Intrinsic value of CARBO Ceramics - CRR

Previous Close

$6.66

  Intrinsic Value

$5.21

stock screener

  Rating & Target

sell

-22%

  Value-price divergence*

+42%

Previous close

$6.66

 
Intrinsic value

$5.21

 
Up/down potential

-22%

 
Rating

sell

 
Value-price divergence*

+42%

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

We calculate the intrinsic value of CRR 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 0.2

 

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, %
  -63.21
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  103
  165
  255
  381
  552
  779
  1,072
  1,438
  1,889
  2,430
  3,070
  3,812
  4,660
  5,617
  6,684
  7,859
  9,141
  10,530
  12,023
  13,616
  15,309
  17,098
  18,982
  20,959
  23,028
  25,190
  27,444
  29,792
  32,234
  34,774
  37,413
Variable operating expenses, $m
 
  200
  309
  461
  669
  944
  1,297
  1,741
  2,286
  2,941
  3,715
  4,613
  5,640
  6,798
  8,088
  9,510
  11,062
  12,743
  14,549
  16,477
  18,525
  20,690
  22,970
  25,363
  27,867
  30,483
  33,211
  36,051
  39,007
  42,080
  45,274
Fixed operating expenses, $m
 
  110
  112
  115
  118
  121
  124
  127
  130
  134
  137
  140
  144
  148
  151
  155
  159
  163
  167
  171
  175
  180
  184
  189
  194
  198
  203
  208
  214
  219
  224
Total operating expenses, $m
  229
  310
  421
  576
  787
  1,065
  1,421
  1,868
  2,416
  3,075
  3,852
  4,753
  5,784
  6,946
  8,239
  9,665
  11,221
  12,906
  14,716
  16,648
  18,700
  20,870
  23,154
  25,552
  28,061
  30,681
  33,414
  36,259
  39,221
  42,299
  45,498
Operating income, $m
  -126
  -145
  -166
  -196
  -235
  -285
  -350
  -430
  -528
  -645
  -782
  -941
  -1,123
  -1,328
  -1,556
  -1,806
  -2,080
  -2,375
  -2,693
  -3,032
  -3,392
  -3,772
  -4,173
  -4,593
  -5,032
  -5,491
  -5,970
  -6,468
  -6,987
  -7,525
  -8,086
EBITDA, $m
  -78
  -68
  -48
  -19
  21
  76
  147
  236
  347
  480
  639
  823
  1,033
  1,272
  1,537
  1,830
  2,151
  2,497
  2,870
  3,269
  3,692
  4,140
  4,611
  5,106
  5,624
  6,166
  6,730
  7,318
  7,930
  8,566
  9,227
Interest expense (income), $m
  5
  4
  7
  12
  19
  28
  40
  55
  75
  98
  127
  161
  200
  245
  295
  352
  414
  482
  555
  634
  718
  808
  902
  1,002
  1,106
  1,215
  1,330
  1,449
  1,573
  1,702
  1,836
Earnings before tax, $m
  -131
  -149
  -174
  -208
  -253
  -313
  -389
  -485
  -602
  -743
  -909
  -1,102
  -1,323
  -1,573
  -1,851
  -2,158
  -2,493
  -2,857
  -3,248
  -3,666
  -4,110
  -4,580
  -5,075
  -5,594
  -6,138
  -6,707
  -7,300
  -7,917
  -8,559
  -9,227
  -9,922
Tax expense, $m
  -51
  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
Net income, $m
  -80
  -149
  -174
  -208
  -253
  -313
  -389
  -485
  -602
  -743
  -909
  -1,102
  -1,323
  -1,573
  -1,851
  -2,158
  -2,493
  -2,857
  -3,248
  -3,666
  -4,110
  -4,580
  -5,075
  -5,594
  -6,138
  -6,707
  -7,300
  -7,917
  -8,559
  -9,227
  -9,922

