Intrinsic value of Compass Minerals International, Inc. - CMP

Previous Close

$51.06

  Intrinsic Value

$23.43

stock screener

  Rating & Target

str. sell

-54%

Previous close

$51.06

 
Intrinsic value

$23.43

 
Up/down potential

-54%

 
Rating

str. sell

We calculate the intrinsic value of CMP 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 1.7

 

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, %
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
  5.57
  5.52
  5.46
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
Revenue, $m
  1,587
  1,683
  1,784
  1,888
  1,998
  2,112
  2,231
  2,355
  2,485
  2,621
  2,763
  2,911
  3,067
  3,230
  3,400
  3,578
  3,765
  3,961
  4,166
  4,381
  4,607
  4,843
  5,091
  5,351
  5,623
  5,910
  6,210
  6,524
  6,855
  7,201
Variable operating expenses, $m
  1,400
  1,482
  1,568
  1,657
  1,750
  1,847
  1,949
  2,055
  2,166
  2,282
  2,356
  2,483
  2,615
  2,754
  2,899
  3,051
  3,211
  3,378
  3,553
  3,736
  3,928
  4,130
  4,341
  4,563
  4,795
  5,039
  5,295
  5,564
  5,845
  6,141
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
  1,400
  1,482
  1,568
  1,657
  1,750
  1,847
  1,949
  2,055
  2,166
  2,282
  2,356
  2,483
  2,615
  2,754
  2,899
  3,051
  3,211
  3,378
  3,553
  3,736
  3,928
  4,130
  4,341
  4,563
  4,795
  5,039
  5,295
  5,564
  5,845
  6,141
Operating income, $m
  187
  201
  216
  231
  247
  264
  282
  300
  319
  339
  407
  429
  452
  476
  501
  527
  554
  583
  613
  645
  678
  713
  750
  788
  828
  870
  914
  961
  1,009
  1,060
EBITDA, $m
  356
  378
  400
  424
  448
  474
  501
  529
  558
  588
  620
  653
  688
  725
  763
  803
  845
  889
  935
  983
  1,034
  1,087
  1,143
  1,201
  1,262
  1,326
  1,394
  1,464
  1,538
  1,616
Interest expense (income), $m
  27
  74
  80
  86
  93
  100
  107
  115
  122
  131
  139
  148
  158
  167
  178
  188
  200
  211
  224
  237
  250
  264
  279
  295
  311
  329
  347
  365
  385
  406
  428
Earnings before tax, $m
  113
  121
  130
  139
  148
  157
  167
  178
  189
  200
  259
  271
  284
  298
  312
  327
  343
  360
  377
  395
  414
  434
  455
  477
  500
  524
  549
  576
  603
  633
Tax expense, $m
  31
  33
  35
  37
  40
  42
  45
  48
  51
  54
  70
  73
  77
  80
  84
  88
  93
  97
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
Net income, $m
  83
  89
  95
  101
  108
  115
  122
  130
  138
  146
  189
  198
  208
  218
  228
  239
  250
  262
  275
  288
  302
  317
  332
  348
  365
  382
  401
  420
  440
  462

