Intrinsic value of Advanced Disposal Services, Inc. - ADSW

Previous Close

$32.11

  Intrinsic Value

$11.53

stock screener

  Rating & Target

str. sell

-64%

Previous close

$32.11

 
Intrinsic value

$11.53

 
Up/down potential

-64%

 
Rating

str. sell

We calculate the intrinsic value of ADSW 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 0001), $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 2.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.70
  2.93
  3.14
  3.32
  3.49
  3.64
  3.78
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
Revenue, $m
  1,600
  1,647
  1,699
  1,755
  1,816
  1,882
  1,954
  2,030
  2,111
  2,198
  2,290
  2,388
  2,492
  2,602
  2,719
  2,842
  2,972
  3,109
  3,253
  3,406
  3,567
  3,736
  3,914
  4,102
  4,300
  4,508
  4,726
  4,956
  5,198
  5,452
Variable operating expenses, $m
  1,234
  1,266
  1,301
  1,340
  1,381
  1,426
  1,475
  1,526
  1,582
  1,641
  1,556
  1,623
  1,693
  1,768
  1,847
  1,931
  2,019
  2,112
  2,211
  2,314
  2,424
  2,539
  2,660
  2,788
  2,922
  3,063
  3,212
  3,368
  3,532
  3,705
Fixed operating expenses, $m
  263
  268
  274
  280
  287
  293
  299
  306
  313
  319
  327
  334
  341
  349
  356
  364
  372
  380
  389
  397
  406
  415
  424
  433
  443
  453
  462
  473
  483
  494
Total operating expenses, $m
  1,497
  1,534
  1,575
  1,620
  1,668
  1,719
  1,774
  1,832
  1,895
  1,960
  1,883
  1,957
  2,034
  2,117
  2,203
  2,295
  2,391
  2,492
  2,600
  2,711
  2,830
  2,954
  3,084
  3,221
  3,365
  3,516
  3,674
  3,841
  4,015
  4,199
Operating income, $m
  103
  112
  123
  135
  148
  163
  180
  197
  217
  238
  407
  432
  458
  485
  515
  547
  580
  616
  654
  694
  737
  783
  831
  881
  935
  992
  1,052
  1,116
  1,183
  1,254
EBITDA, $m
  465
  480
  498
  518
  539
  563
  589
  617
  647
  680
  715
  752
  792
  835
  880
  928
  979
  1,033
  1,091
  1,151
  1,216
  1,284
  1,356
  1,432
  1,512
  1,597
  1,686
  1,781
  1,880
  1,985
Interest expense (income), $m
  119
  103
  107
  111
  115
  121
  126
  132
  139
  145
  153
  161
  169
  178
  187
  197
  208
  219
  231
  243
  256
  270
  285
  300
  316
  333
  351
  370
  390
  411
  433
Earnings before tax, $m
  0
  6
  12
  19
  28
  37
  47
  59
  71
  85
  247
  263
  280
  298
  318
  339
  361
  385
  411
  438
  467
  498
  530
  565
  602
  641
  682
  726
  772
  821
Tax expense, $m
  0
  2
  3
  5
  8
  10
  13
  16
  19
  23
  67
  71
  76
  80
  86
  91
  98
  104
  111
  118
  126
  134
  143
  153
  163
  173
  184
  196
  208
  222
Net income, $m
  0
  4
  9
  14
  20
  27
  35
  43
  52
  62
  180
  192
  204
  218
  232
  247
  264
  281
  300
  320
  341
  363
  387
  413
  439
  468
  498
  530
  564
  599

