Intrinsic value of Potash of Saskatchewan - POT

Previous Close

$19.24

  Intrinsic Value

$2.40

stock screener

  Rating & Target

str. sell

-88%

  Value-price divergence*

-91%

Previous close

$19.24

 
Intrinsic value

$2.40

 
Up/down potential

-88%

 
Rating

str. sell

 
Value-price divergence*

-91%

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

We calculate the intrinsic value of POT 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 16.2

 

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, %
  -29.03
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  4,456
  4,741
  5,038
  5,347
  5,669
  6,004
  6,354
  6,719
  7,100
  7,498
  7,914
  8,348
  8,802
  9,277
  9,774
  10,294
  10,838
  11,408
  12,005
  12,631
  13,286
  13,973
  14,693
  15,448
  16,240
  17,070
  17,940
  18,854
  19,812
  20,817
  21,871
Variable operating expenses, $m
 
  1,279
  1,359
  1,442
  1,528
  1,618
  1,712
  1,809
  1,911
  2,018
  2,129
  2,236
  2,357
  2,485
  2,618
  2,757
  2,903
  3,055
  3,215
  3,383
  3,558
  3,742
  3,935
  4,137
  4,349
  4,572
  4,805
  5,049
  5,306
  5,575
  5,858
Fixed operating expenses, $m
 
  2,806
  2,877
  2,949
  3,022
  3,098
  3,175
  3,255
  3,336
  3,419
  3,505
  3,592
  3,682
  3,774
  3,869
  3,965
  4,065
  4,166
  4,270
  4,377
  4,487
  4,599
  4,714
  4,832
  4,952
  5,076
  5,203
  5,333
  5,466
  5,603
  5,743
Total operating expenses, $m
  3,874
  4,085
  4,236
  4,391
  4,550
  4,716
  4,887
  5,064
  5,247
  5,437
  5,634
  5,828
  6,039
  6,259
  6,487
  6,722
  6,968
  7,221
  7,485
  7,760
  8,045
  8,341
  8,649
  8,969
  9,301
  9,648
  10,008
  10,382
  10,772
  11,178
  11,601
Operating income, $m
  582
  655
  802
  957
  1,119
  1,289
  1,468
  1,655
  1,853
  2,061
  2,280
  2,520
  2,762
  3,018
  3,287
  3,571
  3,871
  4,187
  4,520
  4,871
  5,241
  5,632
  6,044
  6,479
  6,938
  7,422
  7,932
  8,471
  9,039
  9,638
  10,270
EBITDA, $m
  1,277
  1,398
  1,591
  1,793
  2,005
  2,227
  2,459
  2,704
  2,960
  3,229
  3,512
  3,810
  4,123
  4,452
  4,798
  5,162
  5,546
  5,950
  6,375
  6,823
  7,295
  7,792
  8,315
  8,867
  9,448
  10,060
  10,705
  11,385
  12,101
  12,856
  13,651
Interest expense (income), $m
  189
  196
  220
  246
  273
  301
  330
  361
  393
  426
  460
  496
  534
  574
  615
  658
  704
  751
  800
  852
  907
  964
  1,024
  1,086
  1,152
  1,221
  1,293
  1,369
  1,448
  1,532
  1,619
Earnings before tax, $m
  366
  459
  582
  710
  846
  988
  1,137
  1,295
  1,460
  1,635
  1,819
  2,023
  2,228
  2,444
  2,672
  2,913
  3,167
  3,436
  3,719
  4,018
  4,334
  4,668
  5,021
  5,393
  5,786
  6,201
  6,639
  7,102
  7,591
  8,107
  8,652
Tax expense, $m
  43
  124
  157
  192
  228
  267
  307
  350
  394
  441
  491
  546
  602
  660
  722
  787
  855
  928
  1,004
  1,085
  1,170
  1,260
  1,356
  1,456
  1,562
  1,674
  1,793
  1,918
  2,050
  2,189
  2,336
Net income, $m
  323
  335
  425
  519
  617
  721
  830
  945
  1,066
  1,194
  1,328
  1,477
  1,627
  1,784
  1,951
  2,127
  2,312
  2,508
  2,715
  2,933
  3,164
  3,408
  3,665
  3,937
  4,224
  4,527
  4,847
  5,185
  5,541
  5,918
  6,316

