Intrinsic value of Schnitzer Steel Industries - SCHN

Previous Close

$29.10

  Intrinsic Value

$3.03

stock screener

  Rating & Target

str. sell

-90%

  Value-price divergence*

-36%

Previous close

$29.10

 
Intrinsic value

$3.03

 
Up/down potential

-90%

 
Rating

str. sell

 
Value-price divergence*

-36%

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

We calculate the intrinsic value of SCHN 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 0.8

 

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, %
  -29.35
  35.50
  32.45
  29.71
  27.23
  25.01
  23.01
  21.21
  19.59
  18.13
  16.82
  15.63
  14.57
  13.61
  12.75
  11.98
  11.28
  10.65
  10.09
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
Revenue, $m
  1,353
  1,833
  2,428
  3,150
  4,007
  5,010
  6,162
  7,469
  8,932
  10,552
  12,326
  14,253
  16,330
  18,553
  20,919
  23,425
  26,067
  28,844
  31,753
  34,794
  37,967
  41,274
  44,715
  48,294
  52,014
  55,880
  59,897
  64,073
  68,413
  72,925
  77,619
Variable operating expenses, $m
 
  2,014
  2,663
  3,449
  4,383
  5,475
  6,731
  8,156
  9,750
  11,514
  13,448
  15,531
  17,794
  20,217
  22,795
  25,525
  28,404
  31,430
  34,600
  37,914
  41,372
  44,974
  48,724
  52,623
  56,677
  60,890
  65,268
  69,817
  74,546
  79,464
  84,578
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
  1,360
  2,014
  2,663
  3,449
  4,383
  5,475
  6,731
  8,156
  9,750
  11,514
  13,448
  15,531
  17,794
  20,217
  22,795
  25,525
  28,404
  31,430
  34,600
  37,914
  41,372
  44,974
  48,724
  52,623
  56,677
  60,890
  65,268
  69,817
  74,546
  79,464
  84,578
Operating income, $m
  -8
  -181
  -234
  -299
  -376
  -466
  -569
  -686
  -818
  -963
  -1,122
  -1,278
  -1,464
  -1,663
  -1,876
  -2,100
  -2,337
  -2,586
  -2,847
  -3,120
  -3,404
  -3,700
  -4,009
  -4,330
  -4,663
  -5,010
  -5,370
  -5,745
  -6,134
  -6,538
  -6,959
EBITDA, $m
  47
  -112
  -148
  -192
  -244
  -305
  -376
  -455
  -545
  -643
  -751
  -869
  -996
  -1,131
  -1,275
  -1,428
  -1,589
  -1,758
  -1,936
  -2,121
  -2,315
  -2,516
  -2,726
  -2,944
  -3,171
  -3,407
  -3,652
  -3,906
  -4,171
  -4,446
  -4,732
Interest expense (income), $m
  6
  6
  11
  17
  24
  33
  43
  54
  67
  82
  98
  116
  135
  156
  178
  202
  227
  253
  281
  310
  340
  371
  404
  439
  474
  511
  550
  590
  632
  675
  720
Earnings before tax, $m
  -16
  -188
  -246
  -316
  -400
  -499
  -612
  -741
  -885
  -1,045
  -1,220
  -1,394
  -1,599
  -1,819
  -2,053
  -2,302
  -2,564
  -2,839
  -3,127
  -3,429
  -3,744
  -4,072
  -4,413
  -4,769
  -5,138
  -5,522
  -5,920
  -6,335
  -6,765
  -7,213
  -7,679
Tax expense, $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
  0
Net income, $m
  -19
  -188
  -246
  -316
  -400
  -499
  -612
  -741
  -885
  -1,045
  -1,220
  -1,394
  -1,599
  -1,819
  -2,053
  -2,302
  -2,564
  -2,839
  -3,127
  -3,429
  -3,744
  -4,072
  -4,413
  -4,769
  -5,138
  -5,522
  -5,920
  -6,335
  -6,765
  -7,213
  -7,679

