Intrinsic value of Cosan Cl A - CZZ

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$5.86

  Intrinsic Value

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  Value-price divergence*

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$5.86

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

We calculate the intrinsic value of CZZ 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 1.6

 

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, %
  1.33
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,958
  12,768
  13,062
  13,398
  13,775
  14,192
  14,650
  15,149
  15,689
  16,271
  16,896
  17,564
  18,277
  19,036
  19,842
  20,698
  21,605
  22,565
  23,581
  24,654
  25,786
  26,982
  28,242
  29,571
  30,971
  32,445
  33,998
  35,632
  37,351
  39,160
  41,063
Variable operating expenses, $m
 
  9,817
  10,042
  10,298
  10,585
  10,904
  11,254
  11,635
  12,047
  12,491
  12,968
  13,406
  13,950
  14,530
  15,145
  15,799
  16,491
  17,224
  17,999
  18,818
  19,682
  20,595
  21,557
  22,571
  23,640
  24,765
  25,950
  27,197
  28,510
  29,890
  31,343
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
  2,816
  9,817
  10,042
  10,298
  10,585
  10,904
  11,254
  11,635
  12,047
  12,491
  12,968
  13,406
  13,950
  14,530
  15,145
  15,799
  16,491
  17,224
  17,999
  18,818
  19,682
  20,595
  21,557
  22,571
  23,640
  24,765
  25,950
  27,197
  28,510
  29,890
  31,343
Operating income, $m
  1,142
  2,951
  3,020
  3,100
  3,189
  3,288
  3,396
  3,515
  3,642
  3,780
  3,928
  4,158
  4,326
  4,506
  4,697
  4,900
  5,114
  5,341
  5,582
  5,836
  6,104
  6,387
  6,685
  7,000
  7,331
  7,680
  8,048
  8,434
  8,841
  9,270
  9,720
EBITDA, $m
  1,752
  4,945
  5,059
  5,189
  5,335
  5,496
  5,674
  5,867
  6,076
  6,301
  6,543
  6,802
  7,078
  7,372
  7,684
  8,016
  8,367
  8,739
  9,132
  9,548
  9,986
  10,449
  10,937
  11,452
  11,994
  12,565
  13,166
  13,799
  14,465
  15,166
  15,903
Interest expense (income), $m
  0
  742
  743
  776
  814
  857
  903
  955
  1,011
  1,072
  1,137
  1,208
  1,283
  1,363
  1,448
  1,539
  1,635
  1,737
  1,845
  1,960
  2,080
  2,208
  2,342
  2,484
  2,634
  2,791
  2,957
  3,132
  3,315
  3,509
  3,712
Earnings before tax, $m
  176
  2,209
  2,277
  2,324
  2,375
  2,431
  2,493
  2,559
  2,631
  2,708
  2,791
  2,950
  3,044
  3,143
  3,249
  3,360
  3,479
  3,604
  3,736
  3,876
  4,024
  4,179
  4,343
  4,516
  4,698
  4,889
  5,091
  5,303
  5,526
  5,761
  6,008
Tax expense, $m
  20
  596
  615
  627
  641
  656
  673
  691
  710
  731
  753
  796
  822
  849
  877
  907
  939
  973
  1,009
  1,047
  1,086
  1,128
  1,173
  1,219
  1,268
  1,320
  1,374
  1,432
  1,492
  1,555
  1,622
Net income, $m
  110
  1,612
  1,662
  1,696
  1,734
  1,775
  1,820
  1,868
  1,921
  1,977
  2,037
  2,153
  2,222
  2,294
  2,371
  2,453
  2,540
  2,631
  2,728
  2,830
  2,937
  3,051
  3,170
  3,296
  3,429
  3,569
  3,716
  3,871
  4,034
  4,205
  4,386

