Intrinsic value of Compass Minerals International - CMP

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$66.55

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$66.55

 
Intrinsic value

$194.64

 
Up/down potential

+192%

 
Rating

str. buy

 
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 CMP 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, %
  3.55
  53.30
  48.47
  44.12
  40.21
  36.69
  33.52
  30.67
  28.10
  25.79
  23.71
  21.84
  20.16
  18.64
  17.28
  16.05
  14.94
  13.95
  13.06
  12.25
  11.52
  10.87
  10.28
  9.76
  9.28
  8.85
  8.47
  8.12
  7.81
  7.53
  7.27
Revenue, $m
  1,138
  1,745
  2,590
  3,733
  5,234
  7,154
  9,553
  12,482
  15,990
  20,114
  24,884
  30,318
  36,430
  43,221
  50,688
  58,823
  67,614
  77,046
  87,105
  97,775
  109,043
  120,898
  133,333
  146,341
  159,923
  174,080
  188,820
  204,154
  220,095
  236,664
  253,881
Variable operating expenses, $m
 
  1,370
  2,014
  2,885
  4,028
  5,491
  7,318
  9,550
  12,222
  15,364
  18,997
  23,096
  27,752
  32,925
  38,614
  44,811
  51,508
  58,694
  66,356
  74,484
  83,068
  92,100
  101,572
  111,482
  121,828
  132,614
  143,843
  155,524
  167,668
  180,290
  193,406
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
  963
  1,370
  2,014
  2,885
  4,028
  5,491
  7,318
  9,550
  12,222
  15,364
  18,997
  23,096
  27,752
  32,925
  38,614
  44,811
  51,508
  58,694
  66,356
  74,484
  83,068
  92,100
  101,572
  111,482
  121,828
  132,614
  143,843
  155,524
  167,668
  180,290
  193,406
Operating income, $m
  175
  374
  576
  848
  1,206
  1,663
  2,234
  2,932
  3,768
  4,750
  5,886
  7,222
  8,678
  10,295
  12,074
  14,012
  16,106
  18,353
  20,749
  23,290
  25,974
  28,798
  31,760
  34,859
  38,094
  41,467
  44,978
  48,630
  52,428
  56,374
  60,475
EBITDA, $m
  265
  528
  785
  1,131
  1,585
  2,167
  2,893
  3,781
  4,843
  6,092
  7,537
  9,183
  11,034
  13,091
  15,353
  17,817
  20,480
  23,337
  26,383
  29,615
  33,028
  36,619
  40,386
  44,326
  48,440
  52,728
  57,192
  61,837
  66,665
  71,684
  76,899
Interest expense (income), $m
  27
  44
  75
  118
  177
  255
  353
  477
  628
  808
  1,020
  1,266
  1,546
  1,860
  2,210
  2,594
  3,013
  3,465
  3,951
  4,468
  5,018
  5,598
  6,208
  6,848
  7,517
  8,216
  8,945
  9,704
  10,493
  11,314
  12,166
Earnings before tax, $m
  197
  331
  501
  730
  1,028
  1,408
  1,881
  2,455
  3,140
  3,942
  4,866
  5,956
  7,132
  8,435
  9,864
  11,418
  13,093
  14,887
  16,798
  18,822
  20,957
  23,201
  25,552
  28,011
  30,577
  33,250
  36,033
  38,926
  41,935
  45,061
  48,309
Tax expense, $m
  34
  89
  135
  197
  278
  380
  508
  663
  848
  1,064
  1,314
  1,608
  1,926
  2,277
  2,663
  3,083
  3,535
  4,020
  4,535
  5,082
  5,658
  6,264
  6,899
  7,563
  8,256
  8,978
  9,729
  10,510
  11,322
  12,166
  13,043
Net income, $m
  163
  241
  366
  533
  751
  1,028
  1,373
  1,792
  2,292
  2,878
  3,552
  4,348
  5,206
  6,158
  7,201
  8,335
  9,558
  10,868
  12,263
  13,740
  15,298
  16,937
  18,653
  20,448
  22,321
  24,273
  26,304
  28,416
  30,612
  32,894
  35,266

