Intrinsic value of Casella Waste Systems Cl A - CWST

Previous Close

$25.65

  Intrinsic Value

$1.67

stock screener

  Rating & Target

str. sell

-93%

Previous close

$25.65

 
Intrinsic value

$1.67

 
Up/down potential

-93%

 
Rating

str. sell

We calculate the intrinsic value of CWST 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 2017), $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 1.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.17
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
Revenue, $m
  636
  674
  713
  755
  798
  843
  890
  939
  991
  1,044
  1,101
  1,159
  1,221
  1,285
  1,353
  1,424
  1,498
  1,575
  1,657
  1,742
  1,831
  1,925
  2,024
  2,127
  2,235
  2,348
  2,468
  2,593
  2,724
  2,861
Variable operating expenses, $m
  585
  619
  654
  692
  730
  771
  813
  858
  904
  952
  990
  1,042
  1,098
  1,156
  1,216
  1,280
  1,347
  1,416
  1,490
  1,566
  1,647
  1,731
  1,819
  1,912
  2,010
  2,112
  2,219
  2,331
  2,449
  2,573
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
  585
  619
  654
  692
  730
  771
  813
  858
  904
  952
  990
  1,042
  1,098
  1,156
  1,216
  1,280
  1,347
  1,416
  1,490
  1,566
  1,647
  1,731
  1,819
  1,912
  2,010
  2,112
  2,219
  2,331
  2,449
  2,573
Operating income, $m
  51
  55
  59
  63
  67
  72
  77
  82
  87
  92
  111
  117
  123
  130
  136
  144
  151
  159
  167
  176
  185
  194
  204
  215
  225
  237
  249
  262
  275
  289
EBITDA, $m
  118
  125
  133
  140
  148
  157
  165
  175
  184
  194
  205
  215
  227
  239
  251
  265
  278
  293
  308
  324
  340
  358
  376
  395
  415
  437
  459
  482
  506
  532
Interest expense (income), $m
  43
  26
  22
  24
  26
  28
  31
  33
  35
  38
  40
  43
  46
  49
  52
  55
  58
  62
  65
  69
  73
  78
  82
  87
  92
  97
  102
  108
  114
  120
  127
Earnings before tax, $m
  25
  32
  34
  37
  39
  41
  44
  46
  49
  52
  68
  71
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  162
Tax expense, $m
  7
  9
  9
  10
  11
  11
  12
  13
  13
  14
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
Net income, $m
  18
  24
  25
  27
  28
  30
  32
  34
  36
  38
  50
  52
  54
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118

