Intrinsic value of Republic Services - RSG

Previous Close

$65.14

  Intrinsic Value

$63.76

stock screener

  Rating & Target

hold

-2%

Previous close

$65.14

 
Intrinsic value

$63.76

 
Up/down potential

-2%

 
Rating

hold

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 21.9

 

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
  7.50
  7.25
  7.02
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.78
  5.71
  5.64
  5.57
  5.51
  5.46
  5.42
  5.38
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
Revenue, $m
  9,388
  10,092
  10,824
  11,584
  12,374
  13,196
  14,051
  14,940
  15,866
  16,830
  17,834
  18,881
  19,974
  21,113
  22,303
  23,546
  24,844
  26,202
  27,621
  29,106
  30,659
  32,285
  33,988
  35,771
  37,639
  39,596
  41,647
  43,796
  46,050
  48,412
  50,890
Variable operating expenses, $m
 
  8,283
  8,802
  9,342
  9,903
  10,487
  11,094
  11,725
  12,382
  13,067
  13,780
  13,407
  14,183
  14,992
  15,837
  16,720
  17,642
  18,606
  19,613
  20,668
  21,771
  22,926
  24,135
  25,401
  26,727
  28,117
  29,573
  31,099
  32,700
  34,377
  36,137
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
  8,283
  8,802
  9,342
  9,903
  10,487
  11,094
  11,725
  12,382
  13,067
  13,780
  13,407
  14,183
  14,992
  15,837
  16,720
  17,642
  18,606
  19,613
  20,668
  21,771
  22,926
  24,135
  25,401
  26,727
  28,117
  29,573
  31,099
  32,700
  34,377
  36,137
Operating income, $m
  1,341
  1,809
  2,022
  2,242
  2,471
  2,709
  2,957
  3,215
  3,483
  3,763
  4,054
  5,474
  5,790
  6,121
  6,466
  6,826
  7,203
  7,596
  8,007
  8,438
  8,888
  9,360
  9,853
  10,370
  10,912
  11,479
  12,074
  12,697
  13,350
  14,035
  14,753
EBITDA, $m
  2,411
  3,398
  3,645
  3,901
  4,167
  4,444
  4,732
  5,031
  5,343
  5,667
  6,006
  6,358
  6,726
  7,110
  7,510
  7,929
  8,366
  8,823
  9,301
  9,801
  10,324
  10,872
  11,445
  12,046
  12,675
  13,334
  14,024
  14,748
  15,507
  16,303
  17,137
Interest expense (income), $m
  330
  329
  370
  414
  459
  505
  554
  605
  657
  712
  769
  828
  890
  955
  1,023
  1,093
  1,166
  1,243
  1,324
  1,408
  1,496
  1,587
  1,684
  1,784
  1,890
  2,001
  2,116
  2,238
  2,365
  2,498
  2,638
Earnings before tax, $m
  966
  1,480
  1,651
  1,828
  2,013
  2,204
  2,403
  2,610
  2,826
  3,051
  3,285
  4,645
  4,900
  5,166
  5,443
  5,733
  6,036
  6,353
  6,684
  7,030
  7,393
  7,772
  8,170
  8,586
  9,022
  9,479
  9,957
  10,459
  10,985
  11,537
  12,115
Tax expense, $m
  353
  400
  446
  494
  543
  595
  649
  705
  763
  824
  887
  1,254
  1,323
  1,395
  1,470
  1,548
  1,630
  1,715
  1,805
  1,898
  1,996
  2,099
  2,206
  2,318
  2,436
  2,559
  2,688
  2,824
  2,966
  3,115
  3,271
Net income, $m
  613
  1,081
  1,205
  1,335
  1,469
  1,609
  1,754
  1,906
  2,063
  2,227
  2,398
  3,391
  3,577
  3,771
  3,974
  4,185
  4,406
  4,637
  4,879
  5,132
  5,397
  5,674
  5,964
  6,268
  6,586
  6,919
  7,269
  7,635
  8,019
  8,422
  8,844