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  77
  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
  2,467
  3,665
  5,441
  7,842
  10,996
  15,030
  20,068
  26,223
  33,592
  42,256
  52,276
  63,694
  76,533
  90,800
  106,488
  123,578
  142,046
  161,862
  182,993
  205,409
  229,082
  253,988
  280,110
  307,439
  335,972
  365,715
  396,681
  428,895
  462,385
  497,193
  533,364
Adjusted assets (=assets-cash), $m
  2,390
  3,665
  5,441
  7,842
  10,996
  15,030
  20,068
  26,223
  33,592
  42,256
  52,276
  63,694
  76,533
  90,800
  106,488
  123,578
  142,046
  161,862
  182,993
  205,409
  229,082
  253,988
  280,110
  307,439
  335,972
  365,715
  396,681
  428,895
  462,385
  497,193
  533,364
Revenue / Adjusted assets
  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
  0.476
Average production assets, $m
  1,068
  1,636
  2,430
  3,502
  4,910
  6,711
  8,960
  11,708
  14,999
  18,867
  23,341
  28,439
  34,171
  40,541
  47,545
  55,176
  63,422
  72,269
  81,704
  91,713
  102,282
  113,403
  125,066
  137,268
  150,007
  163,287
  177,113
  191,496
  206,450
  221,991
  238,140
Working capital, $m
  343
  607
  901
  1,299
  1,821
  2,490
  3,324
  4,344
  5,565
  7,000
  8,659
  10,551
  12,678
  15,041
  17,639
  20,470
  23,530
  26,812
  30,312
  34,026
  37,947
  42,073
  46,400
  50,927
  55,653
  60,580
  65,709
  71,046
  76,593
  82,359
  88,351
Total debt, $m
  1,325
  2,141
  3,384
  5,065
  7,272
  10,096
  13,623
  17,931
  23,090
  29,154
  36,168
  44,161
  53,148
  63,135
  74,116
  86,080
  99,008
  112,878
  127,670
  143,361
  159,932
  177,367
  195,652
  214,782
  234,755
  255,575
  277,252
  299,801
  323,245
  347,610
  372,929
Total liabilities, $m
  1,749
  2,566
  3,809
  5,490
  7,697
  10,521
  14,048
  18,356
  23,515
  29,579
  36,593
  44,586
  53,573
  63,560
  74,541
  86,505
  99,433
  113,303
  128,095
  143,786
  160,357
  177,792
  196,077
  215,207
  235,180
  256,000
  277,677
  300,226
  323,670
  348,035
  373,354
Total equity, $m
  717
  1,100
  1,632
  2,353
  3,299
  4,509
  6,021
  7,867
  10,078
  12,677
  15,683
  19,108
  22,960
  27,240
  31,946
  37,073
  42,614
  48,559
  54,898
  61,623
  68,725
  76,196
  84,033
  92,232
  100,792
  109,714
  119,004
  128,668
  138,716
  149,158
  160,009
Total liabilities and equity, $m
  2,466
  3,666
  5,441
  7,843
  10,996
  15,030
  20,069
  26,223
  33,593
  42,256
  52,276
  63,694
  76,533
  90,800
  106,487
  123,578
  142,047
  161,862
  182,993
  205,409
  229,082
  253,988
  280,110
  307,439
  335,972
  365,714
  396,681
  428,894
  462,386
  497,193
  533,363
Debt-to-equity ratio
  1.848
  1.950
  2.070
  2.150
  2.200
  2.240
  2.260
  2.280
  2.290
  2.300
  2.310
  2.310
  2.310
  2.320
  2.320
  2.320
  2.320
  2.320
  2.330
  2.330
  2.330
  2.330
  2.330
  2.330
  2.330
  2.330
  2.330
  2.330
  2.330
  2.330
  2.330
Adjusted equity ratio
  0.268
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  163
  241
  366
  533
  751
  1,028
  1,373
  1,792
  2,292
  2,878
  3,552
  4,348
  5,206
  6,158
  7,201
  8,335
  9,558
  10,868
  12,263
  13,740
  15,298
  16,937
  18,653
  20,448
  22,321
  24,273
  26,304
  28,416
  30,612
  32,894
  35,266
Depreciation, amort., depletion, $m
  90
  154
  209
  283
  380
  504
  659
  849
  1,076
  1,342
  1,651
  1,961
  2,357
  2,796
  3,279
  3,805
  4,374
  4,984
