Intrinsic value of US Ecology, Inc. - ECOL

Previous Close

$59.16

  Intrinsic Value

$67.67

stock screener

  Rating & Target

hold

+14%

Previous close

$59.16

 
Intrinsic value

$67.67

 
Up/down potential

+14%

 
Rating

hold

We calculate the intrinsic value of ECOL 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, %
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.62
  8.25
  7.93
  7.64
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
Revenue, $m
  667
  777
  896
  1,025
  1,162
  1,308
  1,462
  1,625
  1,796
  1,975
  2,161
  2,356
  2,559
  2,771
  2,990
  3,219
  3,456
  3,702
  3,959
  4,225
  4,502
  4,790
  5,090
  5,402
  5,728
  6,067
  6,420
  6,789
  7,174
  7,576
Variable operating expenses, $m
  503
  578
  659
  747
  840
  939
  1,044
  1,155
  1,272
  1,393
  1,472
  1,605
  1,743
  1,887
  2,036
  2,192
  2,353
  2,521
  2,696
  2,877
  3,066
  3,262
  3,466
  3,679
  3,900
  4,131
  4,372
  4,623
  4,885
  5,159
Fixed operating expenses, $m
  59
  61
  62
  63
  65
  66
  68
  69
  71
  72
  74
  75
  77
  79
  80
  82
  84
  86
  88
  90
  92
  94
  96
  98
  100
  102
  104
  107
  109
  111
Total operating expenses, $m
  562
  639
  721
  810
  905
  1,005
  1,112
  1,224
  1,343
  1,465
  1,546
  1,680
  1,820
  1,966
  2,116
  2,274
  2,437
  2,607
  2,784
  2,967
  3,158
  3,356
  3,562
  3,777
  4,000
  4,233
  4,476
  4,730
  4,994
  5,270
Operating income, $m
  105
  139
  175
  215
  257
  303
  350
  401
  454
  509
  616
  676
  740
  805
  874
  945
  1,019
  1,095
  1,175
  1,258
  1,345
  1,435
  1,528
  1,626
  1,727
  1,833
  1,944
  2,059
  2,180
  2,306
EBITDA, $m
  184
  223
  266
  311
  360
  412
  467
  525
  586
  650
  716
  786
  859
  934
  1,013
  1,094
  1,179
  1,268
  1,359
  1,455
  1,554
  1,657
  1,765
  1,877
  1,994
  2,115
  2,242
  2,375
  2,513
  2,658
Interest expense (income), $m
  14
  20
  25
  32
  38
  45
  53
  61
  70
  79
  89
  99
  109
  120
  132
  143
  156
  169
  182
  196
  210
  225
  241
  257
  274
  291
  310
  329
  348
  369
  391
Earnings before tax, $m
  85
  113
  144
  177
  212
  249
  289
  331
  375
  420
  517
  567
  619
  674
  730
  789
  850
  913
  979
  1,048
  1,120
  1,194
  1,271
  1,352
  1,436
  1,524
  1,615
  1,711
  1,811
  1,915
Tax expense, $m
  23
  31
  39
  48
  57
  67
  78
  89
  101
  114
  140
  153
  167
  182
  197
  213
  229
  247
  264
  283
  302
  322
  343
  365
  388
  411
  436
  462
  489
  517
Net income, $m
  62
  83
  105
  129
  155
  182
  211
  241
  273
  307
  378
  414
  452
  492
  533
  576
  620
  667
  715
  765
  817
  872
  928
  987
  1,048
  1,112
  1,179
  1,249
  1,322
  1,398