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
  22,083
  23,684
  25,348
  27,078
  28,876
  30,746
  32,691
  34,717
  36,826
  39,024
  41,316
  43,706
  46,200
  48,803
  51,522
  54,364
  57,334
  60,440
  63,688
  67,088
  70,646
  74,372
  78,273
  82,360
  86,643
  91,130
  95,834
  100,765
  105,935
  111,357
Adjusted assets (=assets-cash), $m
  20,562
  22,083
  23,684
  25,348
  27,078
  28,876
  30,746
  32,691
  34,717
  36,826
  39,024
  41,316
  43,706
  46,200
  48,803
  51,522
  54,364
  57,334
  60,440
  63,688
  67,088
  70,646
  74,372
  78,273
  82,360
  86,643
  91,130
  95,834
  100,765
  105,935
  111,357
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
  8,366
  8,973
  9,603
  10,258
  10,940
  11,648
  12,385
  13,153
  13,952
  14,785
  15,653
  16,558
  17,503
  18,489
  19,519
  20,596
  21,721
  22,898
  24,129
  25,416
  26,764
  28,176
  29,654
  31,203
  32,825
  34,525
  36,307
  38,175
  40,134
  42,188
Working capital, $m
  -527
  -636
  -682
  -730
  -780
  -831
  -885
  -941
  -1,000
  -1,060
  -1,124
  -1,190
  -1,258
  -1,330
  -1,405
  -1,483
  -1,565
  -1,651
  -1,740
  -1,834
  -1,932
  -2,034
  -2,141
  -2,254
  -2,371
  -2,495
  -2,624
  -2,759
  -2,901
  -3,050
  -3,206
Total debt, $m
  7,659
  8,610
  9,617
  10,664
  11,752
  12,883
  14,059
  15,283
  16,557
  17,884
  19,266
  20,708
  22,211
  23,780
  25,417
  27,128
  28,915
  30,783
  32,736
  34,780
  36,918
  39,156
  41,500
  43,954
  46,525
  49,218
  52,041
  55,000
  58,101
  61,353
  64,763
Total liabilities, $m
  12,938
  13,890
  14,897
  15,944
  17,032
  18,163
  19,339
  20,563
  21,837
  23,164
  24,546
  25,988
  27,491
  29,060
  30,697
  32,408
  34,195
  36,063
  38,016
  40,060
  42,198
  44,436
  46,780
  49,234
  51,805
  54,498
  57,321
  60,280
  63,381
  66,633
  70,043
Total equity, $m
  7,691
  8,193
  8,787
  9,404
  10,046
  10,713
  11,407
  12,129
  12,880
  13,663
  14,478
  15,328
  16,215
  17,140
  18,106
  19,115
  20,169
  21,271
  22,423
  23,628
  24,890
  26,210
  27,592
  29,039
  30,556
  32,144
  33,809
  35,554
  37,384
  39,302
  41,313
Total liabilities and equity, $m
  20,629
  22,083
  23,684
  25,348
  27,078
  28,876
  30,746
  32,692
  34,717
  36,827
  39,024
  41,316
  43,706
  46,200
  48,803
  51,523
  54,364
  57,334
  60,439
  63,688
  67,088
  70,646
  74,372
  78,273
  82,361
  86,642
  91,130
  95,834
  100,765
  105,935
  111,356
Debt-to-equity ratio
  0.996
  1.050
  1.090
  1.130
  1.170
  1.200
  1.230
  1.260
  1.290
  1.310
  1.330
  1.350
  1.370
  1.390
  1.400
  1.420
  1.430
  1.450
  1.460
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.550
  1.550
  1.560
  1.570
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
  1,081
  1,205
  1,335
  1,469
  1,609
  1,754
  1,906
  2,063
  2,227
  2,398
  3,391
  3,577
  3,771
  3,974
  4,185
  4,406
  4,637
  4,879
  5,132
  5,397
  5,674
  5,964
  6,268
  6,586
  6,919
  7,269
  7,635
  8,019
  8,422
  8,844
Depreciation, amort., depletion, $m
  1,070
  1,589
  1,623
  1,659
  1,696
  1,734
  1,774
  1,816
  1,859
  1,905
  1,952
  884
  935
  989
  1,045
  1,103
  1,164
  1,227
  1,294
  1,363
  1,436
  1,512
  1,592
  1,675
  1,763
  1,855
  1,951
  2,051
  2,157
  2,267
  2,383
Funds from operations, $m
  1,643
  2,670
  2,829
  2,994
  3,165
  3,343
  3,529
  3,722
  3,922
  4,132
  4,350
  4,275
  4,513
  4,760
  5,018
  5,288
  5,570
  5,865
  6,173
  6,495
  6,833
  7,186
  7,556
  7,943
  8,349
  8,774
  9,219
  9,686
  10,176
  10,689
  11,228
Change in working capital, $m
  -205
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -86
  -89
  -94
  -98
  -102
  -107
  -112
  -118
  -123
  -129
  -135
  -142
  -149
  -156
Cash from operations, $m
  1,848
  2,714
  2,875
  3,042
  3,215
  3,395
  3,583
  3,778
  3,981
  4,192
  4,413
  4,341
  4,581
  4,832
  5,093
  5,366
  5,652
  5,950
  6,262
  6,589
  6,931
  7,288
  7,663
  8,055
  8,466
  8,897
  9,349
  9,822
  10,318
  10,838
  11,384
Maintenance CAPEX, $m
  0
  -440
  -473
  -507
  -543
  -580
  -618
  -658
  -700
  -743
  -788
  -835
  -884
  -935
  -989
  -1,045
  -1,103
  -1,164
  -1,227
  -1,294
  -1,363
  -1,436
  -1,512
  -1,592
  -1,675
  -1,763
  -1,855
  -1,951
  -2,051
  -2,157
  -2,267
New CAPEX, $m
  -928
  -581
  -607
  -630
  -655
  -681
  -708
  -737
  -767
  -799
  -833
  -868
  -905
  -945
  -986
  -1,030
  -1,076
  -1,125
  -1,177
  -1,231
  -1,288
  -1,348
  -1,411
  -1,478
  -1,548
  -1,622
  -1,700
  -1,782
  -1,868
  -1,959
  -2,054
Cash from investing activities, $m
  -961
  -1,021
  -1,080
  -1,137
  -1,198
  -1,261
  -1,326
  -1,395
  -1,467
  -1,542
  -1,621
  -1,703
  -1,789
  -1,880
  -1,975
  -2,075
  -2,179
  -2,289
  -2,404
  -2,525
  -2,651
  -2,784
  -2,923
  -3,070
  -3,223
  -3,385
  -3,555
  -3,733
  -3,919
  -4,116
  -4,321
Free cash flow, $m
  887
  1,693
  1,796
  1,904
  2,017
  2,134
  2,256
  2,382
  2,514
  2,650
  2,792
  2,638
  2,792
  2,951
  3,118
  3,291
  3,472
  3,661
  3,858
  4,064
  4,279
  4,504
  4,739
  4,985
  5,243
  5,512
  5,794
  6,089
  6,399
  6,723
  7,062
Issuance/(repayment) of debt, $m
  103
  957
  1,007
  1,047
  1,088
  1,131
  1,176
  1,224
  1,274
  1,327
  1,383
  1,441
  1,503
  1,569
  1,638
  1,710
  1,787
  1,868
  1,954
  2,043
  2,138
  2,238
  2,343
  2,454
  2,571
  2,694
  2,823
  2,959
  3,102
  3,252
  3,410
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
  957
  1,007
  1,047
  1,088
  1,131
  1,176
  1,224
  1,274
  1,327
  1,383
  1,441
  1,503
  1,569
  1,638
  1,710
  1,787
  1,868
  1,954
  2,043
  2,138
  2,238
  2,343
  2,454
  2,571
  2,694
  2,823
  2,959
  3,102
  3,252
  3,410
Total cash flow (excl. dividends), $m
  454
  2,650
  2,803
  2,951
  3,105
  3,265
  3,432
  3,606
  3,788
  3,977
  4,174
  4,079
  4,295
  4,520
  4,756
  5,002
  5,260
  5,529
  5,812
  6,108
  6,418
  6,742
  7,083
  7,439
  7,813
  8,205
  8,617
  9,048
  9,500
  9,975
  10,472
Retained Cash Flow (-), $m
  83
  -564
  -594
  -617
  -642
  -667
  -694
  -722
  -751
  -783
  -815
  -850
  -887
  -925
  -966
  -1,009
  -1,054
  -1,102
  -1,152
  -1,205
  -1,261
  -1,320
  -1,382
  -1,448
  -1,516
  -1,589
  -1,665
  -1,745
  -1,829
  -1,918
  -2,011
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
 
