Intrinsic value of Covanta Holding Corporation - CVA

Previous Close

$17.21

  Intrinsic Value

$1.75

stock screener

  Rating & Target

str. sell

-90%

Previous close

$17.21

 
Intrinsic value

$1.75

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of CVA 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 2.3

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,905
  1,949
  1,999
  2,056
  2,118
  2,186
  2,261
  2,341
  2,428
  2,521
  2,621
  2,727
  2,841
  2,961
  3,089
  3,224
  3,367
  3,519
  3,679
  3,848
  4,026
  4,214
  4,413
  4,622
  4,842
  5,073
  5,317
  5,574
  5,844
  6,128
Variable operating expenses, $m
  1,794
  1,834
  1,879
  1,930
  1,987
  2,049
  2,117
  2,190
  2,269
  2,354
  2,385
  2,482
  2,585
  2,694
  2,810
  2,933
  3,064
  3,202
  3,347
  3,501
  3,663
  3,835
  4,015
  4,205
  4,405
  4,616
  4,838
  5,071
  5,317
  5,575
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
  1,794
  1,834
  1,879
  1,930
  1,987
  2,049
  2,117
  2,190
  2,269
  2,354
  2,385
  2,482
  2,585
  2,694
  2,810
  2,933
  3,064
  3,202
  3,347
  3,501
  3,663
  3,835
  4,015
  4,205
  4,405
  4,616
  4,838
  5,071
  5,317
  5,575
Operating income, $m
  112
  116
  120
  125
  131
  137
  144
  151
  159
  167
  236
  246
  256
  267
  278
  291
  303
  317
  332
  347
  363
  380
  398
  416
  436
  457
  479
  502
  527
  552
EBITDA, $m
  373
  381
  391
  402
  414
  428
  442
  458
  475
  493
  513
  534
  556
  579
  604
  631
  659
  689
  720
  753
  788
  825
  864
  904
  948
  993
  1,041
  1,091
  1,144
  1,199
Interest expense (income), $m
  150
  145
  149
  153
  158
  164
  171
  178
  186
  194
  203
  213
  223
  234
  246
  258
  272
  286
  301
  317
  333
  351
  369
  389
  410
  432
  454
  479
  504
  531
  559
Earnings before tax, $m
  -33
  -33
  -33
  -33
  -33
  -34
  -34
  -35
  -35
  -36
  24
  23
  22
  21
  20
  19
  18
  16
  15
  13
  12
  10
  9
  7
  5
  3
  1
  -2
  -4
  -7
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  6
  6
  6
  6
  5
  5
  5
  4
  4
  4
  3
  3
  2
  2
  1
  1
  0
  0
  0
  0
Net income, $m
  -33
  -33
  -33
  -33
  -33
  -34
  -34
  -35
  -35
  -36
  17
  17
  16
  15
  14
  14
  13
  12
  11
  10
  9
  8
  6
  5
  4
  2
  0
  -2
  -4
  -7

