Intrinsic value of Casella Waste Systems Cl A - CWST

Previous Close

$32.26

  Intrinsic Value

$2.10

stock screener

  Rating & Target

str. sell

-94%

Previous close

$32.26

 
Intrinsic value

$2.10

 
Up/down potential

-94%

 
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 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 1.3

 

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, %
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  645
  692
  741
  792
  846
  901
  958
  1,018
  1,081
  1,145
  1,213
  1,284
  1,357
  1,434
  1,514
  1,598
  1,686
  1,777
  1,873
  1,973
  2,078
  2,188
  2,303
  2,424
  2,550
  2,682
  2,821
  2,966
  3,118
  3,278
Variable operating expenses, $m
  592
  635
  679
  725
  773
  822
  874
  928
  984
  1,042
  1,090
  1,153
  1,219
  1,288
  1,360
  1,435
  1,514
  1,596
  1,682
  1,772
  1,867
  1,965
  2,069
  2,177
  2,290
  2,409
  2,534
  2,664
  2,801
  2,944
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
  592
  635
  679
  725
  773
  822
  874
  928
  984
  1,042
  1,090
  1,153
  1,219
  1,288
  1,360
  1,435
  1,514
  1,596
  1,682
  1,772
  1,867
  1,965
  2,069
  2,177
  2,290
  2,409
  2,534
  2,664
  2,801
  2,944
Operating income, $m
  53
  57
  62
  68
  73
  79
  85
  91
  97
  104
  124
  131
  138
  146
  154
  163
  172
  181
  191
  201
  212
  223
  235
  247
  260
  273
  287
  302
  318
  334
EBITDA, $m
  124
  133
  143
  152
  163
  173
  184
  196
  208
  220
  233
  247
  261
  276
  291
  307
  324
  342
  360
  379
  400
  421
  443
  466
  490
  516
  542
  570
  600
  630
Interest expense (income), $m
  43
  26
  23
  25
  28
  30
  33
  36
  39
  42
  45
  48
  51
  55
  59
  62
  66
  71
  75
  79
  84
  89
  95
  100
  106
  112
  118
  125
  132
  139
  146
Earnings before tax, $m
  27
  34
  37
  40
  43
  46
  49
  52
  55
  59
  76
  79
  83
  87
  92
  96
  101
  106
  111
  117
  122
  128
  135
  141
  148
  155
  163
  170
  179
  187
Tax expense, $m
  7
  9
  10
  11
  12
  12
  13
  14
  15
  16
  20
  21
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
  46
  48
  51
Net income, $m
  19
  25
  27
  29
  31
  33
  36
  38
  40
  43
  55
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  98
  103
  108
  113
  119
  124
  130
  137

