Intrinsic value of Stericycle, Inc. - SRCL

Previous Close

$56.04

  Intrinsic Value

$22.59

stock screener

  Rating & Target

str. sell

-60%

Previous close

$56.04

 
Intrinsic value

$22.59

 
Up/down potential

-60%

 
Rating

str. sell

We calculate the intrinsic value of SRCL 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 5.1

 

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, %
  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
  3,556
  3,638
  3,731
  3,836
  3,952
  4,080
  4,219
  4,369
  4,531
  4,705
  4,891
  5,090
  5,301
  5,526
  5,764
  6,017
  6,284
  6,567
  6,866
  7,181
  7,514
  7,865
  8,235
  8,625
  9,035
  9,468
  9,923
  10,401
  10,905
  11,435
Variable operating expenses, $m
  3,553
  3,624
  3,704
  3,795
  3,895
  4,005
  4,125
  4,255
  4,395
  4,545
  4,219
  4,390
  4,573
  4,766
  4,972
  5,190
  5,420
  5,664
  5,922
  6,194
  6,481
  6,784
  7,103
  7,440
  7,794
  8,167
  8,559
  8,972
  9,407
  9,864
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
  3,553
  3,624
  3,704
  3,795
  3,895
  4,005
  4,125
  4,255
  4,395
  4,545
  4,219
  4,390
  4,573
  4,766
  4,972
  5,190
  5,420
  5,664
  5,922
  6,194
  6,481
  6,784
  7,103
  7,440
  7,794
  8,167
  8,559
  8,972
  9,407
  9,864
Operating income, $m
  3
  14
  27
  41
  57
  75
  94
  114
  137
  161
  672
  699
  728
  759
  792
  827
  864
  902
  943
  987
  1,033
  1,081
  1,132
  1,185
  1,242
  1,301
  1,364
  1,429
  1,499
  1,571
EBITDA, $m
  636
  650
  667
  686
  707
  730
  754
  781
  810
  841
  875
  910
  948
  988
  1,031
  1,076
  1,124
  1,174
  1,228
  1,284
  1,344
  1,406
  1,472
  1,542
  1,616
  1,693
  1,774
  1,860
  1,950
  2,045
Interest expense (income), $m
  89
  150
  154
  159
  165
  171
  178
  186
  194
  203
  213
  223
  234
  246
  259
  272
  287
  302
  318
  335
  353
  372
  391
  413
  435
  458
  483
  509
  536
  564
  595
Earnings before tax, $m
  -148
  -141
  -133
  -124
  -114
  -104
  -92
  -80
  -66
  -52
  449
  465
  482
  500
  520
  540
  562
  585
  609
  634
  661
  689
  719
  750
  784
  818
  855
  894
  934
  977
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  121
  126
  130
  135
  140
  146
  152
  158
  164
  171
  178
  186
  194
  203
  212
  221
  231
  241
  252
  264
Net income, $m
  -148
  -141
  -133
  -124
  -114
  -104
  -92
  -80
  -66
  -52
  328
  339
  352
  365
  379
  394
  410
  427
  444
  463
  483
  503
  525
  548
  572
  597
  624
  652
  682
  713

