Intrinsic value of CF Industries Holdings, Inc. - CF

Previous Close

$47.16

  Intrinsic Value

$7.36

stock screener

  Rating & Target

str. sell

-84%

Previous close

$47.16

 
Intrinsic value

$7.36

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of CF 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 10.5

 

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, %
  3.00
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
Revenue, $m
  4,562
  4,708
  4,867
  5,039
  5,225
  5,425
  5,638
  5,866
  6,109
  6,367
  6,641
  6,932
  7,239
  7,564
  7,908
  8,271
  8,653
  9,057
  9,483
  9,931
  10,404
  10,901
  11,425
  11,976
  12,556
  13,165
  13,807
  14,481
  15,190
  15,935
Variable operating expenses, $m
  4,308
  4,439
  4,581
  4,735
  4,901
  5,079
  5,270
  5,473
  5,690
  5,920
  5,930
  6,189
  6,464
  6,754
  7,061
  7,385
  7,726
  8,087
  8,467
  8,868
  9,289
  9,734
  10,201
  10,693
  11,211
  11,755
  12,328
  12,930
  13,563
  14,228
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
  4,308
  4,439
  4,581
  4,735
  4,901
  5,079
  5,270
  5,473
  5,690
  5,920
  5,930
  6,189
  6,464
  6,754
  7,061
  7,385
  7,726
  8,087
  8,467
  8,868
  9,289
  9,734
  10,201
  10,693
  11,211
  11,755
  12,328
  12,930
  13,563
  14,228
Operating income, $m
  253
  269
  286
  305
  324
  346
  369
  393
  419
  447
  711
  743
  775
  810
  847
  886
  927
  970
  1,016
  1,064
  1,115
  1,168
  1,224
  1,283
  1,345
  1,410
  1,479
  1,551
  1,627
  1,707
EBITDA, $m
  1,306
  1,348
  1,394
  1,443
  1,496
  1,553
  1,614
  1,680
  1,749
  1,823
  1,902
  1,985
  2,073
  2,166
  2,264
  2,368
  2,478
  2,593
  2,715
  2,844
  2,979
  3,121
  3,271
  3,429
  3,595
  3,770
  3,953
  4,146
  4,349
  4,563
Interest expense (income), $m
  0
  254
  269
  286
  305
  325
  347
  371
  396
  423
  452
  482
  515
  549
  585
  624
  664
  707
  752
  800
  850
  903
  959
  1,018
  1,080
  1,145
  1,214
  1,286
  1,361
  1,441
  1,525
Earnings before tax, $m
  0
  0
  0
  0
  -1
  -1
  -2
  -3
  -4
  -5
  229
  228
  227
  225
  223
  222
  220
  218
  216
  213
  211
  209
  206
  203
  200
  197
  193
  190
  186
  182
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  62
  62
  61
  61
  60
  60
  59
  59
  58
  58
  57
  56
  56
  55
  54
  53
  52
  51
  50
  49
Net income, $m
  0
  0
  0
  0
  -1
  -1
  -2
  -3
  -4
  -5
  167
  166
  165
  164
  163
  162
  160
  159
  157
  156
  154
  152
  150
  148
  146
  144
  141
  139
  136
  133

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
  13,034
  13,451
  13,906
  14,398
  14,929
  15,499
  16,110
  16,761
  17,455
  18,192
  18,975
  19,805
  20,683
  21,612
  22,594
  23,630
  24,724
  25,878
  27,094
  28,376
  29,725
  31,147
  32,643
  34,217
  35,873
  37,615
  39,447
  41,374
  43,399
  45,528
Adjusted assets (=assets-cash), $m
  13,034
  13,451
  13,906
  14,398
  14,929
  15,499
  16,110
  16,761
  17,455
  18,192
  18,975
  19,805
  20,683
  21,612
  22,594
  23,630
  24,724
  25,878
  27,094
  28,376
  29,725
  31,147
  32,643
  34,217
  35,873
  37,615
  39,447
  41,374
  43,399
  45,528
Revenue / Adjusted assets
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
Average production assets, $m
  10,383
  10,715
  11,077
  11,470
  11,893
  12,347
  12,833
  13,352
  13,904
  14,492
  15,115
  15,776
  16,476
  17,216
  17,998
  18,824
  19,695
  20,614
  21,583
  22,604
  23,679
  24,811
  26,003
  27,257
  28,577
  29,964
  31,424
  32,959
  34,572
  36,268
Working capital, $m
  -119
  -122
  -127
  -131
  -136
  -141
  -147
  -153
  -159
  -166
  -173
  -180
  -188
  -197
  -206
  -215
  -225
  -235
  -247
  -258
  -271
  -283
  -297
  -311
  -326
  -342
  -359
  -377
  -395
  -414
Total debt, $m
  4,979
  5,298
  5,647
  6,024
  6,431
  6,867
  7,335
  7,834
  8,365
  8,930
  9,530
  10,165
  10,838
  11,550
  12,302
  13,096
  13,934
  14,817
  15,749
  16,731
  17,765
  18,853
  19,999
  21,205
  22,474
  23,808
  25,212
  26,687
  28,239
  29,870
Total liabilities, $m
  9,984
  10,303
  10,652
  11,029
  11,436
  11,872
  12,340
  12,839
  13,370
  13,935
  14,535
  15,170
  15,843
  16,555
  17,307
  18,101
  18,939
  19,822
  20,754
  21,736
  22,770
  23,858
  25,004
  26,210
  27,479
  28,813
  30,217
  31,692
  33,244
  34,875
Total equity, $m
  3,050
  3,148
  3,254
  3,369
  3,493
  3,627
  3,770
  3,922
  4,084
  4,257
  4,440
  4,634
  4,840
  5,057
  5,287
  5,529
  5,785
  6,055
  6,340
  6,640
  6,956
  7,288
  7,638
  8,007
  8,394
  8,802
  9,231
  9,682
  10,155
  10,654
Total liabilities and equity, $m
  13,034
  13,451
  13,906
  14,398
  14,929
  15,499
  16,110
  16,761
  17,454
  18,192
  18,975
  19,804
  20,683
  21,612
  22,594
  23,630
  24,724
  25,877
  27,094
  28,376
  29,726
  31,146
  32,642
  34,217
  35,873
  37,615
  39,448
  41,374
  43,399
  45,529
Debt-to-equity ratio
  1.630
  1.680
  1.740
  1.790
  1.840
  1.890
  1.950
  2.000
  2.050
  2.100
  2.150
  2.190
  2.240
  2.280
  2.330
  2.370
  2.410
  2.450
  2.480
  2.520
  2.550
  2.590
  2.620
  2.650
  2.680
  2.700
  2.730
  2.760
  2.780
  2.800
Adjusted equity ratio
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234
  0.234

