Carpenter Technology (CRS:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Carpenter Technology(CRS:NYS)

Industrials:Metal Fabrication

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Close Price/Date
$44.61 (USD) 24/10/2018

Weighted Valuation
$56.52 (USD)

Overall Rating
Undervalued by 26.7%

Valuation Models Analyst Consensus: $61.00 (USD)
(in order of importance) Adjusted Book Value: $49.81 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (CRS:NYS USD)

Price 44.61
Range 44.09 – 51.33
52 week 42.66 – 60.43
Open 50.15
Vol / Avg. 1.02M/269571
Mkt cap 2.11B
P/E 11.38
Div/yield 0.72/0.02
EPS 3.92
Shares 47.32M
Beta 2.06

Company Description

Carpenter Technology is a leading U.S. producer of specialty metals and alloys that include nickel, cobalt, titanium, and chromium. The company’s products are frequently used in applications that require stress tolerance as well as resistance to corrosion and heat. Carpenter’s end markets include the aerospace, energy, industrial, consumer, automotive, and medical sectors.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for CRS:NYS

Using a discounted cash flow model we generated an intrinsic value of $24.40 (USD) for CRS:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

CRS:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $24.40 1% 5% 1% 5%
WACC (or Ke) 12.89 $28.89 $20.75
Terminal Growth Rate 3.00 $21.15 $28.39
Tax Rate 0.18 $28.19 $20.62
Cash Flow 497,590,255 $20.45 $28.35
Capital Expenditures -168,420,000 $23.29 $25.52
Long Term Debt 609,600,000 $25.05 $23.76

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $85.24 (USD) for CRS:NYS. We also generated a valuation of $55.27 (USD) using other metrics and comparables.
The comparable companies were Allegheny Technologies (ATI:NYS) and Valmont Industries (VMI:NYS).

Company CRS:NYS End Date Value
Earnings/Share $3.92 (USD)
Book Value/Share $31.40 (USD)
Sales/Share $45.33 (USD)
Cash Flow/Share $4.40 (USD)
EBITDA/Share $6.41 (USD)
Price Based on Comps Adjustment Factor (%)
$119.06 (USD) -5.9
$74.11 (USD) -15.8
$46.82 (USD) -13.4
$90.70 (USD) 30.0
$71.30 (USD) 31.2
CRS:NYS Ratios Used Average Values ATI:NYS VMI:NYS
15.04 PE Ratio 30.37 0.00 30.37
1.88 PB Ratio 2.36 1.93 2.79
1.30 PS Ratio 1.03 0.93 1.13
13.41 PCF Ratio 23.25 24.58 21.92
10.75 EV to EBITDA 11.12 12.25 10.00


Using a multiples approach we generated a valuation of  $65.13 (USD) for CRS:NYS

Company CRS:NYS End Date Value
Earnings/Share $3.92 (USD)
Book Value/Share $31.40 (USD)
Sales/Share $45.33 (USD)
Cash Flow/Share $4.40 (USD)
EBITDA/Share $6.41 (USD)
Price Based on Comps Adjustment Factor
$113.38 (USD) 0
$48.31 (USD) 0
$45.88 (USD) 0
$46.32 (USD) 0
$71.74 (USD) 0
Ratios Ratio Average
PE Ratio 28.92
PB Ratio 1.54
PS Ratio 1.01
PCF Ratio 10.54
EV to EBITDA 11.19

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  CRS:NYS for the last 10 years was  1.58

We ran the Adjusted Book Value for  CRS:NYS and generated a book value of  $31.49 (USD)
By multiplying these we get an adjusted valuation of  $49.81 (USD)

Analyst Data

In the Stockcalc database there are 2 analysts that provide a valuation for CRS:NYS. The 2 analysts have a concensus valuation for CRS:NYS for 2019 of $61.00 (USD).

CRS:NYS Carpenter Technology

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 3 0 3.5000 Hold 2018-10-23

Current Price: 44.61 USD

Analyst Consensus
USD Millions 2019 2020
Mean EPS 3.76 4.83
# EPS Analysts 3 3
Mean Revenue 2,452.60 2,633.00
# Revenue Analysts 3 3
Mean Target Price 61.00
Mean Cash Flow 5.41 7.61
Mean EBITDA 390.50 465.00
Mean Net Income 182.00 232.20
Mean Debt Outstanding 461.00 360.00
Mean Tax Rate 25.00 25.00
Mean Growth Rate 26.52
Mean Capital Expenditure 190.00 150.00

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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