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
  2,514
  2,667
  2,827
  2,993
  3,166
  3,347
  3,535
  3,732
  3,938
  4,153
  4,379
  4,614
  4,860
  5,118
  5,388
  5,671
  5,967
  6,277
  6,602
  6,943
  7,301
  7,675
  8,068
  8,480
  8,912
  9,365
  9,841
  10,340
  10,863
  11,413
Adjusted assets (=assets-cash), $m
  2,514
  2,667
  2,827
  2,993
  3,166
  3,347
  3,535
  3,732
  3,938
  4,153
  4,379
  4,614
  4,860
  5,118
  5,388
  5,671
  5,967
  6,277
  6,602
  6,943
  7,301
  7,675
  8,068
  8,480
  8,912
  9,365
  9,841
  10,340
  10,863
  11,413
Revenue / Adjusted assets
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
  0.631
Average production assets, $m
  1,433
  1,520
  1,611
  1,705
  1,804
  1,907
  2,014
  2,127
  2,244
  2,367
  2,495
  2,629
  2,769
  2,916
  3,070
  3,231
  3,400
  3,577
  3,762
  3,956
  4,160
  4,373
  4,597
  4,832
  5,078
  5,336
  5,607
  5,892
  6,190
  6,503
Working capital, $m
  482
  512
  542
  574
  607
  642
  678
  716
  755
  797
  840
  885
  932
  982
  1,034
  1,088
  1,145
  1,204
  1,266
  1,332
  1,400
  1,472
  1,548
  1,627
  1,710
  1,796
  1,888
  1,983
  2,084
  2,189
Total debt, $m
  1,478
  1,596
  1,719
  1,847
  1,981
  2,121
  2,266
  2,418
  2,577
  2,743
  2,917
  3,099
  3,289
  3,488
  3,697
  3,915
  4,143
  4,383
  4,634
  4,897
  5,173
  5,462
  5,765
  6,083
  6,417
  6,767
  7,134
  7,519
  7,923
  8,347
Total liabilities, $m
  1,941
  2,059
  2,182
  2,310
  2,444
  2,584
  2,729
  2,881
  3,040
  3,206
  3,380
  3,562
  3,752
  3,951
  4,160
  4,378
  4,606
  4,846
  5,097
  5,360
  5,636
  5,925
  6,228
  6,546
  6,880
  7,230
  7,597
  7,982
  8,386
  8,810
Total equity, $m
  573
  608
  644
  682
  722
  763
  806
  851
  898
  947
  998
  1,052
  1,108
  1,167
  1,228
  1,293
  1,360
  1,431
  1,505
  1,583
  1,665
  1,750
  1,839
  1,933
  2,032
  2,135
  2,244
  2,357
  2,477
  2,602
Total liabilities and equity, $m
  2,514
  2,667
  2,826
  2,992
  3,166
  3,347
  3,535
  3,732
  3,938
  4,153
  4,378
  4,614
  4,860
  5,118
  5,388
  5,671
  5,966
  6,277
  6,602
  6,943
  7,301
  7,675
  8,067
  8,479
  8,912
  9,365
  9,841
  10,339
  10,863
  11,412
Debt-to-equity ratio
  2.580
  2.620
  2.670
  2.710
  2.740
  2.780
  2.810
  2.840
  2.870
  2.900
  2.920
  2.950
  2.970
  2.990
  3.010
  3.030
  3.050
  3.060
  3.080
  3.090
  3.110
  3.120
  3.130
  3.150
  3.160
  3.170
  3.180
  3.190
  3.200
  3.210
Adjusted equity ratio
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  83
  89
  95
  101
  108
  115
  122
  130
  138
  146
  189
  198
  208
  218
  228
  239
  250
  262
  275
  288
  302
  317
  332
  348
  365
  382
  401
  420
  440
  462
Depreciation, amort., depletion, $m
  169
  177
  184
  192
  201
  210
  219
  228
  238
  249
  213
  225
  237
  249
  262
  276
  291
  306
  322
  338
  356
  374
  393
  413
  434
  456
  479
  504
  529
  556
Funds from operations, $m
  252
  265
  279
  294
  309
  325
  341
  358
  376
  395
  402
  423
  444
  467
  490
  515
  541
  568
  597
  626
  658
  690
  725
  761
  799
  838
  880
  924
  970
  1,018
Change in working capital, $m
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  65
  69
  72
  75
  79
  83
  87
  91
  96
  100
  105
Cash from operations, $m
  224
  236
  249
  262
  275
  290
  305
  320
  337
  354
  359
  378
  397
  417
  439
  461
  484
  509
  534
  561
  589
  619
  649
  682
  716
  751
  789
  828
  869
  912
Maintenance CAPEX, $m
  -115
  -122
  -130
  -138
  -146
  -154
  -163
  -172
  -182
  -192
  -202
  -213
  -225
  -237
  -249
  -262
  -276
  -291
  -306
  -322
  -338
  -356
  -374
  -393
  -413
  -434
  -456
  -479
  -504
  -529
New CAPEX, $m
  -84
  -87
  -91
  -95
  -99
  -103
  -108
  -112
  -117
  -123
  -128
  -134
  -140
  -147
  -154
  -161
  -169
  -177
  -185
  -194
  -204
  -213
  -224
  -235
  -246
  -258
  -271
  -284
  -298
  -313
Cash from investing activities, $m
  -199
  -209
  -221
  -233
  -245
  -257
  -271
  -284
  -299
  -315
  -330
  -347
  -365
  -384
  -403
  -423
  -445
  -468
  -491
  -516
  -542
  -569
  -598
  -628
  -659
  -692
  -727
  -763
  -802
  -842
Free cash flow, $m
  25
  26
  28
  29
  31
  33
  34
  36
  38
  39
  28
  30
  32
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  54
  57
  59
  62
  64
  67
  70
Issuance/(repayment) of debt, $m
  113
  118
  123
  128
  134
  140
  146
  152
  159
  166
  174
  182
  190
  199
  208
  218
  229
  240
  251
  263
  276
  289
  303
  318
  334
  350
  367
  385
  404
  424
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  113
  118
  123
  128
  134
  140
  146
  152
  159
  166
  174
  182
  190
  199
  208
  218
  229
  240
  251
  263
  276
  289
  303
  318
  334
  350
  367
  385
  404
  424
Total cash flow (excl. dividends), $m
  138
  144
  151
  158
  165
  172
  180
  188
  197
  205
  202
  212
  222
  233
  244
  256
  268
  281
  294
  308
  323
  339
  355
  372
  390
  409
  429
  450
  471
  494
Retained Cash Flow (-), $m
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -64
  -68
  -71
  -74
  -78
  -81
  -85
  -90
  -94
  -99
  -103
  -108
  -114
  -119
  -125
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
  105
  109
  115
  120
  125
  131
  137
  143
  150
  156
  151
  158
  166
  174
  182
  191
  200
  210
  220
  231
  242
  253
  266
  278
  292
  306
  320
  336
  352
  369
Discount rate, %
  10.10
  10.61
  11.14
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.05
  20.00
  21.00
  22.05
  23.15
  24.31
  25.52
  26.80
  28.14
  29.55
  31.02
  32.57
  34.20
  35.91
  37.71
  39.59
  41.57
PV of cash for distribution, $m
  95
  89
  83
  77
  70
  63
  56
  49
  43
  36
  28
  23
  19
  15
  12
  9
  7
  5
  4
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  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
  100.0

