Intrinsic value of Heritage-Crystal Clean - HCCI

Previous Close

$25.71

  Intrinsic Value

$2.03

stock screener

  Rating & Target

str. sell

-92%

Previous close

$25.71

 
Intrinsic value

$2.03

 
Up/down potential

-92%

 
Rating

str. sell

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 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 0.6

 

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, %
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
Revenue, $m
  425
  489
  557
  630
  707
  789
  875
  965
  1,059
  1,158
  1,261
  1,368
  1,479
  1,595
  1,715
  1,840
  1,970
  2,104
  2,245
  2,391
  2,542
  2,700
  2,865
  3,036
  3,215
  3,402
  3,596
  3,799
  4,011
  4,233
Variable operating expenses, $m
  411
  472
  538
  607
  681
  760
  842
  928
  1,019
  1,113
  1,206
  1,309
  1,415
  1,526
  1,641
  1,760
  1,884
  2,014
  2,148
  2,287
  2,433
  2,584
  2,741
  2,905
  3,076
  3,255
  3,441
  3,635
  3,838
  4,050
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
  411
  472
  538
  607
  681
  760
  842
  928
  1,019
  1,113
  1,206
  1,309
  1,415
  1,526
  1,641
  1,760
  1,884
  2,014
  2,148
  2,287
  2,433
  2,584
  2,741
  2,905
  3,076
  3,255
  3,441
  3,635
  3,838
  4,050
Operating income, $m
  14
  16
  19
  22
  26
  29
  33
  37
  41
  45
  54
  59
  64
  69
  74
  79
  85
  91
  97
  103
  110
  117
  124
  131
  139
  147
  155
  164
  173
  183
EBITDA, $m
  37
  42
  48
  54
  61
  68
  75
  83
  91
  100
  109
  118
  127
  137
  148
  159
  170
  181
  194
  206
  219
  233
  247
  262
  277
  293
  310
  328
  346
  365
Interest expense (income), $m
  2
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
Earnings before tax, $m
  12
  14
  16
  19
  21
  24
  26
  29
  32
  36
  44
  47
  51
  54
  58
  62
  66
  71
  75
  80
  85
  90
  95
  100
  106
  112
  118
  125
  131
  139
Tax expense, $m
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  35
  37
Net income, $m
  9
  10
  12
  14
  15
  17
  19
  21
  24
  26
  32
  34
  37
  40
  42
  45
  48
  51
  55
  58
  62
  65
  69
  73
  77
  82
  86
  91
  96
  101