  5,635
  6,325
  7,054
  7,821
  8,625
  9,467
  10,345
  11,261
  12,215
  13,207
  14,238
  15,310
  16,423
Funds from operations, $m
  135
  395
  574
  815
  1,130
  1,532
  2,032
  2,641
  3,368
  4,220
  5,203
  6,309
  7,563
  8,954
  10,480
  12,140
  13,932
  15,852
  17,897
  20,065
  22,352
  24,757
  27,279
  29,915
  32,666
  35,534
  38,519
  41,623
  44,850
  48,204
  51,689
Change in working capital, $m
  -32
  211
  294
  398
  522
  668
  835
  1,020
  1,221
  1,435
  1,660
  1,891
  2,127
  2,363
  2,599
  2,831
  3,059
  3,282
  3,500
  3,713
  3,921
  4,126
  4,327
  4,527
  4,726
  4,927
  5,130
  5,336
  5,548
  5,766
  5,992
Cash from operations, $m
  167
  367
  280
  418
  608
  864
  1,198
  1,622
  2,147
  2,785
  3,543
  4,418
  5,436
  6,590
  7,881
  9,309
  10,873
  12,570
  14,397
  16,352
  18,431
  20,632
  22,951
  25,388
  27,940
  30,607
  33,389
  36,287
  39,302
  42,438
  45,698
Maintenance CAPEX, $m
  0
  -74
  -113
  -168
  -241
  -339
  -463
  -618
  -807
  -1,034
  -1,301
  -1,610
  -1,961
  -2,357
  -2,796
  -3,279
  -3,805
  -4,374
  -4,984
  -5,635
  -6,325
  -7,054
  -7,821
  -8,625
  -9,467
  -10,345
  -11,261
  -12,215
  -13,207
  -14,238
  -15,310
New CAPEX, $m
  -182
  -568
  -793
  -1,072
  -1,408
  -1,801
  -2,250
  -2,748
  -3,290
  -3,868
  -4,474
  -5,098
  -5,732
  -6,370
  -7,004
  -7,631
  -8,246
  -8,847
  -9,435
  -10,008
  -10,570
  -11,120
  -11,663
  -12,202
  -12,740
  -13,280
  -13,826
  -14,383
  -14,953
  -15,541
  -16,150
Cash from investing activities, $m
  -468
  -642
  -906
  -1,240
  -1,649
  -2,140
  -2,713
  -3,366
  -4,097
  -4,902
  -5,775
  -6,708
  -7,693
  -8,727
  -9,800
  -10,910
  -12,051
  -13,221
  -14,419
  -15,643
  -16,895
  -18,174
  -19,484
  -20,827
  -22,207
  -23,625
  -25,087
  -26,598
  -28,160
  -29,779
  -31,460
Free cash flow, $m
  -301
  -275
  -626
  -822
  -1,041
  -1,276
  -1,515
  -1,744
  -1,951
  -2,118
  -2,232
  -2,290
  -2,257
  -2,136
  -1,919
  -1,601
  -1,178
  -652
  -22
  709
  1,537
  2,458
  3,467
  4,561
  5,734
  6,982
  8,302
  9,689
  11,143
  12,659
  14,238
Issuance/(repayment) of debt, $m
  417
  893
  1,244
  1,681
  2,207
  2,824
  3,527
  4,308
  5,158
  6,065
  7,014
  7,992
  8,987
  9,987
  10,981
  11,963
  12,928
  13,871
  14,792
  15,691
  16,571
  17,434
  18,286
  19,130
  19,973
  20,820
  21,677
  22,549
  23,444
  24,365
  25,320
Issuance/(repurchase) of shares, $m
  1
  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  
  409
  893
  1,244
  1,681
  2,207
  2,824
  3,527
  4,308
  5,158
  6,065
  7,014
  7,992
  8,987
  9,987
  10,981
  11,963
  12,928
  13,871
  14,792
  15,691
  16,571
  17,434
  18,286
  19,130
  19,973
  20,820
  21,677
  22,549
  23,444
  24,365
  25,320
Total cash flow (excl. dividends), $m
  113
  618
  618
  859
  1,166
  1,548
  2,012
  2,564
  3,208
  3,947
  4,782
  5,703
  6,730
  7,851
  9,062
  10,363
  11,749
  13,219
  14,770
  16,400
  18,107
  19,892
  21,753
  23,691
  25,707
  27,802
  29,978
  32,239
  34,586
  37,024
  39,558
Retained Cash Flow (-), $m
  -77
  -383
  -533
  -720
  -946
  -1,210
  -1,511
  -1,846
  -2,211
  -2,599
  -3,006
  -3,425
  -3,852
  -4,280
  -4,706
  -5,127
  -5,540
  -5,945
  -6,339
  -6,725
  -7,102
  -7,472
  -7,837
  -8,199
  -8,560
  -8,923
  -9,290
  -9,664
  -10,047
  -10,442
  -10,851
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
 