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  3,620
  3,726
  3,843
  3,971
  4,109
  4,259
  4,420
  4,592
  4,776
  4,973
  5,181
  5,403
  5,638
  5,887
  6,150
  6,429
  6,723
  7,033
  7,361
  7,706
  8,070
  8,453
  8,856
  9,281
  9,728
  10,198
  10,693
  11,213
  11,761
  12,336
Adjusted assets (=assets-cash), $m
  3,620
  3,726
  3,843
  3,971
  4,109
  4,259
  4,420
  4,592
  4,776
  4,973
  5,181
  5,403
  5,638
  5,887
  6,150
  6,429
  6,723
  7,033
  7,361
  7,706
  8,070
  8,453
  8,856
  9,281
  9,728
  10,198
  10,693
  11,213
  11,761
  12,336
Revenue / Adjusted assets
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
Average production assets, $m
  2,555
  2,630
  2,713
  2,803
  2,901
  3,006
  3,120
  3,242
  3,372
  3,510
  3,657
  3,814
  3,980
  4,156
  4,341
  4,538
  4,746
  4,965
  5,196
  5,439
  5,696
  5,967
  6,251
  6,551
  6,867
  7,199
  7,548
  7,915
  8,302
  8,708
Working capital, $m
  -62
  -64
  -66
  -68
  -71
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -101
  -106
  -111
  -116
  -121
  -127
  -133
  -139
  -146
  -153
  -160
  -168
  -176
  -184
  -193
  -203
  -213
Total debt, $m
  1,972
  2,051
  2,138
  2,232
  2,335
  2,446
  2,566
  2,694
  2,830
  2,976
  3,131
  3,295
  3,470
  3,654
  3,850
  4,056
  4,275
  4,505
  4,748
  5,004
  5,274
  5,558
  5,858
  6,173
  6,504
  6,853
  7,221
  7,607
  8,013
  8,439
Total liabilities, $m
  2,686
  2,765
  2,852
  2,946
  3,049
  3,160
  3,280
  3,407
  3,544
  3,690
  3,845
  4,009
  4,184
  4,368
  4,564
  4,770
  4,988
  5,219
  5,462
  5,718
  5,988
  6,272
  6,571
  6,887
  7,218
  7,567
  7,934
  8,320
  8,726
  9,153
Total equity, $m
  934
  961
  991
  1,024
  1,060
  1,099
  1,140
  1,185
  1,232
  1,283
  1,337
  1,394
  1,455
  1,519
  1,587
  1,659
  1,735
  1,815
  1,899
  1,988
  2,082
  2,181
  2,285
  2,394
  2,510
  2,631
  2,759
  2,893
  3,034
  3,183
Total liabilities and equity, $m
  3,620
  3,726
  3,843
  3,970
  4,109
  4,259
  4,420
  4,592
  4,776
  4,973
  5,182
  5,403
  5,639
  5,887
  6,151
  6,429
  6,723
  7,034
  7,361
  7,706
  8,070
  8,453
  8,856
  9,281
  9,728
  10,198
  10,693
  11,213
  11,760
  12,336
Debt-to-equity ratio
  2.110
  2.130
  2.160
  2.180
  2.200
  2.230
  2.250
  2.270
  2.300
  2.320
  2.340
  2.360
  2.390
  2.410
  2.430
  2.450
  2.460
  2.480
  2.500
  2.520
  2.530
  2.550
  2.560
  2.580
  2.590
  2.600
  2.620
  2.630
  2.640
  2.650
Adjusted equity ratio
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  4
  9
  14
  20
  27
  35
  43
  52
  62
  180
  192
  204
  218
  232
  247
  264
  281
  300
  320
  341
  363
  387
  413
  439
  468
  498
  530
  564
  599
Depreciation, amort., depletion, $m
  362
  368
  375
  383
  391
  400
  409
  420
  431
  442
  307
  320
  334
  349
  365
  381
  399
  417
  437
  457
  479
  501
  525
  551
  577
  605
  634
  665
  698
  732
Funds from operations, $m
  362
  372
  384
  397
  411
  427
  444
  463
  483
  504
  487
  512
  539
  567
  597
  629
  662
  698
  736
  777
  820
  865
  913
  963
  1,016
  1,073
  1,132
  1,195
  1,261
  1,331
Change in working capital, $m
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
Cash from operations, $m
  364
  374
  386
  399
  414
  430
  447
  466
  486
  508
  491
  516
  543
  571
  601
  633
  668
  704
  742
  783
  826
  871
  919
  970
  1,024
  1,081
  1,141
  1,204
  1,271
  1,341
Maintenance CAPEX, $m
  -209
  -215
  -221
  -228
  -236
  -244
  -253
  -262
  -272
  -283
  -295
  -307
  -320
  -334
  -349
  -365
  -381
  -399
  -417
  -437
  -457
  -479
  -501
  -525
  -551
  -577
  -605
  -634
  -665
  -698
New CAPEX, $m
  -68
  -75
  -83
  -90
  -98
  -106
  -114
  -122
  -130
  -139
  -147
  -156
  -166
  -176
  -186
  -197
  -208
  -219
  -231
  -244
  -257
  -270
  -285
  -300
  -316
  -332
  -349
  -367
  -386
  -406
Cash from investing activities, $m
  -277
  -290
  -304
  -318
  -334
  -350
  -367
  -384
  -402
  -422
  -442
  -463
  -486
  -510
  -535
  -562
  -589
  -618
  -648
  -681
  -714
  -749
  -786
  -825
  -867
  -909
  -954
  -1,001
  -1,051
  -1,104
Free cash flow, $m
  87
  85
  82
  81
  80
  80
  81
  82
  83
  86
  49
  52
  56
  61
  66
  72
  79
  86
  94
  103
  112
  122
  133
  145
  158
  172
  187
  202
  219
  237
Issuance/(repayment) of debt, $m
  69
  79
  87
  95
  103
  111
  119
  128
  137
  146
  155
  164
  174
  185
  195
  207
  218
  230
  243
  256
  270
  284
  299
  315
  332
  349
  367
  386
  406
  427
Issuance/(repurchase) of shares, $m
  22
  23
  21
  19
  15
  11
  7
  1
  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  
  91
  102
  108
  114
  118
  122
  126
  129
  137
  146
  155
  164
  174
  185
  195
  207
  218
  230
  243
  256
  270
  284
  299
  315
  332
  349
  367
  386
  406
  427
Total cash flow (excl. dividends), $m
  178
  187
  191
  195
  199
  203
  207
  211
  220
  231
  204
  217
  231
  246
  262
  279
  297
  316
  337
  359
  382
  407
  433
  460
  490
  521
  554
  588
  625
  664
Retained Cash Flow (-), $m
  -22
  -27
  -30
  -33
  -36
  -39
  -42
  -44
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -80
  -84
  -89
  -94
  -99
  -104
  -110
  -115
  -121
  -128
  -134
  -141
  -148
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
  156
  159
  160
  162
  163
  164
  165
  167
  173
  181
  150
  159
  170
  181
  194
  207
  221
  236
  252
  270
  288
  308
  329
  351
  374
  399
  426
  454
  484
  516
Discount rate, %
  9.60
  10.08
  10.58
  11.11
  11.67
  12.25
  12.86
  13.51
  14.18
  14.89
  15.64
  16.42
  17.24
  18.10
  19.01
  19.96
  20.96
  22.00
  23.10
  24.26
  25.47
  26.75
  28.08
  29.49
  30.96
  32.51
  34.13
  35.84
  37.63
  39.51
PV of cash for distribution, $m
  142
  131
  119
  106
  94
  82
  71
  60
  52
  45
  30
  26
  22
  18
  14
  11
  9
  7
  5
  4
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.2
  98.4
  97.7
  97.2
  96.7
  96.4
  96.2
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1

