Intrinsic value of AltaGas Ltd. - ALA

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$30.41

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$30.41

 
Intrinsic value

$5.56

 
Up/down potential

-82%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of ALA 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 5.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   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, %
  -0.14
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
Revenue, $m
  2,190
  2,497
  2,824
  3,171
  3,537
  3,923
  4,328
  4,751
  5,193
  5,654
  6,134
  6,633
  7,152
  7,691
  8,252
  8,834
  9,440
  10,069
  10,724
  11,405
  12,114
  12,852
  13,621
  14,423
  15,259
  16,131
  17,042
  17,993
  18,987
  20,026
  21,112
Variable operating expenses, $m
 
  2,120
  2,387
  2,669
  2,968
  3,282
  3,612
  3,957
  4,317
  4,693
  5,084
  5,405
  5,828
  6,268
  6,724
  7,199
  7,692
  8,205
  8,739
  9,294
  9,872
  10,473
  11,100
  11,753
  12,435
  13,146
  13,888
  14,663
  15,473
  16,319
  17,205
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
  1,809
  2,120
  2,387
  2,669
  2,968
  3,282
  3,612
  3,957
  4,317
  4,693
  5,084
  5,405
  5,828
  6,268
  6,724
  7,199
  7,692
  8,205
  8,739
  9,294
  9,872
  10,473
  11,100
  11,753
  12,435
  13,146
  13,888
  14,663
  15,473
  16,319
  17,205
Operating income, $m
  381
  376
  437
  501
  569
  640
  715
  794
  876
  961
  1,050
  1,228
  1,324
  1,424
  1,527
  1,635
  1,747
  1,864
  1,985
  2,111
  2,242
  2,379
  2,521
  2,669
  2,824
  2,986
  3,154
  3,330
  3,514
  3,707
  3,908
EBITDA, $m
  653
  746
  843
  947
  1,057
  1,172
  1,293
  1,419
  1,551
  1,689
  1,832
  1,981
  2,136
  2,297
  2,465
  2,639
  2,819
  3,007
  3,203
  3,406
  3,618
  3,839
  4,068
  4,308
  4,558
  4,818
  5,090
  5,374
  5,671
  5,982
  6,306
Interest expense (income), $m
  142
  135
  163
  192
  223
  256
  290
  327
  364
  404
  445
  488
  533
  579
  628
  678
  730
  784
  841
  899
  960
  1,024
  1,090
  1,159
  1,230
  1,305
  1,383
  1,465
  1,550
  1,639
  1,732
Earnings before tax, $m
  246
  241
  274
  309
  346
  385
  425
  467
  511
  557
  604
  739
  791
  844
  900
  957
  1,017
  1,079
  1,144
  1,212
  1,282
  1,355
  1,431
  1,511
  1,594
  1,680
  1,771
  1,865
  1,964
  2,067
  2,175
Tax expense, $m
  33
  65
  74
  84
  93
  104
  115
  126
  138
  150
  163
  200
  214
  228
  243
  258
  275
  291
  309
  327
  346
  366
  386
  408
  430
  454
  478
  504
  530
  558
  587
Net income, $m
  204
  176
  200
  226
  253
  281
  310
  341
  373
  406
  441
  540
  577
  616
  657
  699
  742
  788
  835
  885
  936
  989
  1,045
  1,103
  1,163
  1,227
  1,293
  1,362
  1,434
  1,509
  1,588