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  27
  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
  891
  1,171
  1,551
  2,011
  2,559
  3,199
  3,935
  4,770
  5,704
  6,738
  7,871
  9,102
  10,428
  11,848
  13,358
  14,958
  16,646
  18,419
  20,276
  22,219
  24,245
  26,356
  28,554
  30,839
  33,214
  35,683
  38,249
  40,915
  43,686
  46,568
  49,565
Adjusted assets (=assets-cash), $m
  864
  1,171
  1,551
  2,011
  2,559
  3,199
  3,935
  4,770
  5,704
  6,738
  7,871
  9,102
  10,428
  11,848
  13,358
  14,958
  16,646
  18,419
  20,276
  22,219
  24,245
  26,356
  28,554
  30,839
  33,214
  35,683
  38,249
  40,915
  43,686
  46,568
  49,565
Revenue / Adjusted assets
  1.566
  1.565
  1.565
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
  1.566
Average production assets, $m
  416
  563
  745
  967
  1,230
  1,538
  1,892
  2,293
  2,742
  3,239
  3,784
  4,376
  5,013
  5,696
  6,422
  7,191
  8,003
  8,855
  9,748
  10,682
  11,656
  12,671
  13,727
  14,826
  15,968
  17,155
  18,389
  19,670
  21,003
  22,388
  23,829
Working capital, $m
  166
  200
  265
  343
  437
  546
  672
  814
  974
  1,150
  1,344
  1,554
  1,780
  2,022
  2,280
  2,553
  2,841
  3,144
  3,461
  3,793
  4,138
  4,499
  4,874
  5,264
  5,670
  6,091
  6,529
  6,984
  7,457
  7,949
  8,460
Total debt, $m
  193
  322
  492
  697
  941
  1,227
  1,555
  1,927
  2,344
  2,805
  3,310
  3,859
  4,451
  5,084
  5,758
  6,471
  7,224
  8,015
  8,843
  9,709
  10,613
  11,555
  12,535
  13,554
  14,614
  15,715
  16,859
  18,048
  19,284
  20,569
  21,906
Total liabilities, $m
  394
  522
  692
  897
  1,141
  1,427
  1,755
  2,127
  2,544
  3,005
  3,510
  4,059
  4,651
  5,284
  5,958
  6,671
  7,424
  8,215
  9,043
  9,909
  10,813
  11,755
  12,735
  13,754
  14,814
  15,915
  17,059
  18,248
  19,484
  20,769
  22,106
Total equity, $m
  498
  649
  859
  1,114
  1,418
  1,772
  2,180
  2,642
  3,160
  3,733
  4,361
  5,042
  5,777
  6,564
  7,401
  8,287
  9,222
  10,204
  11,233
  12,309
  13,432
  14,601
  15,819
  17,085
  18,401
  19,768
  21,190
  22,667
  24,202
  25,799
  27,459
Total liabilities and equity, $m
  892
  1,171
  1,551
  2,011
  2,559
  3,199
  3,935
  4,769
  5,704
  6,738
  7,871
  9,101
  10,428
  11,848
  13,359
  14,958
  16,646
  18,419
  20,276
  22,218
  24,245
  26,356
  28,554
  30,839
  33,215
  35,683
  38,249
  40,915
  43,686
  46,568
  49,565
Debt-to-equity ratio
  0.388
  0.500
  0.570
  0.630
  0.660
  0.690
  0.710
  0.730
  0.740
  0.750
  0.760
  0.770
  0.770
  0.770
  0.780
  0.780
  0.780
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
Adjusted equity ratio
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -19
  -188
  -246
  -316
  -400
  -499
  -612
  -741
  -885
  -1,045
  -1,220
  -1,394
  -1,599
  -1,819
  -2,053
  -2,302
  -2,564
  -2,839
  -3,127
  -3,429
  -3,744
  -4,072
  -4,413
  -4,769
  -5,138
  -5,522
  -5,920
  -6,335
  -6,765
  -7,213
  -7,679
Depreciation, amort., depletion, $m
  55
  69
  86
  107
  132
  160
  194
  231
  273
  319
  370
  409
  469
  532
  600
  672
  748
  828
  911
  998
  1,089
  1,184
  1,283
  1,386
  1,492
  1,603
  1,719
  1,838
  1,963
  2,092