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
  1,117
  1,301
  1,501
  1,716
  1,946
  2,191
  2,449
  2,722
  3,008
  3,308
  3,621
  3,947
  4,287
  4,641
  5,009
  5,391
  5,789
  6,202
  6,631
  7,077
  7,541
  8,024
  8,526
  9,049
  9,594
  10,162
  10,754
  11,372
  12,016
  12,690
Adjusted assets (=assets-cash), $m
  1,117
  1,301
  1,501
  1,716
  1,946
  2,191
  2,449
  2,722
  3,008
  3,308
  3,621
  3,947
  4,287
  4,641
  5,009
  5,391
  5,789
  6,202
  6,631
  7,077
  7,541
  8,024
  8,526
  9,049
  9,594
  10,162
  10,754
  11,372
  12,016
  12,690
Revenue / Adjusted assets
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
Average production assets, $m
  555
  646
  746
  853
  967
  1,088
  1,217
  1,352
  1,494
  1,643
  1,798
  1,960
  2,129
  2,305
  2,488
  2,678
  2,875
  3,080
  3,294
  3,515
  3,746
  3,985
  4,235
  4,495
  4,765
  5,047
  5,342
  5,648
  5,969
  6,303
Working capital, $m
  88
  103
  118
  135
  153
  173
  193
  214
  237
  261
  285
  311
  338
  366
  395
  425
  456
  489
  523
  558
  594
  632
  672
  713
  756
  801
  847
  896
  947
  1,000
Total debt, $m
  469
  583
  708
  841
  984
  1,136
  1,296
  1,466
  1,643
  1,829
  2,024
  2,226
  2,438
  2,657
  2,886
  3,123
  3,370
  3,627
  3,893
  4,170
  4,458
  4,758
  5,070
  5,395
  5,733
  6,086
  6,454
  6,837
  7,238
  7,656
Total liabilities, $m
  694
  808
  932
  1,066
  1,209
  1,361
  1,521
  1,690
  1,868
  2,054
  2,248
  2,451
  2,662
  2,882
  3,110
  3,348
  3,595
  3,851
  4,118
  4,395
  4,683
  4,983
  5,295
  5,620
  5,958
  6,311
  6,678
  7,062
  7,462
  7,880
Total equity, $m
  423
  493
  569
  651
  738
  830
  928
  1,032
  1,140
  1,254
  1,372
  1,496
  1,625
  1,759
  1,898
  2,043
  2,194
  2,350
  2,513
  2,682
  2,858
  3,041
  3,231
  3,430
  3,636
  3,851
  4,076
  4,310
  4,554
  4,809
Total liabilities and equity, $m
  1,117
  1,301
  1,501
  1,717
  1,947
  2,191
  2,449
  2,722
  3,008
  3,308
  3,620
  3,947
  4,287
  4,641
  5,008
  5,391
  5,789
  6,201
  6,631
  7,077
  7,541
  8,024
  8,526
  9,050
  9,594
  10,162
  10,754
  11,372
  12,016
  12,689
Debt-to-equity ratio
  1.110
  1.180
  1.240
  1.290
  1.330
  1.370
  1.400
  1.420
  1.440
  1.460
  1.470
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.540
  1.550
  1.550
  1.560
  1.560
  1.570
  1.570
  1.580
  1.580
  1.580
  1.590
  1.590
  1.590
Adjusted equity ratio
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379
  0.379

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  62
  83
  105
  129
  155
  182
  211
  241
  273
  307
  378
  414
  452
  492
  533
  576
  620
  667
  715
  765
  817
  872
  928
  987
  1,048
  1,112
  1,179
  1,249
  1,322
  1,398
Depreciation, amort., depletion, $m
  80
  85
  90
  96
  103
  109
  117
  124
  132
  140
  100
  110
  119
  129
  139
  150
  161
  172
  184
  196
  209
  223
  237
  251
  266
  282
  298
  316
  333
  352
Funds from operations, $m
  142
  167
  195
  225
  257
  292
  328
  366
  406
  447
  478
  524
  571
  621
  672
  725
  781
  839
  899
  962
  1,027
  1,094
  1,165
  1,238
  1,315
  1,394
  1,478
  1,564
  1,655
  1,750
Change in working capital, $m
  13
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
Cash from operations, $m
  129
  153
  180
  208
  239
  272
  307
  344
  383
  424
  453
  498
  544
  593
  643
  695
  750
  806
  865
  926
  990
  1,056
  1,125
  1,197
  1,272
  1,350
  1,431
  1,516
  1,604
  1,697
Maintenance CAPEX, $m
  -26
  -31
  -36
  -42
  -48
  -54
  -61
  -68
  -76
  -83
  -92
  -100
  -110
  -119
  -129
  -139
  -150
  -161
  -172
  -184
  -196
  -209
  -223
  -237
  -251
  -266
  -282
  -298
  -316
  -333
New CAPEX, $m
  -84
  -92
  -99
  -107
  -114
  -121
  -128
  -135
  -142
  -149
  -155
  -162
  -169
  -176
  -183
  -190
  -197
  -205
  -213
  -222
  -230
  -240
  -250
  -260
  -271
  -282
  -294
  -307
  -320
  -334
Cash from investing activities, $m
  -110
  -123
  -135
  -149
  -162
  -175
  -189
  -203
  -218
  -232
  -247
  -262
  -279
  -295
  -312
  -329
  -347
  -366
  -385
  -406
  -426
  -449
  -473
  -497
  -522
  -548
  -576
  -605
  -636
  -667
Free cash flow, $m
  19
  30
  44
  60
  77
  97
  118
  141
  165
  192
  206
  235
  266
  298
  331
  366
  403
  441
  480
  521
  563
  607
  653
  700
  750
  801
  855
  911
  969
  1,029
Issuance/(repayment) of debt, $m
  105
  115
  124
  134
  143
  152
  161
  169
  178
  186
  194
  203
  211
  220
  228
  237
  247
  256
  267
  277
  288
  300
  312
  325
  338
  353
  368
  384
  400
  418
Issuance/(repurchase) of shares, $m
  2
  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  
  107
  115
  124
  134
  143
  152
  161
  169
  178
  186
  194
  203
  211
  220
  228
  237
  247
  256
  267
  277
  288
  300
  312
  325
  338
  353
  368
  384
  400
  418
Total cash flow (excl. dividends), $m
  125
  145
  168
  193
  220
  249
  279
  310
  343
  378
  400
  438
  477
  518
  560
  604
  650
  697
  746
  798
  851
  907
  965
  1,025
  1,088
  1,154
  1,223
  1,294
  1,369
  1,447
Retained Cash Flow (-), $m
  -64
  -70
  -76
  -82
  -87
  -93
  -98
  -103
  -108
  -114
  -119
  -124
  -129
  -134
  -139
  -145
  -151
  -157
  -163
  -169
  -176
  -183
  -190
  -198
  -206
  -215
  -224
  -234
  -244
  -255
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
  61
  75
  93
  112
  133
  156
  181
  207
  235
  264
  282
  314
  348
  384
  420
  459
  499
  541
  584
  629
  675
  724
  774
  827
  882
  939
  998
  1,060
  1,125
  1,192
Discount rate, %
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
  57
  65
  74
  82
  89
  94
  97
  99
  98
  96
  87
  82
  76
  69
  62
  54
  46
  38
  32
  25
  20
  15
  11
  8
  6
  4
  3
  2
  1
  1
Current shareholders' claim on cash, %
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9