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
  6,585
  6,736
  6,909
  7,104
  7,319
  7,555
  7,813
  8,091
  8,391
  8,713
  9,058
  9,425
  9,817
  10,233
  10,674
  11,142
  11,637
  12,161
  12,714
  13,298
  13,914
  14,565
  15,250
  15,972
  16,732
  17,533
  18,375
  19,262
  20,195
  21,176
Adjusted assets (=assets-cash), $m
  6,585
  6,736
  6,909
  7,104
  7,319
  7,555
  7,813
  8,091
  8,391
  8,713
  9,058
  9,425
  9,817
  10,233
  10,674
  11,142
  11,637
  12,161
  12,714
  13,298
  13,914
  14,565
  15,250
  15,972
  16,732
  17,533
  18,375
  19,262
  20,195
  21,176
Revenue / Adjusted assets
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
Average production assets, $m
  3,371
  3,448
  3,537
  3,636
  3,747
  3,868
  3,999
  4,142
  4,296
  4,460
  4,637
  4,825
  5,025
  5,238
  5,464
  5,704
  5,957
  6,225
  6,509
  6,808
  7,123
  7,456
  7,807
  8,176
  8,565
  8,975
  9,407
  9,861
  10,338
  10,840
Working capital, $m
  100
  102
  104
  107
  111
  114
  118
  122
  127
  132
  137
  143
  148
  155
  161
  168
  176
  184
  192
  201
  210
  220
  231
  241
  253
  265
  278
  291
  305
  320
Total debt, $m
  2,859
  2,950
  3,054
  3,170
  3,299
  3,440
  3,595
  3,761
  3,941
  4,134
  4,340
  4,561
  4,795
  5,044
  5,309
  5,589
  5,885
  6,199
  6,531
  6,880
  7,250
  7,639
  8,049
  8,482
  8,937
  9,417
  9,922
  10,453
  11,012
  11,599
Total liabilities, $m
  3,944
  4,035
  4,139
  4,255
  4,384
  4,526
  4,680
  4,847
  5,026
  5,219
  5,426
  5,646
  5,880
  6,129
  6,394
  6,674
  6,971
  7,284
  7,616
  7,966
  8,335
  8,724
  9,135
  9,567
  10,022
  10,502
  11,007
  11,538
  12,097
  12,684
Total equity, $m
  2,640
  2,701
  2,771
  2,849
  2,935
  3,030
  3,133
  3,245
  3,365
  3,494
  3,632
  3,780
  3,936
  4,103
  4,280
  4,468
  4,666
  4,876
  5,098
  5,333
  5,580
  5,840
  6,115
  6,405
  6,710
  7,031
  7,368
  7,724
  8,098
  8,492
Total liabilities and equity, $m
  6,584
  6,736
  6,910
  7,104
  7,319
  7,556
  7,813
  8,092
  8,391
  8,713
  9,058
  9,426
  9,816
  10,232
  10,674
  11,142
  11,637
  12,160
  12,714
  13,299
  13,915
  14,564
  15,250
  15,972
  16,732
  17,533
  18,375
  19,262
  20,195
  21,176
Debt-to-equity ratio
  1.080
  1.090
  1.100
  1.110
  1.120
  1.140
  1.150
  1.160
  1.170
  1.180
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.320
  1.330
  1.340
  1.350
  1.350
  1.360
  1.370
Adjusted equity ratio
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -148
  -141
  -133
  -124
  -114
  -104
  -92
  -80
  -66
  -52
  328
  339
  352
  365
  379
  394
  410
  427
  444
  463
  483
  503
  525
  548
  572
  597
  624
  652
  682
  713
Depreciation, amort., depletion, $m
  633
  637
  640
  645
  650
  655
  661
  667
  674
  681
  202
  211
  219
  229
  239
  249
  260
  272
  284
  297
  311
  326
  341
  357
  374
  392
  411
  431
  451
  473
Funds from operations, $m
  486
  496
  508
  521
  536
  551
  569
  587
  607
  629
  530
  550
  571
  594
  618
  643
  670
  699
  729
  760
  794
  829
  866
  905
  946
  989
  1,035
  1,083
  1,133
  1,186
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Cash from operations, $m
  484
  494
  505
  518
  532
  548
  565
  583
  603
  624
  525
  545
  566
  588
  611
  636
  663
  691
  720
  751
  784
  819
  855
  894
  935
  977
  1,022
  1,069
  1,119
  1,172
Maintenance CAPEX, $m
  -144
  -147
  -151
  -154
  -159
  -164
  -169
  -175
  -181
  -188
  -195
  -202
  -211
  -219
  -229
  -239
  -249
  -260
  -272
  -284
  -297
  -311
  -326
  -341
  -357
  -374
  -392
  -411
  -431
  -451
New CAPEX, $m
  -65
  -78
  -89
  -99
  -110
  -121
  -132
  -143
  -154
  -165
  -176
  -188
  -200
  -213
  -226
  -239
  -253
  -268
  -283
  -299
  -316
  -333
  -351
  -370
  -389
  -410
  -431
  -454
  -478
  -502
Cash from investing activities, $m
  -209
  -225
  -240
  -253
  -269
  -285
  -301
  -318
  -335
  -353
  -371
  -390
  -411
  -432
  -455
  -478
  -502
  -528
  -555
  -583
  -613
  -644
  -677
  -711
  -746
  -784
  -823
  -865
  -909
  -953
Free cash flow, $m
  274
  269
  266
  264
  263
  263
  264
  266
  268
  271
  154
  154
  154
  155
  157
  158
  160
  162
  165
  168
  171
  175
  179
  184
  188
  193
  199
  205
  211
  218
Issuance/(repayment) of debt, $m
  76
  91
  104
  116
  129
  142
  154
  167
  180
  193
  206
  220
  234
  249
  264
  280
  297
  314
  331
  350
  369
  389
  410
  432
  455
  480
  505
  531
  559
  588
Issuance/(repurchase) of shares, $m
  201
  201
  202
  202
  200
  198
  195
  191
  187
  181
  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  
  277
  292
  306
  318
  329
  340
  349
  358
  367
  374
  206
  220
  234
  249
  264
  280
  297
  314
  331
  350
  369
  389
  410
  432
  455
  480
  505
  531
  559
  588
Total cash flow (excl. dividends), $m
  551
  561
  572
  582
  593
  603
  613
  624
  635
  646
  360
  374
  389
  405
  421
  438
  457
  476
  497
  518
  541
  564
  590
  616
  644
  673
  704
  736
  770
  806
Retained Cash Flow (-), $m
  -201
  -201
  -202
  -202
  -200
  -198
  -195
  -191
  -187
  -181
  -138
  -147
  -157
  -167
  -177
  -188
  -199
  -210
  -222
  -234
  -247
  -261
  -275
  -289
  -305
  -321
  -338
  -356
  -374
  -393
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
  351
  360
  370
  381
  392
  405
  418
  433
  448
  464
  222
  227
  232
  238
  244
  251
  258
  266
  275
  284
  293
  304
  315
  326
  339
  352
  366
  380
  396
  412
Discount rate, %
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
  322
  300
  278
  256
  233
  211
  188
  167
  146
  126
  49
  41
  33
  26
  21
  16
  12
  9
  7
  5
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  96.2
  92.6
  89.2
  86.0
  83.1
  80.3
  77.8
  75.4
  73.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3
  71.3

