Intrinsic value of Fortis Inc. - FTS

Previous Close

$42.39

  Intrinsic Value

$153.69

stock screener

  Rating & Target

str. buy

+263%

Previous close

$42.39

 
Intrinsic value

$153.69

 
Up/down potential

+263%

 
Rating

str. buy

We calculate the intrinsic value of FTS 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 17.8

 

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, %
  24.40
  22.46
  20.71
  19.14
  17.73
  16.46
  15.31
  14.28
  13.35
  12.52
  11.76
  11.09
  10.48
  9.93
  9.44
  8.99
  8.59
  8.24
  7.91
  7.62
  7.36
  7.12
  6.91
  6.72
  6.55
  6.39
  6.25
  6.13
  6.02
  5.91
Revenue, $m
  8,506
  10,417
  12,575
  14,982
  17,638
  20,540
  23,685
  27,067
  30,681
  34,521
  38,582
  42,860
  47,351
  52,054
  56,967
  62,091
  67,427
  72,980
  78,754
  84,756
  90,993
  97,474
  104,210
  111,212
  118,493
  126,068
  133,952
  142,161
  150,712
  159,625
Variable operating expenses, $m
  4,632
  5,395
  6,256
  7,217
  8,277
  9,436
  10,691
  12,041
  13,484
  15,017
  15,401
  17,109
  18,902
  20,779
  22,740
  24,786
  26,916
  29,133
  31,438
  33,833
  36,323
  38,910
  41,599
  44,394
  47,301
  50,325
  53,472
  56,749
  60,162
  63,720
Fixed operating expenses, $m
  1,494
  1,527
  1,561
  1,595
  1,630
  1,666
  1,703
  1,740
  1,778
  1,817
  1,857
  1,898
  1,940
  1,983
  2,026
  2,071
  2,116
  2,163
  2,211
  2,259
  2,309
  2,360
  2,412
  2,465
  2,519
  2,574
  2,631
  2,689
  2,748
  2,808
Total operating expenses, $m
  6,126
  6,922
  7,817
  8,812
  9,907
  11,102
  12,394
  13,781
  15,262
  16,834
  17,258
  19,007
  20,842
  22,762
  24,766
  26,857
  29,032
  31,296
  33,649
  36,092
  38,632
  41,270
  44,011
  46,859
  49,820
  52,899
  56,103
  59,438
  62,910
  66,528
Operating income, $m
  2,380
  3,495
  4,758
  6,170
  7,731
  9,439
  11,291
  13,286
  15,419
  17,687
  21,323
  23,853
  26,509
  29,292
  32,200
  35,234
  38,395
  41,684
  45,106
  48,663
  52,361
  56,204
  60,199
  64,353
  68,673
  73,169
  77,849
  82,723
  87,802
  93,096
EBITDA, $m
  3,721
  4,860
  6,149
  7,590
  9,184
  10,927
  12,819
  14,855
  17,032
  19,347
  21,797
  24,379
  27,091
  29,931
  32,900
  35,997
  39,223
  42,581
  46,073
  49,704
  53,478
  57,401
  61,479
  65,719
  70,129
  74,718
  79,494
  84,469
  89,653
  95,057
Interest expense (income), $m
  644
  832
  1,127
  1,467
  1,852
  2,281
  2,755
  3,272
  3,833
  4,436
  5,081
  5,765
  6,490
  7,253
  8,053
  8,892
  9,768
  10,682
  11,633
  12,623
  13,653
  14,723
  15,835
  16,991
  18,192
  19,441
  20,739
  22,090
  23,496
  24,960
  26,485
Earnings before tax, $m
  1,548
  2,369
  3,291
  4,318
  5,449
  6,684
  8,019
  9,453
  10,982
  12,606
  15,558
  17,363
  19,257
  21,239
  23,308
  25,466
  27,713
  30,051
  32,482
  35,010
  37,637
  40,368
  43,208
  46,161
  49,233
  52,430
  55,759
  59,227
  62,842
  66,612
Tax expense, $m
  418
  640
  889
  1,166
  1,471
  1,805
  2,165
  2,552
  2,965
  3,404
  4,201
  4,688
  5,199
  5,734
  6,293
  6,876
  7,483
  8,114
  8,770
  9,453
  10,162
  10,899
  11,666
  12,463
  13,293
  14,156
  15,055
  15,991
  16,967
  17,985
Net income, $m
  1,130
  1,729
  2,402
  3,152
  3,978
  4,879
  5,854
  6,900
  8,017
  9,202
  11,357
  12,675
  14,057
  15,504
  17,015
  18,590
  20,230
  21,937
  23,712
  25,557
  27,475
  29,469
  31,542
  33,697
  35,940
  38,274
  40,704
  43,236
  45,875
  48,626

