Intrinsic value of Just Energy Group Inc. - JE

Previous Close

$7.43

  Intrinsic Value

$2.64

stock screener

  Rating & Target

str. sell

-64%

Previous close

$7.43

 
Intrinsic value

$2.64

 
Up/down potential

-64%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of JE 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 2017), $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 1.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -8.50
  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
  3,757
  3,832
  3,920
  4,021
  4,134
  4,259
  4,397
  4,547
  4,709
  4,883
  5,071
  5,271
  5,485
  5,713
  5,955
  6,212
  6,484
  6,773
  7,077
  7,399
  7,739
  8,098
  8,476
  8,875
  9,295
  9,738
  10,204
  10,694
  11,210
  11,753
  12,324
Variable operating expenses, $m
 
  3,663
  3,747
  3,842
  3,949
  4,068
  4,199
  4,341
  4,494
  4,660
  4,838
  4,999
  5,202
  5,418
  5,647
  5,891
  6,149
  6,422
  6,711
  7,017
  7,339
  7,679
  8,038
  8,416
  8,815
  9,234
  9,676
  10,141
  10,631
  11,145
  11,687
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
  3,540
  3,663
  3,747
  3,842
  3,949
  4,068
  4,199
  4,341
  4,494
  4,660
  4,838
  4,999
  5,202
  5,418
  5,647
  5,891
  6,149
  6,422
  6,711
  7,017
  7,339
  7,679
  8,038
  8,416
  8,815
  9,234
  9,676
  10,141
  10,631
  11,145
  11,687
Operating income, $m
  217
  169
  174
  179
  185
  191
  198
  206
  215
  224
  233
  272
  284
  295
  308
  321
  335
  350
  366
  382
  400
  419
  438
  459
  480
  503
  527
  553
  579
  608
  637
EBITDA, $m
  243
  204
  209
  215
  221
  227
  235
  243
  251
  261
  271
  281
  293
  305
  318
  331
  346
  361
  378
  395
  413
  432
  452
  474
  496
  520
  544
  571
  598
  627
  658
Interest expense (income), $m
  53
  45
  15
  17
  19
  22
  25
  29
  32
  36
  41
  45
  50
  56
  61
  67
  74
  81
  88
  95
  103
  112
  121
  130
  140
  151
  162
  173
  186
  198
  212
Earnings before tax, $m
  514
  124
  159
  162
  166
  169
  173
  177
  182
  187
  192
  227
  233
  240
  246
  254
  261
  269
  278
  287
  297
  307
  317
  328
  340
  353
  366
  379
  394
  409
  425
Tax expense, $m
  43
  33
  43
  44
  45
  46
  47
  48
  49
  51
  52
  61
  63
  65
  67
  68
  71
  73
  75
  78
  80
  83
  86
  89
  92
  95
  99
  102
  106
  110
  115
Net income, $m
  446
  90
  116
  118
  121
  123
  126
  130
  133
  137
  140
  166
  170
  175
  180
  185
  191
  197
  203
  210
  217
  224
  232
  240
  248
  257
  267
  277
  288
  299
  310

