Intrinsic value of SunCoke Energy - SXC

Previous Close

$9.07

  Intrinsic Value

$2.93

stock screener

  Rating & Target

str. sell

-68%

  Value-price divergence*

-227%

Previous close

$9.07

 
Intrinsic value

$2.93

 
Up/down potential

-68%

 
Rating

str. sell

 
Value-price divergence*

-227%

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

We calculate the intrinsic value of SXC 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 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -10.27
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,223
  1,247
  1,276
  1,309
  1,346
  1,387
  1,431
  1,480
  1,533
  1,590
  1,651
  1,716
  1,786
  1,860
  1,939
  2,022
  2,111
  2,205
  2,304
  2,409
  2,519
  2,636
  2,759
  2,889
  3,026
  3,170
  3,322
  3,481
  3,649
  3,826
  4,012
Variable operating expenses, $m
 
  1,174
  1,201
  1,231
  1,266
  1,304
  1,346
  1,391
  1,440
  1,494
  1,551
  1,604
  1,669
  1,738
  1,812
  1,890
  1,973
  2,061
  2,153
  2,251
  2,355
  2,464
  2,579
  2,700
  2,828
  2,963
  3,105
  3,254
  3,411
  3,576
  3,750
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
  1,102
  1,174
  1,201
  1,231
  1,266
  1,304
  1,346
  1,391
  1,440
  1,494
  1,551
  1,604
  1,669
  1,738
  1,812
  1,890
  1,973
  2,061
  2,153
  2,251
  2,355
  2,464
  2,579
  2,700
  2,828
  2,963
  3,105
  3,254
  3,411
  3,576
  3,750
Operating income, $m
  122
  74
  76
  78
  80
  83
  86
  89
  92
  96
  100
  112
  117
  121
  127
  132
  138
  144
  150
  157
  165
  172
  180
  189
  198
  207
  217
  227
  238
  250
  262
EBITDA, $m
  236
  193
  197
  202
  208
  214
  221
  229
  237
  246
  255
  265
  276
  287
  300
  313
  326
  341
  356
  372
  389
  407
  426
  446
  468
  490
  513
  538
  564
  591
  620
Interest expense (income), $m
  58
  53
  55
  57
  60
  64
  67
  72
  76
  81
  86
  92
  98
  104
  111
  118
  126
  134
  143
  152
  161
  172
  182
  194
  206
  218
  232
  246
  260
  276
  292
Earnings before tax, $m
  68
  20
  21
  21
  20
  19
  18
  17
  16
  15
  14
  20
  19
  17
  16
  14
  12
  10
  8
  5
  3
  0
  -2
  -5
  -8
  -11
  -15
  -18
  -22
  -26
  -30
Tax expense, $m
  8
  5
  6
  6
  5
  5
  5
  5
  4
  4
  4
  5
  5
  5
  4
  4
  3
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  14
  15
  15
  15
  15
  14
  13
  13
  12
  11
  10
  15
  14
  13
  11
  10
  9
  7
  6
  4
  2
  0
  -2
  -5
  -8
  -11
  -15
  -18
  -22
  -26
  -30

