Intrinsic value of Commercial Metals Company - CMC

Previous Close

$18.24

  Intrinsic Value

$15.18

stock screener

  Rating & Target

hold

-17%

Previous close

$18.24

 
Intrinsic value

$15.18

 
Up/down potential

-17%

 
Rating

hold

We calculate the intrinsic value of CMC 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 2.1

 

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, %
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  5,512
  6,468
  7,509
  8,634
  9,842
  11,130
  12,497
  13,941
  15,460
  17,054
  18,721
  20,462
  22,277
  24,166
  26,132
  28,176
  30,300
  32,507
  34,801
  37,185
  39,664
  42,241
  44,923
  47,715
  50,622
  53,651
  56,809
  60,102
  63,538
  67,125
Variable operating expenses, $m
  4,999
  5,864
  6,807
  7,826
  8,920
  10,086
  11,324
  12,632
  14,007
  15,451
  16,954
  18,531
  20,174
  21,886
  23,666
  25,517
  27,440
  29,439
  31,517
  33,676
  35,920
  38,255
  40,684
  43,212
  45,845
  48,588
  51,447
  54,429
  57,541
  60,790
Fixed operating expenses, $m
  235
  240
  246
  251
  256
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
  326
  333
  340
  348
  355
  363
  371
  379
  388
  396
  405
  414
  423
  432
  442
Total operating expenses, $m
  5,234
  6,104
  7,053
  8,077
  9,176
  10,348
  11,592
  12,906
  14,287
  15,737
  17,246
  18,830
  20,479
  22,198
  23,985
  25,843
  27,773
  29,779
  31,865
  34,031
  36,283
  38,626
  41,063
  43,600
  46,241
  48,993
  51,861
  54,852
  57,973
  61,232
Operating income, $m
  279
  364
  457
  558
  666
  782
  905
  1,036
  1,173
  1,317
  1,475
  1,633
  1,797
  1,969
  2,148
  2,333
  2,527
  2,728
  2,937
  3,154
  3,380
  3,615
  3,860
  4,116
  4,381
  4,659
  4,948
  5,249
  5,564
  5,893
EBITDA, $m
  436
  548
  669
  801
  943
  1,094
  1,255
  1,425
  1,604
  1,792
  1,988
  2,194
  2,409
  2,632
  2,865
  3,107
  3,358
  3,620
  3,892
  4,174
  4,469
  4,775
  5,093
  5,425
  5,771
  6,131
  6,507
  6,899
  7,308
  7,735
Interest expense (income), $m
  66
  63
  81
  101
  123
  147
  172
  199
  228
  259
  291
  324
  359
  396
  434
  474
  516
  559
  604
  650
  698
  749
  801
  855
  912
  971
  1,032
  1,096
  1,163
  1,232
  1,305
Earnings before tax, $m
  216
  283
  356
  435
  519
  610
  706
  807
  914
  1,027
  1,150
  1,273
  1,401
  1,535
  1,673
  1,818
  1,968
  2,124
  2,287
  2,456
  2,631
  2,814
  3,005
  3,204
  3,411
  3,626
  3,852
  4,087
  4,332
  4,589
Tax expense, $m
  58
  76
  96
  117
  140
  165
  191
  218
  247
  277
  311
  344
  378
  414
  452
  491
  531
  574
  617
  663
  710
  760
  811
  865
  921
  979
  1,040
  1,103
  1,170
  1,239
Net income, $m
  158
  207
  260
  317
  379
  445
  515
  589
  668
  749
  840
  929
  1,023
  1,120
  1,222
  1,327
  1,437
  1,551
  1,669
  1,793
  1,921
  2,055
  2,194
  2,339
  2,490
  2,647
  2,812
  2,983
  3,163
  3,350