Compass Minerals International, Inc. (CMI) is a provider of essential minerals that solve nature's challenges, including salt for winter roadway safety and other consumer, industrial and agricultural uses; specialty plant nutrition minerals for the quality and yield of crops, and specialty chemicals for water treatment and other industrial processes. The Company has three segments: Salt, Plant Nutrition North America and Plant Nutrition South America. The Salt segment produces and markets salt and magnesium chloride for use in road deicing and dust control, food processing, water softeners, and agricultural and industrial applications. Its Plant Nutrition North America segment includes sales of sulfate of potash (SOP) specialty fertilizer and micronutrients. The Plant Nutrition South America segment operates two primary businesses in Brazil: agricultural productivity and chemical solutions.

FINANCIAL RATIOS  of  Compass Minerals International, Inc. (CMP)

Valuation Ratios
P/E Ratio 10.6
Price to Sales 1.5
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 10.3
Price to Free Cash Flow -115
Growth Rates
Sales Growth Rate 3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.5%
Cap. Spend. - 3 Yr. Gr. Rate 8.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 166.7%
Total Debt to Equity 184.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 9.1%
Ret/ On Assets - 3 Yr. Avg. 11.6%
Return On Total Capital 9.6%
Ret/ On T. Cap. - 3 Yr. Avg. 13.5%
Return On Equity 24%
Return On Equity - 3 Yr. Avg. 28.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 26.4%
Gross Margin - 3 Yr. Avg. 29.7%
EBITDA Margin 27.6%
EBITDA Margin - 3 Yr. Avg. 28.7%
Operating Margin 15.4%
Oper. Margin - 3 Yr. Avg. 19.9%
Pre-Tax Margin 17.3%
Pre-Tax Margin - 3 Yr. Avg. 19.9%
Net Profit Margin 14.3%
Net Profit Margin - 3 Yr. Avg. 15.3%
Effective Tax Rate 17.3%
Eff/ Tax Rate - 3 Yr. Avg. 22.9%
Payout Ratio 57.7%

CMP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CMP stock intrinsic value calculation we used $1494 million for the last fiscal year's total revenue generated by Compass Minerals International, Inc.. The default revenue input number comes from 0001 income statement of Compass Minerals International, 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 CMP stock valuation model: a) initial revenue growth rate of 6.2% 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 10.1%, whose default value for CMP is calculated based on our internal credit rating of Compass Minerals International, 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 Compass Minerals International, 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 CMP stock the variable cost ratio is equal to 88.4%.

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 CMP 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 Compass Minerals International, Inc..

Corporate tax rate of 27% is the nominal tax rate for Compass Minerals International, 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 CMP 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 CMP are equal to 90.3%.

Life of production assets of 11.7 years is the average useful life of capital assets used in Compass Minerals International, 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 CMP is equal to 30.4%. 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 - $540.2 million for Compass Minerals International, 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 33.819 million for Compass Minerals International, 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 Compass Minerals International, Inc. at the current share price and the inputted number of shares is $1.7 billion.

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