Intrinsic value of Heritage-Crystal Clean - HCCI

Previous Close

$19.85

  Intrinsic Value

$1.83

stock screener

  Rating & Target

str. sell

-91%

Previous close

$19.85

 
Intrinsic value

$1.83

 
Up/down potential

-91%

 
Rating

str. sell

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

We calculate the intrinsic value of HCCI 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 2016), $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 0.5

 

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, %
  -0.57
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  348
  355
  363
  372
  383
  395
  407
  421
  436
  452
  470
  488
  508
  529
  552
  575
  601
  627
  656
  685
  717
  750
  785
  822
  861
  902
  945
  991
  1,038
  1,089
  1,142
Variable operating expenses, $m
 
  351
  359
  368
  378
  390
  402
  416
  431
  446
  463
  479
  498
  519
  541
  564
  589
  615
  642
  672
  703
  735
  770
  806
  844
  884
  926
  971
  1,018
  1,067
  1,119
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
  337
  351
  359
  368
  378
  390
  402
  416
  431
  446
  463
  479
  498
  519
  541
  564
  589
  615
  642
  672
  703
  735
  770
  806
  844
  884
  926
  971
  1,018
  1,067
  1,119
Operating income, $m
  11
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
EBITDA, $m
  29
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  63
  66
  70
  73
Interest expense (income), $m
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
Earnings before tax, $m
  9
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  6
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
Tax expense, $m
  3
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
Net income, $m
  6
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  37
  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
  314
  283
  289
  297
  305
  314
  324
  335
  347
  360
  374
  389
  405
  421
  439
  458
  478
  499
  522
  546
  571
  597
  625
  655
  685
  718
  752
  789
  827
  867
  909
Adjusted assets (=assets-cash), $m
  277
  283
  289
  297
  305
  314
  324
  335
  347
  360
  374
  389
  405
  421
  439
  458
  478
  499
  522
  546
  571
  597
  625
  655
  685
  718
  752
  789
  827
  867
  909
Revenue / Adjusted assets
  1.256
  1.254
  1.256
  1.253
  1.256
  1.258
  1.256
  1.257
  1.256
  1.256
  1.257
  1.254
  1.254
  1.257
  1.257
  1.255
  1.257
  1.257
  1.257
  1.255
  1.256
  1.256
  1.256
  1.255
  1.257
  1.256
  1.257
  1.256
  1.255
  1.256
  1.256
Average production assets, $m
  175
  179
  183
  187
  193
  198
  205
  212
  219
  228
  236
  246
  256
  266
  277
  289
  302
  316
  330
  345
  361
  377
  395
  414
  433
  454
  475
  498
  522
  548
  574
Working capital, $m
  55
  26
  26
  27
  28
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
Total debt, $m
  63
  58
  61
  64
  67
  71
  75
  79
  84
  89
  94
  100
  106
  113
  120
  128
  135
  144
  153
  162
  172
  182
  193
  205
  217
  230
  243
  258
  273
  289
  305
Total liabilities, $m
  117
  111
  114
  117
  120
  124
  128
  132
  137
  142
  147
  153
  159
  166
  173
  181
  188
  197
  206
  215
  225
  235
  246
  258
  270
  283
  296
  311
  326
  342
  358
Total equity, $m
  198
  171
  175
  180
  185
  190
  197
  203
  210
  218
  227
  236
  245
  255
  266
  278
  290
  303
  316
  331
  346
  362
  379
  397
  415
  435
  456
  478
  501
  525
  551
Total liabilities and equity, $m
  315
  282
  289
  297
  305
  314
  325
  335
  347
  360
  374
  389
  404
  421
  439
  459
  478
  500
  522
  546
  571
  597
  625
  655
  685
  718
  752
  789
  827
  867
  909
Debt-to-equity ratio
  0.318
  0.340
  0.350
  0.360
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.480
  0.490
  0.500
  0.500
  0.510
  0.520
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
  0.550
Adjusted equity ratio
  0.581
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
Depreciation, amort., depletion, $m
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  22
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
Funds from operations, $m
  45
  20
  21
  21
  22
  22
  23
  24
  24
  25
  26
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
Change in working capital, $m
  7
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
Cash from operations, $m
  38
  20
  20
  20
  21
  21
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  49
  51
  53
  56
Maintenance CAPEX, $m
  0
  -15
  -16
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
New CAPEX, $m
  -16
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Cash from investing activities, $m
  -19
  -19
  -20
  -21
  -21
  -23
  -23
  -25
  -27
  -27
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -75
Free cash flow, $m
  19
  1
  0
  0
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
Issuance/(repayment) of debt, $m
  -7
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
Issuance/(repurchase) of shares, $m
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  14
  15
  15
  16
Cash from financing (excl. dividends), $m  
  -6
  4
  5
  6
  6
  8
  8
  9
  10
  11
  11
  10
  11
  12
  13
  13
  15
  15
  17
  17
  19
  20
  21
  23
  23
  25
  27
  28
  30
  31
  33
Total cash flow (excl. dividends), $m
  13
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
Retained Cash Flow (-), $m
  -9
  -3
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
Prev. year cash balance distribution, $m
 