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,831
  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
  15,957
  45,601
  46,650
  47,849
  49,195
  50,686
  52,323
  54,105
  56,034
  58,112
  60,342
  62,728
  65,274
  67,984
  70,865
  73,922
  77,162
  80,591
  84,217
  88,049
  92,094
  96,363
  100,865
  105,610
  110,610
  115,876
  121,420
  127,256
  133,396
  139,857
  146,652
Adjusted assets (=assets-cash), $m
  14,126
  45,601
  46,650
  47,849
  49,195
  50,686
  52,323
  54,105
  56,034
  58,112
  60,342
  62,728
  65,274
  67,984
  70,865
  73,922
  77,162
  80,591
  84,217
  88,049
  92,094
  96,363
  100,865
  105,610
  110,610
  115,876
  121,420
  127,256
  133,396
  139,857
  146,652
Revenue / Adjusted assets
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
Average production assets, $m
  8,461
  27,299
  27,927
  28,644
  29,450
  30,343
  31,323
  32,389
  33,544
  34,788
  36,123
  37,551
  39,075
  40,698
  42,423
  44,253
  46,192
  48,245
  50,416
  52,709
  55,131
  57,687
  60,382
  63,222
  66,216
  69,368
  72,687
  76,180
  79,856
  83,724
  87,792
Working capital, $m
  677
  -472
  -483
  -496
  -510
  -525
  -542
  -561
  -581
  -602
  -625
  -650
  -676
  -704
  -734
  -766
  -799
  -835
  -872
  -912
  -954
  -998
  -1,045
  -1,094
  -1,146
  -1,200
  -1,258
  -1,318
  -1,382
  -1,449
  -1,519
Total debt, $m
  7,688
  21,237
  22,181
  23,260
  24,472
  25,814
  27,287
  28,890
  30,626
  32,497
  34,504
  36,651
  38,942
  41,382
  43,975
  46,726
  49,641
  52,728
  55,991
  59,440
  63,081
  66,923
  70,974
  75,245
  79,745
  84,484
  89,474
  94,726
  100,253
  106,067
  112,183
Total liabilities, $m
  13,974
  41,041
  41,985
  43,064
  44,276
  45,618
  47,091
  48,694
  50,430
  52,301
  54,308
  56,455
  58,746
  61,186
  63,779
  66,530
  69,445
  72,532
  75,795
  79,244
  82,885
  86,727
  90,778
  95,049
  99,549
  104,288
  109,278
  114,530
  120,057
  125,871
  131,987
Total equity, $m
  1,983
  4,560
  4,665
  4,785
  4,920
  5,069
  5,232
  5,410
  5,603
  5,811
  6,034
  6,273
  6,527
  6,798
  7,087
  7,392
  7,716
  8,059
  8,422
  8,805
  9,209
  9,636
  10,086
  10,561
  11,061
  11,588
  12,142
  12,726
  13,340
  13,986
  14,665
Total liabilities and equity, $m
  15,957
  45,601
  46,650
  47,849
  49,196
  50,687
  52,323
  54,104
  56,033
  58,112
  60,342
  62,728
  65,273
  67,984
  70,866
  73,922
  77,161
  80,591
  84,217
  88,049
  92,094
  96,363
  100,864
  105,610
  110,610
  115,876
  121,420
  127,256
  133,397
  139,857
  146,652
Debt-to-equity ratio
  3.877
  4.660
  4.750
  4.860
  4.970
  5.090
  5.220
  5.340
  5.470
  5.590
  5.720
  5.840
  5.970
  6.090
  6.210
  6.320
  6.430
  6.540
  6.650
  6.750
  6.850
  6.940
  7.040
  7.120
  7.210
  7.290
  7.370
  7.440
  7.520
  7.580
  7.650
Adjusted equity ratio
  0.011
  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
  110
  1,612
  1,662
  1,696
  1,734
  1,775
  1,820
  1,868
  1,921
  1,977
  2,037
  2,153
  2,222
  2,294
  2,371
  2,453
  2,540
  2,631
  2,728
  2,830
  2,937
  3,051
  3,170
  3,296
  3,429
  3,569
  3,716
  3,871
  4,034
  4,205
  4,386
Depreciation, amort., depletion, $m
