Intrinsic value of Republic Services - RSG

Previous Close

$64.65

  Intrinsic Value

$60.62

stock screener

  Rating & Target

hold

-6%

  Value-price divergence*

-15%

Previous close

$64.65

 
Intrinsic value

$60.62

 
Up/down potential

-6%

 
Rating

hold

 
Value-price divergence*

-15%

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

We calculate the intrinsic value of RSG 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 22.0

 

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, %
  3.00
  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
  9,388
  9,989
  10,614
  11,265
  11,943
  12,650
  13,387
  14,156
  14,959
  15,797
  16,673
  17,588
  18,544
  19,545
  20,592
  21,687
  22,834
  24,035
  25,293
  26,611
  27,991
  29,439
  30,956
  32,546
  34,214
  35,963
  37,797
  39,721
  41,740
  43,857
  46,079
Variable operating expenses, $m
 
  8,209
  8,653
  9,116
  9,597
  10,099
  10,623
  11,169
  11,739
  12,334
  12,955
  12,489
  13,168
  13,879
  14,622
  15,400
  16,214
  17,067
  17,960
  18,896
  19,877
  20,904
  21,981
  23,111
  24,295
  25,537
  26,839
  28,206
  29,639
  31,143
  32,720
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
  8,046
  8,209
  8,653
  9,116
  9,597
  10,099
  10,623
  11,169
  11,739
  12,334
  12,955
  12,489
  13,168
  13,879
  14,622
  15,400
  16,214
  17,067
  17,960
  18,896
  19,877
  20,904
  21,981
  23,111
  24,295
  25,537
  26,839
  28,206
  29,639
  31,143
  32,720
Operating income, $m
  1,341
  1,780
  1,961
  2,150
  2,346
  2,551
  2,765
  2,988
  3,220
  3,463
  3,717
  5,099
  5,376
  5,666
  5,970
  6,287
  6,620
  6,968
  7,333
  7,715
  8,115
  8,534
  8,974
  9,435
  9,919
  10,426
  10,958
  11,515
  12,101
  12,714
  13,359
EBITDA, $m
  2,411
  3,364
  3,574
  3,793
  4,022
  4,260
  4,508
  4,767
  5,037
  5,320
  5,614
  5,923
  6,245
  6,582
  6,934
  7,303
  7,689
  8,094
  8,517
  8,961
  9,426
  9,913
  10,424
  10,960
  11,521
  12,110
  12,728
  13,376
  14,056
  14,769
  15,517
Interest expense (income), $m
  330
  329
  364
  401
  440
  480
  522
  565
  611
  658
  708
  760
  814
  870
  930
  992
  1,056
  1,124
  1,195
  1,270
  1,348
  1,430
  1,515
  1,605
  1,699
  1,798
  1,901
  2,010
  2,124
  2,243
  2,369
Earnings before tax, $m
  966
  1,450
  1,597
  1,748
  1,907
  2,071
  2,243
  2,422
  2,610
  2,805
  3,009
  4,339
  4,562
  4,796
  5,040
  5,296
  5,563
  5,844
  6,137
  6,445
  6,767
  7,105
  7,459
  7,830
  8,220
  8,628
  9,056
  9,506
  9,977
  10,471
  10,990
Tax expense, $m
  353
  392
  431
  472
  515
  559
  606
  654
  705
  757
  813
  1,172
  1,232
  1,295
  1,361
  1,430
  1,502
  1,578
  1,657
  1,740
  1,827
  1,918
  2,014
  2,114
  2,219
  2,330
  2,445
  2,566
  2,694
  2,827
  2,967
Net income, $m
  613
  1,059
  1,166
  1,276
  1,392
  1,512
  1,638
  1,768
  1,905
  2,048
  2,197
  3,168
  3,330
  3,501
  3,679
  3,866
  4,061
  4,266
  4,480
  4,705
  4,940
  5,187
  5,445
  5,716
  6,000
  6,298
  6,611
  6,939
  7,283
  7,644
  8,023