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  95
  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
  1,238
  1,166
  1,193
  1,223
  1,258
  1,296
  1,338
  1,383
  1,433
  1,486
  1,543
  1,604
  1,669
  1,738
  1,812
  1,890
  1,973
  2,060
  2,153
  2,251
  2,354
  2,464
  2,579
  2,700
  2,828
  2,962
  3,104
  3,253
  3,410
  3,576
  3,749
Adjusted assets (=assets-cash), $m
  1,143
  1,166
  1,193
  1,223
  1,258
  1,296
  1,338
  1,383
  1,433
  1,486
  1,543
  1,604
  1,669
  1,738
  1,812
  1,890
  1,973
  2,060
  2,153
  2,251
  2,354
  2,464
  2,579
  2,700
  2,828
  2,962
  3,104
  3,253
  3,410
  3,576
  3,749
Revenue / Adjusted assets
  3.287
  3.286
  3.286
  3.288
  3.286
  3.286
  3.286
  3.288
  3.286
  3.286
  3.286
  3.286
  3.286
  3.287
  3.286
  3.287
  3.286
  3.288
  3.287
  3.287
  3.288
  3.287
  3.287
  3.287
  3.287
  3.288
  3.287
  3.287
  3.287
  3.287
  3.287
Average production assets, $m
  90
  92
  94
  97
  99
  102
  106
  109
  113
  117
  122
  127
  132
  137
  143
  149
  156
  163
  170
  178
  186
  194
  203
  213
  223
  234
  245
  257
  269
  282
  296
Working capital, $m
  109
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
Total debt, $m
  498
  160
  184
  212
  243
  277
  315
  356
  400
  448
  499
  554
  613
  675
  742
  812
  886
  965
  1,049
  1,137
  1,230
  1,328
  1,432
  1,541
  1,656
  1,777
  1,905
  2,039
  2,180
  2,329
  2,485
Total liabilities, $m
  1,387
  1,049
  1,073
  1,101
  1,132
  1,166
  1,204
  1,245
  1,289
  1,337
  1,388
  1,443
  1,502
  1,564
  1,631
  1,701
  1,775
  1,854
  1,938
  2,026
  2,119
  2,217
  2,321
  2,430
  2,545
  2,666
  2,794
  2,928
  3,069
  3,218
  3,374
Total equity, $m
  -149
  117
  119
  122
  126
  130
  134
  138
  143
  149
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  258
  270
  283
  296
  310
  325
  341
  358
  375
Total liabilities and equity, $m
  1,238
  1,166
  1,192
  1,223
  1,258
  1,296
  1,338
  1,383
  1,432
  1,486
  1,542
  1,603
  1,669
  1,738
  1,812
  1,890
  1,972
  2,060
  2,153
  2,251
  2,354
  2,463
  2,579
  2,700
  2,828
  2,962
  3,104
  3,253
  3,410
  3,576
  3,749
Debt-to-equity ratio
  -3.342
  1.370
  1.550
  1.730
  1.930
  2.140
  2.350
  2.570
  2.790
  3.020
  3.240
  3.460
  3.670
  3.890
  4.090
  4.300
  4.490
  4.690
  4.870
  5.050
  5.220
  5.390
  5.550
  5.710
  5.860
  6.000
  6.140
  6.270
  6.390
  6.510
  6.630
Adjusted equity ratio
  -0.213
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  446
  90
  116
  118
  121
  123
  126
  130
  133
  137
  140
  166
  170
  175
  180
  185
  191
  197
  203
  210
  217
  224
  232
  240
  248
  257
  267
  277
  288
  299
  310
Depreciation, amort., depletion, $m
  26
  35
  35
  36
  36
  36
  36
  36
  37
  37
  37
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
Funds from operations, $m
  116
  126
  152
  154
  157
  159
  163
  166
  170
  174
  178
  175
  179
  184
  190
  196
  202
  208
  215
  222
  229
  237
  246
  255
  264
  274
  284
  295
  306
  318
  331
Change in working capital, $m
  -34
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  150
  125
  151
  154
  156
  159
  162
  165
  169
  173
  177
  174
  178
  183
  189
  194
  200
  207
  214
  221
  228
  236
  244
  253
  262
  272
  282
  293
  304
  316
  329
Maintenance CAPEX, $m
  0
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
New CAPEX, $m
  -26
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
Cash from investing activities, $m
  -58
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -16
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
Free cash flow, $m
  92
  117
  143
  145
  147
  149
  152
  155
  158
  161
  164
  160
  165
  169
  173
  178
  184
  189
  195
  201
  208
  214
  222
  229
  237
  246
  255
  264
  274
  284
  295
Issuance/(repayment) of debt, $m
  -241
  -338
  24
  28
  31
  34
  38
  41
  44
  48
  51
  55
  59
  62
  66
  70
  75
  79
  83
  88
  93
  98
  104
  109
  115
  121
  128
  134
  141
  149
  156
Issuance/(repurchase) of shares, $m
  121
  270
  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 from financing (excl. dividends), $m  
  -84
  -68
  24
  28
  31
  34
  38
  41
  44
  48
  51
  55
  59
  62
  66
  70
  75
  79
  83
  88
  93
  98
  104
  109
  115
  121
  128
  134
  141
  149
  156
Total cash flow (excl. dividends), $m
  7
  50
  167
  172
  178
  183
  189
  196
  202
  209
  216
  215
  223
  231
  240
  249
  258
  268
  278
  289
  301
  313
  325
  338
  352
  367
  382
  398
  415
  433
  452
Retained Cash Flow (-), $m
  -502
  -361
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
Prev. year cash balance distribution, $m
 