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
  363
  418
  476
  539
  605
  675
  748
  826
  906
  991
  1,078
  1,170
  1,265
  1,364
  1,467
  1,574
  1,685
  1,800
  1,920
  2,045
  2,175
  2,310
  2,451
  2,597
  2,750
  2,910
  3,076
  3,250
  3,431
  3,621
Adjusted assets (=assets-cash), $m
  363
  418
  476
  539
  605
  675
  748
  826
  906
  991
  1,078
  1,170
  1,265
  1,364
  1,467
  1,574
  1,685
  1,800
  1,920
  2,045
  2,175
  2,310
  2,451
  2,597
  2,750
  2,910
  3,076
  3,250
  3,431
  3,621
Revenue / Adjusted assets
  1.171
  1.170
  1.170
  1.169
  1.169
  1.169
  1.170
  1.168
  1.169
  1.169
  1.170
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
Average production assets, $m
  206
  237
  271
  306
  344
  383
  425
  469
  515
  563
  613
  665
  719
  775
  833
  894
  957
  1,023
  1,091
  1,162
  1,236
  1,312
  1,392
  1,476
  1,563
  1,653
  1,748
  1,846
  1,949
  2,057
Working capital, $m
  38
  43
  50
  56
  63
  70
  78
  86
  94
  103
  112
  122
  132
  142
  153
  164
  175
  187
  200
  213
  226
  240
  255
  270
  286
  303
  320
  338
  357
  377
Total debt, $m
  42
  55
  70
  86
  103
  121
  139
  159
  180
  201
  223
  246
  271
  296
  322
  349
  377
  407
  437
  469
  502
  536
  572
  609
  648
  688
  731
  775
  821
  869
Total liabilities, $m
  92
  106
  121
  137
  154
  171
  190
  210
  230
  252
  274
  297
  321
  346
  373
  400
  428
  457
  488
  519
  552
  587
  623
  660
  699
  739
  781
  825
  872
  920
Total equity, $m
  271
  312
  355
  402
  451
  503
  558
  616
  676
  739
  805
  873
  944
  1,018
  1,094
  1,174
  1,257
  1,343
  1,433
  1,526
  1,622
  1,723
  1,828
  1,938
  2,052
  2,171
  2,295
  2,424
  2,560
  2,701
Total liabilities and equity, $m
  363
  418
  476
  539
  605
  674
  748
  826
  906
  991
  1,079
  1,170
  1,265
  1,364
  1,467
  1,574
  1,685
  1,800
  1,921
  2,045
  2,174
  2,310
  2,451
  2,598
  2,751
  2,910
  3,076
  3,249
  3,432
  3,621
Debt-to-equity ratio
  0.150
  0.180
  0.200
  0.210
  0.230
  0.240
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
Adjusted equity ratio
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  10
  12
  14
  15
  17
  19
  21
  24
  26
  32
  34
  37
  40
  42
  45
  48
  51
  55
  58
  62
  65
  69
  73
  77
  82
  86
  91
  96
  101
Depreciation, amort., depletion, $m
  23
  26
  29
  32
  35
  39
  42
  46
  50
  55
  54
  59
  64
  69
  74
  79
  85
  91
  97
  103
  109
  116
  123
  131
  138
  146
  155
  163
  173
  182
Funds from operations, $m
  32
  36
  41
  45
  51
  56
  62
  68
  74
  81
  86
  93
  101
  108
  116
  124
  133
  142
  151
  161
  171
  182
  192
  204
  216
  228
  241
  254
  268
  283
Change in working capital, $m
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
Cash from operations, $m
  27
  30
  35
  39
  44
  49
  54
  60
  66
  72
  77
  84
  91
  98
  105
  113
  122
  130
  139
  148
  158
  167
  178
  189
  200
  211
  224
  236
  250
  263
Maintenance CAPEX, $m
  -16
  -18
  -21
  -24
  -27
  -30
  -34
  -38
  -42
  -46
  -50
  -54
  -59
  -64
  -69
  -74
  -79
  -85
  -91
  -97
  -103
  -109
  -116
  -123
  -131
  -138
  -146
  -155
  -163
  -173
New CAPEX, $m
  -29
  -31
  -33
  -35
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -87
  -91
  -95
  -99
  -103
  -108
Cash from investing activities, $m
  -45
  -49
  -54
  -59
  -65
  -70
  -76
  -82
  -88
  -94
  -100
  -106
  -113
  -120
  -127
  -135
  -142
  -151
  -159
  -168
  -177
  -186
  -196
  -206
  -218
  -229
  -241
  -254
  -266
  -281
Free cash flow, $m
  -18
  -19
  -20
  -20
  -21
  -21
  -22
  -22
  -22
  -22
  -23
  -23
  -22
  -22
  -22
  -21
  -21
  -20
  -20
  -19
  -19
  -19
  -18
  -18
  -18
  -17
  -17
  -17
  -17
  -17
Issuance/(repayment) of debt, $m
  13
  14
  15
  16
  17
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
Issuance/(repurchase) of shares, $m
  29
  30
  32
  33
  34
  35
  36
  36
  37
  37
  34
  34
  34
  34
  34
  34
  34
  35
  35
  35
  35
  35
  36
  36
  37
  37
  38
  39
  39
  40
Cash from financing (excl. dividends), $m  
  42
  44
  47
  49
  51
  53
  55
  56
  58
  58
  56
  57
  58
  59
  60
  61
  62
  64
  65
  67
  68
  69
  72
  73
  76
  77
  80
  83
  85
  88
Total cash flow (excl. dividends), $m
  24
  25
  27
  28
  30
  31
  33
  34
  35
  37
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
Retained Cash Flow (-), $m
  -37
  -41
  -44
  -47
  -49
  -52
  -55
  -58
  -60
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -124
  -130
  -135
  -141
Prev. year cash balance distribution, $m
  1
  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
  -12
  -15
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -26
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
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
  -12
  -14
  -15
  -15
  -15
  -15
  -15
  -15
  -14
  -14
  -15
  -14
  -13
  -12
  -11
  -10
  -9
  -8
  -7
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
Current shareholders' claim on cash, %
  95.4
  91.3
  87.8
  84.6
  81.9
  79.5
  77.3
  75.3
  73.6
  72.0
  70.8
  69.6
  68.5
  67.6
  66.7
  65.9
  65.1
  64.4
  63.7
  63.1
  62.6
  62.0
  61.5
  61.0
  60.6
  60.1
  59.7
  59.3
  59.0
  58.6

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 95.6
Price to Sales 1.6
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 15.1
Price to Free Cash Flow 26.1
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 $365.957 million for the last fiscal year's total revenue generated by Heritage-Crystal Clean. The default revenue input number comes from 0001 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 16.1% 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 97%.

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 5.4% 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 48.6%.

Life of production assets of 11.3 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 8.9%. 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 - $235.228 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 23.049 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 $0.6 billion.

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COMPANY NEWS

▶ Heritage-Crystal Clean: 3Q Earnings Snapshot   [05:13PM  Associated Press]
▶ Heritage-Crystal Clean: 2Q Earnings Snapshot   [Jul-25-18 07:27PM  Associated Press]
▶ Heritage-Crystal Clean: 1Q Earnings Snapshot   [May-03-18 05:11AM  Associated Press]
▶ New Strong Buy Stocks for March 15th   [Mar-15-18 10:29AM  Zacks]
▶ 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]

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