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
  3,831
  4,495
  5,218
  6,000
  6,839
  7,735
  8,685
  9,688
  10,744
  11,851
  13,010
  14,220
  15,481
  16,794
  18,160
  19,580
  21,056
  22,590
  24,184
  25,841
  27,563
  29,355
  31,219
  33,159
  35,179
  37,284
  39,478
  41,766
  44,154
  46,647
Adjusted assets (=assets-cash), $m
  3,831
  4,495
  5,218
  6,000
  6,839
  7,735
  8,685
  9,688
  10,744
  11,851
  13,010
  14,220
  15,481
  16,794
  18,160
  19,580
  21,056
  22,590
  24,184
  25,841
  27,563
  29,355
  31,219
  33,159
  35,179
  37,284
  39,478
  41,766
  44,154
  46,647
Revenue / Adjusted assets
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
  1.439
Average production assets, $m
  1,301
  1,526
  1,772
  2,038
  2,323
  2,627
  2,949
  3,290
  3,649
  4,025
  4,418
  4,829
  5,257
  5,703
  6,167
  6,649
  7,151
  7,672
  8,213
  8,776
  9,361
  9,969
  10,602
  11,261
  11,947
  12,662
  13,407
  14,184
  14,995
  15,841
Working capital, $m
  1,108
  1,300
  1,509
  1,735
  1,978
  2,237
  2,512
  2,802
  3,107
  3,428
  3,763
  4,113
  4,478
  4,857
  5,253
  5,663
  6,090
  6,534
  6,995
  7,474
  7,972
  8,491
  9,030
  9,591
  10,175
  10,784
  11,419
  12,080
  12,771
  13,492
Total debt, $m
  1,496
  1,869
  2,276
  2,715
  3,187
  3,690
  4,224
  4,788
  5,381
  6,004
  6,655
  7,335
  8,043
  8,781
  9,549
  10,347
  11,177
  12,039
  12,935
  13,866
  14,834
  15,841
  16,888
  17,978
  19,114
  20,297
  21,530
  22,816
  24,158
  25,559
Total liabilities, $m
  2,153
  2,526
  2,933
  3,372
  3,844
  4,347
  4,881
  5,445
  6,038
  6,660
  7,311
  7,991
  8,700
  9,438
  10,206
  11,004
  11,834
  12,696
  13,591
  14,523
  15,491
  16,497
  17,545
  18,635
  19,770
  20,953
  22,187
  23,473
  24,815
  26,215
Total equity, $m
  1,678
  1,969
  2,286
  2,628
  2,996
  3,388
  3,804
  4,243
  4,706
  5,191
  5,698
  6,228
  6,781
  7,356
  7,954
  8,576
  9,223
  9,894
  10,593
  11,318
  12,073
  12,857
  13,674
  14,523
  15,408
  16,330
  17,291
  18,294
  19,339
  20,431
Total liabilities and equity, $m
  3,831
  4,495
  5,219
  6,000
  6,840
  7,735
  8,685
  9,688
  10,744
  11,851
  13,009
  14,219
  15,481
  16,794
  18,160
  19,580
  21,057
  22,590
  24,184
  25,841
  27,564
  29,354
  31,219
  33,158
  35,178
  37,283
  39,478
  41,767
  44,154
  46,646
Debt-to-equity ratio
  0.890
  0.950
  1.000
  1.030
  1.060
  1.090
  1.110
  1.130
  1.140
  1.160
  1.170
  1.180
  1.190
  1.190
  1.200
  1.210
  1.210
  1.220
  1.220
  1.230
  1.230
  1.230
  1.240
  1.240
  1.240
  1.240
  1.250
  1.250
  1.250
  1.250
Adjusted equity ratio
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  158
  207
  260
  317
  379
  445
  515
  589
  668
  749
  840
  929
  1,023
  1,120
  1,222
  1,327
  1,437
  1,551
  1,669
  1,793
  1,921
  2,055
  2,194
  2,339
  2,490
  2,647
  2,812
  2,983
  3,163
  3,350
Depreciation, amort., depletion, $m
  158
  184
  212
  243
  276
  312
  349
  389
  431
  474
  514
  562
  611
  663
  717
  773
  831
  892
  955
  1,020
  1,088
  1,159
  1,233
  1,309
  1,389
  1,472
  1,559
  1,649
  1,744
  1,842
Funds from operations, $m
  316
  390
  472
  561
  656
  757
  865
  978
  1,098
  1,224
  1,354
  1,491
  1,634
  1,783
  1,939
  2,100
  2,268
  2,443
  2,624
  2,813
  3,009
  3,214
  3,426
  3,648