  610
  1,994
  2,038
  2,089
  2,145
  2,208
  2,277
  2,352
  2,434
  2,521
  2,615
  2,644
  2,752
  2,866
  2,988
  3,116
  3,253
  3,398
  3,550
  3,712
  3,882
  4,062
  4,252
  4,452
  4,663
  4,885
  5,119
  5,365
  5,624
  5,896
  6,183
Funds from operations, $m
  977
  3,606
  3,700
  3,785
  3,879
  3,983
  4,097
  4,221
  4,355
  4,498
  4,652
  4,798
  4,974
  5,160
  5,359
  5,569
  5,792
  6,028
  6,278
  6,541
  6,820
  7,113
  7,423
  7,749
  8,092
  8,454
  8,835
  9,236
  9,658
  10,101
  10,568
Change in working capital, $m
  -172
  -9
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -57
  -60
  -64
  -67
  -70
Cash from operations, $m
  1,149
  3,974
  3,711
  3,797
  3,893
  3,999
  4,114
  4,239
  4,375
  4,520
  4,676
  4,823
  5,000
  5,189
  5,389
  5,601
  5,826
  6,064
  6,316
  6,581
  6,862
  7,157
  7,469
  7,798
  8,144
  8,509
  8,892
  9,296
  9,721
  10,168
  10,638
Maintenance CAPEX, $m
  0
  -1,885
  -1,922
  -1,967
  -2,017
  -2,074
  -2,137
  -2,206
  -2,281
  -2,362
  -2,450
  -2,544
  -2,644
  -2,752
  -2,866
  -2,988
  -3,116
  -3,253
  -3,398
  -3,550
  -3,712
  -3,882
  -4,062
  -4,252
  -4,452
  -4,663
  -4,885
  -5,119
  -5,365
  -5,624
  -5,896
New CAPEX, $m
  -693
  -538
  -628
  -718
  -806
  -893
  -980
  -1,067
  -1,155
  -1,244
  -1,335
  -1,428
  -1,524
  -1,623
  -1,725
  -1,830
  -1,939
  -2,053
  -2,171
  -2,294
  -2,422
  -2,555
  -2,695
  -2,841
  -2,993
  -3,152
  -3,319
  -3,493
  -3,676
  -3,867
  -4,068
Cash from investing activities, $m
  -230
  -2,423
  -2,550
  -2,685
  -2,823
  -2,967
  -3,117
  -3,273
  -3,436
  -3,606
  -3,785
  -3,972
  -4,168
  -4,375
  -4,591
  -4,818
  -5,055
  -5,306
  -5,569
  -5,844
  -6,134
  -6,437
  -6,757
  -7,093
  -7,445
  -7,815
  -8,204
  -8,612
  -9,041
  -9,491
  -9,964
Free cash flow, $m
  919
  1,552
  1,161
  1,113
  1,070
  1,032
  998
  967
  939
  914
  891
  850
  831
  814
  798
  784
  770
  758
  747
  737
  728
  719
  712
  705
  699
  693
  688
  684
  680
  677
  675
Issuance/(repayment) of debt, $m
  -591
  28
  944
  1,079
  1,211
  1,342
  1,473
  1,604
  1,736
  1,870
  2,007
  2,147
  2,291
  2,440
  2,593
  2,751
  2,916
  3,086
  3,264
  3,448
  3,641
  3,842
  4,052
  4,271
  4,500
  4,739
  4,990
  5,252
  5,527
  5,814
  6,116
Issuance/(repurchase) of shares, $m
  638
  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  
  -120
  28
  944
  1,079
  1,211
  1,342
  1,473
  1,604
  1,736
  1,870
  2,007
  2,147
  2,291
  2,440
  2,593
  2,751
  2,916
  3,086
  3,264
  3,448
  3,641
  3,842
  4,052
  4,271
  4,500
  4,739
  4,990
  5,252
  5,527
  5,814
  6,116
Total cash flow (excl. dividends), $m
  769
  1,580
  2,105
  2,192
  2,282
  2,374
  2,470
  2,571
  2,675
  2,784
  2,898
  2,998
  3,123
  3,254
  3,391
  3,535
  3,686
  3,844
  4,011
  4,185
  4,369
  4,561
  4,763
  4,976
  5,199
  5,432
  5,678
  5,936
  6,207
  6,492
  6,790
Retained Cash Flow (-), $m
  -113
  -894
  -105
  -120
  -135
  -149
  -164
  -178
  -193
  -208
  -223
  -239
  -255
  -271
  -288
  -306
  -324
  -343
  -363
  -383
  -405
  -427
  -450
  -475
  -500
  -527
  -554
  -584
  -614
  -646
  -680
Prev. year cash balance distribution, $m
 