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  68
  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
  20,630
  21,857
  23,226
  24,650
  26,134
  27,681
  29,294
  30,977
  32,733
  34,567
  36,483
  38,485
  40,578
  42,768
  45,058
  47,456
  49,965
  52,593
  55,345
  58,229
  61,251
  64,417
  67,737
  71,217
  74,866
  78,693
  82,707
  86,917
  91,334
  95,967
  100,829
Adjusted assets (=assets-cash), $m
  20,562
  21,857
  23,226
  24,650
  26,134
  27,681
  29,294
  30,977
  32,733
  34,567
  36,483
  38,485
  40,578
  42,768
  45,058
  47,456
  49,965
  52,593
  55,345
  58,229
  61,251
  64,417
  67,737
  71,217
  74,866
  78,693
  82,707
  86,917
  91,334
  95,967
  100,829
Revenue / Adjusted assets
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
  0.457
Average production assets, $m
  7,785
  8,281
  8,799
  9,339
  9,901
  10,487
  11,098
  11,736
  12,401
  13,096
  13,822
  14,580
  15,373
  16,203
  17,070
  17,979
  18,929
  19,925
  20,968
  22,060
  23,205
  24,405
  25,662
  26,981
  28,363
  29,813
  31,334
  32,929
  34,602
  36,358
  38,199
Working capital, $m
  -527
  -629
  -669
  -710
  -752
  -797
  -843
  -892
  -942
  -995
  -1,050
  -1,108
  -1,168
  -1,231
  -1,297
  -1,366
  -1,439
  -1,514
  -1,593
  -1,676
  -1,763
  -1,855
  -1,950
  -2,050
  -2,155
  -2,266
  -2,381
  -2,502
  -2,630
  -2,763
  -2,903
Total debt, $m
  7,659
  8,468
  9,329
  10,225
  11,159
  12,131
  13,146
  14,204
  15,309
  16,463
  17,668
  18,927
  20,244
  21,621
  23,062
  24,570
  26,148
  27,801
  29,532
  31,346
  33,247
  35,238
  37,326
  39,516
  41,811
  44,218
  46,743
  49,391
  52,169
  55,083
  58,141
Total liabilities, $m
  12,938
  13,748
  14,609
  15,505
  16,439
  17,411
  18,426
  19,484
  20,589
  21,743
  22,948
  24,207
  25,524
  26,901
  28,342
  29,850
  31,428
  33,081
  34,812
  36,626
  38,527
  40,518
  42,606
  44,796
  47,091
  49,498
  52,023
  54,671
  57,449
  60,363
  63,421
Total equity, $m
  7,691
  8,109
  8,617
  9,145
  9,696
  10,270
  10,868
  11,492
  12,144
  12,824
  13,535
  14,278
  15,055
  15,867
  16,717
  17,606
  18,537
  19,512
  20,533
  21,603
  22,724
  23,899
  25,130
  26,422
  27,775
  29,195
  30,684
  32,246
  33,885
  35,604
  37,408
Total liabilities and equity, $m
  20,629
  21,857
  23,226
  24,650
  26,135
  27,681
  29,294
  30,976
  32,733
  34,567
  36,483
  38,485
  40,579
  42,768
  45,059
  47,456
  49,965
  52,593
  55,345
  58,229
  61,251
  64,417
  67,736
  71,218
  74,866
  78,693
  82,707
  86,917
  91,334
  95,967
  100,829
Debt-to-equity ratio
  0.996
  1.040
  1.080
  1.120
  1.150
  1.180
  1.210
  1.240
  1.260
  1.280
  1.310
  1.330
  1.340
  1.360
  1.380
  1.400
  1.410
  1.420
  1.440
  1.450
  1.460
  1.470
  1.490
  1.500
  1.510
  1.510
  1.520
  1.530
  1.540
  1.550
  1.550
Adjusted equity ratio
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  613
  1,059
  1,166
  1,276
  1,392
  1,512
  1,638
  1,768
  1,905
  2,048
  2,197
  3,168
  3,330
  3,501
  3,679
  3,866
  4,061
  4,266
  4,480
  4,705
  4,940
  5,187
  5,445
  5,716
  6,000
  6,298
  6,611
  6,939
  7,283
  7,644
  8,023
Depreciation, amort., depletion, $m
  1,070
  1,584
  1,613