  30
  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
 
  32
  1
  1
  1
  1
  0
  0
  0
  0
  -1
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  30
  1
  1
  1
  0
  0
  0
  0
  0
  0
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  99.5
  98.9
  98.2
  97.4
  96.5
  95.6
  94.6
  93.6
  92.5
  91.4
  90.6
  89.8
  89.0
  88.2
  87.3
  86.4
  85.4
  84.5
  83.5
  82.6
  81.6
  80.6
  79.6
  78.6
  77.6
  76.6
  75.6
  74.6
  73.6
  72.7

Heritage-Crystal Clean, Inc. provides full-service parts cleaning, containerized waste management, used oil collection, vacuum truck services and antifreeze recycling. The Company owns and operates a used oil re-refinery. The Company operates through two segments: Environmental Services and Oil Business. The Company provides hazardous and non-hazardous waste services to small and mid-sized customers in both the manufacturing and vehicle maintenance sectors. The Environmental Services segment consists of the Company's parts cleaning, containerized waste management, vacuum truck services, used antifreeze recycling activities and field services. The Oil Business segment consists of used oil collection activities, sale of recycled fuel oil, re-refining activities, and oil filter removal and disposal services. Through its re-refining process, the Company recycles used oil into lubricant base oil and by-products, and it is a supplier to firms that produce and market finished lubricants.

FINANCIAL RATIOS  of  Heritage-Crystal Clean (HCCI)

Valuation Ratios
P/E Ratio 73.8
Price to Sales 1.3
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 11.6
Price to Free Cash Flow 20.1
Growth Rates
Sales Growth Rate -0.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate -2.3%
Financial Strength
Quick Ratio 5
Current Ratio 0.1
LT Debt to Equity 28.3%
Total Debt to Equity 31.8%
Interest Coverage 6
Management Effectiveness
Return On Assets 2.4%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 2.3%
Ret/ On T. Cap. - 3 Yr. Avg. -0.2%
Return On Equity 3.1%
Return On Equity - 3 Yr. Avg. -0.1%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 8.3%
EBITDA Margin - 3 Yr. Avg. 5.2%
Operating Margin 3.2%
Oper. Margin - 3 Yr. Avg. 0.5%
Pre-Tax Margin 2.6%
Pre-Tax Margin - 3 Yr. Avg. 0.1%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. -0%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 0%

HCCI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HCCI stock intrinsic value calculation we used $348 million for the last fiscal year's total revenue generated by Heritage-Crystal Clean. The default revenue input number comes from 2016 income statement of Heritage-Crystal Clean. 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 HCCI stock valuation model: a) initial revenue growth rate of 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 4.3%, whose default value for HCCI is calculated based on our internal credit rating of Heritage-Crystal Clean, 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 Heritage-Crystal Clean.
    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 HCCI stock the variable cost ratio is equal to 98.9%.

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 HCCI 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 3.5% for Heritage-Crystal Clean.

Corporate tax rate of 27% is the nominal tax rate for Heritage-Crystal Clean. 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 HCCI 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 HCCI are equal to 50.3%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Heritage-Crystal Clean 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 HCCI is equal to 7.2%. 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 - $198 million for Heritage-Crystal Clean - 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 22.874 million for Heritage-Crystal Clean 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 Heritage-Crystal Clean at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ At $19.4, Is It Time To Buy Heritage-Crystal Clean Inc (HCCI)?   [Nov-30-17 07:45PM  Simply Wall St.]
▶ Heritage-Crystal Clean tops Street 2Q forecasts   [Jul-25-17 11:04PM  Associated Press]
▶ Heritage-Crystal Clean beats 1Q profit forecasts   [May-01-17 05:36PM  Associated Press]
▶ Heritage-Crystal Clean misses Street 4Q forecasts   [Mar-01-17 06:01PM  Associated Press]
▶ Is Consolidated-Tomoka Land Co. (CTO) a Good Stock to Invest in?   [Dec-14-16 11:42AM  at Insider Monkey]
▶ Revised 2015 Fourth Quarter Financial Results   [Mar-24-16 01:00PM  at noodls]
Financial statements of HCCI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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