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  0
  0
  0
  -1
  -1
  -2
  -3
  -4
  -5
  167
  166
  165
  164
  163
  162
  160
  159
  157
  156
  154
  152
  150
  148
  146
  144
  141
  139
  136
  133
Depreciation, amort., depletion, $m
  1,053
  1,079
  1,108
  1,138
  1,172
  1,207
  1,246
  1,287
  1,330
  1,376
  1,190
  1,242
  1,297
  1,356
  1,417
  1,482
  1,551
  1,623
  1,699
  1,780
  1,865
  1,954
  2,047
  2,146
  2,250
  2,359
  2,474
  2,595
  2,722
  2,856
Funds from operations, $m
  1,053
  1,079
  1,107
  1,138
  1,171
  1,206
  1,244
  1,284
  1,326
  1,371
  1,358
  1,409
  1,463
  1,520
  1,580
  1,644
  1,711
  1,782
  1,857
  1,936
  2,019
  2,106
  2,198
  2,294
  2,396
  2,503
  2,616
  2,734
  2,858
  2,989
Change in working capital, $m
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
Cash from operations, $m
  1,056
  1,083
  1,112
  1,143
  1,176
  1,211
  1,249
  1,290
  1,333
  1,378
  1,365
  1,416
  1,471
  1,528
  1,589
  1,653
  1,721
  1,793
  1,868
  1,947
  2,031
  2,119
  2,211
  2,309
  2,411
  2,519
  2,632
  2,751
  2,876
  3,008
Maintenance CAPEX, $m
  -794
  -818
  -844
  -872
  -903
  -936
  -972
  -1,010
  -1,051
  -1,095
  -1,141
  -1,190
  -1,242
  -1,297
  -1,356
  -1,417
  -1,482
  -1,551
  -1,623
  -1,699
  -1,780
  -1,865
  -1,954
  -2,047
  -2,146
  -2,250
  -2,359
  -2,474
  -2,595
  -2,722
New CAPEX, $m
  -303
  -332
  -362
  -392
  -423
  -454
  -486
  -519
  -553
  -587
  -624
  -661
  -700
  -740
  -782
  -826
  -871
  -919
  -969
  -1,021
  -1,075
  -1,132
  -1,192
  -1,254
  -1,319
  -1,388
  -1,459
  -1,535
  -1,613
  -1,696
Cash from investing activities, $m
  -1,097
  -1,150
  -1,206
  -1,264
  -1,326
  -1,390
  -1,458
  -1,529
  -1,604
  -1,682
  -1,765
  -1,851
  -1,942
  -2,037
  -2,138
  -2,243
  -2,353
  -2,470
  -2,592
  -2,720
  -2,855
  -2,997
  -3,146
  -3,301
  -3,465
  -3,638
  -3,818
  -4,009
  -4,208
  -4,418
Free cash flow, $m
  -41
  -67
  -94
  -122
  -150
  -179
  -209
  -240
  -271
  -304
  -400
  -435
  -471
  -509
  -548
  -589
  -632
  -677
  -724
  -773
  -824
  -878
  -934
  -993
  -1,054
  -1,119
  -1,187
  -1,258
  -1,332
  -1,410
Issuance/(repayment) of debt, $m
  281
  319
  348
  377
  407
  437
  467
  499
  531
  565
  600
  636
  673
  712
  752
  794
  838
  884
  932
  982
  1,034
  1,089
  1,146
  1,206
  1,269
  1,334
  1,403
  1,476
  1,551
  1,631
Issuance/(repurchase) of shares, $m
  92
  97
  106
  116
  125
  135
  145
  155
  166
  177
  16
  28
  40
  53
  67
  81
  95
  111
  127
  144
  162
  180
  200
  220
  242
  264
  288
  312
  338
  365
Cash from financing (excl. dividends), $m  
  373
  416
  454
  493
  532
  572
  612
  654
  697
  742
  616
  664
  713
  765
  819
  875
  933
  995
  1,059
  1,126
  1,196
  1,269
  1,346
  1,426
  1,511
  1,598
  1,691
  1,788
  1,889
  1,996
Total cash flow (excl. dividends), $m
  333
  350
  360
  371
  381
  392
  403
  415
  426
  438
  215
  228
  242
  256
  270
  285
  301
  318
  335
  353
  371
  391
  412
  433
  456
  479
  504
  530
  557
  586
Retained Cash Flow (-), $m
  -92
  -98
  -106
  -116
  -125
  -135
  -145
  -155
  -166
  -177
  -183
  -194
  -206
  -217
  -230
  -243
  -256
  -270
  -285
  -300
  -316
  -333
  -350
  -368
  -388
  -408
  -429
  -451
  -474
  -498
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
  240
  252
  254
  255
  256
  257
  258
  259
  260
  261
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  76
  79
  83
  88
Discount rate, %
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
  226
  221
  206
  190
  174
  158
  143
  127
  113
  98
  10
  9
  8
  7
  6
  5
  5
  4
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.1
  98.2
  97.3
  96.4
  95.4
  94.3
  93.3
  92.2
  91.1
  90.0
  89.9
  89.8
  89.6
  89.3
  89.0
  88.6
  88.2
  87.7
  87.2
  86.6
  86.0
  85.4
  84.7
  84.1
  83.4
  82.6
  81.9
  81.1
  80.3
  79.5