  2,148
  2,209
  2,334
  2,463
  2,598
  2,738
  2,884
  3,036
  3,194
  3,359
  3,229
  3,408
  3,595
  3,790
  3,993
  4,206
  4,428
  4,660
  4,903
  5,157
  5,422
  5,701
  5,992
  6,297
  6,617
  6,952
  7,303
  7,671
  8,057
  8,461
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
 
  2,000
  1,902
  1,844
  1,773
  1,689
  1,593
  1,488
  1,375
  1,256
  1,133
  923
  816
  710
  609
  514
  426
  347
  278
  218
  167
  126
  92
  66
  46
  31
  21
  13
  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. is a provider of non-hazardous solid waste collection, transfer, disposal, recycling and energy services. The Company's segments include Group 1, Group 2 and Corporate entities. Its Group 1 and Group 2 segments provide integrated waste management services. Group 1 consists of geographic areas located in the western and portions of the mid-western United States. Group 2 consists of geographic areas located in Texas, the southeastern and portions of the mid-western United States, and the eastern seaboard of the United States. As of December 31, 2016, it operated in 39 states and Puerto Rico through 333 collection operations, 204 transfer stations, 192 active landfills, 64 recycling centers, seven treatment, recovery and disposal facilities, and 10 salt water disposal wells. As of December 31, 2016, it also operated 71 landfill gas and renewable energy projects and had post-closure responsibility for 124 closed landfills.

FINANCIAL RATIOS  of  Republic Services (RSG)

Valuation Ratios
P/E Ratio 36.1
Price to Sales 2.4
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 12
Price to Free Cash Flow 24
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. 3.8%
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. 24.9%
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 7.5% 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 336.813 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 $21.9 billion.

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COMPANY NEWS

▶ Republic Services, Inc. Continued Its Steady Growth   [Nov-03-17 11:00AM  Motley Fool]
▶ Republic Services beats Street 3Q forecasts   [Nov-02-17 04:22PM  Associated Press]
▶ Fighting the Toxic Nightmare Next Door   [Sep-28-17 05:00AM  Bloomberg]
▶ Republic Services Getting Closer To Key Technical Measure   [Sep-08-17 03:00AM  Investor's Business Daily]
▶ 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]
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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