Intrinsic value of Algonquin Power & Utilities Corp. - AQN

Previous Close

$13.39

  Intrinsic Value

$176.24

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+46%

Previous close

$13.39

 
Intrinsic value

$176.24

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+46%

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

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 5.2

 

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, %
  6.61
  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
  1,059
  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
 
  541
  555
  569
  583
  597
  612
  628
  643
  659
  676
  693
  710
  728
  746
  765
  784
  803
  823
  844
  865
  887
  909
  932
  955
  979
  1,003
  1,028
  1,054
  1,081
  1,108
Total operating expenses, $m
  870
  1,091
  1,388
  1,799
  2,354
  3,083
  4,018
  5,189
  6,622
  8,344
  10,375
  12,699
  15,388
  18,420
  21,796
  25,516
  29,576
  33,969
  38,689
  43,729
  49,081
  54,737
  60,693
  66,943
  73,484
  80,317
  87,440
  94,859
  102,577
  110,602
  118,943
Operating income, $m
  226
  663
  1,322
  2,253
  3,525
  5,211
  7,385
  10,117
  13,475
  17,516
  22,289
  27,863
  34,202
  41,353
  49,322
  58,106
  67,697
  78,081
  89,241
  101,158
  113,816
  127,196
  141,287
  156,075
  171,556
  187,726
  204,587
  222,148
  240,419
  259,416
  279,163
EBITDA, $m
  422
  845
  1,587
  2,634
  4,064
  5,959
  8,401
  11,470
  15,242
  19,781
  25,142
  31,367
  38,487
  46,517
  55,466
  65,331
  76,101
  87,762
  100,294
  113,676
  127,890
  142,916
  158,738
  175,344
  192,727
  210,885
  229,819
  249,537
  270,053
  291,386
  313,559
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
  130
  466
  952
  1,630
  2,548
  3,750
  5,285
  7,196
  9,521
  12,296
  15,545
  19,320
  23,571
  28,334
  33,611
  39,395
  45,680
  52,454
  59,707
  67,425
  75,599
  84,218
  93,274
  102,763
  112,680
  123,027
  133,807
  145,025
  156,691
  168,817
  181,418
Tax expense, $m
  38
  126
  257
  440
  688
  1,013
  1,427
  1,943
  2,571
  3,320
  4,197
  5,216
  6,364
  7,650
  9,075
  10,637
  12,334
  14,163
  16,121
  18,205
  20,412
  22,739
  25,184
  27,746
  30,424
  33,217
  36,128
  39,157
  42,307
  45,581
  48,983
Net income, $m
  131
  340
  695
  1,190
  1,860
  2,738
  3,858
  5,253
  6,951
  8,976
  11,348
  14,103
  17,206
  20,684
  24,536
  28,758
  33,346
  38,292
  43,586
  49,220
  55,187
  61,479
  68,090
  75,017
  82,257
  89,810
  97,679
  105,868
  114,384
  123,236
  132,435