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  134
  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
  2,121
  2,025
  2,072
  2,125
  2,185
  2,251
  2,324
  2,403
  2,488
  2,581
  2,680
  2,786
  2,899
  3,019
  3,147
  3,283
  3,427
  3,579
  3,740
  3,910
  4,090
  4,279
  4,479
  4,690
  4,912
  5,146
  5,392
  5,651
  5,924
  6,211
  6,513
Adjusted assets (=assets-cash), $m
  1,987
  2,025
  2,072
  2,125
  2,185
  2,251
  2,324
  2,403
  2,488
  2,581
  2,680
  2,786
  2,899
  3,019
  3,147
  3,283
  3,427
  3,579
  3,740
  3,910
  4,090
  4,279
  4,479
  4,690
  4,912
  5,146
  5,392
  5,651
  5,924
  6,211
  6,513
Revenue / Adjusted assets
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
Average production assets, $m
  1,747
  1,781
  1,822
  1,869
  1,922
  1,980
  2,044
  2,114
  2,189
  2,270
  2,357
  2,450
  2,550
  2,656
  2,768
  2,888
  3,014
  3,148
  3,290
  3,440
  3,598
  3,764
  3,940
  4,126
  4,321
  4,527
  4,743
  4,971
  5,211
  5,463
  5,729
Working capital, $m
  144
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
Total debt, $m
  854
  867
  909
  956
  1,010
  1,070
  1,135
  1,206
  1,284
  1,367
  1,456
  1,551
  1,653
  1,761
  1,876
  1,999
  2,128
  2,265
  2,410
  2,563
  2,725
  2,895
  3,075
  3,265
  3,465
  3,675
  3,897
  4,130
  4,376
  4,634
  4,905
Total liabilities, $m
  1,810
  1,823
  1,865
  1,912
  1,966
  2,026
  2,091
  2,162
  2,240
  2,323
  2,412
  2,507
  2,609
  2,717
  2,832
  2,955
  3,084
  3,221
  3,366
  3,519
  3,681
  3,851
  4,031
  4,221
  4,421
  4,631
  4,853
  5,086
  5,332
  5,590
  5,861
Total equity, $m
  311
  203
  207
  212
  218
  225
  232
  240
  249
  258
  268
  279
  290
  302
  315
  328
  343
  358
  374
  391
  409
  428
  448
  469
  491
  515
  539
  565
  592
  621
  651
Total liabilities and equity, $m
  2,121
  2,026
  2,072
  2,124
  2,184
  2,251
  2,323
  2,402
  2,489
  2,581
  2,680
  2,786
  2,899
  3,019
  3,147
  3,283
  3,427
  3,579
  3,740
  3,910
  4,090
  4,279
  4,479
  4,690
  4,912
  5,146
  5,392
  5,651
  5,924
  6,211
  6,512
Debt-to-equity ratio
  2.746
  4.280
  4.390
  4.500
  4.620
  4.750
  4.890
  5.020
  5.160
  5.300
  5.430
  5.570
  5.700
  5.830
  5.960
  6.090
  6.210
  6.330
  6.440
  6.560
  6.660
  6.770
  6.870
  6.960
  7.050
  7.140
  7.230
  7.310
  7.390
  7.460
  7.530
Adjusted equity ratio
  0.089
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  15
  15
  15
  15
  14
  13
  13
  12
  11
  10
  15
  14
  13
  11
  10
  9
  7
  6
  4
  2
  0
  -2
  -5
  -8
  -11
  -15
  -18
  -22
  -26
  -30
Depreciation, amort., depletion, $m
  114
  119
  122
  125
  128
  131
  135
  140
  145
  150
  155
  153
  159
  166
  173
  180
  188
  197
  206
  215
  225
  235
  246
  258
  270
  283
  296
  311
  326
  341
  358
Funds from operations, $m
  268
  134
  137
  140
  142
  145
  149
  153
  156
  161
  165
  168
  173
  179
  184
  191
  197
  204
  211
  219
  227
  236
  244
  253
  262
  272
  282
  292
  304
  316
  328
Change in working capital, $m
  49
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  219
  109
  137
  139
  142
  145
  148
  152
  156
  160
  165
  167
  172
  178
  183
  190
  196
  203
  210
  218
  226
  234
  243
  251
  260
  270
  280
  291
  302
  313
  326
Maintenance CAPEX, $m
  0
  -109
  -111
  -114
  -117
  -120
  -124
  -128
  -132
  -137
  -142
  -147
  -153
  -159
  -166
  -173
  -180
  -188
  -197
  -206
  -215
  -225
  -235
  -246
  -258
  -270
  -283
  -296
  -311
  -326
  -341
New CAPEX, $m
  -64
  -34
  -41
  -47
  -53
  -58
  -64
  -70
  -75
  -81
  -87
  -93
  -99
  -106
  -113
  -119
  -127
  -134
  -142
  -150
  -158
  -167
  -176
  -185
  -195
  -206
  -217
  -228
  -240
  -252
  -265
Cash from investing activities, $m
  -36
  -143
  -152
  -161
  -170
  -178
  -188
  -198
  -207
  -218
  -229
  -240
  -252
  -265
  -279
  -292
  -307
  -322
  -339
  -356
  -373
  -392
  -411
  -431
  -453
  -476
  -500
  -524
  -551
  -578
  -606
Free cash flow, $m
  183
  -35
  -16
  -22
  -27
  -33
  -39
  -45
  -52
  -58
  -64
  -73
  -80
  -88
  -95
  -103
  -111
  -119
  -128
  -138
  -147
  -157
  -169
  -180
  -193
  -206
  -220
  -234
  -249
  -265
  -281
Issuance/(repayment) of debt, $m
  -121
  18
  42
  48
  54
  60
  65
  71
  77
  83
  89
  95
  102
  108
  115
  122
  129
  137
  145
  153
  162
  171
  180
  190
  200
  210
  222
  233
  245
  258
  272
Issuance/(repurchase) of shares, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  4
  6
  9
  12
  15
  19
  23
  27
  31
  35
  40
Cash from financing (excl. dividends), $m  
  -172
  18
  42
  48
  54
  60
  65
  71
  77
  83
  89
  95
  102
  108
  115
  122
  129
  137
  145
  154
  166
  177
  189
  202
  215
  229
  245
  260
  276
  293
  312
Total cash flow (excl. dividends), $m
  11
  -17
  26
  26
  26
  26
  26
  26
  25
  25
  25
  22
  21
  21
  20
  19
  18
  18
  17
  16
  14
  13
  11
  9
  7
  5
  2
  -1
  -3
  -6
  -9
Retained Cash Flow (-), $m
  -21
  -21
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
Prev. year cash balance distribution, $m
 