  235
  85
  138
  220
  338
  501
  717
  997
  1,348
  1,776
  2,277
  2,878
  3,570
  4,356
  5,236
  6,209
  7,274
  8,430
  9,675
  11,006
  12,420
  13,916
  15,492
  17,147
  18,879
  20,688
  22,575
  24,539
  26,582
  28,706
Discount rate, %
 
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
 
  215
  70
  103
  146
  198
  255
  315
  373
  423
  462
  483
  490
  479
  454
  415
  367
  314
  260
  208
  162
  121
  88
  61
  41
  27
  17
  10
  6
  3
  2
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

Compass Minerals International, Inc. produces and markets salt, sulfate of potash specialty fertilizer (SOP), plant micronutrients, and magnesium chloride primarily in North America and the United Kingdom. Its Salt segment mines, produces, processes, distributes, and markets sodium chloride and magnesium chloride for use in highway and consumer deicing, dust control, water conditioning, consumer and industrial food preparation, and agricultural and industrial applications; and purchases potassium chloride and calcium chloride to sell as finished products or to blend with sodium chloride to produce specialty products. This segment offers rock salt, mechanically evaporated and solar evaporated salt, and brine and flake magnesium chloride products to producers of intermediate chemical products used in the production of vinyls and other chemicals, and pulp and paper, as well as water treatment and other industrial uses. The company’s Plant Nutrition segment provides SOP, which is used as an ingredient in specialty fertilizer blends for chloride-sensitive crops and turfs under the Protassium+ brand name; and develops and distributes micronutrient products under the Wolf Trax brand. This segment serves growers and fertilizer distributors worldwide. The company also produces and markets consumer deicing and water conditioning products, ingredients used in consumer and commercial food preparation, and other mineral-based products for consumer, agricultural, and industrial applications; and offers records management services to businesses located in the United Kingdom. It operates rock salt mines in Goderich, Ontario, Canada; Cote Blanche, Louisiana, the United States; and Winsford, Cheshire, the United Kingdom. The company was formerly known as Salt Holdings Corporation and changed its name to Compass Minerals International, Inc. in December 2003. Compass Minerals International, Inc. was founded in 1993 and is headquartered in Overland Park, Kansas.

FINANCIAL RATIOS  of  Compass Minerals International (CMP)

Valuation Ratios
P/E Ratio 13.8
Price to Sales 2
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 13.5
Price to Free Cash Flow -149.9
Growth Rates
Sales Growth Rate 3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.5%
Cap. Spend. - 3 Yr. Gr. Rate 8.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 166.7%
Total Debt to Equity 184.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 9.1%
Ret/ On Assets - 3 Yr. Avg. 11.6%
Return On Total Capital 9.6%
Ret/ On T. Cap. - 3 Yr. Avg. 13.5%
Return On Equity 24%
Return On Equity - 3 Yr. Avg. 28.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 26.4%
Gross Margin - 3 Yr. Avg. 29.7%
EBITDA Margin 27.6%
EBITDA Margin - 3 Yr. Avg. 28.7%
Operating Margin 15.4%
Oper. Margin - 3 Yr. Avg. 19.9%
Pre-Tax Margin 17.3%
Pre-Tax Margin - 3 Yr. Avg. 19.9%
Net Profit Margin 14.3%
Net Profit Margin - 3 Yr. Avg. 15.3%
Effective Tax Rate 17.3%
Eff/ Tax Rate - 3 Yr. Avg. 22.9%
Payout Ratio 57.7%