  1,644
  1,676
  1,709
  1,743
  1,779
  1,817
  1,856
  1,897
  824
  869
  915
  964
  1,016
  1,069
  1,126
  1,185
  1,246
  1,311
  1,379
  1,450
  1,524
  1,602
  1,684
  1,770
  1,860
  1,955
  2,054
  2,158
Funds from operations, $m
  1,643
  2,643
  2,779
  2,920
  3,067
  3,221
  3,381
  3,548
  3,722
  3,904
  4,094
  3,991
  4,199
  4,416
  4,644
  4,882
  5,131
  5,391
  5,665
  5,951
  6,251
  6,565
  6,895
  7,240
  7,603
  7,983
  8,381
  8,799
  9,238
  9,698
  10,181
Change in working capital, $m
  -205
  -38
  -39
  -41
  -43
  -45
  -46
  -48
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -116
  -121
  -127
  -133
  -140
Cash from operations, $m
  1,848
  2,681
  2,818
  2,961
  3,110
  3,265
  3,427
  3,596
  3,773
  3,957
  4,149
  4,049
  4,259
  4,479
  4,710
  4,951
  5,203
  5,467
  5,744
  6,034
  6,338
  6,657
  6,991
  7,341
  7,708
  8,093
  8,497
  8,921
  9,365
  9,831
  10,321
Maintenance CAPEX, $m
  0
  -440
  -468
  -497
  -528
  -559
  -592
  -627
  -663
  -701
  -740
  -781
  -824
  -869
  -915
  -964
  -1,016
  -1,069
  -1,126
  -1,185
  -1,246
  -1,311
  -1,379
  -1,450
  -1,524
  -1,602
  -1,684
  -1,770
  -1,860
  -1,955
  -2,054
New CAPEX, $m
  -928
  -496
  -518
  -540
  -562
  -586
  -611
  -637
  -665
  -695
  -726
  -759
  -793
  -829
  -868
  -908
  -951
  -996
  -1,043
  -1,092
  -1,145
  -1,200
  -1,258
  -1,318
  -1,383
  -1,450
  -1,521
  -1,595
  -1,673
  -1,755
  -1,842
Cash from investing activities, $m
  -961
  -936
  -986
  -1,037
  -1,090
  -1,145
  -1,203
  -1,264
  -1,328
  -1,396
  -1,466
  -1,540
  -1,617
  -1,698
  -1,783
  -1,872
  -1,967
  -2,065
  -2,169
  -2,277
  -2,391
  -2,511
  -2,637
  -2,768
  -2,907
  -3,052
  -3,205
  -3,365
  -3,533
  -3,710
  -3,896
Free cash flow, $m
  887
  1,745
  1,832
  1,924
  2,020
  2,120
  2,224
  2,332
  2,444
  2,561
  2,683
  2,509
  2,642
  2,781
  2,926
  3,078
  3,236
  3,402
  3,575
  3,757
  3,947
  4,146
  4,354
  4,572
  4,801
  5,041
  5,292
  5,555
  5,831
  6,121
  6,425
Issuance/(repayment) of debt, $m
  103
  815
  861
  896
  933
  973
  1,015
  1,058
  1,105
  1,154
  1,205
  1,259
  1,317
  1,377
  1,441
  1,508
  1,579
  1,653
  1,731
  1,814
  1,901
  1,992
  2,088
  2,189
  2,295
  2,407
  2,525
  2,648
  2,778
  2,915
  3,058
Issuance/(repurchase) of shares, $m
  -354
  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  
  -432
  815
  861
  896
  933
  973
  1,015
  1,058
  1,105
  1,154
  1,205
  1,259
  1,317
  1,377
  1,441
  1,508
  1,579
  1,653
  1,731
  1,814
  1,901
  1,992
  2,088
  2,189
  2,295
  2,407
  2,525
  2,648
  2,778
  2,915
  3,058
Total cash flow (excl. dividends), $m
  454
  2,561
  2,693
  2,821
  2,954
  3,093
  3,238
  3,390
  3,549
  3,715
  3,889
  3,769
  3,959
  4,158
  4,367
  4,586
  4,815
  5,055
  5,307
  5,571
  5,847
  6,138
  6,442
  6,761
  7,096
  7,448
  7,817
  8,204
  8,610
  9,036
  9,483
Retained Cash Flow (-), $m
  83
  -480
  -508
  -529
  -551
  -574
  -598
  -624
  -652
  -680
  -711
  -743
  -777
  -812
  -850
  -889
  -931
  -975
  -1,021
  -1,070
  -1,121
  -1,175
  -1,232
  -1,291
  -1,354
  -1,420
  -1,489
  -1,562
  -1,639
  -1,719
  -1,804
Prev. year cash balance distribution, $m
 