  3,879
  4,120
  4,371
  4,633
  4,906
  5,192
Change in working capital, $m
  175
  192
  209
  226
  243
  259
  275
  290
  305
  320
  335
  350
  365
  380
  395
  411
  427
  444
  461
  479
  498
  518
  539
  561
  584
  609
  635
  662
  691
  721
Cash from operations, $m
  141
  198
  263
  334
  413
  498
  590
  688
  793
  903
  1,018
  1,141
  1,269
  1,404
  1,544
  1,689
  1,841
  1,999
  2,163
  2,334
  2,511
  2,696
  2,887
  3,087
  3,295
  3,511
  3,736
  3,971
  4,215
  4,471
Maintenance CAPEX, $m
  -127
  -151
  -177
  -206
  -237
  -270
  -305
  -343
  -383
  -424
  -468
  -514
  -562
  -611
  -663
  -717
  -773
  -831
  -892
  -955
  -1,020
  -1,088
  -1,159
  -1,233
  -1,309
  -1,389
  -1,472
  -1,559
  -1,649
  -1,744
New CAPEX, $m
  -205
  -225
  -246
  -266
  -285
  -304
  -323
  -341
  -359
  -376
  -393
  -411
  -428
  -446
  -464
  -482
  -501
  -521
  -541
  -563
  -585
  -608
  -633
  -659
  -686
  -715
  -745
  -777
  -811
  -847
Cash from investing activities, $m
  -332
  -376
  -423
  -472
  -522
  -574
  -628
  -684
  -742
  -800
  -861
  -925
  -990
  -1,057
  -1,127
  -1,199
  -1,274
  -1,352
  -1,433
  -1,518
  -1,605
  -1,696
  -1,792
  -1,892
  -1,995
  -2,104
  -2,217
  -2,336
  -2,460
  -2,591
Free cash flow, $m
  -192
  -178
  -160
  -137
  -109
  -76
  -38
  5
  52
  103
  157
  216
  280
  346
  416
  490
  567
  647
  730
  816
  906
  999
  1,095
  1,195
  1,299
  1,407
  1,518
  1,635
  1,755
  1,881
Issuance/(repayment) of debt, $m
  338
  373
  407
  440
  472
  503
  534
  564
  593
  622
  651
  680
  709
  738
  768
  798
  830
  862
  896
  931
  968
  1,007
  1,047
  1,090
  1,135
  1,183
  1,233
  1,286
  1,342
  1,401
Issuance/(repurchase) of shares, $m
  107
  84
  57
  25
  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  
  445
  457
  464
  465
  472
  503
  534
  564
  593
  622
  651
  680
  709
  738
  768
  798
  830
  862
  896
  931
  968
  1,007
  1,047
  1,090
  1,135
  1,183
  1,233
  1,286
  1,342
  1,401
Total cash flow (excl. dividends), $m
  253
  279
  304
  328
  363
  427
  496
  568
  645
  726
  808
  896
  988
  1,084
  1,184
  1,288
  1,396
  1,509
  1,626
  1,747
  1,874
  2,006
  2,143
  2,286
  2,434
  2,590
  2,752
  2,921
  3,097
  3,282
Retained Cash Flow (-), $m
  -265
  -291
  -317
  -343
  -368
  -392
  -416
  -439
  -462
  -485
  -507
  -530
  -552
  -575
  -598
  -622
  -647
  -672
  -698
  -726
  -754
  -785
  -816
  -850
  -885
  -922
  -961
  -1,002
  -1,046
  -1,092
Prev. year cash balance distribution, $m
  81
  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
  69
  -12
  -13
  -15
  -5
  35
  80
  129
  183
  240
  301
  366
  436
  509
  586
  666
  750
  837
  927
  1,022
  1,119
  1,221
  1,326
  1,436
  1,550
  1,668
  1,791
  1,918
  2,051
  2,190
Discount rate, %
  5.10
  5.36
  5.62
  5.90
  6.20
  6.51
  6.83
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.27
  12.89
  13.53
  14.21
  14.92
  15.66
  16.45
  17.27
  18.13
  19.04
  19.99
  20.99
PV of cash for distribution, $m
  65
  -11
  -11
  -12
  -4
  24
  50
  74
  95
  112
  125
  134
  140
  141
  138
  133
  125
  114
  103
  90
  78
  66
  54
  44
  34
  26
  20
  15
  10
  7
Current shareholders' claim on cash, %
  95.0
  91.8
  90.0
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3
  89.3