US Ecology, Inc. is a provider of environmental services to commercial and government entities. The Company offers treatment, disposal and recycling of hazardous, non-hazardous and radioactive waste, as well as a range of field and industrial services. The Company operates in two business segments: Environmental Services, and Field & Industrial Services. Its Environmental Services segment provides a range of hazardous material management services, including transportation, recycling, treatment and disposal of hazardous and non-hazardous waste at Company-owned landfill, wastewater and other treatment facilities. The Company's Field & Industrial Services segment provides packaging and collection of hazardous waste and total waste management solutions at customer sites and through its transfer facilities. Its services include on-site management, waste characterization, transportation and disposal of non-hazardous and hazardous waste.

FINANCIAL RATIOS  of  US Ecology, Inc. (ECOL)

Valuation Ratios
P/E Ratio 37.9
Price to Sales 2.7
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 17.2
Price to Free Cash Flow 33
Growth Rates
Sales Growth Rate -15.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.7%
Cap. Spend. - 3 Yr. Gr. Rate 11.4%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 98.2%
Total Debt to Equity 100%
Interest Coverage 5
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 6.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity 12.7%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 31%
Gross Margin - 3 Yr. Avg. 31.3%
EBITDA Margin 22%
EBITDA Margin - 3 Yr. Avg. 21.2%
Operating Margin 15.1%
Oper. Margin - 3 Yr. Avg. 14.6%
Pre-Tax Margin 11.5%
Pre-Tax Margin - 3 Yr. Avg. 11.2%
Net Profit Margin 7.1%
Net Profit Margin - 3 Yr. Avg. 6.7%
Effective Tax Rate 38.2%
Eff/ Tax Rate - 3 Yr. Avg. 40.2%
Payout Ratio 47.1%

ECOL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ECOL stock intrinsic value calculation we used $566 million for the last fiscal year's total revenue generated by US Ecology, Inc.. The default revenue input number comes from 0001 income statement of US Ecology, 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 ECOL stock valuation model: a) initial revenue growth rate of 17.8% 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 6.9%, whose default value for ECOL is calculated based on our internal credit rating of US Ecology, 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 US Ecology, 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 ECOL stock the variable cost ratio is equal to 76.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $58 million in the base year in the intrinsic value calculation for ECOL 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 US Ecology, Inc..

Corporate tax rate of 27% is the nominal tax rate for US Ecology, 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 ECOL 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 ECOL are equal to 83.2%.

Life of production assets of 17.9 years is the average useful life of capital assets used in US Ecology, 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 ECOL is equal to 13.2%. 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 - $359.217 million for US Ecology, 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 22.051 million for US Ecology, 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 US Ecology, Inc. at the current share price and the inputted number of shares is $1.3 billion.

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