Intrinsic value of US Ecology - ECOL

Previous Close

$52.80

  Intrinsic Value

$18.60

stock screener

  Rating & Target

str. sell

-65%

Previous close

$52.80

 
Intrinsic value

$18.60

 
Up/down potential

-65%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -15.10
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
Revenue, $m
  478
  512
  548
  585
  624
  664
  706
  750
  795
  842
  892
  943
  997
  1,053
  1,111
  1,172
  1,236
  1,303
  1,373
  1,446
  1,523
  1,603
  1,687
  1,775
  1,867
  1,964
  2,065
  2,171
  2,283
  2,400
  2,522
Variable operating expenses, $m
 
  446
  476
  507
  539
  573
  608
  644
  682
  721
  762
  786
  831
  877
  926
  977
  1,030
  1,086
  1,144
  1,205
  1,269
  1,336
  1,406
  1,479
  1,556
  1,637
  1,721
  1,810
  1,903
  2,000
  2,102
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
  406
  446
  476
  507
  539
  573
  608
  644
  682
  721
  762
  786
  831
  877
  926
  977
  1,030
  1,086
  1,144
  1,205
  1,269
  1,336
  1,406
  1,479
  1,556
  1,637
  1,721
  1,810
  1,903
  2,000
  2,102
Operating income, $m
  72
  66
  72
  78
  85
  91
  98
  105
  113
  121
  129
  157
  166
  175
  185
  195
  206
  217
  229
  241
  254
  267
  281
  296
  311
  327
  344
  362
  380
  400
  420
EBITDA, $m
  108
  112
  120
  128
  137
  146
  155
  165
  174
  185
  196
  207
  219
  231
  244
  257
  271
  286
  301
  317
  334
  352
  370
  390
  410
  431
  453
  477
  501
  527
  554
Interest expense (income), $m
  14
  13
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  42
  45
  48
  52
  55
  58
  62
  66
  70
  74
  79
  83
  88
  93
  99
  104
  110
Earnings before tax, $m
  55
  52
  57
  61
  66
  70
  75
  81
  86
  92
  97
  123
  129
  136
  143
  150
  158
  166
  174
  182
  192
  201
  211
  221
  232
  244
  256
  269
  282
  296
  310
Tax expense, $m
  21
  14
  15
  17
  18
  19
  20
  22
  23
  25
  26
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
  72
  76
  80
  84
Net income, $m
  34
  38
  41
  45
  48
  51
  55
  59
  63
  67
  71
  90
  94
  99
  104
  110
  115
  121
  127
  133
  140
  147
  154
  162
  170
  178
  187
  196
  206
  216
  226

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7
  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
  776
  824
  881
  941
  1,003
  1,068
  1,135
  1,205
  1,278
  1,354
  1,433
  1,516
  1,602
  1,692
  1,786
  1,885
  1,988
  2,095
  2,207
  2,325
  2,448
  2,577
  2,712
  2,854
  3,002
  3,157
  3,320
  3,491
  3,670
  3,858
  4,055
Adjusted assets (=assets-cash), $m
  769
  824
  881
  941
  1,003
  1,068
  1,135
  1,205
  1,278
  1,354
  1,433
  1,516
  1,602
  1,692
  1,786
  1,885
  1,988
  2,095
  2,207
  2,325
  2,448
  2,577
  2,712
  2,854
  3,002
  3,157
  3,320
  3,491
  3,670
  3,858
  4,055
Revenue / Adjusted assets
  0.622
  0.621
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
Average production assets, $m
  455
  488
  522
  557
  594
  632
  672
  714
  757
  802
  849
  898
  949
  1,002
  1,058
  1,116
  1,177
  1,241
  1,307
  1,377
  1,450
  1,526
  1,606
  1,690
  1,778
  1,870
  1,966
  2,067
  2,173
  2,284
  2,401
Working capital, $m
  52
  54
  58
  61
  66
  70
  74
  79
  83
  88
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
Total debt, $m
  280
  310
  346
  384
  424
  465
  508
  553
  599
  648
  698
  751
  806
  864
  924
  986
  1,052
  1,121
  1,192
  1,267
  1,346
  1,428
  1,514
  1,605
  1,699
  1,798
  1,902
  2,011
  2,126
  2,245
  2,371
Total liabilities, $m
  496
  526
  562
  600
  640
  681
  724
  769
  815
  864
  914
  967
  1,022
  1,080
  1,140
  1,202
  1,268
  1,337
  1,408
  1,483
  1,562
  1,644
  1,730
  1,821
  1,915
  2,014
  2,118
  2,227
  2,342
  2,461
  2,587
Total equity, $m
  280
  298
  319
  341
  363
  387
  411
  436
  463
  490
  519
  549
  580
  613
  647
  682
  719
  758
  799
  842
  886
  933
  982
  1,033
  1,087
  1,143
  1,202
  1,264
  1,329
  1,397
  1,468
Total liabilities and equity, $m
  776
  824
  881
  941
  1,003
  1,068
  1,135
  1,205
  1,278
  1,354
  1,433
  1,516
  1,602
  1,693
  1,787
  1,884
  1,987
  2,095
  2,207
  2,325
  2,448
  2,577
  2,712
  2,854
  3,002
  3,157
  3,320
  3,491
  3,671
  3,858
  4,055
Debt-to-equity ratio
  1.000
  1.040
  1.090
  1.130
  1.170
  1.200
  1.240
  1.270
  1.300
  1.320
  1.350
  1.370
  1.390
  1.410
  1.430
  1.450
  1.460
  1.480
  1.490
  1.510
  1.520
  1.530
  1.540
  1.550
  1.560
  1.570
  1.580
  1.590
  1.600
  1.610
  1.620
Adjusted equity ratio
  0.358
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362
  0.362

