Intrinsic value of Algonquin Power & Utilities Corp. - AQN

Previous Close

$12.64

  Intrinsic Value

$171.69

stock screener

  Rating & Target

str. buy

+999%

Previous close

$12.64

 
Intrinsic value

$171.69

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of AQN 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 4.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,754
  2,709
  4,052
  5,879
  8,294
  11,403
  15,306
  20,098
  25,861
  32,664
  40,561
  49,590
  59,773
  71,118
  83,622
  97,273
  112,050
  127,930
  144,887
  162,896
  181,934
  201,979
  223,018
  245,040
  268,042
  292,028
  317,007
  342,996
  370,018
  398,105
Variable operating expenses, $m
  550
  833
  1,230
  1,771
  2,486
  3,406
  4,561
  5,979
  7,685
  9,699
  12,006
  14,678
  17,692
  21,050
  24,751
  28,792
  33,166
  37,866
  42,885
  48,216
  53,850
  59,784
  66,011
  72,529
  79,338
  86,437
  93,831
  101,523
  109,521
  117,835
Fixed operating expenses, $m
  540
  551
  564
  576
  589
  602
  615
  628
  642
  656
  671
  686
  701
  716
  732
  748
  764
  781
  798
  816
  834
  852
  871
  890
  910
  930
  950
  971
  992
  1,014
Total operating expenses, $m
  1,090
  1,384
  1,794
  2,347
  3,075
  4,008
  5,176
  6,607
  8,327
  10,355
  12,677
  15,364
  18,393
  21,766
  25,483
  29,540
  33,930
  38,647
  43,683
  49,032
  54,684
  60,636
  66,882
  73,419
  80,248
  87,367
  94,781
  102,494
  110,513
  118,849
Operating income, $m
  664
  1,325
  2,258
  3,532
  5,220
  7,395
  10,130
  13,490
  17,533
  22,309
  27,885
  34,226
  41,380
  49,352
  58,139
  67,733
  78,120
  89,283
  101,204
  113,865
  127,249
  141,343
  156,136
  171,621
  187,795
  204,661
  222,226
  240,502
  259,505
  279,256
EBITDA, $m
  846
  1,590
  2,639
  4,071
  5,967
  8,411
  11,483
  15,257
  19,798
  25,162
  31,389
  38,511
  46,545
  55,496
  65,364
  76,137
  87,801
  100,336
  113,722
  127,939
  142,968
  158,794
  175,405
  192,792
  210,954
  229,892
  249,615
  270,136
  291,474
  313,652
Interest expense (income), $m
  132
  197
  370
  623
  978
  1,461
  2,100
  2,921
  3,953
  5,220
  6,744
  8,543
  10,631
  13,019
  15,711
  18,711
  22,017
  25,627
  29,534
  33,733
  38,217
  42,979
  48,012
  53,313
  58,876
  64,699
  70,781
  77,123
  83,728
  90,600
  97,745
Earnings before tax, $m
  467
  955
  1,635
  2,554
  3,759
  5,296
  7,208
  9,536
  12,313
  15,564
  19,342
  23,595
  28,361
  33,641
  39,428
  45,716
  52,493
  59,749
  67,471
  75,648
  84,271
  93,331
  102,823
  112,745
  123,096
  133,880
  145,103
  156,774
  168,905
  181,511
Tax expense, $m
  126
  258
  442
  690
  1,015
  1,430
  1,946
  2,575
  3,324
  4,202
  5,222
  6,371
  7,658
  9,083
  10,646
  12,343
  14,173
  16,132
  18,217
  20,425
  22,753
  25,199
  27,762
  30,441
  33,236
  36,148
  39,178
  42,329
  45,604
  49,008
Net income, $m
  341
  697
  1,194
  1,865
  2,744
  3,866
  5,262
  6,962
  8,988
  11,362
  14,119
  17,224
  20,704
  24,558
  28,782
  33,372
  38,320
  43,617
  49,254
  55,223
  61,518
  68,132
  75,061
  82,304
  89,860
  97,733
  105,925
  114,445
  123,301
  132,503

