Intrinsic value of Emera Incorporated - EMA

Previous Close

$45.99

  Intrinsic Value

$172.14

stock screener

  Rating & Target

str. buy

+274%

  Value-price divergence*

0%

Previous close

$45.99

 
Intrinsic value

$172.14

 
Up/down potential

+274%

 
Rating

str. buy

 
Value-price divergence*

0%

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

We calculate the intrinsic value of EMA 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 9.8

 

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, %
  53.35
  53.40
  48.56
  44.20
  40.28
  36.76
  33.58
  30.72
  28.15
  25.83
  23.75
  21.88
  20.19
  18.67
  17.30
  16.07
  14.97
  13.97
  13.07
  12.26
  11.54
  10.88
  10.30
  9.77
  9.29
  8.86
  8.47
  8.13
  7.81
  7.53
  7.28
Revenue, $m
  4,277
  6,561
  9,747
  14,055
  19,717
  26,965
  36,019
  47,085
  60,339
  75,928
  93,961
  114,516
  137,636
  163,332
  191,592
  222,386
  255,666
  291,379
  329,467
  369,875
  412,552
  457,455
  504,554
  553,830
  605,279
  658,911
  714,751
  772,840
  833,234
  896,001
  961,227
Variable operating expenses, $m
 
  5,035
  7,178
  10,077
  13,886
  18,761
  24,853
  32,297
  41,214
  51,701
  63,832
  77,039
  92,592
  109,879
  128,891
  149,606
  171,995
  196,021
  221,644
  248,828
  277,538
  307,746
  339,431
  372,581
  407,192
  443,272
  480,838
  519,916
  560,545
  602,771
  646,651
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
  3,722
  5,035
  7,178
  10,077
  13,886
  18,761
  24,853
  32,297
  41,214
  51,701
  63,832
  77,039
  92,592
  109,879
  128,891
  149,606
  171,995
  196,021
  221,644
  248,828
  277,538
  307,746
  339,431
  372,581
  407,192
  443,272
  480,838
  519,916
  560,545
  602,771
  646,651
Operating income, $m
  555
  1,526
  2,569
  3,979
  5,832
  8,203
  11,167
  14,788
  19,126
  24,227
  30,129
  37,477
  45,043
  53,453
  62,701
  72,779
  83,671
  95,358
  107,823
  121,047
  135,014
  149,709
  165,123
  181,249
  198,087
  215,639
  233,913
  252,924
  272,688
  293,230
  314,576
EBITDA, $m
  1,148
  2,862
  4,252
  6,131
  8,601
  11,762
  15,712
  20,539
  26,320
  33,120
  40,987
  49,953
  60,038
  71,246
  83,574
  97,006
  111,523
  127,101
  143,716
  161,342
  179,958
  199,545
  220,090
  241,584
  264,027
  287,421
  311,779
  337,118
  363,462
  390,842
  419,294
Interest expense (income), $m
  480
  720
  1,278
  2,054
  3,104
  4,483
  6,248
  8,454
  11,149
  14,377
  18,174
  22,567
  27,573
  33,205
  39,464
  46,347
  53,848
  61,954
  70,653
  79,930
  89,772
  100,167
  111,104
  122,577
  134,579
  147,111
  160,174
  173,775
  187,924
  202,635
  217,923
Earnings before tax, $m
  244
  806
  1,290
  1,924
  2,728
  3,720
  4,918
  6,334
  7,977
  9,850
  11,955
  14,910
  17,470
  20,248
  23,238
  26,432
  29,823
  33,404
  37,171
  41,117
  45,242
  49,542
  54,019
  58,673
  63,508
  68,528
  73,739
  79,149
  84,764
  90,596
  96,653
Tax expense, $m
  -22
  218
  348
  520
  737
  1,005
  1,328
  1,710
  2,154
  2,659
  3,228
  4,026
  4,717
  5,467
  6,274
  7,137
  8,052
  9,019
  10,036
  11,102
  12,215
  13,376
  14,585
  15,842
  17,147
  18,503
  19,910
  21,370
  22,886
  24,461
  26,096
Net income, $m
  255
  589
  942
  1,405
  1,991
  2,716
  3,590
  4,624
  5,823
  7,190
  8,727
  10,885
  12,753
  14,781
  16,964
  19,295
  21,771
  24,385
  27,135
  30,016
  33,026
  36,166
  39,434
  42,831
  46,361
  50,026
  53,830
  57,778
  61,878
  66,135
  70,557