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
  652
  691
  732
  774
  818
  865
  913
  963
  1,016
  1,071
  1,129
  1,189
  1,252
  1,318
  1,388
  1,460
  1,536
  1,616
  1,699
  1,787
  1,878
  1,975
  2,075
  2,181
  2,292
  2,409
  2,531
  2,659
  2,793
  2,935
Adjusted assets (=assets-cash), $m
  652
  691
  732
  774
  818
  865
  913
  963
  1,016
  1,071
  1,129
  1,189
  1,252
  1,318
  1,388
  1,460
  1,536
  1,616
  1,699
  1,787
  1,878
  1,975
  2,075
  2,181
  2,292
  2,409
  2,531
  2,659
  2,793
  2,935
Revenue / Adjusted assets
  0.975
  0.975
  0.974
  0.975
  0.976
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
  0.975
Average production assets, $m
  540
  573
  606
  641
  678
  716
  757
  798
  842
  888
  935
  985
  1,038
  1,093
  1,150
  1,210
  1,273
  1,339
  1,408
  1,481
  1,557
  1,636
  1,720
  1,808
  1,900
  1,996
  2,097
  2,204
  2,315
  2,432
Working capital, $m
  -43
  -46
  -49
  -51
  -54
  -57
  -61
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -102
  -107
  -113
  -118
  -125
  -131
  -138
  -145
  -152
  -160
  -168
  -176
  -185
  -195
Total debt, $m
  416
  451
  488
  526
  566
  608
  651
  696
  744
  794
  845
  900
  957
  1,016
  1,078
  1,144
  1,212
  1,284
  1,359
  1,438
  1,520
  1,607
  1,697
  1,793
  1,893
  1,997
  2,107
  2,223
  2,344
  2,471
Total liabilities, $m
  587
  622
  658
  697
  736
  778
  822
  867
  914
  964
  1,016
  1,070
  1,127
  1,187
  1,249
  1,314
  1,383
  1,454
  1,529
  1,608
  1,691
  1,777
  1,868
  1,963
  2,063
  2,168
  2,278
  2,393
  2,514
  2,641
Total equity, $m
  65
  69
  73
  77
  82
  86
  91
  96
  102
  107
  113
  119
  125
  132
  139
  146
  154
  162
  170
  179
  188
  197
  208
  218
  229
  241
  253
  266
  279
  293
Total liabilities and equity, $m
  652
  691
  731
  774
  818
  864
  913
  963
  1,016
  1,071
  1,129
  1,189
  1,252
  1,319
  1,388
  1,460
  1,537
  1,616
  1,699
  1,787
  1,879
  1,974
  2,076
  2,181
  2,292
  2,409
  2,531
  2,659
  2,793
  2,934
Debt-to-equity ratio
  6.390
  6.530
  6.670
  6.800
  6.920
  7.030
  7.130
  7.230
  7.320
  7.410
  7.490
  7.570
  7.640
  7.710
  7.770
  7.830
  7.890
  7.950
  8.000
  8.050
  8.090
  8.140
  8.180
  8.220
  8.260
  8.290
  8.330
  8.360
  8.390
  8.420
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  18
  24
  25
  27
  28
  30
  32
  34
  36
  38
  50
  52
  54
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
Depreciation, amort., depletion, $m
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  94
  99
  104
  109
  115
  121
  127
  134
  141
  148
  156
  164
  172
  181
  190
  200
  210
  220
  232
  243
Funds from operations, $m
  85
  94
  99
  104
  109
  115
  121
  127
  133
  140
  143
  151
  158
  166
  175
  183
  193
  202
  212
  223
  234
  245
  258
  270
  284
  298
  313
  328
  344
  362
Change in working capital, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from operations, $m
  88
  97
  102
  107
  112
  118
  124
  130
  137
  144
  147
  155
  162
  171
  179
  188
  198
  207
  218
  229
  240
  252
  264
  277
  291
  306
  321
  337
  353
  371
Maintenance CAPEX, $m
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -80
  -84
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -127
  -134
  -141
  -148
  -156
  -164
  -172
  -181
  -190
  -200
  -210
  -220
  -232
New CAPEX, $m
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -117
Cash from investing activities, $m
  -82
  -86
  -91
  -96
  -101
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -166
  -175
  -184
  -193
  -203
  -214
  -224
  -236
  -248
  -260
  -273
  -286
  -301
  -316
  -331
  -349
Free cash flow, $m
  6
  10
  11
  11
  11
  12
  12
  13
  13
  14
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
Issuance/(repayment) of debt, $m
  -66
  35
  37
  38
  40
  42
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  68
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  127
Issuance/(repurchase) of shares, $m
  85
  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  
  19
  35
  37
  38
  40
  42
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  68
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  127
Total cash flow (excl. dividends), $m
  25
  45
  47
  49
  51
  53
  56
  58
  61
  63
  62
  65
  68
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  149
Retained Cash Flow (-), $m
  -103
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
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
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
Cash available for distribution, $m
  -79
  41
  43
  45
  47
  49
  51
  53
  55
  58
  57
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  135
Discount rate, %
  12.70
  13.34
  14.00
  14.70
  15.44
  16.21
  17.02
  17.87
  18.76
  19.70
  20.69
  21.72
  22.81
  23.95
  25.15
  26.40
  27.72
  29.11
  30.56
  32.09
  33.70
  35.38
  37.15
  39.01
  40.96
  43.01
  45.16
  47.41
  49.79
  52.27
PV of cash for distribution, $m
  -70
  32
  29
  26
  23
  20
  17
  14
  12
  10
  7
  6
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Casella Waste Systems, Inc. is a solid waste services company. The Company provides resource management services to residential, commercial, municipal and industrial customers, primarily in the areas of solid waste collection and disposal, transfer, recycling and organics services. It manages its solid waste operations on a geographic basis through two regional operating segments: Eastern and Western regions, each of which provides a range of solid waste services, and its recycling and commodity brokerage operations through its Recycling segment. Organics services, ancillary operations and industrial services are included in its Other segment. As of January 31, 2017, the Company owned and/or operated 32 solid waste collection operations, 46 transfer stations, 18 recycling facilities, nine Subtitle D landfills, four landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition (C&D) materials.