CMP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CMP stock intrinsic value calculation we used $1138 million for the last fiscal year's total revenue generated by Compass Minerals International. The default revenue input number comes from 2016 income statement of Compass Minerals International. 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 CMP stock valuation model: a) initial revenue growth rate of 53.3% 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 9.3%, whose default value for CMP is calculated based on our internal credit rating of Compass Minerals International, 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 Compass Minerals International.
    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 CMP stock the variable cost ratio is equal to 79.8%.

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 CMP 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 Compass Minerals International.

Corporate tax rate of 27% is the nominal tax rate for Compass Minerals International. 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 CMP 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 CMP are equal to 93.8%.

Life of production assets of 14.5 years is the average useful life of capital assets used in Compass Minerals International 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 CMP is equal to 34.8%. 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 - $717 million for Compass Minerals International - 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 33.751 million for Compass Minerals International 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 Compass Minerals International at the current share price and the inputted number of shares is $2.2 billion.


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COMPANY NEWS

▶ Weitz Funds Comments on Compass Minerals   [May-18-17 01:15PM  GuruFocus.com]
▶ Compass Minerals Declares Dividend   [May-04-17 07:30AM  Business Wire]
▶ Compass Minerals Survives a Mild Winter   [May-03-17 07:19PM  Motley Fool]
▶ Compass beats 1Q profit forecasts   [04:36PM  Associated Press]
▶ 9 Small-Cap Stocks With Wide Moats   [Apr-12-17 06:00AM  Morningstar]
▶ Compass Minerals Reports First-Quarter Snow-Event Data   [Apr-10-17 09:00AM  Business Wire]
▶ Snow Scarcity Dings Compass Minerals   [Apr-05-17 10:40AM  Morningstar]
▶ Stocks Reach Their 3-Year Lows   [Apr-02-17 11:01AM  GuruFocus.com]
▶ Basic Materials: The Most Expensive Sector We Cover   [Mar-30-17 07:00AM  Morningstar]
▶ Could It Be Time to Buy US Domestic Moats?   [Mar-27-17 04:05PM  Market Realist]
▶ Which KC-area stocks had the best, worst February? Take a look   [04:00PM  American City Business Journals]
▶ Compass Minerals to Host Investor Meetings   [04:15PM  Business Wire]
▶ Compass Minerals Posts a Double Win   [Feb-08-17 07:05PM  at Motley Fool]
▶ Eight Dividend Stocks Rewarding Shareholders With A Raise   [Feb-07-17 12:55PM  at Insider Monkey]
▶ Utilities Awake From Their Long Slumber   [Feb-01-17 11:15AM  at Investopedia]
▶ Compass Minerals Declares Fourth-Quarter Dividend   [Nov-09-16 04:28PM  Business Wire]
▶ CFO steps down from Compass Minerals   [Nov-03-16 09:35AM  at bizjournals.com]
▶ [$$] TreeHouse Shuffles Executives, Shutters Plant   [08:59AM  at The Wall Street Journal]
▶ Compass Minerals Misses Q3 Earnings (CMP)   [12:10PM  at Investopedia]
▶ Compass Minerals Earnings Preview (CMP)   [10:48AM  at Investopedia]
▶ The 2 Best Potash Stocks to Buy Now   [Oct-17-16 05:49PM  at Motley Fool]
▶ Compass Minerals CEO: Brazil acquisition adds diversity, stability   [Oct-10-16 04:05PM  at bizjournals.com]
▶ High-Quality Dividend-Payers Selling at a Discount   [Aug-31-16 07:00AM  at Morningstar]
Stock chart of CMP Financial statements of CMP Annual reports of CMP
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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