  129
  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
 
  91
  22
  21
  20
  20
  19
  18
  17
  16
  15
  11
  10
  9
  7
  6
  4
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Discount rate, %
 
  8.70
  9.14
  9.59
  10.07
  10.57
  11.10
  11.66
  12.24
  12.85
  13.50
  14.17
  14.88
  15.62
  16.41
  17.23
  18.09
  18.99
  19.94
  20.94
  21.98
  23.08
  24.24
  25.45
  26.72
  28.06
  29.46
  30.93
  32.48
  34.11
  35.81
PV of cash for distribution, $m
 
  84
  18
  16
  14
  12
  10
  8
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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
  99.8
  99.3
  98.5
  97.5
  96.1
  94.4
  92.5
  90.4
  88.0
  85.5
  82.9
  80.1

SunCoke Energy, Inc. operates as an independent producer of coke in the Americas. The company operates through four segments: Domestic Coke, Brazil Coke, Coal Logistics, and Coal Mining. The company offers metallurgical and thermal coal. It also provides coal handling and/or mixing services to steel, coke, electric utility, and coal mining customers. SunCoke Energy, Inc. was incorporated in 2010 and is headquartered in Lisle, Illinois.

FINANCIAL RATIOS  of  SunCoke Energy (SXC)

Valuation Ratios
P/E Ratio 41.6
Price to Sales 0.5
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 2.7
Price to Free Cash Flow 3.8
Growth Rates
Sales Growth Rate -10.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.8%
Cap. Spend. - 3 Yr. Gr. Rate -15.2%
Financial Strength
Quick Ratio 27
Current Ratio 0
LT Debt to Equity 273%
Total Debt to Equity 274.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. -3.9%
Return On Equity 4.7%
Return On Equity - 3 Yr. Avg. -9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 25.9%
Gross Margin - 3 Yr. Avg. 21.5%
EBITDA Margin 19.6%
EBITDA Margin - 3 Yr. Avg. 11.8%
Operating Margin 9.9%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 5.6%
Pre-Tax Margin - 3 Yr. Avg. -0.4%
Net Profit Margin 1.1%
Net Profit Margin - 3 Yr. Avg. -2.9%
Effective Tax Rate 11.8%
Eff/ Tax Rate - 3 Yr. Avg. 6.5%
Payout Ratio 0%

SXC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SXC stock intrinsic value calculation we used $1223 million for the last fiscal year's total revenue generated by SunCoke Energy. The default revenue input number comes from 2016 income statement of SunCoke Energy. 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 SXC stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.7%, whose default value for SXC is calculated based on our internal credit rating of SunCoke Energy, 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 SunCoke Energy.
    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 SXC stock the variable cost ratio is equal to 94.1%.

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 SXC 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 6.3% for SunCoke Energy.

Corporate tax rate of 27% is the nominal tax rate for SunCoke Energy. 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 SXC 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 SXC are equal to 142.8%.

Life of production assets of 16 years is the average useful life of capital assets used in SunCoke Energy 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 SXC is equal to 1.2%. 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 - $311 million for SunCoke Energy - 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 63.334 million for SunCoke Energy 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 SunCoke Energy at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ SunCoke Energy Partners Provides Opportunity for Investors   [May-09-17 03:59PM  GuruFocus.com]
▶ SunCoke posts 1Q profit   [08:16AM  Associated Press]
▶ Warrior Met Coal IPO: What Investors Need to Know   [Apr-13-17 08:56PM  Motley Fool]
▶ SunCoke posts 4Q profit   [08:04AM  Associated Press]
▶ Is Renren Inc (RENN) A Good Stock to Buy?   [Dec-16-16 07:38PM  at Insider Monkey]
▶ Is SunCoke Energy, Inc (SXC) A Good Stock To Buy?   [Dec-08-16 11:16AM  at Insider Monkey]
Stock chart of SXC Financial statements of SXC Annual reports of SXC
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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