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
  59,073
  72,340
  87,325
  104,041
  122,486
  142,642
  164,480
  187,966
  213,062
  239,729
  267,931
  297,639
  328,829
  361,486
  395,603
  431,185
  468,245
  506,806
  546,904
  588,582
  631,893
  676,901
  723,678
  772,305
  822,871
  875,475
  930,223
  987,228
  1,046,612
  1,108,506
Adjusted assets (=assets-cash), $m
  59,073
  72,340
  87,325
  104,041
  122,486
  142,642
  164,480
  187,966
  213,062
  239,729
  267,931
  297,639
  328,829
  361,486
  395,603
  431,185
  468,245
  506,806
  546,904
  588,582
  631,893
  676,901
  723,678
  772,305
  822,871
  875,475
  930,223
  987,228
  1,046,612
  1,108,506
Revenue / Adjusted assets
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
Average production assets, $m
  961
  1,177
  1,421
  1,693
  1,993
  2,321
  2,676
  3,059
  3,467
  3,901
  4,360
  4,843
  5,351
  5,882
  6,437
  7,016
  7,619
  8,247
  8,899
  9,577
  10,282
  11,015
  11,776
  12,567
  13,390
  14,246
  15,137
  16,064
  17,030
  18,038
Working capital, $m
  -706
  -865
  -1,044
  -1,244
  -1,464
  -1,705
  -1,966
  -2,247
  -2,547
  -2,865
  -3,202
  -3,557
  -3,930
  -4,320
  -4,728
  -5,154
  -5,596
  -6,057
  -6,537
  -7,035
  -7,552
  -8,090
  -8,649
  -9,231
  -9,835
  -10,464
  -11,118
  -11,799
  -12,509
  -13,249
Total debt, $m
  30,448
  39,656
  50,056
  61,657
  74,457
  88,445
  103,601
  119,901
  137,317
  155,824
  175,396
  196,014
  217,659
  240,323
  264,001
  288,694
  314,414
  341,176
  369,003
  397,928
  427,986
  459,221
  491,685
  525,432
  560,525
  597,032
  635,026
  674,588
  715,801
  758,755
Total liabilities, $m
  40,996
  50,204
  60,604
  72,205
  85,005
  98,993
  114,149
  130,449
  147,865
  166,372
  185,944
  206,562
  228,207
  250,871
  274,549
  299,242
  324,962
  351,724
  379,551
  408,476
  438,534
  469,769
  502,233
  535,980
  571,073
  607,580
  645,574
  685,136
  726,349
  769,303
Total equity, $m
  18,076
  22,136
  26,721
  31,837
  37,481
  43,648
  50,331
  57,518
  65,197
  73,357
  81,987
  91,078
  100,622
  110,615
  121,055
  131,943
  143,283
  155,083
  167,353
  180,106
  193,359
  207,132
  221,445
  236,325
  251,799
  267,895
  284,648
  302,092
  320,263
  339,203
Total liabilities and equity, $m
  59,072
  72,340
  87,325
  104,042
  122,486
  142,641
  164,480
  187,967
  213,062
  239,729
  267,931
  297,640
  328,829
  361,486
  395,604
  431,185
  468,245
  506,807
  546,904
  588,582
  631,893
  676,901
  723,678
  772,305
  822,872
  875,475
  930,222
  987,228
  1,046,612
  1,108,506
Debt-to-equity ratio
  1.680
  1.790
  1.870
  1.940
  1.990
  2.030
  2.060
  2.080
  2.110
  2.120
  2.140
  2.150
  2.160
  2.170
  2.180
  2.190
  2.190
  2.200
  2.200
  2.210
  2.210
  2.220
  2.220
  2.220
  2.230
  2.230
  2.230
  2.230
  2.240
  2.240
Adjusted equity ratio
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,130
  1,729
  2,402
  3,152
  3,978
  4,879
  5,854
  6,900
  8,017
  9,202
  11,357
  12,675
  14,057
  15,504
  17,015
  18,590
  20,230
  21,937
  23,712
  25,557
  27,475
  29,469
  31,542
  33,697
  35,940
  38,274
  40,704
  43,236
  45,875
  48,626
Depreciation, amort., depletion, $m
  1,341
  1,364
  1,391
  1,420
  1,453
  1,489
  1,527
  1,569
  1,613
  1,660
  474
  526
  582
  639
  700
  763
  828
  896
  967
  1,041
  1,118
  1,197
  1,280
  1,366
  1,455
  1,548
  1,645
  1,746
  1,851
  1,961
Funds from operations, $m
  2,471
  3,093
  3,793
  4,573
  5,431
  6,368
  7,381
  8,469
  9,630
  10,863
  11,831
  13,201
  14,639
  16,144
  17,715
  19,353
  21,059
  22,834
  24,679
  26,598
  28,593
  30,666
  32,822
  35,063
  37,395
  39,822
  42,349
  44,982
  47,726
  50,587
Change in working capital, $m
  -138
  -159