FINANCIAL RATIOS  of  Casella Waste Systems Cl A (CWST)

Valuation Ratios
P/E Ratio -152.3
Price to Sales 1.9
Price to Book -42.6
Price to Tangible Book
Price to Cash Flow 13.3
Price to Free Cash Flow 41
Growth Rates
Sales Growth Rate 3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 8%
Cap. Spend. - 3 Yr. Gr. Rate 3.3%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity -2016%
Total Debt to Equity -2036%
Interest Coverage 1
Management Effectiveness
Return On Assets 6.8%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital -1.4%
Ret/ On T. Cap. - 3 Yr. Avg. -1.7%
Return On Equity 29.8%
Return On Equity - 3 Yr. Avg. 55.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 32.4%
Gross Margin - 3 Yr. Avg. 30.8%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 16.1%
Operating Margin 5.5%
Oper. Margin - 3 Yr. Avg. 5.3%
Pre-Tax Margin -1.1%
Pre-Tax Margin - 3 Yr. Avg. -1.4%
Net Profit Margin -1.2%
Net Profit Margin - 3 Yr. Avg. -1.7%
Effective Tax Rate -16.7%
Eff/ Tax Rate - 3 Yr. Avg. -18.9%
Payout Ratio 0%

CWST stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CWST stock intrinsic value calculation we used $599 million for the last fiscal year's total revenue generated by Casella Waste Systems Cl A. The default revenue input number comes from 2017 income statement of Casella Waste Systems Cl A. 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 CWST stock valuation model: a) initial revenue growth rate of 6.1% 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 12.7%, whose default value for CWST is calculated based on our internal credit rating of Casella Waste Systems Cl A, 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 Casella Waste Systems Cl A.
    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 CWST stock the variable cost ratio is equal to 92.1%.

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 CWST 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 Casella Waste Systems Cl A.

Corporate tax rate of 27% is the nominal tax rate for Casella Waste Systems Cl A. 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 CWST stock is equal to 1.1%.

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 CWST are equal to 85%.

Life of production assets of 10 years is the average useful life of capital assets used in Casella Waste Systems Cl A 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 CWST is equal to -6.8%. 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 - $-38 million for Casella Waste Systems Cl A - 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 42 million for Casella Waste Systems Cl A 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 Casella Waste Systems Cl A at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ Casella: 1Q Earnings Snapshot   [May-03-18 04:40PM  Associated Press]
▶ Gabelli & Companys Annual Waste Conference   [Mar-21-18 12:58PM  Business Wire]
▶ Gabelli & Companys Annual Waste Conference   [Mar-07-18 07:30AM  Business Wire]
▶ Should You Buy Casella Waste Systems Inc (CWST)?   [Dec-01-17 06:40PM  Simply Wall St.]
▶ Casella beats Street 3Q forecasts   [Nov-01-17 04:56PM  Associated Press]
▶ Casella reports 2Q loss   [Aug-02-17 09:54PM  Associated Press]
▶ The Best Stock in Vermont: Casella Waste Systems   [Jul-21-17 01:10PM  Kiplinger]
▶ New Strong Buy Stocks for July 7th   [Jul-07-17 10:31AM  Zacks]
▶ Casella reports 1Q loss   [May-04-17 04:58PM  Associated Press]
▶ Strong Performing Stocks To Buy Now   [Apr-26-17 04:27PM  Zacks]
▶ Five Strong Buy Stocks to Buy at New Highs   [Apr-19-17 07:13PM  Zacks]
▶ Casella Waste Systems Gearing Up for a Better Future   [Apr-10-17 03:33PM  GuruFocus.com]
▶ Bull of the Day: Casella Waste (CWST)   [07:01AM  at Investopedia]
▶ Today's Strong Buys Breaking Out to New Highs   [Mar-25-17 12:01AM  Zacks]
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