  95
  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
 
  -216
  164
  169
  174
  180
  185
  191
  197
  203
  210
  209
  217
  224
  232
  241
  250
  259
  269
  279
  290
  302
  314
  326
  340
  353
  368
  383
  400
  416
  434
Discount rate, %
 
  10.30
  10.82
  11.36
  11.92
  12.52
  13.15
  13.80
  14.49
  15.22
  15.98
  16.78
  17.62
  18.50
  19.42
  20.39
  21.41
  22.48
  23.61
  24.79
  26.03
  27.33
  28.70
  30.13
  31.64
  33.22
  34.88
  36.62
  38.45
  40.38
  42.40
PV of cash for distribution, $m
 
  -196
  134
  123
  111
  100
  88
  77
  67
  57
  48
  38
  31
  25
  19
  15
  11
  8
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Just Energy Group Inc. (Just Energy) is an energy management solutions provider engaged in electricity, natural gas, solar and green energy. The Company's segments include Consumer Energy and Commercial Energy. The Company operates in the United States, Canada and the United Kingdom, offering a range of energy products, including long-term fixed-price, variable rate and flat bill programs; home energy management services, including smart thermostats and tools to manage energy use at the appliance level, and residential solar panel installations. It markets under the brands, such as Just Energy, Hudson Energy, Amigo Energy, GreenStar Energy, Just Solar, Tara Energy and TerraPass. Just Energy's commercial business is operated primarily through Hudson Energy. Hudson Energy offers fixed and variable rate natural gas and electricity contracts, as well as customized products. Just Energy also offers green products through its JustGreen Electricity and Natural Gas and TerraPass programs.

FINANCIAL RATIOS  of  Just Energy Group Inc. (JE)

Valuation Ratios
P/E Ratio 2.5
Price to Sales 0.3
Price to Book -7.5
Price to Tangible Book
Price to Cash Flow 7.5
Price to Free Cash Flow 9.1
Growth Rates
Sales Growth Rate -8.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 52.9%
Cap. Spend. - 3 Yr. Gr. Rate 11.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity -334.2%
Total Debt to Equity -334.2%
Interest Coverage 11
Management Effectiveness
Return On Assets 39%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 248.5%
Ret/ On T. Cap. - 3 Yr. Avg. 140.8%
Return On Equity -111.5%
Return On Equity - 3 Yr. Avg. -0.1%
Asset Turnover 3
Profitability Ratios
Gross Margin 18.5%
Gross Margin - 3 Yr. Avg. 17%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 2.3%
Operating Margin 5.8%
Oper. Margin - 3 Yr. Avg. 4.3%
Pre-Tax Margin 13.7%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 11.9%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 8.4%
Eff/ Tax Rate - 3 Yr. Avg. 4.4%
Payout Ratio 17.3%

JE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the JE stock intrinsic value calculation we used $3757 million for the last fiscal year's total revenue generated by Just Energy Group Inc.. The default revenue input number comes from 2017 income statement of Just Energy Group 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 JE 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 10.3%, whose default value for JE is calculated based on our internal credit rating of Just Energy Group 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 Just Energy Group 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 JE stock the variable cost ratio is equal to 95.6%.

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 JE 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 9.1% for Just Energy Group Inc..

Corporate tax rate of 27% is the nominal tax rate for Just Energy Group 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 JE 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 JE are equal to 2.4%.

Life of production assets of 14.4 years is the average useful life of capital assets used in Just Energy Group 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 JE is equal to 0.4%. 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 - $-149 million for Just Energy Group 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 146.273 million for Just Energy Group 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 Just Energy Group Inc. at the current share price and the inputted number of shares is $1.1 billion.

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Financial statements of JE
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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