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
  12,990
  20,069
  30,013
  43,548
  61,439
  84,465
  113,377
  148,871
  191,560
  241,956
  300,455
  367,335
  442,762
  526,800
  619,423
  720,537
  829,998
  947,630
  1,073,240
  1,206,640
  1,347,657
  1,496,142
  1,651,984
  1,815,111
  1,985,498
  2,163,169
  2,348,198
  2,540,709
  2,740,877
  2,948,925
Adjusted assets (=assets-cash), $m
  12,990
  20,069
  30,013
  43,548
  61,439
  84,465
  113,377
  148,871
  191,560
  241,956
  300,455
  367,335
  442,762
  526,800
  619,423
  720,537
  829,998
  947,630
  1,073,240
  1,206,640
  1,347,657
  1,496,142
  1,651,984
  1,815,111
  1,985,498
  2,163,169
  2,348,198
  2,540,709
  2,740,877
  2,948,925
Revenue / Adjusted assets
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
Average production assets, $m
  758
  1,170
  1,750
  2,540
  3,583
  4,926
  6,612
  8,682
  11,172
  14,111
  17,523
  21,423
  25,822
  30,723
  36,125
  42,022
  48,406
  55,266
  62,591
  70,371
  78,595
  87,255
  96,344
  105,857
  115,794
  126,156
  136,947
  148,174
  159,848
  171,981
Working capital, $m
  -247
  -382
  -571
  -829
  -1,169
  -1,608
  -2,158
  -2,834
  -3,646
  -4,606
  -5,719
  -6,992
  -8,428
  -10,028
  -11,791
  -13,715
  -15,799
  -18,038
  -20,429
  -22,968
  -25,653
  -28,479
  -31,446
  -34,551
  -37,794
  -41,176
  -44,698
  -48,362
  -52,173
  -56,133
Total debt, $m
  8,045
  13,539
  21,255
  31,758
  45,642
  63,510
  85,945
  113,489
  146,616
  185,723
  231,118
  283,017
  341,548
  406,761
  478,637
  557,102
  642,044
  733,326
  830,799
  934,318
  1,043,747
  1,158,971
  1,279,905
  1,406,491
  1,538,712
  1,676,584
  1,820,167
  1,969,555
  2,124,885
  2,286,331
Total liabilities, $m
  10,080
  15,574
  23,290
  33,793
  47,677
  65,545
  87,980
  115,524
  148,651
  187,758
  233,153
  285,052
  343,583
  408,796
  480,672
  559,137
  644,079
  735,361
  832,834
  936,353
  1,045,782
  1,161,006
  1,281,940
  1,408,526
  1,540,747
  1,678,619
  1,822,202
  1,971,590
  2,126,920
  2,288,366
Total equity, $m
  2,910
  4,495
  6,723
  9,755
  13,762
  18,920
  25,396
  33,347
  42,910
  54,198
  67,302
  82,283
  99,179
  118,003
  138,751
  161,400
  185,920
  212,269
  240,406
  270,287
  301,875
  335,136
  370,044
  406,585
  444,752
  484,550
  525,996
  569,119
  613,956
  660,559
Total liabilities and equity, $m
  12,990
  20,069
  30,013
  43,548
  61,439
  84,465
  113,376
  148,871
  191,561
  241,956
  300,455
  367,335
  442,762
  526,799
  619,423
  720,537
  829,999
  947,630
  1,073,240
  1,206,640
  1,347,657
  1,496,142
  1,651,984
  1,815,111
  1,985,499
  2,163,169
  2,348,198
  2,540,709
  2,740,876
  2,948,925
Debt-to-equity ratio
  2.760
  3.010
  3.160
  3.260
  3.320
  3.360
  3.380
  3.400
  3.420
  3.430
  3.430
  3.440
  3.440
  3.450
  3.450
  3.450
  3.450
  3.450
  3.460
  3.460
  3.460
  3.460
  3.460
  3.460
  3.460
  3.460
  3.460
  3.460
  3.460
  3.460
Adjusted equity ratio
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  341
  697
  1,194
  1,865
  2,744
  3,866
  5,262
  6,962
  8,988
  11,362
  14,119
  17,224
  20,704
  24,558
  28,782
  33,372
  38,320
  43,617
  49,254
  55,223
  61,518
  68,132
  75,061
  82,304
  89,860
  97,733
  105,925
  114,445
  123,301
  132,503
Depreciation, amort., depletion, $m
  182
  265
  381
  539
  747
  1,016
  1,353
  1,767
  2,265
  2,853
  3,505
  4,285
  5,164
  6,145
  7,225
  8,404
  9,681
  11,053
  12,518
  14,074
  15,719
  17,451
  19,269
  21,171
  23,159
  25,231
  27,389
  29,635
  31,970
  34,396
Funds from operations, $m
  523
  962
  1,575
  2,403
  3,491
  4,882
  6,615
  8,729
  11,253
  14,215
  17,624
  21,509
  25,868
  30,702
  36,007
  41,777
  48,001
  54,670
  61,772
  69,297
  77,237
  85,583
  94,330
  103,475
  113,019
  122,964
  133,315
  144,080
  155,270
  166,899
Change in working capital, $m
  -93
  -135
  -189
  -258
  -341
  -438
  -550
  -676
  -813
  -959
  -1,114
  -1,273
  -1,436
  -1,600