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
  3,920
  4,011
  4,114
  4,229
  4,358
  4,498
  4,652
  4,817
  4,996
  5,188
  5,393
  5,612
  5,845
  6,093
  6,355
  6,634
  6,929
  7,240
  7,570
  7,918
  8,285
  8,672
  9,080
  9,510
  9,962
  10,439
  10,941
  11,469
  12,024
  12,608
Adjusted assets (=assets-cash), $m
  3,920
  4,011
  4,114
  4,229
  4,358
  4,498
  4,652
  4,817
  4,996
  5,188
  5,393
  5,612
  5,845
  6,093
  6,355
  6,634
  6,929
  7,240
  7,570
  7,918
  8,285
  8,672
  9,080
  9,510
  9,962
  10,439
  10,941
  11,469
  12,024
  12,608
Revenue / Adjusted assets
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
Average production assets, $m
  2,917
  2,984
  3,061
  3,147
  3,242
  3,347
  3,461
  3,584
  3,717
  3,860
  4,013
  4,176
  4,349
  4,533
  4,729
  4,936
  5,155
  5,387
  5,632
  5,891
  6,164
  6,452
  6,756
  7,076
  7,413
  7,767
  8,141
  8,533
  8,947
  9,381
Working capital, $m
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  45
  46
  48
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  79
  82
  86
  90
  95
  99
  104
Total debt, $m
  2,561
  2,639
  2,729
  2,830
  2,942
  3,065
  3,199
  3,344
  3,500
  3,667
  3,846
  4,037
  4,241
  4,457
  4,686
  4,929
  5,187
  5,459
  5,746
  6,050
  6,371
  6,708
  7,065
  7,440
  7,835
  8,251
  8,689
  9,150
  9,635
  10,145
Total liabilities, $m
  3,423
  3,501
  3,591
  3,692
  3,804
  3,927
  4,061
  4,206
  4,362
  4,529
  4,708
  4,899
  5,103
  5,319
  5,548
  5,791
  6,049
  6,321
  6,608
  6,912
  7,233
  7,570
  7,927
  8,302
  8,697
  9,113
  9,551
  10,012
  10,497
  11,007
Total equity, $m
  498
  509
  522
  537
  553
  571
  591
  612
  635
  659
  685
  713
  742
  774
  807
  842
  880
  920
  961
  1,006
  1,052
  1,101
  1,153
  1,208
  1,265
  1,326
  1,389
  1,457
  1,527
  1,601
Total liabilities and equity, $m
  3,921
  4,010
  4,113
  4,229
  4,357
  4,498
  4,652
  4,818
  4,997
  5,188
  5,393
  5,612
  5,845
  6,093
  6,355
  6,633
  6,929
  7,241
  7,569
  7,918
  8,285
  8,671
  9,080
  9,510
  9,962
  10,439
  10,940
  11,469
  12,024
  12,608
Debt-to-equity ratio
  5.140
  5.180
  5.220
  5.270
  5.320
  5.370
  5.410
  5.470
  5.520
  5.570
  5.620
  5.660
  5.710
  5.760
  5.810
  5.850
  5.890
  5.940
  5.980
  6.020
  6.050
  6.090
  6.130
  6.160
  6.190
  6.220
  6.250
  6.280
  6.310
  6.340
Adjusted equity ratio
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -33
  -33
  -33
  -33
  -33
  -34
  -34
  -35
  -35
  -36
  17
  17
  16
  15
  14
  14
  13
  12
  11
  10
  9
  8
  6
  5
  4
  2
  0
  -2
  -4
  -7
Depreciation, amort., depletion, $m
  261
  266
  271
  277
  284
  291
  299
  307
  316
  326
  277
  288
  300
  313
  326
  340
  356
  372
  388
  406
  425
  445
  466
  488
  511
  536
  561
  589
  617
  647
Funds from operations, $m
  228
  233
  238
  244
  250
  257
  265
  273
  281
  290
  294
  305
  316
  328
  341
  354
  368
  383
  399
  416
  434
  453
  472
  493
  515
  538
  562
  587
  613
  640
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
Cash from operations, $m
  228
  232
  237
  243
  249
  256
  263
  271
  280
  289
  292
  303
  314
  326
  338
  352
  366
  381
  397
  413
  431
  449
  469
  489
  511
  534
  558
  582
  608
  636
Maintenance CAPEX, $m
  -197
  -201
  -206
  -211
  -217
  -224
  -231
  -239
  -247
  -256
  -266
  -277
  -288
  -300
  -313
  -326
  -340
  -356
  -372
  -388
  -406
  -425
  -445
  -466
  -488
  -511
  -536
  -561
  -589
  -617
New CAPEX, $m
  -57
  -67
  -77
  -86
  -95
  -105
  -114
  -123
  -133
  -143
  -153
  -163
  -173
  -184
  -196
  -207
  -219
  -232
  -245
  -259
  -273
  -288
  -304
  -320
  -337
  -355
  -373
  -393
  -413
  -435
Cash from investing activities, $m
  -254
  -268
  -283
  -297
  -312
  -329
  -345
  -362
  -380
  -399
  -419
  -440
  -461
  -484
  -509
  -533
  -559
  -588
  -617
  -647
  -679
  -713
  -749
  -786
  -825
  -866
  -909
  -954
  -1,002
  -1,052
Free cash flow, $m
  -27
  -36
  -45
  -54
  -63
  -72
  -81
  -91
  -100
  -110
  -127
  -137
  -147
  -158
  -170
  -182
  -194
  -207
  -220
  -234
  -249
  -264
  -280
  -296
  -314
  -332
  -351
  -372
  -393
  -416
Issuance/(repayment) of debt, $m
  67
  79
  90
  101
  112
  123
  134
  145
  156
  167
  179
  191
  203
  216
  229
  243
  257
  272
  288
  304
  320
  338
  356
  375
  395
  416
  438
  461
  485
  510
Issuance/(repurchase) of shares, $m
  44
  44
  46
  48
  50
  51
  54
  56
  58
  60
  9
  11
  14
  16
  19
  22
  25
  28
  31
  34
  38
  42
  46
  50
  54
  59
  63
  69
  75
  81
Cash from financing (excl. dividends), $m  
  111
  123
  136
  149
  162
  174
  188
  201
  214
  227
  188
  202
  217
  232
  248
  265
  282
  300
  319
  338
  358
  380
  402
  425
  449
  475
  501
  530
  560
  591
Total cash flow (excl. dividends), $m
  84
  87
  91
  95
  98
  102
  106
  110
  113
  117
  61
  65
  70
  74
  79
  83
  88
  93
  98
  104
  110
  116
  122
  129
  135
  143
  150
  158
  166
  175
Retained Cash Flow (-), $m
  -44
  -44
  -46
  -48
  -50
  -51
  -54
  -56
  -58
  -60
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -57
  -61
  -64
  -69
  -75
  -81
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
  40
  43
  45
  47
  49
  51
  52
  54
  56
  57
  35
  38
  40
  43
  45
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  89
  91
  94
Discount rate, %
  12.00
  12.60
  13.23
  13.89
  14.59
  15.32
  16.08
  16.89
  17.73
  18.62
  19.55
  20.52
  21.55
  22.63
  23.76
  24.95
  26.19
  27.50
  28.88
  30.32
  31.84
  33.43
  35.10
  36.86
  38.70
  40.64
  42.67
  44.80
  47.04
  49.39
PV of cash for distribution, $m
  36
  34
  31
  28
  25
  22
  18
  15
  13
  10
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.1
  96.2
  94.4
  92.6
  90.8
  89.0
  87.2
  85.5
  83.8
  82.1
  81.9
  81.6
  81.2
  80.8
  80.4
  80.0
  79.5
  78.9
  78.4
  77.8
  77.1
  76.5
  75.8
  75.1
  74.4
  73.6
  72.9
  72.1
  71.3
  70.5