Commercial Metals Company, together with its subsidiaries, manufactures, recycles and markets steel and metal products, related materials and services through a network. The Company's Americas Recycling segment processes scrap metals for use as a raw material by manufacturers of new metal products. The Americas Mills segment consists of steel mills, commonly referred to as minimills that produce reinforcing bar (rebar), angles, flats and rounds. Its Americas Fabrication segment consists of its steel fabrication facilities that bend, weld, cut and fabricate steel, primarily rebar. Its International Mill segment consists of its mill, recycling and fabrication operations located in Poland. Its International Marketing and Distribution segment includes international operations for the sales, distribution and processing of primary and secondary metals, fabricated metals, semi-finished, long and flat steel products, and other industrial products.

FINANCIAL RATIOS  of  Commercial Metals Company (CMC)

Valuation Ratios
P/E Ratio 45.9
Price to Sales 0.5
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow -54.2
Growth Rates
Sales Growth Rate 9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30.7%
Cap. Spend. - 3 Yr. Gr. Rate 15.9%
Financial Strength
Quick Ratio 13
Current Ratio 0.2
LT Debt to Equity 57.5%
Total Debt to Equity 58.9%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.1%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.4%
Return On Equity 3.3%
Return On Equity - 3 Yr. Avg. 4.4%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 12.2%
Gross Margin - 3 Yr. Avg. 12.4%
EBITDA Margin 5.2%
EBITDA Margin - 3 Yr. Avg. 5.8%
Operating Margin 2%
Oper. Margin - 3 Yr. Avg. 2.9%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. 1.5%
Net Profit Margin 1%
Net Profit Margin - 3 Yr. Avg. 1.3%
Effective Tax Rate 26.7%
Eff/ Tax Rate - 3 Yr. Avg. 25.7%
Payout Ratio 121.7%

CMC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CMC stock intrinsic value calculation we used $4644 million for the last fiscal year's total revenue generated by Commercial Metals Company. The default revenue input number comes from 0001 income statement of Commercial Metals Company. 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 CMC stock valuation model: a) initial revenue growth rate of 18.7% 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 5.1%, whose default value for CMC is calculated based on our internal credit rating of Commercial Metals Company, 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 Commercial Metals Company.
    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 CMC stock the variable cost ratio is equal to 90.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $230 million in the base year in the intrinsic value calculation for CMC 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 Commercial Metals Company.

Corporate tax rate of 27% is the nominal tax rate for Commercial Metals Company. 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 CMC 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 CMC are equal to 23.6%.

Life of production assets of 8.6 years is the average useful life of capital assets used in Commercial Metals Company 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 CMC is equal to 20.1%. 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 - $1493.397 million for Commercial Metals Company - 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 117.462 million for Commercial Metals Company 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 Commercial Metals Company at the current share price and the inputted number of shares is $2.1 billion.

RELATED COMPANIES Price Int.Val. Rating
GGB Gerdau S.A. 3.79 0.66  str.sell
STLD Steel Dynamics 31.47 350.33  str.buy
SCHN Schnitzer Stee 25.43 136.50  str.buy
AKS AK Steel Holdi 2.41 10.00  str.buy

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.