Intrinsic value of Casella Waste Systems, Inc. - CWST

Previous Close

$34.90

  Intrinsic Value

$21.40

stock screener

  Rating & Target

sell

-39%

Previous close

$34.90

 
Intrinsic value

$21.40

 
Up/down potential

-39%

 
Rating

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 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 1.6

 

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, %
  15.50
  14.45
  13.51
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
Revenue, $m
  763
  874
  992
  1,117
  1,250
  1,390
  1,537
  1,691
  1,852
  2,020
  2,195
  2,377
  2,567
  2,764
  2,968
  3,181
  3,402
  3,631
  3,870
  4,118
  4,377
  4,646
  4,926
  5,218
  5,523
  5,841
  6,173
  6,519
  6,881
  7,259
Variable operating expenses, $m
  149
  165
  182
  200
  219
  239
  260
  282
  305
  329
  313
  339
  366
  394
  424
  454
  486
  518
  552
  588
  625
  663
  703
  745
  788
  834
  881
  930
  982
  1,036
Fixed operating expenses, $m
  512
  523
  535
  547
  559
  571
  583
  596
  609
  623
  636
  651
  665
  679
  694
  710
  725
  741
  758
  774
  791
  809
  826
  845
  863
  882
  902
  921
  942
  962
Total operating expenses, $m
  661
  688
  717
  747
  778
  810
  843
  878
  914
  952
  949
  990
  1,031
  1,073
  1,118
  1,164
  1,211
  1,259
  1,310
  1,362
  1,416
  1,472
  1,529
  1,590
  1,651
  1,716
  1,783
  1,851
  1,924
  1,998
Operating income, $m
  102
  185
  275
  371
  473
  580
  694
  813
  938
  1,069
  1,245
  1,387
  1,536
  1,690
  1,850
  2,017
  2,191
  2,372
  2,560
  2,756
  2,961
  3,174
  3,397
  3,629
  3,872
  4,125
  4,390
  4,667
  4,957
  5,260
EBITDA, $m
  211
  305
  405
  512
  626
  746
  873
  1,006
  1,146
  1,291
  1,444
  1,602
  1,767
  1,939
  2,118
  2,304
  2,498
  2,699
  2,909
  3,128
  3,356
  3,594
  3,841
  4,100
  4,370
  4,652
  4,947
  5,255
  5,578
  5,915
Interest expense (income), $m
  43
  29
  30
  36
  42
  49
  56
  64
  72
  80
  89
  98
  107
  117
  127
  138
  149
  160
  172
  185
  198
  211
  225
  239
  254
  270
  287
  304
  322
  340
  360
Earnings before tax, $m
  73
  155
  239
  328
  423
  524
  630
  741
  858
  980
  1,148
  1,280
  1,418
  1,562
  1,712
  1,868
  2,030
  2,199
  2,375
  2,559
  2,750
  2,949
  3,157
  3,375
  3,601
  3,838
  4,086
  4,345
  4,617
  4,901
Tax expense, $m
  20
  42
  64
  89
  114
  141
  170
  200
  232
  265
  310
  346
  383
  422
  462
  504
  548
  594
  641
  691
  743
  796
  853
  911
  972
  1,036
  1,103
  1,173
  1,247
  1,323
Net income, $m
  53
  113
  174
  240
  309
  383
  460
  541
  626
  715
  838
  935
  1,035
  1,141
  1,250
  1,364
  1,482
  1,606
  1,734
  1,868
  2,008
  2,153
  2,305
  2,463
  2,629
  2,802
  2,983
  3,172
  3,370
  3,577