  -1,763
  -1,925
  -2,084
  -2,239
  -2,391
  -2,539
  -2,684
  -2,826
  -2,966
  -3,105
  -3,243
  -3,382
  -3,522
  -3,664
  -3,810
  -3,960
Cash from operations, $m
  616
  1,097
  1,764
  2,661
  3,832
  5,320
  7,166
  9,404
  12,066
  15,174
  18,737
  22,782
  27,304
  32,302
  37,770
  43,702
  50,085
  56,909
  64,163
  71,837
  79,921
  88,409
  97,296
  106,580
  116,263
  126,346
  136,837
  147,744
  159,080
  170,860
Maintenance CAPEX, $m
  -95
  -152
  -234
  -350
  -508
  -717
  -985
  -1,322
  -1,736
  -2,234
  -2,822
  -3,505
  -4,285
  -5,164
  -6,145
  -7,225
  -8,404
  -9,681
  -11,053
  -12,518
  -14,074
  -15,719
  -17,451
  -19,269
  -21,171
  -23,159
  -25,231
  -27,389
  -29,635
  -31,970
New CAPEX, $m
  -284
  -413
  -580
  -789
  -1,043
  -1,343
  -1,686
  -2,070
  -2,490
  -2,939
  -3,412
  -3,900
  -4,399
  -4,901
  -5,402
  -5,897
  -6,384
  -6,860
  -7,326
  -7,780
  -8,224
  -8,660
  -9,089
  -9,514
  -9,937
  -10,362
  -10,791
  -11,227
  -11,674
  -12,133
Cash from investing activities, $m
  -379
  -565
  -814
  -1,139
  -1,551
  -2,060
  -2,671
  -3,392
  -4,226
  -5,173
  -6,234
  -7,405
  -8,684
  -10,065
  -11,547
  -13,122
  -14,788
  -16,541
  -18,379
  -20,298
  -22,298
  -24,379
  -26,540
  -28,783
  -31,108
  -33,521
  -36,022
  -38,616
  -41,309
  -44,103
Free cash flow, $m
  237
  532
  950
  1,522
  2,281
  3,261
  4,494
  6,012
  7,840
  10,001
  12,504
  15,377
  18,620
  22,236
  26,224
  30,580
  35,297
  40,368
  45,784
  51,539
  57,623
  64,030
  70,757
  77,798
  85,154
  92,825
  100,815
  109,128
  117,772
  126,757
Issuance/(repayment) of debt, $m
  3,765
  5,494
  7,717
  10,503
  13,884
  17,868
  22,435
  27,543
  33,127
  39,107
  45,395
  51,899
  58,531
  65,213
  71,876
  78,465
  84,942
  91,282
  97,474
  103,519
  109,429
  115,225
  120,933
  126,587
  132,221
  137,873
  143,582
  149,388
  155,330
  161,445
Issuance/(repurchase) of shares, $m
  745
  889
  1,034
  1,167
  1,264
  1,292
  1,214
  989
  574
  0
  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  
  4,510
  6,383
  8,751
  11,670
  15,148
  19,160
  23,649
  28,532
  33,701
  39,107
  45,395
  51,899
  58,531
  65,213
  71,876
  78,465
  84,942
  91,282
  97,474
  103,519
  109,429
  115,225
  120,933
  126,587
  132,221
  137,873
  143,582
  149,388
  155,330
  161,445
Total cash flow (excl. dividends), $m
  4,747
  6,915
  9,700
  13,191
  17,428
  22,420
  28,144
  34,544
  41,541
  49,108
  57,898
  67,276
  77,152
  87,449
  98,100
  109,045
  120,239
  131,649
  143,258
  155,057
  167,052
  179,255
  191,690
  204,385
  217,375
  230,698
  244,397
  258,516
  273,102
  288,202
Retained Cash Flow (-), $m
  -1,086
  -1,586
  -2,227
  -3,032
  -4,008
  -5,158
  -6,476
  -7,951
  -9,562
  -11,289
  -13,104
  -14,981
  -16,896
  -18,824
  -20,748
  -22,650
  -24,519
  -26,349
  -28,137
  -29,882
  -31,588
  -33,261
  -34,909
  -36,540
  -38,167
  -39,798
  -41,446
  -43,122
  -44,838
  -46,603
Prev. year cash balance distribution, $m
  100
  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
  3,761
  5,329
  7,473
  10,160
  13,421
  17,263
  21,668
  26,594
  31,979
  37,819
  44,795
  52,295
  60,256
  68,625
  77,352
  86,395
  95,719
  105,300
  115,121
  125,176
  135,464
  145,994
  156,781
  167,844
  179,208
  190,900
  202,950
  215,394
  228,264
  241,599
Discount rate, %
  10.90
  11.45
  12.02
  12.62
  13.25
  13.91
  14.61
  15.34
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.66
  23.79
  24.98
  26.23
  27.54
  28.92
  30.37
  31.89
  33.48
  35.15
  36.91
  38.76
  40.69
  42.73
  44.87
PV of cash for distribution, $m
  3,391
  4,290
  5,316
  6,316
  7,204
  7,901
  8,343
  8,492
  8,341
  7,929
  7,421
  6,723
  5,898
  5,011
  4,125
  3,290
  2,542
  1,902
  1,377
  965
  653
  427
  270
  164
  96
  54
  29
  15
  8
  4
Current shareholders' claim on cash, %
  86.2
  76.9
  70.5
  66.0
  62.8
  60.6
  59.1
  58.2
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8
  57.8

