Discounted Cash Flow Calculation for NYSE:HCC using 2 Stage Free Cash Flow to Equity Model
The calculations below outline how an intrinsic value for
Warrior Met Coal
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.
NYSE:HCC DCF 1st Stage: Next 10 year cash flow forecast
The current share price of
Warrior Met Coal
is above its future cash flow value.
Often investors are willing to pay a
for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
Warrior Met Coal's
is considered below, and whether this is a fair price.
Price based on past earnings
Warrior Met Coal's earnings available for a low price, and how does
this compare to other companies in the same industry?
Warrior Met Coal's earnings are expected to decrease over the next 1-3 years, this is not considered high growth.
Warrior Met Coal's revenue is expected to decrease over the next 1-3 years, this is not considered high growth.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Warrior Met Coal's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
Metals and Mining
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
Warrior Met Coal
has a total score of
3/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
Warrior Met Coal's finances.
The net worth of a company is the difference between its assets and liabilities.
Warrior Met Coal is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
Warrior Met Coal's long term commitments exceed its cash and other short term assets.
This treemap shows a more detailed breakdown of
Warrior Met Coal's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
High level of physical assets or inventory.
Debt is covered by short term assets, assets are 1x debt.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Mr. Walter J. Scheller III, also known as Walt, has been Chief Executive Officer at Warrior Met Coal, LLC since March 31, 2016. Mr. Scheller served as the Chief Executive Officer at Walter Energy, Inc. from September 12, 2011 to March 31, 2016. Mr. Scheller served as the President and Chief Operating Officer of Jim Walter Resources, Inc.(alternate Name: New WEI 13, Inc.)a subsidiary of Walter Energy, Inc. from June 15, 2010 to September 2011. He joined Walter Energy from Peabody Energy Corporation. He served as the Senior Vice President and Group Executive of Colorado Operations at Peabody Energy Corp. since September 1, 2007. He served as Senior Vice President of Strategic Operations at Peabody Energy Corp. from June 8, 2006 to September 1, 2007 and its Senior Vice President of Operations Improvement until September 1, 2007. He was responsible for leading its continuous improvement initiatives and implementing standard operating procedures across Peabody operations. Mr. Scheller has nearly two decades of operations experience, served as Vice President of Northern Appalachia Gas Operations for CNX Gas Corp. Before that, Mr. Scheller served in a number of executive and operational roles with Consol Energy, Inc., served as Vice President- Operations. He previously served as Vice President and General Manager of Corporate Safety with a major U.S. coal producer and held executive management positions in the safety, operations and legal functions. Mr. Scheller has 33 years of experience in the Mining sector. He has been Director at Warrior Met Coal, LLC since March 31, 2016. He served as a Director at Walter Energy, Inc. from September 12, 2011 to March 31, 2016. He holds a Master's Degree in Business Administration from the University of Pittsburgh - Joseph M. Katz Graduate School of Business, a Law degree/JD from Duquesne University and a Bachelor's Degree in Mining Engineering from West Virginia University.
Walt's compensation has been consistent with company performance over the past year.
Walt's remuneration is about average for companies of similar size in United States of America.
Management Team Tenure
Average tenure and age of the
Warrior Met Coal
management team in years:
The tenure for the Warrior Met Coal management team is about average.
CEO & Director
Chief Financial Officer
Chief Operating Officer
Chief Administrative Officer & Secretary
Chief Accounting Officer & Controller
Senior Vice President of Sales & Marketing
Board of Directors Tenure
Average tenure and age of the
Warrior Met Coal
board of directors in years:
The average tenure for the Warrior Met Coal board of directors is less than 3 years, this suggests a new board.
Did Changing Sentiment Drive Warrior Met Coal's Share Price Down By 12%?
(NYSE:HCC) share price has gained some 32% in the last three months. … Even though the Warrior Met Coal share price is down over the year, its EPS actually improved. … The divergence between the EPS and the share price is quite notable, during the year.
What Investors Should Know About Warrior Met Coal, Inc.'s (NYSE:HCC) Financial Strength
(NYSE:HCC) with its market cap of US$1.4b, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. … I believe these basic checks tell most of the story you need to know.