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  32
  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
  17,255
  18,306
  19,452
  20,645
  21,888
  23,183
  24,534
  25,943
  27,414
  28,950
  30,555
  32,231
  33,985
  35,818
  37,737
  39,744
  41,846
  44,047
  46,352
  48,767
  51,298
  53,950
  56,730
  59,645
  62,701
  65,906
  69,268
  72,794
  76,493
  80,373
  84,445
Adjusted assets (=assets-cash), $m
  17,223
  18,306
  19,452
  20,645
  21,888
  23,183
  24,534
  25,943
  27,414
  28,950
  30,555
  32,231
  33,985
  35,818
  37,737
  39,744
  41,846
  44,047
  46,352
  48,767
  51,298
  53,950
  56,730
  59,645
  62,701
  65,906
  69,268
  72,794
  76,493
  80,373
  84,445
Revenue / Adjusted assets
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
Average production assets, $m
  13,433
  14,290
  15,184
  16,116
  17,086
  18,097
  19,152
  20,252
  21,400
  22,599
  23,852
  25,161
  26,529
  27,961
  29,458
  31,025
  32,666
  34,384
  36,184
  38,069
  40,044
  42,115
  44,285
  46,560
  48,946
  51,448
  54,072
  56,825
  59,712
  62,742
  65,920
Working capital, $m
  -303
  583
  620
  658
  697
  739
  782
  826
  873
  922
  973
  1,027
  1,083
  1,141
  1,202
  1,266
  1,333
  1,403
  1,477
  1,554
  1,634
  1,719
  1,807
  1,900
  1,997
  2,100
  2,207
  2,319
  2,437
  2,560
  2,690
Total debt, $m
  4,591
  5,127
  5,728
  6,353
  7,004
  7,683
  8,391
  9,129
  9,900
  10,705
  11,546
  12,424
  13,343
  14,304
  15,309
  16,361
  17,462
  18,616
  19,824
  21,089
  22,415
  23,805
  25,262
  26,789
  28,390
  30,070
  31,831
  33,679
  35,617
  37,651
  39,784
Total liabilities, $m
  9,056
  9,592
  10,193
  10,818
  11,469
  12,148
  12,856
  13,594
  14,365
  15,170
  16,011
  16,889
  17,808
  18,769
  19,774
  20,826
  21,927
  23,081
  24,289
  25,554
  26,880
  28,270
  29,727
  31,254
  32,855
  34,535
  36,296
  38,144
  40,082
  42,116
  44,249
Total equity, $m
  8,199
  8,714
  9,259
  9,827
  10,419
  11,035
  11,678
  12,349
  13,049
  13,780
  14,544
  15,342
  16,177
  17,049
  17,963
  18,918
  19,919
  20,966
  22,064
  23,213
  24,418
  25,680
  27,004
  28,391
  29,846
  31,371
  32,971
  34,650
  36,411
  38,258
  40,196
Total liabilities and equity, $m
  17,255
  18,306
  19,452
  20,645
  21,888
  23,183
  24,534
  25,943
  27,414
  28,950
  30,555
  32,231
  33,985
  35,818
  37,737
  39,744
  41,846
  44,047
  46,353
  48,767
  51,298
  53,950
  56,731
  59,645
  62,701
  65,906
  69,267
  72,794
  76,493
  80,374
  84,445
Debt-to-equity ratio
  0.560
  0.590
  0.620
  0.650
  0.670
  0.700
  0.720
  0.740
  0.760
  0.780
  0.790
  0.810
  0.820
  0.840
  0.850
  0.860
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.940
  0.950
  0.960
  0.970
  0.970
  0.980
  0.980
  0.990
Adjusted equity ratio
  0.474
  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