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  404
  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
  29,221
  44,331
  65,857
  94,969
  133,226
  182,194
  243,374
  318,142
  407,698
  513,025
  634,874
  773,760
  929,970
  1,103,591
  1,294,542
  1,502,605
  1,727,472
  1,968,776
  2,226,130
  2,499,155
  2,787,511
  3,090,912
  3,409,148
  3,742,096
  4,089,724
  4,452,102
  4,829,401
  5,221,894
  5,629,956
  6,054,061
  6,494,778
Adjusted assets (=assets-cash), $m
  28,817
  44,331
  65,857
  94,969
  133,226
  182,194
  243,374
  318,142
  407,698
  513,025
  634,874
  773,760
  929,970
  1,103,591
  1,294,542
  1,502,605
  1,727,472
  1,968,776
  2,226,130
  2,499,155
  2,787,511
  3,090,912
  3,409,148
  3,742,096
  4,089,724
  4,452,102
  4,829,401
  5,221,894
  5,629,956
  6,054,061
  6,494,778
Revenue / Adjusted assets
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
  0.148
Average production assets, $m
  11,880
  18,226
  27,077
  39,046
  54,775
  74,908
  100,062
  130,802
  167,623
  210,927
  261,025
  318,127
  382,351
  453,735
  532,243
  617,787
  710,240
  809,450
  915,260
  1,027,513
  1,146,068
  1,270,810
  1,401,651
  1,538,540
  1,681,465
  1,830,455
  1,985,579
  2,146,950
  2,314,723
  2,489,091
  2,670,289
Working capital, $m
  -1,213
  -276
  -409
  -590
  -828
  -1,133
  -1,513
  -1,978
  -2,534
  -3,189
  -3,946
  -4,810
  -5,781
  -6,860
  -8,047
  -9,340
  -10,738
  -12,238
  -13,838
  -15,535
  -17,327
  -19,213
  -21,191
  -23,261
  -25,422
  -27,674
  -30,020
  -32,459
  -34,996
  -37,632
  -40,372
Total debt, $m
  15,713
  27,198
  43,709
  66,037
  95,380
  132,938
  179,864
  237,211
  305,900
  386,686
  480,145
  586,670
  706,483
  839,651
  986,109
  1,145,694
  1,318,167
  1,503,247
  1,700,637
  1,910,048
  2,131,217
  2,363,925
  2,608,013
  2,863,383
  3,130,014
  3,407,958
  3,697,346
  3,998,389
  4,311,372
  4,636,661
  4,974,691
Total liabilities, $m
  22,517
  34,002
  50,513
  72,841
  102,184
  139,742
  186,668
  244,015
  312,704
  393,490
  486,949
  593,474
  713,287
  846,455
  992,913
  1,152,498
  1,324,971
  1,510,051
  1,707,441
  1,916,852
  2,138,021
  2,370,729
  2,614,817
  2,870,187
  3,136,818
  3,414,762
  3,704,150
  4,005,193
  4,318,176
  4,643,465
  4,981,495
Total equity, $m
  6,704
  10,329
  15,345
  22,128
  31,042
  42,451
  56,706
  74,127
  94,994
  119,535
  147,926
  180,286
  216,683
  257,137
  301,628
  350,107
  402,501
  458,725
  518,688
  582,303
  649,490
  720,182
  794,332
  871,908
  952,906
  1,037,340
  1,125,250
  1,216,701
  1,311,780
  1,410,596
  1,513,283
Total liabilities and equity, $m
  29,221
  44,331
  65,858
  94,969
  133,226
  182,193
  243,374
  318,142
  407,698
  513,025
  634,875
  773,760
  929,970
  1,103,592
  1,294,541
  1,502,605