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  34
  38
  41
  45
  48
  51
  55
  59
  63
  67
  71
  90
  94
  99
  104
  110
  115
  121
  127
  133
  140
  147
  154
  162
  170
  178
  187
  196
  206
  216
  226
Depreciation, amort., depletion, $m
  36
  47
  48
  50
  52
  55
  57
  59
  61
  64
  67
  50
  53
  56
  59
  62
  65
  69
  73
  76
  81
  85
  89
  94
  99
  104
  109
  115
  121
  127
  133
Funds from operations, $m
  76
  85
  90
  95
  100
  106
  112
  118
  124
  131
  138
  140
  147
  155
  163
  172
  180
  190
  200
  210
  220
  232
  243
  256
  268
  282
  296
  311
  326
  343
  360
Change in working capital, $m
  1
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Cash from operations, $m
  75
  81
  86
  91
  96
  102
  107
  113
  119
  126
  132
  134
  141
  149
  157
  165
  174
  183
  192
  202
  212
  223
  234
  246
  259
  272
  285
  300
  315
  330
  347
Maintenance CAPEX, $m
  0
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -73
  -76
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -127
New CAPEX, $m
  -36
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -117
Cash from investing activities, $m
  -42
  -58
  -61
  -64
  -68
  -71
  -75
  -78
  -83
  -87
  -92
  -96
  -101
  -106
  -112
  -117
  -123
  -129
  -136
  -143
  -149
  -157
  -165
  -173
  -182
  -191
  -200
  -210
  -221
  -232
  -244
Free cash flow, $m
  33
  23
  25
  27
  29
  30
  32
  34
  37
  39
  41
  38
  40
  43
  45
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  94
  99
  103
Issuance/(repayment) of debt, $m
  -16
  35
  37
  38
  40
  41
  43
  45
  47
  48
  51
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
  114
  120
  126
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -16
  35
  37
  38
  40
  41
  43
  45
  47
  48
  51
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
  114
  120
  126
Total cash flow (excl. dividends), $m
  17
  58
  62
  65
  68
  72
  75
  79
  83
  87
  92
  91
  95
  100
  105
  111
  116
  122
  128
  135
  142
  149
  156
  164
  172
  180
  189
  198
  208
  218
  229
Retained Cash Flow (-), $m
  -24
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -71
Prev. year cash balance distribution, $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 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
 
  39
  41
  43
  46
  48
  51
  54
  57
  60
  63
  61
  64
  68
  71
  75
  79
  83
  88
  92
  97
  102
  107
  112
  118
  124
  130
  137
  143
  150
  158
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  37
  35
  34
  33
  32
  30
  28
  26
  24
  22
  18
  16
  14
  12
  10
  8
  7
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  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
  100.0

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 (ECOL)

Valuation Ratios
P/E Ratio 33.8
Price to Sales 2.4
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 15.3
Price to Free Cash Flow 29.5
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 $478 million for the last fiscal year's total revenue generated by US Ecology. The default revenue input number comes from 2016 income statement of US Ecology. 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 7.2% 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 7.3%, whose default value for ECOL is calculated based on our internal credit rating of US Ecology, 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.
    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 87.4%.

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 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 4.9% for US Ecology.

Corporate tax rate of 27% is the nominal tax rate for US Ecology. 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 95.2%.

Life of production assets of 18 years is the average useful life of capital assets used in US Ecology 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 10.5%. 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 - $280 million for US Ecology - 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 21.765 million for US Ecology 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 at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ US Ecology, Inc. to Host Earnings Call   [07:20AM  ACCESSWIRE]
▶ US Ecology misses Street 3Q forecasts   [Oct-26-17 07:35PM  Associated Press]
▶ US Ecology meets 2Q profit forecasts   [Jul-27-17 11:53PM  Associated Press]
▶ US Ecology meets 2Q profit forecasts   [06:53PM  Associated Press]
▶ The Best Stock in Idaho: US Ecology   [Jul-18-17 02:50PM  Kiplinger]
▶ ETFs with exposure to US Ecology, Inc. : May 23, 2017   [May-23-17 12:39PM  Capital Cube]
▶ US Ecology misses 1Q profit forecasts   [Apr-27-17 07:18PM  Associated Press]
▶ 9 Small-Cap Stocks With Wide Moats   [Apr-12-17 06:00AM  Morningstar]
▶ US Ecology misses Street 4Q forecasts   [04:58PM  Associated Press]
▶ Is Forward Pharma A/S (FWP) A Good Stock to Buy?   [Dec-13-16 05:43AM  at Insider Monkey]
▶ Is US Ecology Inc. (ECOL) A Good Stock To Buy?   [Dec-10-16 01:27PM  at Insider Monkey]
Financial statements of ECOL
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