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  323
  335
  425
  519
  617
  721
  830
  945
  1,066
  1,194
  1,328
  1,477
  1,627
  1,784
  1,951
  2,127
  2,312
  2,508
  2,715
  2,933
  3,164
  3,408
  3,665
  3,937
  4,224
  4,527
  4,847
  5,185
  5,541
  5,918
  6,316
Depreciation, amort., depletion, $m
  695
  743
  788
  836
  886
  938
  992
  1,048
  1,107
  1,169
  1,233
  1,290
  1,360
  1,434
  1,511
  1,591
  1,675
  1,763
  1,856
  1,952
  2,054
  2,160
  2,271
  2,388
  2,510
  2,638
  2,773
  2,914
  3,062
  3,218
  3,381
Funds from operations, $m
  1,320
  1,078
  1,213
  1,355
  1,503
  1,659
  1,822
  1,993
  2,173
  2,362
  2,561
  2,767
  2,987
  3,218
  3,461
  3,718
  3,987
  4,271
  4,571
  4,886
  5,218
  5,568
  5,936
  6,325
  6,734
  7,165
  7,620
  8,099
  8,604
  9,136
  9,696
Change in working capital, $m
  60
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  84
  89
  93
  97
  102
  107
  112
  118
  124
  130
Cash from operations, $m
  1,260
  1,043
  1,177
  1,317
  1,464
  1,617
  1,779
  1,948
  2,126
  2,313
  2,510
  2,714
  2,931
  3,160
  3,400
  3,654
  3,920
  4,201
  4,497
  4,809
  5,137
  5,483
  5,848
  6,232
  6,636
  7,063
  7,513
  7,986
  8,486
  9,012
  9,566
Maintenance CAPEX, $m
  0
  -689
  -733
  -779
  -826
  -876
  -928
  -982
  -1,039
  -1,097
  -1,159
  -1,223
  -1,290
  -1,360
  -1,434
  -1,511
  -1,591
  -1,675
  -1,763
  -1,856
  -1,952
  -2,054
  -2,160
  -2,271
  -2,388
  -2,510
  -2,638
  -2,773
  -2,914
  -3,062
  -3,218
New CAPEX, $m
  -893
  -857
  -895
  -931
  -970
  -1,011
  -1,054
  -1,100
  -1,148
  -1,199
  -1,253
  -1,309
  -1,369
  -1,431
  -1,498
  -1,567
  -1,641
  -1,718
  -1,799
  -1,885
  -1,975
  -2,070
  -2,170
  -2,275
  -2,386
  -2,502
  -2,624
  -2,753
  -2,887
  -3,029
  -3,178
Cash from investing activities, $m
  -895
  -1,546
  -1,628
  -1,710
  -1,796
  -1,887
  -1,982
  -2,082
  -2,187
  -2,296
  -2,412
  -2,532
  -2,659
  -2,791
  -2,932
  -3,078
  -3,232
  -3,393
  -3,562
  -3,741
  -3,927
  -4,124
  -4,330
  -4,546
  -4,774
  -5,012
  -5,262
  -5,526
  -5,801
  -6,091
  -6,396
Free cash flow, $m
  365
  -504
  -451
  -393
  -333
  -270
  -204
  -134
  -60
  17
  98
  182
  272
  368
  469
  576
  689
  808
  934
  1,068
  1,209
  1,359
  1,518
  1,685
  1,863
  2,051
  2,250
  2,461
  2,684
  2,920
  3,170
Issuance/(repayment) of debt, $m
  360
  568
  600
  625
  651
  679
  708
  738
  771
  805
  841
  879
  919
  961
  1,005
  1,052
  1,101
  1,153
  1,208
  1,265
  1,326
  1,390
  1,457
  1,527
  1,601
  1,679
  1,761
  1,848
  1,938
  2,033
  2,134
Issuance/(repurchase) of shares, $m
  25
  179
  121
  49
  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  
  385
  747
  721
  674
  651
  679
  708
  738
  771
  805
  841
  879
  919
  961
  1,005
  1,052
  1,101
  1,153
  1,208
  1,265
  1,326
  1,390
  1,457
  1,527
  1,601
  1,679
  1,761
  1,848
  1,938
  2,033
  2,134
Total cash flow (excl. dividends), $m
  750
  244
  270
  281
  318
  409
  504
  605
  710
  822
  939
  1,060
  1,191
  1,329
  1,474
  1,628
  1,790
  1,961
  2,142
  2,333
  2,535
  2,749
  2,974
  3,213
  3,464
  3,731
  4,012
  4,309
  4,622
  4,954
  5,304
Retained Cash Flow (-), $m
  183
  -515
  -545
  -568
  -592
  -617
  -643
  -671
  -700
  -731
  -764
  -798
  -835
  -873
  -913
  -956
  -1,000
  -1,048
  -1,097
  -1,150
  -1,205
  -1,262
  -1,323
  -1,387
  -1,455
  -1,526
  -1,600
  -1,678
  -1,761
  -1,847
  -1,938
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
 