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
  846
  969
  1,100
  1,239
  1,386
  1,541
  1,704
  1,875
  2,054
  2,240
  2,434
  2,636
  2,846
  3,064
  3,291
  3,526
  3,771
  4,026
  4,290
  4,566
  4,852
  5,151
  5,462
  5,785
  6,123
  6,476
  6,843
  7,227
  7,628
  8,047
Adjusted assets (=assets-cash), $m
  846
  969
  1,100
  1,239
  1,386
  1,541
  1,704
  1,875
  2,054
  2,240
  2,434
  2,636
  2,846
  3,064
  3,291
  3,526
  3,771
  4,026
  4,290
  4,566
  4,852
  5,151
  5,462
  5,785
  6,123
  6,476
  6,843
  7,227
  7,628
  8,047
Revenue / Adjusted assets
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
Average production assets, $m
  537
  615
  698
  787
  880
  979
  1,082
  1,191
  1,304
  1,422
  1,545
  1,674
  1,807
  1,946
  2,090
  2,239
  2,395
  2,556
  2,724
  2,899
  3,081
  3,271
  3,468
  3,674
  3,888
  4,112
  4,346
  4,589
  4,844
  5,110
Working capital, $m
  -18
  -21
  -24
  -27
  -30
  -33
  -37
  -41
  -44
  -48
  -53
  -57
  -62
  -66
  -71
  -76
  -82
  -87
  -93
  -99
  -105
  -112
  -118
  -125
  -133
  -140
  -148
  -156
  -165
  -174
Total debt, $m
  558
  668
  786
  911
  1,043
  1,183
  1,330
  1,484
  1,644
  1,812
  1,986
  2,168
  2,357
  2,553
  2,758
  2,970
  3,190
  3,419
  3,657
  3,905
  4,163
  4,432
  4,711
  5,003
  5,307
  5,624
  5,955
  6,301
  6,661
  7,039
Total liabilities, $m
  762
  872
  990
  1,115
  1,247
  1,387
  1,534
  1,688
  1,848
  2,016
  2,190
  2,372
  2,561
  2,757
  2,961
  3,174
  3,394
  3,623
  3,861
  4,109
  4,367
  4,636
  4,915
  5,207
  5,511
  5,828
  6,159
  6,504
  6,865
  7,243
Total equity, $m
  85
  97
  110
  124
  139
  154
  170
  188
  205
  224
  243
  264
  285
  306
  329
  353
  377
  403
  429
  457
  485
  515
  546
  579
  612
  648
  684
  723
  763
  805
Total liabilities and equity, $m
  847
  969
  1,100
  1,239
  1,386
  1,541
  1,704
  1,876
  2,053
  2,240
  2,433
  2,636
  2,846
  3,063
  3,290
  3,527
  3,771
  4,026
  4,290
  4,566
  4,852
  5,151
  5,461
  5,786
  6,123
  6,476
  6,843
  7,227
  7,628
  8,048
Debt-to-equity ratio
  6.590
  6.890
  7.150
  7.350
  7.530
  7.680
  7.800
  7.910
  8.010
  8.090
  8.160
  8.230
  8.280
  8.330
  8.380
  8.420
  8.460
  8.490
  8.520
  8.550
  8.580
  8.600
  8.630
  8.650
  8.670
  8.690
  8.700
  8.720
  8.730
  8.750
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
  53
  113
  174
  240
  309
  383
  460
  541
  626
  715
  838
  935
  1,035
  1,141
  1,250
  1,364
  1,482
  1,606
  1,734
  1,868
  2,008
  2,153
  2,305
  2,463
  2,629
  2,802
  2,983
  3,172
  3,370
  3,577
Depreciation, amort., depletion, $m
  109
  119
  130
  141
  153
  166
  179
  193
  208
  223
  198
  215
  232
  249
  268
  287
  307
  328
  349
  372
  395
  419
  445
  471
  498
  527
  557
  588
  621
  655
Funds from operations, $m
  162
  233
  304
  381
  462
  548
  639
  734
  834
  938
  1,036
  1,149
  1,267
  1,390
  1,518
  1,651
  1,789
  1,933
  2,083
  2,240
  2,403
  2,572
  2,750
  2,934
  3,128
  3,329
  3,540
  3,761
  3,991
  4,233
Change in working capital, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from operations, $m
  165
  235
  307
  384
  466
  552
  643
  738
  838
  942
  1,040
  1,154
  1,272
  1,395
  1,523
  1,656
  1,795
  1,939
  2,089
  2,246
  2,409
  2,579
  2,756
  2,941
  3,135
  3,337
  3,548
  3,769
  4,000
  4,242
Maintenance CAPEX, $m
  -60
  -69
  -79
  -90
  -101
  -113
  -125
  -139
  -153
  -167
  -182
  -198
  -215
  -232
  -249
  -268
  -287
  -307
  -328
  -349
  -372
  -395
  -419
  -445
  -471
  -498
  -527
  -557
  -588
  -621
New CAPEX, $m
  -72
  -78
  -83
  -88
  -94
  -99
  -104