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
  662
  711
  761
  814
  868
  925
  984
  1,045
  1,109
  1,176
  1,245
  1,318
  1,394
  1,472
  1,555
  1,641
  1,731
  1,825
  1,923
  2,026
  2,134
  2,247
  2,365
  2,488
  2,618
  2,754
  2,896
  3,045
  3,202
  3,366
Adjusted assets (=assets-cash), $m
  662
  711
  761
  814
  868
  925
  984
  1,045
  1,109
  1,176
  1,245
  1,318
  1,394
  1,472
  1,555
  1,641
  1,731
  1,825
  1,923
  2,026
  2,134
  2,247
  2,365
  2,488
  2,618
  2,754
  2,896
  3,045
  3,202
  3,366
Revenue / Adjusted assets
  0.974
  0.973
  0.974
  0.973
  0.975
  0.974
  0.974
  0.974
  0.975
  0.974
  0.974
  0.974
  0.973
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
Average production assets, $m
  478
  514
  550
  588
  627
  668
  711
  756
  802
  850
  900
  952
  1,007
  1,064
  1,124
  1,186
  1,251
  1,319
  1,390
  1,464
  1,542
  1,624
  1,709
  1,798
  1,892
  1,990
  2,093
  2,201
  2,314
  2,432
Working capital, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
Total debt, $m
  426
  469
  515
  562
  611
  662
  715
  771
  828
  888
  951
  1,016
  1,084
  1,155
  1,229
  1,306
  1,387
  1,472
  1,561
  1,653
  1,750
  1,852
  1,958
  2,069
  2,186
  2,308
  2,436
  2,570
  2,711
  2,859
Total liabilities, $m
  596
  640
  685
  732
  781
  832
  886
  941
  998
  1,058
  1,121
  1,186
  1,254
  1,325
  1,399
  1,477
  1,558
  1,642
  1,731
  1,823
  1,920
  2,022
  2,128
  2,239
  2,356
  2,478
  2,606
  2,741
  2,881
  3,029
Total equity, $m
  66
  71
  76
  81
  87
  92
  98
  105
  111
  118
  125
  132
  139
  147
  155
  164
  173
  182
  192
  203
  213
  225
  236
  249
  262
  275
  290
  305
  320
  337
Total liabilities and equity, $m
  662
  711
  761
  813
  868
  924
  984
  1,046
  1,109
  1,176
  1,246
  1,318
  1,393
  1,472
  1,554
  1,641
  1,731
  1,824
  1,923
  2,026
  2,133
  2,247
  2,364
  2,488
  2,618
  2,753
  2,896
  3,046
  3,201
  3,366
Debt-to-equity ratio
  6.430
  6.600
  6.760
  6.910
  7.040
  7.160
  7.270
  7.370
  7.460
  7.550
  7.630
  7.710
  7.780
  7.840
  7.900
  7.960
  8.020
  8.070
  8.110
  8.160
  8.200
  8.240
  8.280
  8.320
  8.350
  8.380
  8.410
  8.440
  8.470
  8.490
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
  19
  25
  27
  29
  31
  33
  36
  38
  40
  43
  55
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  98
  103
  108
  113
  119
  124
  130
  137
Depreciation, amort., depletion, $m
  71
  76
  80
  85
  90
  95
  100
  105
  111
  117
  110
  116
  123
  130
  137
  145
  153
  161
  170
  179
  188
  198
  208
  219
  231
  243
  255
  268
  282
  297
Funds from operations, $m
  91
  101
  107
  114
  121
  128
  135
  143
  151
  160
  165
  174
  184
  194
  204
  215
  226
  238
  251
  264
  277
  292
  307
  322
  339
  356
  374
  393
  413
  433
Change in working capital, $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 operations, $m
  91
  101
  107
  114
  121
  128
  136
  143
  151
  160
  165
  174
  184
  194
  204
  215
  227
  238
  251
  264
  278
  292
  307
  323
  339
  356
  374
  393
  413
  434
Maintenance CAPEX, $m
  -54
  -58
  -63
  -67
  -72
  -77
  -82
  -87
  -92
  -98
  -104
  -110
  -116
  -123
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -188
  -198
  -208
  -219
  -231
  -243
  -255
  -268
  -282
New CAPEX, $m
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -113
  -119
Cash from investing activities, $m
  -88
  -93
  -99
  -105
  -111
  -118
  -125
  -131
  -138
  -146
  -154
  -162
  -171
  -180
  -190
  -199
  -210
  -221
  -232
  -244
  -257
  -269
  -283
  -297
  -313
  -329
  -346
  -363
  -381
  -401
Free cash flow, $m
  3
  7
  8
  9
  10
  11
  11
  12
  13
  14
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
Issuance/(repayment) of debt, $m
  -57
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  101
  106
  111
  117
  122
  128
  134
  141
  148
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  
  28
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  101
  106
  111
  117
  122
  128
  134
  141
  148
Total cash flow (excl. dividends), $m
  31
  51
  54
  56
  59
  62
  64
  67
  71
  74
  74
  77
  81
  85
  89
  93
  98
  103
  107
  113
  118
  124
  130
  136
  143
  149
  157
  164
  172
  181
Retained Cash Flow (-), $m
  -104
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
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
  -74
  46
  49
  51
  53
  56
  59
  61
  64
  67
  67
  70
  73
  77
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  130
  136
  142
  149
  157
  164
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
  -65
  36
  33
  29
  26
  23
  19
  16
  14
  11
  8
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
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Current shareholders' claim on cash, %
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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 -191.5
Price to Sales 2.4
Price to Book -53.6
Price to Tangible Book
Price to Cash Flow 16.8
Price to Free Cash Flow 51.6
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 $599.309 million for the last fiscal year's total revenue generated by Casella Waste Systems Cl A. The default revenue input number comes from 0001 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 7.6% 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%.

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 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 74.2%.

Life of production assets of 8.2 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 -0.2%. 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 - $-37.862 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 41.765 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 $1.3 billion.

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COMPANY NEWS

▶ Casella: 3Q Earnings Snapshot   [Nov-01-18 04:57PM  Associated Press]
▶ Casella (CWST) Q2 Earnings Match Estimates   [Aug-02-18 05:50PM  Zacks]
▶ Casella: 2Q Earnings Snapshot   [04:48PM  Associated Press]
▶ 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]

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