Covanta Holding Corporation is a holding company. The Company, through its subsidiaries, owns and operates infrastructure for the conversion of waste to energy, as well as other waste disposal and renewable energy production businesses. The Company operates through North America segment, which consists of waste and energy services operations located primarily in the United States and Canada. Outside of North America, the Company is constructing an energy-from-waste (EfW) facility in Dublin, Ireland. The Company holds interests in an EfW facility in Italy and an infrastructure business in China, which is engaged in EfW operations. These EfW projects generate revenue from three main sources: fees charged for operating projects or processing waste received; the sale of electricity and/or steam, and the sale of ferrous and non-ferrous metals that are recovered from the waste stream as part of the EfW process.

FINANCIAL RATIOS  of  Covanta Holding Corporation (CVA)

Valuation Ratios
P/E Ratio -559.3
Price to Sales 1.3
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow -29.1
Growth Rates
Sales Growth Rate 3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4.5%
Cap. Spend. - 3 Yr. Gr. Rate 13.8%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 555.2%
Total Debt to Equity 561.8%
Interest Coverage 1
Management Effectiveness
Return On Assets -2.1%
Ret/ On Assets - 3 Yr. Avg. -5%
Return On Total Capital -0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity -0.7%
Return On Equity - 3 Yr. Avg. 2.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 30.7%
Gross Margin - 3 Yr. Avg. 33.1%
EBITDA Margin 21.8%
EBITDA Margin - 3 Yr. Avg. 20.2%
Operating Margin 6.4%
Oper. Margin - 3 Yr. Avg. 7.3%
Pre-Tax Margin 0.8%
Pre-Tax Margin - 3 Yr. Avg. -0.2%
Net Profit Margin -0.2%
Net Profit Margin - 3 Yr. Avg. 1.3%
Effective Tax Rate 157.1%
Eff/ Tax Rate - 3 Yr. Avg. 277.4%
Payout Ratio -3275%

CVA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVA stock intrinsic value calculation we used $1868 million for the last fiscal year's total revenue generated by Covanta Holding Corporation. The default revenue input number comes from 0001 income statement of Covanta Holding Corporation. 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 CVA stock valuation model: a) initial revenue growth rate of 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 12%, whose default value for CVA is calculated based on our internal credit rating of Covanta Holding Corporation, 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 Covanta Holding Corporation.
    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 CVA stock the variable cost ratio is equal to 94.2%.

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 CVA 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 5.8% for Covanta Holding Corporation.

Corporate tax rate of 27% is the nominal tax rate for Covanta Holding Corporation. 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 CVA 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 CVA are equal to 153.1%.

Life of production assets of 14.5 years is the average useful life of capital assets used in Covanta Holding Corporation 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 CVA is equal to 1.7%. 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 - $487 million for Covanta Holding Corporation - 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 131.071 million for Covanta Holding Corporation 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 Covanta Holding Corporation at the current share price and the inputted number of shares is $2.3 billion.

RELATED COMPANIES Price Int.Val. Rating
CLH Clean Harbors, 74.25 37.05  sell
CWST Casella Waste 43.47 20.49  sell
AT Atlantic Power 2.31 0.18  str.sell
PESI Perma-Fix Envi 3.89 0.39  str.sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

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