  -271
  -275
  -287
  -274
  -208
  -139
  -66
  10
  91
  175
  262
  356
  456
  561
  672
  790
  914
  1,045
  1,184
  1,331
  1,486
  1,651
  1,825
  2,010
  2,205
  2,412
  2,630
  2,862
  3,107
  3,366
Discount rate, %
 
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
 
  -254
  -241
  -233
  -205
  -142
  -86
  -37
  5
  40
  67
  87
  101
  109
  111
  109
  104
  96
  86
  75
  64
  53
  42
  33
  25
  19
  14
  10
  7
  4
  3
Current shareholders' claim on cash, %
  100
  98.9
  98.2
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0

Potash Corporation of Saskatchewan Inc. (PCS) is a fertilizer producer producing a range of primary crop nutrients, such as potash, nitrogen and phosphate. The Company operates through three segments: potash, nitrogen and phosphate. As of December 31, 2016, it owned and operated five potash operations in Saskatchewan and owned one in New Brunswick. Its nitrogen operations involve the production of nitrogen fertilizers and nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate and nitric acid. It has nitrogen facilities in Georgia, Louisiana, Ohio and Trinidad. Its phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers, phosphate feed and industrial acid, which is used in food products and industrial processes. It has phosphate mines and mineral processing plant complexes in Florida and North Carolina. As of December 31, 2016, the Company had four phosphate feed plants in the United States.

FINANCIAL RATIOS  of  Potash of Saskatchewan (POT)

Valuation Ratios
P/E Ratio 50
Price to Sales 3.6
Price to Book 2
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow 44
Growth Rates
Sales Growth Rate -29%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26.6%
Cap. Spend. - 3 Yr. Gr. Rate -11.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 45.2%
Total Debt to Equity 56%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 6.7%
Return On Total Capital 2.5%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 3.9%
Return On Equity - 3 Yr. Avg. 11.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 18.6%
Gross Margin - 3 Yr. Avg. 30.7%
EBITDA Margin 28.1%
EBITDA Margin - 3 Yr. Avg. 37.4%
Operating Margin 13.1%
Oper. Margin - 3 Yr. Avg. 25.5%
Pre-Tax Margin 8.2%
Pre-Tax Margin - 3 Yr. Avg. 22%
Net Profit Margin 7.2%
Net Profit Margin - 3 Yr. Avg. 16.4%
Effective Tax Rate 11.7%
Eff/ Tax Rate - 3 Yr. Avg. 22.3%
Payout Ratio 250.5%

POT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the POT stock intrinsic value calculation we used $4456 million for the last fiscal year's total revenue generated by Potash of Saskatchewan. The default revenue input number comes from 2016 income statement of Potash of Saskatchewan. 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 POT stock valuation model: a) initial revenue growth rate of 6.4% 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 6.5%, whose default value for POT is calculated based on our internal credit rating of Potash of Saskatchewan, 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 Potash of Saskatchewan.
    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 POT stock the variable cost ratio is equal to 27%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2738 million in the base year in the intrinsic value calculation for POT 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 4.3% for Potash of Saskatchewan.

Corporate tax rate of 27% is the nominal tax rate for Potash of Saskatchewan. 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 POT 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 POT are equal to 301.4%.

Life of production assets of 19.5 years is the average useful life of capital assets used in Potash of Saskatchewan 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 POT is equal to 12.3%. 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 - $8199 million for Potash of Saskatchewan - 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 843.75 million for Potash of Saskatchewan 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 Potash of Saskatchewan at the current share price and the inputted number of shares is $16.2 billion.