CF Industries Holdings, Inc. manufactures and distributes nitrogen fertilizer, and other nitrogen products. The Company's nitrogen fertilizer products are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Its other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to the Company's industrial customers, and compound fertilizer products (nitrogen, phosphorus and potassium or NPKs). The Company's segments include ammonia, granular urea, UAN, AN and other. The Company's ammonia segment produces anhydrous ammonia (ammonia), which is concentrated nitrogen fertilizer as it contains 82% nitrogen. The granular urea segment produces granular urea, which contains 46% nitrogen. The UAN segment produces urea ammonium nitrate solution. The Other segment includes DEF, urea liquor, nitric acid and NPKs. The Company's primary nitrogen fertilizer products are ammonia, granular urea, UAN and AN.

FINANCIAL RATIOS  of  CF Industries Holdings, Inc. (CF)

Valuation Ratios
P/E Ratio -39.7
Price to Sales 3
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 17.8
Price to Free Cash Flow -6.9
Growth Rates
Sales Growth Rate -14.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.4%
Cap. Spend. - 3 Yr. Gr. Rate 21.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 172.6%
Total Debt to Equity 172.6%
Interest Coverage 0
Management Effectiveness
Return On Assets -2%
Ret/ On Assets - 3 Yr. Avg. 5.8%
Return On Total Capital -3%
Ret/ On T. Cap. - 3 Yr. Avg. 7%
Return On Equity -7.5%
Return On Equity - 3 Yr. Avg. 13.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 22.8%
Gross Margin - 3 Yr. Avg. 32.1%
EBITDA Margin 12.3%
EBITDA Margin - 3 Yr. Avg. 35.1%
Operating Margin -0.9%
Oper. Margin - 3 Yr. Avg. 25.6%
Pre-Tax Margin -6.1%
Pre-Tax Margin - 3 Yr. Avg. 21.5%
Net Profit Margin -7.5%
Net Profit Margin - 3 Yr. Avg. 12.7%
Effective Tax Rate 30.1%
Eff/ Tax Rate - 3 Yr. Avg. 34.3%
Payout Ratio -101.1%

CF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CF stock intrinsic value calculation we used $4429 million for the last fiscal year's total revenue generated by CF Industries Holdings, Inc.. The default revenue input number comes from 0001 income statement of CF Industries Holdings, 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 CF stock valuation model: a) initial revenue growth rate of 3% 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 6.6%, whose default value for CF is calculated based on our internal credit rating of CF Industries Holdings, 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 CF Industries Holdings, 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 CF stock the variable cost ratio is equal to 94.6%.

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 CF 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 CF Industries Holdings, Inc..

Corporate tax rate of 27% is the nominal tax rate for CF Industries Holdings, 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 CF 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 CF are equal to 227.6%.

Life of production assets of 12.7 years is the average useful life of capital assets used in CF Industries Holdings, 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 CF is equal to -2.6%. 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 - $2958 million for CF Industries Holdings, 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 222.997 million for CF Industries Holdings, 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 CF Industries Holdings, Inc. at the current share price and the inputted number of shares is $10.5 billion.

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