  2,606
  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
 
  3,292
  2,000
  2,072
  2,147
  2,225
  2,307
  2,392
  2,482
  2,576
  2,675
  2,759
  2,868
  2,983
  3,103
  3,229
  3,362
  3,502
  3,648
  3,802
  3,964
  4,134
  4,313
  4,501
  4,699
  4,906
  5,124
  5,353
  5,593
  5,846
  6,111
Discount rate, %
 
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
 
  3,031
  1,683
  1,579
  1,469
  1,353
  1,235
  1,115
  995
  878
  765
  652
  553
  461
  378
  305
  242
  188
  143
  107
  78
  55
  38
  26
  17
  11
  7
  4
  2
  1
  1
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

Cosan Limited, together with its subsidiaries, engages in piped natural gas, Logistics service, agricultural land, lubricant, sugar and ethanol, and fuel businesses primarily in Brazil and internationally. The company’s Raízen Energia segment produces and markets various products derived from sugar cane, including raw sugar, and anhydrous and hydrated ethanol. This segment is also involved in activities related to energy cogeneration from sugarcane bagasse; and holds interests in companies involved in research and development on new technology. Its Raízen Combustíveis segment distributes and markets fuels, primarily through a franchised network of service stations under the Shell brands in Brazil. The company’s COMGÁS segment distributes piped natural gas to customers in the industrial, residential, commercial, automotive, thermogeneration, and cogeneration sectors in part of the State of Sao Paulo. Its Cosan Logística segment provides logistics services for transport, storage, and port loading of commodities, primarily for sugar products; and leasing or lending of locomotives, wagons, and other railway equipment. The company’s Radar segment is involved in buying, managing, selling, and leasing agricultural land. Its Lubricants segment produces and distributes lubricants under the Mobil and Comma names. The company operates a network of approximately 5,682 Shell service stations and 950 convenience stores, as well as 63 distribution terminals and 59 airports terminals. Cosan Limited was incorporated in 2007 and is based in São Paulo, Brazil.

FINANCIAL RATIOS  of  Cosan Cl A (CZZ)

Valuation Ratios
P/E Ratio 14.1
Price to Sales 0.4
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 1.3
Price to Free Cash Flow 3.4
Growth Rates
Sales Growth Rate 1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9%
Cap. Spend. - 3 Yr. Gr. Rate 17.5%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 338.1%
Total Debt to Equity 387.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.7%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 1.3%
Return On Equity 5.7%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 33.6%
Gross Margin - 3 Yr. Avg. 30.8%
EBITDA Margin 19.9%
EBITDA Margin - 3 Yr. Avg. 16.2%
Operating Margin 28.9%
Oper. Margin - 3 Yr. Avg. 22.8%
Pre-Tax Margin 4.4%
Pre-Tax Margin - 3 Yr. Avg. 5%
Net Profit Margin 2.8%
Net Profit Margin - 3 Yr. Avg. 2.6%
Effective Tax Rate 11.4%
Eff/ Tax Rate - 3 Yr. Avg. 3.8%
Payout Ratio 413.6%

CZZ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CZZ stock intrinsic value calculation we used $12518 million for the last fiscal year's total revenue generated by Cosan Cl A. The default revenue input number comes from 2016 income statement of Cosan Cl A. 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 CZZ stock valuation model: a) initial revenue growth rate of 2% 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 8.6%, whose default value for CZZ is calculated based on our internal credit rating of Cosan Cl A, 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 Cosan Cl A.
    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 CZZ stock the variable cost ratio is equal to 76.9%.

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 CZZ 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 Cosan Cl A.

Corporate tax rate of 27% is the nominal tax rate for Cosan Cl A. 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 CZZ 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 CZZ are equal to 213.8%.

Life of production assets of 14.2 years is the average useful life of capital assets used in Cosan Cl A 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 CZZ 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 - $6272 million for Cosan Cl A - 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 266.196 million for Cosan Cl A 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 Cosan Cl A at the current share price and the inputted number of shares is $1.6 billion.


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COMPANY NEWS

▶ ETFs with exposure to Cosan Ltd. : June 22, 2017   [Jun-22-17 03:37PM  Capital Cube]
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▶ Cosan posts 1Q profit   [May-11-17 05:50PM  Associated Press]
▶ Bull of the Day: Cosan (CZZ)   [07:00AM  Zacks]
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▶ Is The Party Over for These Growth Stocks?   [Oct-21-16 12:50PM  at Insider Monkey]
Stock chart of CZZ Financial statements of CZZ Annual reports of CZZ
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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