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  92
  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
  723
  1,011
  1,562
  2,336
  3,390
  4,782
  6,574
  8,825
  11,587
  14,910
  18,833
  23,386
  28,591
  34,462
  41,003
  48,213
  56,083
  64,603
  73,758
  83,535
  93,918
  104,894
  116,452
  128,582
  141,278
  154,541
  168,369
  182,771
  197,755
  213,335
  229,528
Adjusted assets (=assets-cash), $m
  631
  1,011
  1,562
  2,336
  3,390
  4,782
  6,574
  8,825
  11,587
  14,910
  18,833
  23,386
  28,591
  34,462
  41,003
  48,213
  56,083
  64,603
  73,758
  83,535
  93,918
  104,894
  116,452
  128,582
  141,278
  154,541
  168,369
  182,771
  197,755
  213,335
  229,528
Revenue / Adjusted assets
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
  0.163
Average production assets, $m
  520
  831
  1,284
  1,921
  2,787
  3,932
  5,405
  7,255
  9,527
  12,259
  15,484
  19,227
  23,507
  28,334
  33,712
  39,639
  46,110
  53,114
  60,642
  68,680
  77,217
  86,241
  95,743
  105,716
  116,155
  127,059
  138,429
  150,269
  162,589
  175,398
  188,712
Working capital, $m
  182
  82
  127
  190
  276
  390
  536
  719
  944
  1,215
  1,535
  1,906
  2,330
  2,809
  3,342
  3,929
  4,571
  5,265
  6,011
  6,808
  7,654
  8,549
  9,491
  10,479
  11,514
  12,595
  13,722
  14,896
  16,117
  17,387
  18,707
Total debt, $m
  81
  123
  203
  316
  470
  673
  935
  1,263
  1,667
  2,152
  2,725
  3,389
  4,149
  5,006
  5,961
  7,014
  8,163
  9,407
  10,744
  12,171
  13,687
  15,290
  16,977
  18,748
  20,602
  22,538
  24,557
  26,660
  28,847
  31,122
  33,486
Total liabilities, $m
  107
  148
  228
  341
  495
  698
  960
  1,288
  1,692
  2,177
  2,750
  3,414
  4,174
  5,031
  5,986
  7,039
  8,188
  9,432
  10,769
  12,196
  13,712
  15,315
  17,002
  18,773
  20,627
  22,563
  24,582
  26,685
  28,872
  31,147
  33,511
Total equity, $m
  617
  863
  1,334
  1,995
  2,895
  4,084
  5,614
  7,536
  9,896
  12,733
  16,083
  19,971
  24,417
  29,431
  35,017
  41,173
  47,895
  55,171
  62,990
  71,339
  80,206
  89,580
  99,450
  109,809
  120,652
  131,978
  143,788
  156,087
  168,883
  182,188
  196,017
Total liabilities and equity, $m
  724
  1,011
  1,562
  2,336
  3,390
  4,782
  6,574
  8,824
  11,588
  14,910
  18,833
  23,385
  28,591
  34,462
  41,003
  48,212
  56,083
  64,603
  73,759
  83,535
  93,918
  104,895
  116,452
  128,582
  141,279
  154,541
  168,370
  182,772
  197,755
  213,335
  229,528
Debt-to-equity ratio
  0.131
  0.140
  0.150
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
Adjusted equity ratio
  0.834
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -80
  -149
  -174
  -208
  -253
  -313
  -389
  -485
  -602
  -743
  -909
  -1,102
  -1,323
  -1,573
  -1,851
  -2,158
  -2,493
  -2,857
  -3,248
  -3,666
  -4,110
  -4,580
  -5,075
  -5,594
  -6,138
  -6,707
  -7,300
  -7,917
  -8,559
  -9,227
  -9,922
Depreciation, amort., depletion, $m
  48
  77
  118
  177
  256
  361
  496
  666
  874
  1,125
  1,421
  1,764
  2,157
  2,599
  3,093
  3,637
  4,230
  4,873
  5,563
  6,301
  7,084
  7,912
  8,784
  9,699
  10,656
  11,657
  12,700
  13,786
  14,916
  16,092
  17,313
Funds from operations, $m
  45
  -72
  -55
  -31
  3
  48
  107
  181
  272