Investors Are Undervaluing Warrior Met Coal Inc (NYSE:HCC) By 45.15%
by projecting its future cash flows and then discounting them to today's value. … Discounted Cash Flows (DCF). … If you want to learn more about discounted cash flow, the basis for my calcs can be read in detail in the Simply Wall St analysis model
Do You Know What Warrior Met Coal Inc's (NYSE:HCC) P/E Ratio Means?
This article is written for those who want to get better at using price to earnings ratios (P/E ratios). … Warrior Met Coal has a price to earnings ratio of 2.98, based on the last twelve months. … Price to Earnings Ratio = Price per Share ÷ Earnings per Share (EPS)
Investors Are Undervaluing Warrior Met Coal Inc (NYSE:HCC) By 22.16%
Today, I will calculate the stock's intrinsic value. … by taking the expected future cash flows and discounting them to today's value. … Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model
Should You Worry About Warrior Met Coal Inc's (NYSE:HCC) CEO Salary Level?
Walt Scheller is the CEO of Warrior Met Coal Inc (NYSE:HCC), which has recently grown to a market capitalization of US$1.48b. … Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. … See our latest analysis for Warrior Met Coal
Should You Be Tempted To Buy Warrior Met Coal Inc (NYSE:HCC) Because Of Its PE Ratio?
The content of this article will benefit those of you who are starting to educate yourself about investing in the stock market. … and want to better understand how you can grow your money by investing in Warrior Met Coal Inc (NYSE:HCC). … Warrior Met Coal Inc (NYSE:HCC) is trading with a trailing P/E of 2.6x, which is lower than the industry average of 12.5x.
Warrior Met Coal Inc's (NYSE:HCC) Sustainability In Question?
Warrior Met Coal Inc (NYSE:HCC) has been on my radar for a while, and the biggest I see is around the sustainability of the business going forward. … Although HCC seems to be managing its financials well, and appears to be currently undervalued, meaning we can buy its shares at a good price, I would rather buy an outstanding business at an OK price. … Furthermore, comparing HCC's current share price to its peers based on its industry and earnings level, it's undervalued by 360.39%, with a PE ratio of 2.69x vs.
Is Warrior Met Coal Inc's (NYSE:HCC) ROE Of 110.17% Sustainable?
Check out our latest analysis for Warrior Met Coal What you must know about ROE Return on Equity (ROE) weighs Warrior Met Coal’s profit against the level of its shareholders’ equity. … For now, let’s just look at the cost of equity number for Warrior Met Coal, which is 11.67%. … Warrior Met Coal’s above-industry ROE is encouraging, and is also in excess of its cost of equity.
Estimating The Fair Value Of Warrior Met Coal Inc (NYSE:HCC)
Today I will be providing a simple run through of a valuation method used to estimate the attractiveness of Warrior Met Coal Inc (NYSE:HCC) as an investment opportunity by taking the foreast future cash flows of the company and discounting them back to today's value. … 5-year cash flow forecast 2018 2019 2020 2021 2022 Levered FCF ($, Millions) $302.67 $123.00 $99.50 $116.42 $135.04 Source Analyst x3 Analyst x3 Analyst x2 Extrapolated @ (17%, capped from 56.5%) Extrapolated @ (16%, capped from 56.5%) Present Value Discounted @ 11.48% $271.51 $98.98 $71.82 $75.38 $78.44 Present Value of 5-year Cash Flow (PVCF)= $596 The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. … Terminal Value (TV) = FCF2022 × (1 + g) ÷ (r – g) = $135 × (1 + 2.5%) ÷ (11.5% – 2.5%) = $1,536 Present Value of Terminal Value (PVTV) = TV / (1 + r)5 = $1,536 / ( 1 + 11.5%)5 = $892 The total value, or equity value, is then the sum of the present value of the cash flows, which in this case is $1,488.
Warrior Met Coal, Inc. produces and exports metallurgical coal for the steel industry. It operates two underground mines located in Alabama. The company sells its metallurgical coal to a customer base of blast furnace steel producers located primarily in Europe, South America, and Asia. It also sells natural gas, which is extracted as a byproduct from coal production. Warrior Met Coal, Inc. was founded in 2015 and is headquartered in Brookwood, Alabama.
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