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  110
  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
  8,249
  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
  8,139
  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
  0.130
  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
  474
  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
  -55
  -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
  4,290
  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
  6,326
  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
  1,924
  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
  8,250
  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
  2.230
  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
  0.223
  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
  131
  340
  695
  1,190
  1,860
  2,738
  3,858
  5,253
  6,951
  8,976
  11,348
  14,103
  17,206
  20,684
  24,536
  28,758
  33,346
  38,292
  43,586
  49,220
  55,187
  61,479
  68,090
  75,017
  82,257
  89,810
  97,679
  105,868
  114,384
  123,236
  132,435
Depreciation, amort., depletion, $m
  196
  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
  291
  522
  960
  1,571
  2,398
  3,485
  4,874
  6,606
  8,718
  11,241
  14,201
  17,608
  21,491
  25,848
  30,680
  35,983
  41,751
  47,973
  54,639
  61,739
  69,261
  77,198
  85,541
  94,285
  103,428
  112,969
  122,910
  133,258
  144,019
  155,206
  166,831
Change in working capital, $m
  4
  -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
  287
  615
  1,094
  1,760
  2,656
  3,826
  5,312
  7,156
  9,393
  12,053
  15,160
  18,721
  22,764
  27,284
  32,280
  37,746
  43,675
  50,056
  56,878
  64,130
  71,801
  79,882
  88,368
  97,252
  106,533
  116,212
  126,292
  136,780
  147,684
  159,016
  170,792
Maintenance CAPEX, $m
  0
  -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
  -406
  -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
  -2,895
  -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
  -2,608
  236
  530
  946
  1,517
  2,274
  3,253
  4,485
  6,001
  7,827
  9,987
  12,488
  15,359
  18,601
  22,214
  26,200
  30,553
  35,268
  40,337
  45,751
  51,503
  57,584
  63,989
  70,712
  77,751
  85,104
  92,771
  100,757
  109,067
  117,708
  126,689
Issuance/(repayment) of debt, $m
  2,691
  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
  15
  746
  891
  1,037
  1,172
  1,270
  1,300
  1,223
  1,000
  587
  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  
  2,724
  4,511
  6,385
  8,754
  11,675
  15,154
  19,168
  23,658
  28,543
  33,714
  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
  115
  4,747
  6,915
  9,700
  13,191
  17,428
  22,420
  28,144
  34,544
  41,541
  49,094
  57,882
  67,258
  77,132
  87,428
  98,076
  109,018
  120,210
  131,618
  143,224
  155,021
  167,013
  179,214
  191,645
  204,337
  217,324
  230,644
  244,340
  258,455
  273,038
  288,134
Retained Cash Flow (-), $m
  11
  -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
  37,805
  44,779
  52,277
  60,236
  68,603
  77,328
  86,369
  95,691
  105,269
  115,088
  125,140
  135,425
  145,953
  156,737
  167,797
  179,157
  190,846
  202,893
  215,333
  228,200
  241,531
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
  7,926
  7,418
  6,721
  5,896
  5,010
  4,124
  3,289
  2,541
  1,901
  1,377
  964
  653
  427
  270
  164
  96
  54
  29
  15
  8
  4
Current shareholders' claim on cash, %
  100
  86.8
  77.9
  71.7
  67.4
  64.2
  62.1
  60.6
  59.7
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3
  59.3

Algonquin Power & Utilities Corp., through its subsidiaries, engages in the generation, distribution, and transmission utility assets in North America. The company generates and sells electrical energy through a portfolio of non-regulated renewable and clean energy power generation facilities. It owns or has interests in hydroelectric facilities with a combined generating capacity of approximately 120 megawatts (MW); wind powered generating facilities with a combined generating capacity of 700 MW; and solar energy facilities with a generating capacity of 30 MW, as well as interests in thermal energy facilities with an installed generating capacity of approximately 335 MW. The company also owns and operates electricity, natural gas, water distribution, and wastewater collection utility systems to approximately 489,000 connections. It serves approximately 93,000 electric connections; 292,000 natural gas connections; and 104,000 regulated water distribution and wastewater collection connections in the states of California, New Hampshire, Georgia, Illinois, Iowa, Massachusetts, Missouri, Arizona, Arkansas, and Texas. The company was founded in 1996 and is headquartered in Oakville, Canada.

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

Valuation Ratios
P/E Ratio 28
Price to Sales 3.3
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow -30.8
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 385.621 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 $5.2 billion.

RELATED COMPANIES Price Int.Val. Rating
EMA Emera Incorpor 47.21 517.13  str.buy
JE Just Energy Gr 6.64 3.30  str.sell
NPI Northland Powe 23.28 166.39  str.buy
FTS Fortis Inc. 44.80 254.54  str.buy
ALA AltaGas Ltd. 29.27 5.54  str.sell
TRP TransCanada Co 64.52 5.35  str.sell
Stock chart of AQN Financial statements of AQN
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.