  -108
  -113
  -118
  -123
  -128
  -133
  -139
  -144
  -150
  -156
  -162
  -168
  -175
  -182
  -189
  -197
  -206
  -214
  -224
  -233
  -244
  -255
  -266
Cash from investing activities, $m
  -132
  -147
  -162
  -178
  -195
  -212
  -229
  -247
  -266
  -285
  -305
  -326
  -348
  -371
  -393
  -418
  -443
  -469
  -496
  -524
  -554
  -584
  -616
  -651
  -685
  -722
  -760
  -801
  -843
  -887
Free cash flow, $m
  33
  89
  145
  206
  271
  340
  414
  491
  572
  657
  735
  827
  924
  1,024
  1,129
  1,238
  1,352
  1,470
  1,593
  1,721
  1,855
  1,994
  2,140
  2,291
  2,449
  2,615
  2,787
  2,968
  3,157
  3,354
Issuance/(repayment) of debt, $m
  14
  110
  118
  125
  133
  140
  147
  154
  161
  168
  175
  182
  189
  196
  204
  212
  220
  229
  238
  248
  258
  269
  280
  292
  304
  317
  331
  346
  361
  377
Issuance/(repurchase) of shares, $m
  47
  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  
  61
  110
  118
  125
  133
  140
  147
  154
  161
  168
  175
  182
  189
  196
  204
  212
  220
  229
  238
  248
  258
  269
  280
  292
  304
  317
  331
  346
  361
  377
Total cash flow (excl. dividends), $m
  94
  199
  263
  331
  404
  480
  560
  645
  732
  824
  909
  1,009
  1,113
  1,221
  1,333
  1,450
  1,572
  1,699
  1,832
  1,969
  2,113
  2,263
  2,419
  2,583
  2,753
  2,932
  3,118
  3,314
  3,518
  3,732
Retained Cash Flow (-), $m
  -100
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
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
  -7
  187
  250
  317
  389
  465
  544
  627
  715
  806
  890
  989
  1,092
  1,199
  1,311
  1,427
  1,548
  1,674
  1,805
  1,942
  2,084
  2,233
  2,388
  2,550
  2,720
  2,897
  3,082
  3,275
  3,478
  3,690
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
  -6
  145
  169
  183
  190
  189
  181
  168
  152
  133
  112
  93
  76
  59
  45
  34
  24
  17
  11
  7
  5
  3
  2
  1
  1
  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, Inc. (CWST)

Valuation Ratios
P/E Ratio -207.2
Price to Sales 2.6
Price to Book -58
Price to Tangible Book
Price to Cash Flow 18.1
Price to Free Cash Flow 55.8
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 $661 million for the last fiscal year's total revenue generated by Casella Waste Systems, Inc.. The default revenue input number comes from 0001 income statement of Casella Waste Systems, 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 CWST stock valuation model: a) initial revenue growth rate of 15.5% 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, 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 Casella Waste Systems, 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 CWST stock the variable cost ratio is equal to 20.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $501 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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Casella Waste Systems, 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 CWST 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 CWST are equal to 70.4%.

Life of production assets of 7.8 years is the average useful life of capital assets used in Casella Waste Systems, 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 CWST is equal to -2.4%. 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 - $-15.832 million for Casella Waste Systems, 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 46.628 million for Casella Waste Systems, 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 Casella Waste Systems, Inc. at the current share price and the inputted number of shares is $1.6 billion.

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