RELATED COMPANIES Price Int.Val. Rating
MOS Mosaic 21.16 8.97  str.sell
AGU Agrium 107.73 52.79  sell
IPI Intrepid Potas 3.88 0.69  str.sell
SQM Sociedad Quimi 60.60 16.66  str.sell
IPHS Innophos Holdi 49.17 20.34  str.sell

COMPANY NEWS

▶ PotashCorps Gross Margins Are Expected to Expand in 3Q17   [Oct-19-17 04:36PM  Market Realist]
▶ What to Expect from PotashCorps 3Q17 Earnings   [01:11PM  Market Realist]
▶ Nitrogen Supply and Demand Impacts Prices   [Oct-13-17 04:06PM  Market Realist]
▶ Nitrogen Input: How Natural Gas Prices Moved Last Week   [Oct-09-17 04:37PM  Market Realist]
▶ IBD Rating Upgrades: Potash Shows Improved Price Strength   [Oct-05-17 03:00AM  Investor's Business Daily]
▶ Natural Gas Prices Rose for the Week Ending September 29   [Oct-02-17 10:41AM  Market Realist]
▶ Potash Stock or Agrium Stock? 1 Analyst Says Both   [Sep-28-17 10:53AM  Motley Fool]
▶ Natural Gas Prices Rose for the Week Ending September 22   [Sep-25-17 10:40AM  Market Realist]
▶ What Analysts Recommend for PotashCorp in September 2017   [Sep-19-17 02:06PM  Market Realist]
▶ Potash Getting Closer To Key Technical Benchmark   [03:00AM  Investor's Business Daily]
▶ The Hot Stock: CF Industries Jumps 6.7%   [Sep-18-17 04:27PM  Barrons.com]
▶ Monsanto: A Top 10 Agricultural Chemicals Stock   [Sep-15-17 05:06PM  Market Realist]
▶ Analyzing Regulatory Approvals for PotashCorp and Agrium   [Sep-08-17 09:08AM  Market Realist]
▶ An Update on the PotashCorp and Agrium Merger   [07:38AM  Market Realist]
▶ Inside the Outlook for Potash Prices Today   [Sep-04-17 10:36AM  Market Realist]
▶ Natural Gas Prices Kept Rising in Week Ended August 25   [Aug-28-17 05:35PM  Market Realist]
▶ Nitrogen Input: Analyzing Natural Gas Prices Last Week   [Aug-23-17 11:53AM  Market Realist]
▶ Analysts Ratings for PotashCorp after 2Q17 Earnings   [Aug-21-17 01:06PM  Market Realist]
▶ Behind Deeres Valuations ahead of Its Fiscal 3Q17 Results   [Aug-16-17 09:07AM  Market Realist]
▶ Why Deeres Analysts Expect Higher Revenues in Fiscal 3Q17   [Aug-15-17 03:36PM  Market Realist]
▶ IPIs Potash Segments Price Realization Rose 22% in 2Q17   [Aug-08-17 04:05PM  Market Realist]
▶ Why PotashCorp Is Concerned about Phosphate Prices   [Aug-02-17 09:07AM  Market Realist]
▶ How Did Natural Gas Prices Trend Last Week?   [Aug-01-17 05:35PM  Market Realist]
▶ PotashCorp Potash Prices Rose 13% in 2Q17   [07:39AM  Market Realist]
▶ Potash Corp. misses 2Q profit forecasts   [Jul-27-17 03:35PM  Associated Press]
▶ Why Mosaics Gross Margins Could Expand in 2Q17   [Jul-21-17 09:14AM  Market Realist]
▶ PotashCorps Operating Costs Are Expected to Rise   [Jul-20-17 07:39AM  Market Realist]
▶ These Stocks Have Changed Direction   [02:00PM  TheStreet.com]
▶ Cotton Continues to Move Lower This Week   [Jul-13-17 10:15AM  Market Realist]
▶ Why Intrepid Potash Stock Jumped 10% on Monday   [Jul-10-17 04:51PM  Motley Fool]
▶ Fertilizer Input: Natural Gas Prices for Week Ended June 30   [Jul-03-17 02:05PM  Market Realist]
▶ Analyzing Natural Gas Price Movements Last Week   [Jun-26-17 12:35PM  Market Realist]
Financial statements of POT
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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