Advanced Disposal Services, Inc. is an integrated provider of non-hazardous solid waste collection, transfer, recycling and disposal services operating primarily in secondary markets or under exclusive arrangements. The Company's segments include South, East, Midwest and Corporate. As of December 31, 2016, the Company had its presence in 16 states across the Midwest, South and East regions of the United States, as well as in the Commonwealth of the Bahamas, served approximately 2.7 million residential customers and over 200,000 commercial and industrial (C&I) customers through its network of 90 collection operations, 72 transfer stations, 21 owned or operated recycling facilities and 39 owned or operated active landfills. The Company's vertically integrated environmental services operations can be classified into three lines of business: collection services, disposal services and recycling services. The disposal services include transfer stations and landfills.

FINANCIAL RATIOS  of  Advanced Disposal Services, Inc. (ADSW)

Valuation Ratios
P/E Ratio -94.2
Price to Sales 2
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 11.9
Price to Free Cash Flow 42.8
Growth Rates
Sales Growth Rate 0.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -5%
Cap. Spend. - 3 Yr. Gr. Rate 1.6%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 227.3%
Total Debt to Equity 231.8%
Interest Coverage 1
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 0.8%
Return On Total Capital -1.1%
Ret/ On T. Cap. - 3 Yr. Avg. -1%
Return On Equity -4.5%
Return On Equity - 3 Yr. Avg. -4.8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 22.1%
EBITDA Margin - 3 Yr. Avg. 22%
Operating Margin 4.8%
Oper. Margin - 3 Yr. Avg. 5.5%
Pre-Tax Margin -4%
Pre-Tax Margin - 3 Yr. Avg. -4.9%
Net Profit Margin -2.1%
Net Profit Margin - 3 Yr. Avg. -1.9%
Effective Tax Rate 46.4%
Eff/ Tax Rate - 3 Yr. Avg. 55%
Payout Ratio 0%

ADSW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ADSW stock intrinsic value calculation we used $1558 million for the last fiscal year's total revenue generated by Advanced Disposal Services, Inc.. The default revenue input number comes from 0001 income statement of Advanced Disposal Services, Inc.. 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 ADSW stock valuation model: a) initial revenue growth rate of 2.7% 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 9.6%, whose default value for ADSW is calculated based on our internal credit rating of Advanced Disposal Services, Inc., 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 Advanced Disposal Services, Inc..
    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 ADSW stock the variable cost ratio is equal to 77.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $257 million in the base year in the intrinsic value calculation for ADSW 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 5.4% for Advanced Disposal Services, Inc..

Corporate tax rate of 27% is the nominal tax rate for Advanced Disposal Services, Inc.. 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 ADSW 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 ADSW are equal to 159.7%.

Life of production assets of 11.9 years is the average useful life of capital assets used in Advanced Disposal Services, Inc. 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 ADSW is equal to -3.9%. 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 - $911.5 million for Advanced Disposal Services, Inc. - 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 88.815 million for Advanced Disposal Services, Inc. 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 Advanced Disposal Services, Inc. at the current share price and the inputted number of shares is $2.9 billion.

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