Algonquin Power & Utilities Corp. (APUC) is a Canada-based company engaged in owning and operating a portfolio of regulated and non-regulated generation, distribution and transmission utility assets. APUC's operations are organized across three business units consisting of Generation, Transmission and Distribution. The Generation Business Group (Generation Group) owns and operates a portfolio of non-regulated renewable and thermal electric generation utility assets; the Transmission Business Group (Transmission Group) is responsible for evaluating and capitalizing upon natural gas pipeline and electric transmission asset opportunities in North America, and the Distribution Business Group (Distribution Group) owns and operates a portfolio of North American electric, natural gas, and water distribution and wastewater collection utility systems. The Generation Group has interests in hydroelectric, wind, solar and thermal facilities.

FINANCIAL RATIOS  of  Algonquin Power & Utilities Corp. (AQN)

Valuation Ratios
P/E Ratio 26.4
Price to Sales 3.2
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow -29.1
Growth Rates
Sales Growth Rate 6.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 99%
Cap. Spend. - 3 Yr. Gr. Rate 20.8%
Financial Strength
Quick Ratio 11
Current Ratio 0.3
LT Debt to Equity 222.5%
Total Debt to Equity 223%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 2.7%
Ret/ On T. Cap. - 3 Yr. Avg. 3.2%
Return On Equity 6.8%
Return On Equity - 3 Yr. Avg. 6.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 41.8%
EBITDA Margin - 3 Yr. Avg. 34.1%
Operating Margin 20.6%
Oper. Margin - 3 Yr. Avg. 17.3%
Pre-Tax Margin 11.9%
Pre-Tax Margin - 3 Yr. Avg. 10.7%
Net Profit Margin 12%
Net Profit Margin - 3 Yr. Avg. 10.5%
Effective Tax Rate 29.2%
Eff/ Tax Rate - 3 Yr. Avg. 28.2%
Payout Ratio 98.5%

AQN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AQN stock intrinsic value calculation we used $1096 million for the last fiscal year's total revenue generated by Algonquin Power & Utilities Corp.. The default revenue input number comes from 2016 income statement of Algonquin Power & Utilities Corp.. 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 AQN stock valuation model: a) initial revenue growth rate of 60% 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 10.9%, whose default value for AQN is calculated based on our internal credit rating of Algonquin Power & Utilities Corp., 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 Algonquin Power & Utilities Corp..
    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 AQN stock the variable cost ratio is equal to 32.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $528 million in the base year in the intrinsic value calculation for AQN 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 4.6% for Algonquin Power & Utilities Corp..

Corporate tax rate of 27% is the nominal tax rate for Algonquin Power & Utilities Corp.. 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 AQN 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 AQN are equal to 43.2%.

Life of production assets of 3.5 years is the average useful life of capital assets used in Algonquin Power & Utilities Corp. 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 AQN is equal to -14.1%. 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 - $1924 million for Algonquin Power & Utilities Corp. - 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 386.913 million for Algonquin Power & Utilities Corp. 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 Algonquin Power & Utilities Corp. at the current share price and the inputted number of shares is $4.9 billion.

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