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  19
  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
  10,201
  11,612
  13,133
  14,747
  16,452
  18,246
  20,128
  22,098
  24,154
  26,297
  28,529
  30,851
  33,264
  35,773
  38,380
  41,089
  43,905
  46,833
  49,877
  53,045
  56,342
  59,776
  63,353
  67,082
  70,972
  75,030
  79,266
  83,690
  88,313
  93,144
  98,196
Adjusted assets (=assets-cash), $m
  10,182
  11,612
  13,133
  14,747
  16,452
  18,246
  20,128
  22,098
  24,154
  26,297
  28,529
  30,851
  33,264
  35,773
  38,380
  41,089
  43,905
  46,833
  49,877
  53,045
  56,342
  59,776
  63,353
  67,082
  70,972
  75,030
  79,266
  83,690
  88,313
  93,144
  98,196
Revenue / Adjusted assets
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
Average production assets, $m
  7,464
  8,508
  9,623
  10,806
  12,055
  13,370
  14,748
  16,191
  17,698
  19,268
  20,904
  22,605
  24,374
  26,212
  28,122
  30,107
  32,170
  34,315
  36,546
  38,867
  41,283
  43,799
  46,420
  49,153
  52,002
  54,976
  58,080
  61,321
  64,708
  68,249
  71,950
Working capital, $m
  -257
  270
  305
  342
  382
  424
  467
  513
  561
  611
  662
  716
  772
  831
  891
  954
  1,019
  1,087
  1,158
  1,232
  1,308
  1,388
  1,471
  1,558
  1,648
  1,742
  1,841
  1,943
  2,051
  2,163
  2,280
Total debt, $m
  3,879
  4,646
  5,482
  6,370
  7,308
  8,295
  9,330
  10,413
  11,544
  12,722
  13,950
  15,227
  16,554
  17,934
  19,368
  20,858
  22,407
  24,017
  25,692
  27,434
  29,247
  31,136
  33,103
  35,154
  37,293
  39,525
  41,855
  44,289
  46,831
  49,488
  52,267
Total liabilities, $m
  5,620
  6,387
  7,223
  8,111
  9,049
  10,036
  11,071
  12,154
  13,285
  14,463
  15,691
  16,968
  18,295
  19,675
  21,109
  22,599
  24,148
  25,758
  27,433
  29,175
  30,988
  32,877
  34,844
  36,895
  39,034
  41,266
  43,596
  46,030
  48,572
  51,229
  54,008
Total equity, $m
  4,581
  5,225
  5,910
  6,636
  7,404
  8,211
  9,058
  9,944
  10,869
  11,834
  12,838
  13,883
  14,969
  16,098
  17,271
  18,490
  19,757
  21,075
  22,445
  23,870
  25,354
  26,899
  28,509
  30,187
  31,937
  33,763
  35,670
  37,661
  39,741
  41,915
  44,188
Total liabilities and equity, $m
  10,201
  11,612
  13,133
  14,747
  16,453
  18,247
  20,129
  22,098
  24,154
  26,297
  28,529
  30,851
  33,264
  35,773
  38,380
  41,089
  43,905
  46,833
  49,878
  53,045
  56,342
  59,776
  63,353
  67,082
  70,971
  75,029
  79,266
  83,691
  88,313
  93,144
  98,196
Debt-to-equity ratio
  0.847
  0.890
  0.930
  0.960
  0.990
  1.010
  1.030
  1.050
  1.060
  1.080
  1.090
  1.100
  1.110
  1.110
  1.120
  1.130
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
  1.160
  1.170
  1.170
  1.170
  1.180
  1.180
  1.180
  1.180
Adjusted equity ratio
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  204
  176
  200
  226
  253
  281
  310
  341
  373
  406
  441
  540
  577
  616
  657
  699
  742
  788
  835
  885
  936
  989
  1,045
  1,103
  1,163
  1,227
  1,293
  1,362
  1,434
  1,509
  1,588
Depreciation, amort., depletion, $m
  272
  369
  406
  446
  487
  531
  577
  625
  676
  728
  782
  753
  812
  874
  937
  1,004
  1,072
  1,144
  1,218
  1,296
  1,376
  1,460
  1,547
  1,638
  1,733