Stericycle, Inc. is a business-to-business services provider. The Company focuses on regulated and compliance solutions for healthcare, retail, and commercial businesses. The Company's segments include Domestic and Canada Regulated Waste and Compliance Services (RCS), Domestic Communication and Related Services (CRS), International RCS and All other. The Domestic and Canada RCS and International RCS segments include medical waste disposal, pharmaceutical waste disposal, hazardous waste management, sustainability solutions for expired or unused inventory, secure information destruction of documents and e-media, training and consulting through its Steri-Safe and Clinical Services programs, and other regulatory compliance services. The Domestic CRS segment consists of inbound/outbound communication, automated patient reminders, online scheduling, notifications, product retrievals, product returns and quality audits.

FINANCIAL RATIOS  of  Stericycle, Inc. (SRCL)

Valuation Ratios
P/E Ratio 23.2
Price to Sales 1.3
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 8.7
Price to Free Cash Flow 11.6
Growth Rates
Sales Growth Rate 19.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 18.3%
Cap. Spend. - 3 Yr. Gr. Rate 13.3%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 102.5%
Total Debt to Equity 105.1%
Interest Coverage 5
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 7.4%
Return On Equity - 3 Yr. Avg. 12.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 42.2%
Gross Margin - 3 Yr. Avg. 42.5%
EBITDA Margin 18.8%
EBITDA Margin - 3 Yr. Avg. 21.5%
Operating Margin 12.2%
Oper. Margin - 3 Yr. Avg. 16.8%
Pre-Tax Margin 9.2%
Pre-Tax Margin - 3 Yr. Avg. 14%
Net Profit Margin 5.8%
Net Profit Margin - 3 Yr. Avg. 9.2%
Effective Tax Rate 36.6%
Eff/ Tax Rate - 3 Yr. Avg. 34.7%
Payout Ratio 18.9%

SRCL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SRCL stock intrinsic value calculation we used $3486 million for the last fiscal year's total revenue generated by Stericycle, Inc.. The default revenue input number comes from 0001 income statement of Stericycle, 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 SRCL 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 9%, whose default value for SRCL is calculated based on our internal credit rating of Stericycle, 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 Stericycle, 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 SRCL stock the variable cost ratio is equal to 100.2%.

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 SRCL 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 Stericycle, Inc..

Corporate tax rate of 27% is the nominal tax rate for Stericycle, 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 SRCL 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 SRCL are equal to 94.8%.

Life of production assets of 22.9 years is the average useful life of capital assets used in Stericycle, 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 SRCL is equal to 2.8%. 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 - $2587.4 million for Stericycle, 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 90.762 million for Stericycle, 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 Stericycle, Inc. at the current share price and the inputted number of shares is $5.1 billion.

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