  2,227
Funds from operations, $m
  119
  -118
  -159
  -209
  -269
  -338
  -419
  -510
  -612
  -725
  -850
  -985
  -1,131
  -1,287
  -1,453
  -1,630
  -1,816
  -2,011
  -2,216
  -2,431
  -2,655
  -2,888
  -3,130
  -3,383
  -3,645
  -3,918
  -4,202
  -4,496
  -4,802
  -5,121
  -5,452
Change in working capital, $m
  20
  52
  65
  79
  93
  109
  126
  142
  159
  177
  193
  210
  226
  242
  258
  273
  288
  303
  317
  331
  346
  360
  375
  390
  405
  421
  438
  455
  473
  492
  512
Cash from operations, $m
  99
  -171
  -224
  -288
  -362
  -448
  -544
  -652
  -771
  -902
  -1,043
  -1,195
  -1,357
  -1,529
  -1,711
  -1,903
  -2,104
  -2,314
  -2,533
  -2,762
  -3,000
  -3,248
  -3,506
  -3,773
  -4,051
  -4,340
  -4,640
  -4,951
  -5,276
  -5,613
  -5,964
Maintenance CAPEX, $m
  0
  -39
  -53
  -70
  -90
  -115
  -144
  -177
  -214
  -256
  -303
  -354
  -409
  -469
  -532
  -600
  -672
  -748
  -828
  -911
  -998
  -1,089
  -1,184
  -1,283
  -1,386
  -1,492
  -1,603
  -1,719
  -1,838
  -1,963
  -2,092
New CAPEX, $m
  -35
  -147
  -183
  -221
  -263
  -308
  -354
  -401
  -449
  -497
  -545
  -592
  -638
  -683
  -726
  -769
  -811
  -852
  -893
  -934
  -974
  -1,015
  -1,056
  -1,099
  -1,142
  -1,187
  -1,233
  -1,282
  -1,332
  -1,385
  -1,441
Cash from investing activities, $m
  -30
  -186
  -236
  -291
  -353
  -423
  -498
  -578
  -663
  -753
  -848
  -946
  -1,047
  -1,152
  -1,258
  -1,369
  -1,483
  -1,600
  -1,721
  -1,845
  -1,972
  -2,104
  -2,240
  -2,382
  -2,528
  -2,679
  -2,836
  -3,001
  -3,170
  -3,348
  -3,533
Free cash flow, $m
  69
  -356
  -459
  -579
  -716
  -870
  -1,042
  -1,230
  -1,435
  -1,655
  -1,891
  -2,140
  -2,404
  -2,680
  -2,970
  -3,272
  -3,587
  -3,914
  -4,254
  -4,607
  -4,973
  -5,352
  -5,746
  -6,155
  -6,579
  -7,019
  -7,476
  -7,952
  -8,446
  -8,961
  -9,497
Issuance/(repayment) of debt, $m
  -36
  137
  169
  205
  244
  285
  328
  372
  417
  461
  505
  549
  591
  633
  674
  714
  753
  791
  829
  866
  904
  942
  980
  1,019
  1,060
  1,101
  1,144
  1,189
  1,236
  1,285
  1,337
Issuance/(repurchase) of shares, $m
  -3
  357
  456
  571
  704
  853
  1,020
  1,203
  1,403
  1,618
  1,848
  2,076
  2,334
  2,606
  2,891
  3,188
  3,498
  3,821
  4,157
  4,505
  4,866
  5,242
  5,631
  6,035
  6,454
  6,889
  7,342
  7,812
  8,301
  8,810
  9,340
Cash from financing (excl. dividends), $m  
  -45
  494
  625
  776
  948
  1,138
  1,348
  1,575
  1,820
  2,079
  2,353
  2,625
  2,925
  3,239
  3,565
  3,902
  4,251
  4,612
  4,986
  5,371
  5,770
  6,184
  6,611
  7,054
  7,514
  7,990
  8,486
  9,001
  9,537
  10,095
  10,677
Total cash flow (excl. dividends), $m
  24
  138
  166
  198
  232
  269
  306
  345
  384
  424
  463
  484
  522
  559
  594
  630
  664
  698
  731
  764
  797
  831
  865
  899
  935
  971
  1,009
  1,049
  1,090
  1,134
  1,179
Retained Cash Flow (-), $m
  37
  -357
  -456
  -571
  -704
  -853
  -1,020
  -1,203
  -1,403
  -1,618
  -1,848
  -2,076
  -2,334
  -2,606
  -2,891
  -3,188
  -3,498
  -3,821
  -4,157
  -4,505
  -4,866
  -5,242
  -5,631
  -6,035
  -6,454
  -6,889
  -7,342
  -7,812
  -8,301
  -8,810
  -9,340
Prev. year cash balance distribution, $m
 