  382
  512
  662
  834
  1,027
  1,242
  1,479
  1,737
  2,016
  2,315
  2,635
  2,974
  3,332
  3,709
  4,104
  4,518
  4,950
  5,400
  5,869
  6,357
  6,864
  7,391
Change in working capital, $m
  63
  31
  45
  63
  86
  113
  146
  183
  225
  271
  320
  371
  424
  478
  533
  588
  641
  694
  746
  797
  846
  895
  942
  989
  1,035
  1,081
  1,127
  1,174
  1,221
  1,270
  1,320
Cash from operations, $m
  -18
  -103
  -100
  -94
  -83
  -65
  -39
  -2
  47
  111
  192
  291
  409
  548
  709
  891
  1,095
  1,322
  1,569
  1,838
  2,128
  2,438
  2,767
  3,116
  3,483
  3,869
  4,273
  4,695
  5,136
  5,594
  6,072
Maintenance CAPEX, $m
  0
  -48
  -76
  -118
  -176
  -256
  -361
  -496
  -666
  -874
  -1,125
  -1,421
  -1,764
  -2,157
  -2,599
  -3,093
  -3,637
  -4,230
  -4,873
  -5,563
  -6,301
  -7,084
  -7,912
  -8,784
  -9,699
  -10,656
  -11,657
  -12,700
  -13,786
  -14,916
  -16,092
New CAPEX, $m
  -7
  -312
  -453
  -636
  -866
  -1,145
  -1,473
  -1,850
  -2,271
  -2,732
  -3,225
  -3,744
  -4,280
  -4,827
  -5,378
  -5,927
  -6,471
  -7,005
  -7,528
  -8,038
  -8,537
  -9,024
  -9,502
  -9,973
  -10,439
  -10,904
  -11,370
  -11,841
  -12,319
  -12,809
  -13,314
Cash from investing activities, $m
  -7
  -360
  -529
  -754
  -1,042
  -1,401
  -1,834
  -2,346
  -2,937
  -3,606
  -4,350
  -5,165
  -6,044
  -6,984
  -7,977
  -9,020
  -10,108
  -11,235
  -12,401
  -13,601
  -14,838
  -16,108
  -17,414
  -18,757
  -20,138
  -21,560
  -23,027
  -24,541
  -26,105
  -27,725
  -29,406
Free cash flow, $m
  -25
  -462
  -630
  -848
  -1,125
  -1,466
  -1,873
  -2,348
  -2,890
  -3,495
  -4,158
  -4,873
  -5,635
  -6,435
  -7,268
  -8,129
  -9,012
  -9,914
  -10,831
  -11,764
  -12,710
  -13,671
  -14,647
  -15,641
  -16,654
  -17,691
  -18,753
  -19,845
  -20,970
  -22,131
  -23,334
Issuance/(repayment) of debt, $m
  -8
  56
  80
  113
  154
  203
  262
  329
  403
  485
  573
  665
  760
  857
  955
  1,053
  1,149
  1,244
  1,337
  1,427
  1,516
  1,602
  1,687
  1,771
  1,854
  1,936
  2,019
  2,103
  2,188
  2,275
  2,364
Issuance/(repurchase) of shares, $m
  0
  473
  644
  869
  1,153
  1,502
  1,920
  2,407
  2,961
  3,581
  4,259
  4,991
  5,769
  6,586
  7,437
  8,315
  9,215
  10,133
  11,067
  12,015
  12,977
  13,953
  14,945
  15,953
  16,981
  18,032
  19,109
  20,216
  21,356
  22,533
  23,751
Cash from financing (excl. dividends), $m  
  37
  529
  724
  982
  1,307
  1,705
  2,182
  2,736
  3,364
  4,066
  4,832
  5,656
  6,529
  7,443
  8,392
  9,368
  10,364
  11,377
  12,404
  13,442
  14,493
  15,555
  16,632
  17,724
  18,835
  19,968
  21,128
  22,319
  23,544
  24,808
  26,115
Total cash flow (excl. dividends), $m
  13
  66
  95
  133
  181
  240
  308
  387
  475
  571
  674
  782
  894
  1,008
  1,123
  1,238
  1,352
  1,463
  1,573
  1,679
  1,783
  1,885
  1,985
  2,083
  2,181
  2,278
  2,375
  2,474
  2,574
  2,676
  2,781
Retained Cash Flow (-), $m
  25
  -473
  -644
  -869
  -1,153
  -1,502
  -1,920
  -2,407
  -2,961
  -3,581
  -4,259
  -4,991
  -5,769
  -6,586
  -7,437
  -8,315
  -9,215
  -10,133
  -11,067
  -12,015
  -12,977
  -13,953
  -14,945
  -15,953
  -16,981
  -18,032
  -19,109
  -20,216
  -21,356
  -22,533
  -23,751
Prev. year cash balance distribution, $m
 