  1,833
  1,936
  2,044
  2,157
  2,275
  2,398
Funds from operations, $m
  378
  545
  607
  672
  740
  812
  888
  966
  1,049
  1,134
  1,224
  1,293
  1,390
  1,490
  1,594
  1,702
  1,815
  1,932
  2,053
  2,180
  2,312
  2,449
  2,592
  2,741
  2,897
  3,059
  3,229
  3,406
  3,591
  3,784
  3,986
Change in working capital, $m
  -78
  33
  35
  37
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  65
  68
  71
  74
  77
  80
  83
  87
  90
  94
  98
  103
  107
  112
  117
Cash from operations, $m
  456
  545
  571
  634
  701
  770
  844
  921
  1,001
  1,085
  1,172
  1,239
  1,334
  1,432
  1,534
  1,639
  1,749
  1,864
  1,983
  2,107
  2,235
  2,369
  2,509
  2,655
  2,807
  2,965
  3,130
  3,303
  3,483
  3,672
  3,869
Maintenance CAPEX, $m
  0
  -249
  -284
  -321
  -360
  -402
  -446
  -492
  -540
  -590
  -642
  -697
  -753
  -812
  -874
  -937
  -1,004
  -1,072
  -1,144
  -1,218
  -1,296
  -1,376
  -1,460
  -1,547
  -1,638
  -1,733
  -1,833
  -1,936
  -2,044
  -2,157
  -2,275
New CAPEX, $m
  -532
  -1,045
  -1,115
  -1,183
  -1,249
  -1,315
  -1,379
  -1,443
  -1,507
  -1,571
  -1,635
  -1,701
  -1,769
  -1,838
  -1,910
  -1,985
  -2,063
  -2,145
  -2,231
  -2,321
  -2,416
  -2,516
  -2,621
  -2,732
  -2,850
  -2,973
  -3,104
  -3,242
  -3,387
  -3,540
  -3,702
Cash from investing activities, $m
  -752
  -1,294
  -1,399
  -1,504
  -1,609
  -1,717
  -1,825
  -1,935
  -2,047
  -2,161
  -2,277
  -2,398
  -2,522
  -2,650
  -2,784
  -2,922
  -3,067
  -3,217
  -3,375
  -3,539
  -3,712
  -3,892
  -4,081
  -4,279
  -4,488
  -4,706
  -4,937
  -5,178
  -5,431
  -5,697
  -5,977
Free cash flow, $m
  -296
  -749
  -827
  -869
  -909
  -946
  -981
  -1,014
  -1,045
  -1,076
  -1,106
  -1,159
  -1,188
  -1,219
  -1,250
  -1,283
  -1,317
  -1,354
  -1,392
  -1,433
  -1,476
  -1,523
  -1,572
  -1,625
  -1,682
  -1,742
  -1,806
  -1,875
  -1,948
  -2,025
  -2,108
Issuance/(repayment) of debt, $m
  -208
  786
  837
  888
  938
  987
  1,035
  1,083
  1,131
  1,179
  1,227
  1,277
  1,328
  1,380
  1,434
  1,490
  1,549
  1,610
  1,675
  1,742
  1,813
  1,888
  1,968
  2,051
  2,139
  2,232
  2,330
  2,433
  2,542
  2,657
  2,779
Issuance/(repurchase) of shares, $m
  604
  608
  675
  708
  738
  767
  793
  817
  840
  862
  883
  926
  947
  968
  990
  1,012
  1,036
  1,061
  1,087
  1,116
  1,146
  1,179
  1,214
  1,252
  1,293
  1,336
  1,383
  1,432
  1,485
  1,542
  1,602
Cash from financing (excl. dividends), $m  
  386
  1,394
  1,512
  1,596
  1,676
  1,754
  1,828
  1,900
  1,971
  2,041
  2,110
  2,203
  2,275
  2,348
  2,424
  2,502
  2,585
  2,671
  2,762
  2,858
  2,959
  3,067
  3,182
  3,303
  3,432
  3,568
  3,713
  3,865
  4,027
  4,199
  4,381
Total cash flow (excl. dividends), $m
  91
  37
  10
  18
  29
  41
  54
  69
  86
  103
  122
  118
  139
  161
  183
  207
  231
  257
  283
  310
  337
  366
  395
  426
  458
  490
  524
  559
  595
  632
  671
Retained Cash Flow (-), $m
  -413
  -644
  -685
  -726
  -767
  -807
  -847
  -886
  -925
  -965
  -1,004
  -1,045
  -1,086
  -1,129
  -1,173
  -1,219
  -1,267
  -1,317
  -1,370
  -1,425
  -1,484
  -1,545
  -1,610
  -1,678
  -1,750
  -1,826
  -1,906
  -1,991
  -2,080
  -2,174
  -2,273
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
 