  -179
  -200
  -220
  -241
  -261
  -281
  -300
  -319
  -337
  -355
  -373
  -390
  -408
  -425
  -443
  -461
  -479
  -498
  -518
  -538
  -559
  -581
  -604
  -629
  -654
  -681
  -710
  -740
Cash from operations, $m
  2,609
  3,252
  3,972
  4,772
  5,652
  6,609
  7,642
  8,750
  9,930
  11,182
  12,168
  13,556
  15,012
  16,534
  18,122
  19,778
  21,502
  23,295
  25,159
  27,096
  29,110
  31,204
  33,381
  35,644
  38,000
  40,451
  43,004
  45,663
  48,436
  51,327
Maintenance CAPEX, $m
  -84
  -104
  -128
  -154
  -184
  -217
  -252
  -291
  -332
  -377
  -424
  -474
  -526
  -582
  -639
  -700
  -763
  -828
  -896
  -967
  -1,041
  -1,118
  -1,197
  -1,280
  -1,366
  -1,455
  -1,548
  -1,645
  -1,746
  -1,851
New CAPEX, $m
  -185
  -216
  -244
  -272
  -300
  -328
  -355
  -382
  -408
  -434
  -459
  -483
  -508
  -531
  -555
  -579
  -603
  -627
  -652
  -678
  -705
  -732
  -761
  -791
  -823
  -856
  -891
  -928
  -966
  -1,007
Cash from investing activities, $m
  -269
  -320
  -372
  -426
  -484
  -545
  -607
  -673
  -740
  -811
  -883
  -957
  -1,034
  -1,113
  -1,194
  -1,279
  -1,366
  -1,455
  -1,548
  -1,645
  -1,746
  -1,850
  -1,958
  -2,071
  -2,189
  -2,311
  -2,439
  -2,573
  -2,712
  -2,858
Free cash flow, $m
  2,340
  2,932
  3,600
  4,346
  5,167
  6,064
  7,034
  8,077
  9,190
  10,371
  11,285
  12,599
  13,978
  15,421
  16,928
  18,499
  20,136
  21,839
  23,610
  25,451
  27,365
  29,354
  31,422
  33,573
  35,811
  38,140
  40,564
  43,090
  45,723
  48,469
Issuance/(repayment) of debt, $m
  7,958
  9,208
  10,399
  11,601
  12,801
  13,988
  15,156
  16,299
  17,416
  18,507
  19,573
  20,617
  21,646
  22,664
  23,677
  24,694
  25,719
  26,762
  27,828
  28,924
  30,058
  31,236
  32,463
  33,747
  35,093
  36,507
  37,995
  39,561
  41,213
  42,955
Issuance/(repurchase) of shares, $m
  2,349
  2,331
  2,183
  1,963
  1,666
  1,289
  829
  286
  0
  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  
  10,307
  11,539
  12,582
  13,564
  14,467
  15,277
  15,985
  16,585
  17,416
  18,507
  19,573
  20,617
  21,646
  22,664
  23,677
  24,694
  25,719
  26,762
  27,828
  28,924
  30,058
  31,236
  32,463
  33,747
  35,093
  36,507
  37,995
  39,561
  41,213
  42,955
Total cash flow (excl. dividends), $m
  12,648
  14,470
  16,183
  17,910
  19,634
  21,341
  23,019
  24,663
  26,606
  28,878
  30,858
  33,217
  35,624
  38,085
  40,605
  43,193
  45,855
  48,601
  51,438
  54,375
  57,423
  60,590
  63,885
  67,320
  70,904
  74,647
  78,559
  82,652
  86,936
  91,423
Retained Cash Flow (-), $m
  -3,479
  -4,060
  -4,585
  -5,115
  -5,644
  -6,168
  -6,683
  -7,187
  -7,679
  -8,160
  -8,630
  -9,091
  -9,544
  -9,993
  -10,440
  -10,888
  -11,340
  -11,800
  -12,270
  -12,753
  -13,253
  -13,772
  -14,314
  -14,880
  -15,473
  -16,097
  -16,753
  -17,444
  -18,172
  -18,940
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
  9,168
  10,410
  11,597
  12,795
  13,990
  15,173
  16,337
  17,476
  18,927
  20,717
  22,228
  24,126
  26,080
  28,092
  30,165
  32,305
  34,515
  36,801
  39,168
  41,622
  44,169
  46,817
  49,572
  52,440
  55,430
  58,550
  61,806
  65,208
  68,764
  72,484
Discount rate, %
  10.00
  10.50
  11.03
  11.58
  12.16
  12.76
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.07
  25.27
  26.53
  27.86
  29.25
  30.72
  32.25
  33.86
  35.56
  37.33
  39.20
  41.16
PV of cash for distribution, $m
  8,335
  8,526
  8,474
  8,256
  7,884
  7,380
  6,774
  6,096
  5,476
  4,898
  4,226
  3,628
  3,047
  2,502
  2,008
  1,573
  1,203
  897
  651
  460
  315
  210
  136
  85
  51
  30
  17
  9
  5
  2
Current shareholders' claim on cash, %
  88.3
  79.9
  73.9
  69.7
  66.8
  65.0
  64.0
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7
  63.7