  19
  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
 
  -200
  -290
  -374
  -472
  -585
  -714
  -858
  -1,018
  -1,194
  -1,385
  -1,591
  -1,812
  -2,047
  -2,296
  -2,559
  -2,834
  -3,123
  -3,426
  -3,741
  -4,069
  -4,411
  -4,766
  -5,135
  -5,519
  -5,918
  -6,332
  -6,763
  -7,210
  -7,676
  -8,160
Discount rate, %
 
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
 
  -191
  -263
  -320
  -380
  -440
  -499
  -555
  -604
  -644
  -675
  -695
  -703
  -699
  -683
  -655
  -619
  -574
  -523
  -469
  -412
  -356
  -301
  -250
  -203
  -162
  -126
  -96
  -71
  -52
  -37
Current shareholders' claim on cash, %
  100
  68.2
  47.3
  33.4
  23.9
  17.4
  12.8
  9.5
  7.1
  5.4
  4.1
  3.2
  2.5
  1.9
  1.5
  1.2
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0

Schnitzer Steel Industries, Inc. is a recycler of ferrous and nonferrous scrap metal, including end-of-life vehicles, and a manufacturer of finished steel products. The Company operates through two segments: the Auto and Metals Recycling (AMR) business and the Steel Manufacturing Business (SMB). The AMR segment collects and recycles auto bodies, rail cars, home appliances, industrial machinery, manufacturing scrap and construction and demolition scrap from bridges, buildings and other infrastructure. AMR's primary products include recycled ferrous and nonferrous scrap metal. The SMB segment produces finished steel products such as rebar, wire rod, coiled rebar, merchant bar and other specialty products using 100% recycled metal sourced from AMR. SMB's products are primarily used in nonresidential and infrastructure construction in North America. SMB operates a steel mini-mill in McMinnville, Oregon that produces finished steel products using recycled metal and other raw materials.

FINANCIAL RATIOS  of  Schnitzer Steel Industries (SCHN)

Valuation Ratios
P/E Ratio -41
Price to Sales 0.6
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 12.2
Growth Rates
Sales Growth Rate -29.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.4%
Cap. Spend. - 3 Yr. Gr. Rate -17.2%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 37.1%
Total Debt to Equity 38.8%
Interest Coverage -2
Management Effectiveness
Return On Assets -1.4%
Ret/ On Assets - 3 Yr. Avg. -5.6%
Return On Total Capital -2.6%
Ret/ On T. Cap. - 3 Yr. Avg. -7.8%
Return On Equity -3.7%
Return On Equity - 3 Yr. Avg. -11%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 13.1%
Gross Margin - 3 Yr. Avg. 10.3%
EBITDA Margin 3.3%
EBITDA Margin - 3 Yr. Avg. 0.3%
Operating Margin -0.5%
Oper. Margin - 3 Yr. Avg. -3.3%
Pre-Tax Margin -1.2%
Pre-Tax Margin - 3 Yr. Avg. -3.7%
Net Profit Margin -1.4%
Net Profit Margin - 3 Yr. Avg. -3.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 8.7%
Payout Ratio -105.3%

SCHN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SCHN stock intrinsic value calculation we used $1353 million for the last fiscal year's total revenue generated by Schnitzer Steel Industries. The default revenue input number comes from 2016 income statement of Schnitzer Steel Industries. 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 SCHN stock valuation model: a) initial revenue growth rate of 35.5% 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 4.8%, whose default value for SCHN is calculated based on our internal credit rating of Schnitzer Steel Industries, 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 Schnitzer Steel Industries.
    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 SCHN stock the variable cost ratio is equal to 110.2%.

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 SCHN 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 Schnitzer Steel Industries.

Corporate tax rate of 27% is the nominal tax rate for Schnitzer Steel Industries. 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 SCHN 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 SCHN are equal to 30.7%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Schnitzer Steel Industries 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 SCHN is equal to 10.9%. 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 - $498 million for Schnitzer Steel Industries - 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 27.32 million for Schnitzer Steel Industries 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 Schnitzer Steel Industries at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ 5 Stocks in Limelight on New Analyst Coverage   [Sep-20-17 10:49AM  Zacks]
▶ Schnitzer Announces Fiscal 2016 Sustainability Report   [Aug-14-17 10:00AM  Business Wire]
▶ Schnitzer Board Declares Quarterly Dividend   [Jul-28-17 06:00PM  Business Wire]
▶ Breakout Watch: Steel Stock Closing In On Double Bottom Buy Point   [Jul-03-17 01:07PM  Investor's Business Daily]
▶ 5 Best Performing Stocks of June   [10:32AM  Zacks]
▶ Company News for June 27, 2017   [Jun-27-17 10:52AM  Zacks]
▶ Schnitzer Steel posts 3Q profit   [Jun-26-17 09:56PM  Associated Press]
▶ Story Stocks from Briefing.com   [10:09AM  Briefing.com]
▶ Schnitzer Board Declares Quarterly Dividend   [Apr-28-17 05:45PM  Business Wire]
▶ Schnitzer Steel posts 2Q profit   [08:43AM  Associated Press]
▶ Schnitzer Board Declares Quarterly Dividend   [Jan-26-17 07:00PM  Business Wire]
▶ Is Schnitzer Steel Industries, Inc. (SCHN) A Good Stock To Buy?   [Dec-08-16 01:29PM  at Insider Monkey]
▶ Assessing Schnitzer Steel's Post-Earnings Valuation (SCHN)   [Oct-31-16 09:26AM  at Investopedia]
▶ Schnitzer Board Declares Quarterly Dividend   [Oct-27-16 05:45PM  Business Wire]
▶ Schnitzer Steel Q4 Boosted by Lower Costs (SCHN)   [Oct-26-16 11:41AM  at Investopedia]
Financial statements of SCHN
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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