  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
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for 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
Current shareholders' claim on cash, %
  100
  89.3
  80.1
  72.3
  65.7
  60.1
  55.3
  51.2
  47.6
  44.4
  41.6
  39.1
  36.8
  34.8
  33.0
  31.3
  29.8
  28.4
  27.2
  26.0
  24.9
  23.9
  23.0
  22.1
  21.3
  20.5
  19.8
  19.1
  18.5
  17.8
  17.3

AltaGas Ltd. operates as a diversified energy infrastructure company in North America. It operates through three segments: Gas, Power, and Utilities. The Gas segment engages in natural gas gathering and processing; natural gas liquids (NGL) extraction and separation, transmission, and storage; and natural gas marketing activities. This segment also buys and resells energy; and offers gas transportation, storage, and gas marketing services for producers. It serves natural gas producers, national hotel chains and retailers, hospitals, office buildings, and other institutions through 4 natural gas transmission systems with transportation capacity of approximately 0.6 billion cubic feet per day; approximately 70 gathering and processing facilities; and a 6,100 km of gathering and sales lines, as well as owns 4 NGL pipelines with combined capacity of 189,300 barrels per day. The Power segment is involved in the sale of electricity and ancillary services in Western Canada and the United States. As of December 31, 2015, it had had 2,041 megawatt (MW) of power generation capacity, including 1,194 MW of gas-fired generation, 353 MW of coal-fired generating capacity, 277 MW of run-of-river generation, 117 MW of wind power generation, 35 MW of biomass generation, 45 MW of cogeneration capacity, and 20 MW of gas-fired peaking capacity. The Utilities segment operates natural gas distribution utilities and a regulated natural gas storage utility. It owns and operates utility assets that deliver natural gas to end-users in Alberta, British Columbia, and Nova Scotia in Canada; and Michigan and Alaska in the United States. AltaGas Ltd. was founded in 1993 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  AltaGas Ltd. (ALA)

Valuation Ratios
P/E Ratio 24.9
Price to Sales 2.3
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 11.1
Price to Free Cash Flow -66.8
Growth Rates
Sales Growth Rate -0.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.3%
Cap. Spend. - 3 Yr. Gr. Rate -0.6%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 73.5%
Total Debt to Equity 84.7%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 2.4%
Return On Total Capital 2.4%
Ret/ On T. Cap. - 3 Yr. Avg. 1.7%
Return On Equity 4.7%
Return On Equity - 3 Yr. Avg. 3.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 53.6%
Gross Margin - 3 Yr. Avg. 47.6%
EBITDA Margin 30.1%
EBITDA Margin - 3 Yr. Avg. 22.8%
Operating Margin 17.4%
Oper. Margin - 3 Yr. Avg. 13.5%
Pre-Tax Margin 11.2%
Pre-Tax Margin - 3 Yr. Avg. 7.6%
Net Profit Margin 9.3%
Net Profit Margin - 3 Yr. Avg. 5.7%
Effective Tax Rate 13.4%
Eff/ Tax Rate - 3 Yr. Avg. 23.3%
Payout Ratio 178.9%

ALA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALA stock intrinsic value calculation we used $2190 million for the last fiscal year's total revenue generated by AltaGas Ltd.. The default revenue input number comes from 2016 income statement of AltaGas Ltd.. 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 ALA stock valuation model: a) initial revenue growth rate of 14% 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 8.1%, whose default value for ALA is calculated based on our internal credit rating of AltaGas Ltd., 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 AltaGas Ltd..
    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 ALA stock the variable cost ratio is equal to 85.4%.

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 ALA 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 3.5% for AltaGas Ltd..

Corporate tax rate of 27% is the nominal tax rate for AltaGas Ltd.. 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 ALA 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 ALA are equal to 340.8%.

Life of production assets of 30.6 years is the average useful life of capital assets used in AltaGas Ltd. 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 ALA is equal to 10.8%. 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 - $4581 million for AltaGas Ltd. - 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 167.59 million for AltaGas Ltd. 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 AltaGas Ltd. at the current share price and the inputted number of shares is $5.1 billion.


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