  78
  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
 
  -329
  -549
  -735
  -972
  -1,263
  -1,612
  -2,020
  -2,487
  -3,010
  -3,585
  -4,208
  -4,875
  -5,578
  -6,313
  -7,076
  -7,863
  -8,670
  -9,495
  -10,336
  -11,194
  -12,068
  -12,960
  -13,870
  -14,801
  -15,755
  -16,734
  -17,742
  -18,782
  -19,857
  -20,970
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -315
  -503
  -640
  -800
  -979
  -1,170
  -1,365
  -1,554
  -1,729
  -1,880
  -1,999
  -2,080
  -2,121
  -2,120
  -2,078
  -1,998
  -1,886
  -1,749
  -1,591
  -1,422
  -1,248
  -1,075
  -909
  -754
  -613
  -488
  -381
  -291
  -217
  -158
Current shareholders' claim on cash, %
  100
  44.4
  21.5
  11.1
  6.1
  3.5
  2.1
  1.3
  0.8
  0.5
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.1
  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

CARBO Ceramics Inc. is a technology company that provides products and services to the global oil and gas and industrial markets. The Company operates through two segments: Oilfield Technologies and Services, and Environmental Products and Services. The Company's oilfield technologies and services segment includes the manufacturing and selling of proppant products for use primarily in the hydraulic fracturing of oil and natural gas wells, Fracpro software for the design of fracture treatments, and StrataGen consulting services for the optimizing of well completions. The Company's environmental products and services segment is intended to protect operators' assets, minimize environmental risks, and lower lease operating expense (LOE). The Company, through Asset Guard Products Inc. (AGPI), provides spill prevention, containment and countermeasure systems for the oil and gas industry. The Company manufactures various ceramic proppants.

FINANCIAL RATIOS  of  CARBO Ceramics (CRR)

Valuation Ratios
P/E Ratio -2.2
Price to Sales 1.7
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow -9.9
Price to Free Cash Flow -7.2
Growth Rates
Sales Growth Rate -63.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -88.9%
Cap. Spend. - 3 Yr. Gr. Rate -41.2%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity 10.9%
Total Debt to Equity 13.1%
Interest Coverage -25
Management Effectiveness
Return On Assets -9.9%
Ret/ On Assets - 3 Yr. Avg. -5.3%
Return On Total Capital -11.2%
Ret/ On T. Cap. - 3 Yr. Avg. -6.1%
Return On Equity -12.7%
Return On Equity - 3 Yr. Avg. -7%
Asset Turnover 0.1
Profitability Ratios
Gross Margin -82.5%
Gross Margin - 3 Yr. Avg. -24.9%
EBITDA Margin -75.7%
EBITDA Margin - 3 Yr. Avg. -30.6%
Operating Margin -122.3%
Oper. Margin - 3 Yr. Avg. -55.4%
Pre-Tax Margin -127.2%
Pre-Tax Margin - 3 Yr. Avg. -57.1%
Net Profit Margin -77.7%
Net Profit Margin - 3 Yr. Avg. -36.1%
Effective Tax Rate 38.9%
Eff/ Tax Rate - 3 Yr. Avg. 37.2%
Payout Ratio 0%

CRR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRR stock intrinsic value calculation we used $103 million for the last fiscal year's total revenue generated by CARBO Ceramics. The default revenue input number comes from 2016 income statement of CARBO Ceramics. 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 CRR stock valuation model: a) initial revenue growth rate of 60% 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 4.3%, whose default value for CRR is calculated based on our internal credit rating of CARBO Ceramics, 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 CARBO Ceramics.
    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 CRR stock the variable cost ratio is equal to 121.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $107 million in the base year in the intrinsic value calculation for CRR 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 5.9% for CARBO Ceramics.

Corporate tax rate of 27% is the nominal tax rate for CARBO Ceramics. 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 CRR 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 CRR are equal to 504.4%.

Life of production assets of 10.9 years is the average useful life of capital assets used in CARBO Ceramics 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 CRR is equal to 50%. 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 - $617 million for CARBO Ceramics - 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 29.41 million for CARBO Ceramics 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 CARBO Ceramics at the current share price and the inputted number of shares is $0.2 billion.

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Financial statements of CRR
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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