Fortis Inc. is a Canada-based electric and gas utility holding company. The Company's segments include Regulated Utilities and Non-Regulated Utilities. The Regulated Utilities segment includes Regulated Electric & Gas Utilities-the United States, which consists of ITC Holdings Corp. (ITC Holdings), UNS Energy Corporation and Central Hudson Gas & Electric Corporation (Central Hudson); Gas & Electric Utilities-Canadian, which consists of FortisAlberta Inc. (FortisAlberta), FortisBC Energy Inc. (FortisBC Energy), FortisBC Inc. (FortisBC Electric) and Newfoundland Power Inc. (Newfoundland Power); Electric Utilities-Caribbean, which includes its ownership interest in Caribbean Utilities Company, Ltd., Fortis Turks and Caicos, and its investment in Belize Electricity Limited. The Non-Regulated Utilities segment consists of Non-Regulated-Energy Infrastructure, which comprises long-term generation assets in British Columbia and Belize, and the Aitken Creek natural gas storage facility.

FINANCIAL RATIOS  of  Fortis Inc. (FTS)

Valuation Ratios
P/E Ratio 25.8
Price to Sales 2.5
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow -96.2
Growth Rates
Sales Growth Rate 1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.4%
Cap. Spend. - 3 Yr. Gr. Rate 11.9%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 145.8%
Total Debt to Equity 155.9%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.1%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.8%
Return On Equity 5.4%
Return On Equity - 3 Yr. Avg. 6.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 36.3%
EBITDA Margin - 3 Yr. Avg. 34.8%
Operating Margin 21.1%
Oper. Margin - 3 Yr. Avg. 20%
Pre-Tax Margin 12.5%
Pre-Tax Margin - 3 Yr. Avg. 12.2%
Net Profit Margin 9.7%
Net Profit Margin - 3 Yr. Avg. 9.5%
Effective Tax Rate 16.9%
Eff/ Tax Rate - 3 Yr. Avg. 17.5%
Payout Ratio 58.8%

FTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FTS stock intrinsic value calculation we used $6838 million for the last fiscal year's total revenue generated by Fortis Inc.. The default revenue input number comes from 2016 income statement of Fortis 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 FTS stock valuation model: a) initial revenue growth rate of 24.4% 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%, whose default value for FTS is calculated based on our internal credit rating of Fortis 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 Fortis 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 FTS stock the variable cost ratio is equal to 58%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1462 million in the base year in the intrinsic value calculation for FTS 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 3.7% for Fortis Inc..

Corporate tax rate of 27% is the nominal tax rate for Fortis 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 FTS 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 FTS are equal to 11.3%.

Life of production assets of 9.2 years is the average useful life of capital assets used in Fortis 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 FTS is equal to -8.3%. 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 - $14597 million for Fortis 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 419.649 million for Fortis 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 Fortis Inc. at the current share price and the inputted number of shares is $17.8 billion.

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