
  287
  1,248
  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  
  -206
  475
  1,213
  1,618
  2,099
  2,654
  3,280
  3,969
  4,712
  5,496
  6,312
  7,147
  7,991
  8,835
  9,672
  10,496
  11,303
  12,092
  12,862
  13,615
  14,352
  15,077
  15,793
  16,506
  17,220
  17,939
  18,669
  19,415
  20,181
  20,973
  21,794
Total cash flow (excl. dividends), $m
  38
  434
  1,303
  1,778
  2,375
  3,107
  3,986
  5,019
  6,212
  7,568
  9,089
  10,772
  12,615
  14,613
  16,763
  19,059
  21,497
  24,073
  26,783
  29,623
  32,593
  35,692
  38,919
  42,276
  45,765
  49,389
  53,153
  57,061
  61,120
  65,335
  69,716
Retained Cash Flow (-), $m
  -517
  -1,755
  -135
  -180
  -233
  -295
  -364
  -441
  -524
  -611
  -701
  -794
  -888
  -982
  -1,075
  -1,166
  -1,256
  -1,344
  -1,429
  -1,513
  -1,595
  -1,675
  -1,755
  -1,834
  -1,913
  -1,993
  -2,074
  -2,157
  -2,242
  -2,330
  -2,422
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
 
  -1,320
  1,168
  1,598
  2,142
  2,812
  3,621
  4,578
  5,688
  6,958
  8,387
  9,978
  11,727
  13,632
  15,688
  17,893
  20,242
  22,729
  25,353
  28,110
  30,999
  34,016
  37,164
  40,442
  43,852
  47,396
  51,079
  54,904
  58,877
  63,005
  67,294
Discount rate, %
 
  14.50
  15.23
  15.99
  16.79
  17.62
  18.51
  19.43
  20.40
  21.42
  22.49
  23.62
  24.80
  26.04
  27.34
  28.71
  30.14
  31.65
  33.23
  34.90
  36.64
  38.47
  40.40
  42.42
  44.54
  46.76
  49.10
  51.56
  54.14
  56.84
  59.68
PV of cash for distribution, $m
 
  -1,153
  880
  1,024
  1,151
  1,249
  1,307
  1,321
  1,288
  1,213
  1,103
  968
  821
  673
  532
  406
  299
  212
  145
  95
  60
  37
  21
  12
  6
  3
  2
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Cliffs Natural Resources Inc., a mining and natural resources company, produces and supplies iron ore. The company operates four iron ore mines in Michigan and Minnesota; and Koolyanobbing iron ore mining complex located in Western Australia. It sells its products to integrated steel companies and steel producers in the United States and the Asia Pacific. The company was formerly known as Cleveland-Cliffs Inc. Cliffs Natural Resources Inc. was founded in 1847 and is headquartered in Cleveland, Ohio.

FINANCIAL RATIOS  of  Cliffs Natural Resources (CLF)

Valuation Ratios
P/E Ratio 10.4
Price to Sales 0.9
Price to Book -1.2
Price to Tangible Book
Price to Cash Flow 5.9
Price to Free Cash Flow 7.7
Growth Rates
Sales Growth Rate 4.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.8%
Cap. Spend. - 3 Yr. Gr. Rate -39.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity -148.6%
Total Debt to Equity -148.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 18.2%
Ret/ On Assets - 3 Yr. Avg. -34.3%
Return On Total Capital 24.4%
Ret/ On T. Cap. - 3 Yr. Avg. -61.3%
Return On Equity -10.1%
Return On Equity - 3 Yr. Avg. -92.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 18.4%
Gross Margin - 3 Yr. Avg. 18.8%
EBITDA Margin 24%
EBITDA Margin - 3 Yr. Avg. 25%
Operating Margin 19.3%
Oper. Margin - 3 Yr. Avg. 16.9%
Pre-Tax Margin 9.8%
Pre-Tax Margin - 3 Yr. Avg. 8.3%
Net Profit Margin 8.3%
Net Profit Margin - 3 Yr. Avg. -81%
Effective Tax Rate -5.8%
Eff/ Tax Rate - 3 Yr. Avg. 159.4%
Payout Ratio 0%

CLF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CLF stock intrinsic value calculation we used $2109 million for the last fiscal year's total revenue generated by Cliffs Natural Resources. The default revenue input number comes from 2016 income statement of Cliffs Natural Resources. 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 CLF stock valuation model: a) initial revenue growth rate of 51% 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 14.5%, whose default value for CLF is calculated based on our internal credit rating of Cliffs Natural Resources, 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 Cliffs Natural Resources.
    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 CLF stock the variable cost ratio is equal to 73%.

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 CLF 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 7.6% for Cliffs Natural Resources.

Corporate tax rate of 27% is the nominal tax rate for Cliffs Natural Resources. 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 CLF 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 CLF are equal to 52.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Cliffs Natural Resources 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 CLF is equal to 3.7%. 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 - $-1464 million for Cliffs Natural Resources - 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 286.109 million for Cliffs Natural Resources 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 Cliffs Natural Resources at the current share price and the inputted number of shares is $2.2 billion.

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COMPANY NEWS

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▶ The Major Developments for Iron Ore Stocks   [Jun-30-17 07:37AM  Market Realist]
▶ Cliffs Natural CEO on Steel Probe and Iron Ore Prices   [Jun-28-17 02:11PM  Bloomberg Video]
▶ How Analysts See ArcelorMittal at the End of 2Q17   [Jun-23-17 10:36AM  Market Realist]
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▶ How Do Cliffs Technical Indicators Compare to Its Peers?   [Jun-06-17 10:36AM  Market Realist]
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▶ Have US Steel Prices Bottomed Out?   [09:07AM  Market Realist]
▶ Could US Steel Production Continue Favoring Cliffs in 2017?   [Jun-02-17 02:35PM  Market Realist]
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Stock chart of CLF Financial statements of CLF Annual reports of CLF
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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