  62
  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
 
  2,142
  2,185
  2,292
  2,403
  2,519
  2,640
  2,766
  2,897
  3,034
  3,178
  3,026
  3,183
  3,346
  3,517
  3,696
  3,884
  4,080
  4,286
  4,501
  4,726
  4,963
  5,211
  5,470
  5,743
  6,028
  6,327
  6,642
  6,971
  7,317
  7,679
Discount rate, %
 
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
 
  1,995
  1,881
  1,811
  1,730
  1,638
  1,536
  1,427
  1,312
  1,193
  1,072
  865
  762
  661
  565
  475
  393
  320
  255
  200
  153
  115
  84
  60
  42
  29
  19
  12
  8
  5
  3
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

Republic Services, Inc., together with its subsidiaries, provides non-hazardous solid waste collection, transfer, recycling, disposal, and energy services for commercial, industrial, municipal, and residential customers in the United States and Puerto Rico. The company’s collection services include curbside collection of waste; supply of waste containers; and renting of compactors. It is also involved in the processing and sale of old corrugated cardboard, old newspapers, aluminum, glass, and other materials; and provision of landfill services. As of December 31, 2016, the company operated through 333 collection operations, 204 transfer stations, 192 active landfills, 64 recycling centers, and 10 salt water disposal wells, as well as 7 treatment, recovery, and disposal facilities in 39 states and Puerto Rico. It also operates 71 landfill gas and renewable energy projects. The company was founded in 1996 and is headquartered in Phoenix, Arizona.

FINANCIAL RATIOS  of  Republic Services (RSG)

Valuation Ratios
P/E Ratio 35.8
Price to Sales 2.3
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 11.9
Price to Free Cash Flow 23.9
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.9%
Cap. Spend. - 3 Yr. Gr. Rate 1%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 99.5%
Total Debt to Equity 99.6%
Interest Coverage 4
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 7.9%
Return On Equity - 3 Yr. Avg. 8.2%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 38.6%
Gross Margin - 3 Yr. Avg. 38%
EBITDA Margin 25.2%
EBITDA Margin - 3 Yr. Avg. 26.1%
Operating Margin 14.3%
Oper. Margin - 3 Yr. Avg. 15.1%
Pre-Tax Margin 10.3%
Pre-Tax Margin - 3 Yr. Avg. 11.2%
Net Profit Margin 6.5%
Net Profit Margin - 3 Yr. Avg. 7%
Effective Tax Rate 36.5%
Eff/ Tax Rate - 3 Yr. Avg. 37.3%
Payout Ratio 68.4%

RSG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RSG stock intrinsic value calculation we used $9388 million for the last fiscal year's total revenue generated by Republic Services. The default revenue input number comes from 2016 income statement of Republic Services. 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 RSG 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 7.4%, whose default value for RSG is calculated based on our internal credit rating of Republic Services, 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 Republic Services.
    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 RSG stock the variable cost ratio is equal to 82.9%.

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 RSG 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 Republic Services.

Corporate tax rate of 27% is the nominal tax rate for Republic Services. 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 RSG 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 RSG are equal to 82.9%.

Life of production assets of 17.7 years is the average useful life of capital assets used in Republic Services 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 RSG is equal to -6.3%. 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 - $7691 million for Republic Services - 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 340.193 million for Republic Services 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 Republic Services at the current share price and the inputted number of shares is $22.0 billion.

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COMPANY NEWS

▶ Hershey Co (HSY) Leads 8 Dividend Increases This Week   [Jul-28-17 02:37PM  InvestorPlace]
▶ Republic Services beats Street 2Q forecasts   [Jul-27-17 05:28PM  Associated Press]
▶ Don Slager Named to 2017 Highest Rated CEOs List   [Jun-22-17 01:24PM  PR Newswire]
▶ EPA: No radioactive contamination in North County homes sampled by agency   [May-19-17 03:15PM  American City Business Journals]
▶ Republic Services, Inc. Cleaned Up in the First Quarter   [Apr-28-17 09:30AM  Motley Fool]
▶ Republic Services tops Street 1Q forecasts   [Apr-27-17 04:58PM  Associated Press]
▶ Republic Services Celebrates Earth Day with #1MorePledge   [Apr-11-17 10:00AM  PR Newswire]
▶ The 4 Best Dividend Stocks in Waste Management   [Mar-29-17 10:13AM  Motley Fool]
▶ Here's Why Clean Energy Fuels Corp. Stock is Up 17% Today   [Mar-01-17 02:47PM  at Motley Fool]
▶ 3 Key Takeaways From Waste Management Inc.'s 2016 Earnings   [Feb-28-17 06:37AM  at Motley Fool]
▶ Republic Services, Inc. Went Over the Top in 2016   [Feb-17-17 09:30AM  at Motley Fool]
▶ 5 Solid Dividend Stocks Poised to Grow in 2017   [Jan-10-17 08:32AM  at Motley Fool]
Stock chart of RSG Financial statements of RSG
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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