  1,727,472
  1,968,776
  2,226,129
  2,499,155
  2,787,511
  3,090,911
  3,409,149
  3,742,095
  4,089,724
  4,452,102
  4,829,400
  5,221,894
  5,629,956
  6,054,061
  6,494,778
Debt-to-equity ratio
  2.344
  2.630
  2.850
  2.980
  3.070
  3.130
  3.170
  3.200
  3.220
  3.230
  3.250
  3.250
  3.260
  3.270
  3.270
  3.270
  3.270
  3.280
  3.280
  3.280
  3.280
  3.280
  3.280
  3.280
  3.280
  3.290
  3.290
  3.290
  3.290
  3.290
  3.290
Adjusted equity ratio
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  255
  589
  942
  1,405
  1,991
  2,716
  3,590
  4,624
  5,823
  7,190
  8,727
  10,885
  12,753
  14,781
  16,964
  19,295
  21,771
  24,385
  27,135
  30,016
  33,026
  36,166
  39,434
  42,831
  46,361
  50,026
  53,830
  57,778
  61,878
  66,135
  70,557
Depreciation, amort., depletion, $m
  593
  1,336
  1,683
  2,153
  2,769
  3,559
  4,545
  5,751
  7,195
  8,893
  10,858
  12,476
  14,994
  17,794
  20,872
  24,227
  27,853
  31,743
  35,893
  40,295
  44,944
  49,836
  54,967
  60,335
  65,940
  71,783
  77,866
  84,194
  90,773
  97,611
  104,717
Funds from operations, $m
  1,233
  1,925
  2,625
  3,557
  4,761
  6,275
  8,136
  10,375
  13,018
  16,083
  19,585
  23,360
  27,747
  32,575
  37,836
  43,522
  49,623
  56,128
  63,027
  70,310
  77,970
  86,001
  94,400
  103,166
  112,301
  121,808
  131,696
  141,973
  152,651
  163,746
  175,274
Change in working capital, $m
  180
  -96
  -134
  -181
  -238
  -304
  -380
  -465
  -557
  -655
  -757
  -863
  -971
  -1,079
  -1,187
  -1,293
  -1,398
  -1,500
  -1,600
  -1,697
  -1,792
  -1,886
  -1,978
  -2,070
  -2,161
  -2,253
  -2,345
  -2,440
  -2,537
  -2,636
  -2,740
Cash from operations, $m
  1,053
  2,021
  2,759
  3,738
  4,998
  6,579
  8,516
  10,840
  13,574
  16,738
  20,342
  24,224
  28,718
  33,654
  39,023
  44,816
  51,021
  57,628
  64,627
  72,007
  79,763
  87,887
  96,378
  105,236
  114,461
  124,061
  134,041
  144,412
  155,188
  166,382
  178,014
Maintenance CAPEX, $m
  0
  -466
  -715
  -1,062
  -1,531
  -2,148
  -2,938
  -3,924
  -5,130
  -6,573
  -8,272
  -10,236
  -12,476
  -14,994
  -17,794
  -20,872
  -24,227
  -27,853
  -31,743
  -35,893
  -40,295
  -44,944
  -49,836
  -54,967
  -60,335
  -65,940
  -71,783
  -77,866
  -84,194
  -90,773
  -97,611
New CAPEX, $m
  -1,031
  -6,347
  -8,851
  -11,969
  -15,729
  -20,133
  -25,154
  -30,741
  -36,820
  -43,305
  -50,098
  -57,102
  -64,225
  -71,383
  -78,508
  -85,544
  -92,453
  -99,211
  -105,809
  -112,253
  -118,556
  -124,742
  -130,841
  -136,889
  -142,925
  -148,990
  -155,124
  -161,371
  -167,772
  -174,368
  -181,198
Cash from investing activities, $m
  -9,105
  -6,813
  -9,566
  -13,031
  -17,260
  -22,281
  -28,092
  -34,665
  -41,950
  -49,878
  -58,370
  -67,338
  -76,701
  -86,377
  -96,302
  -106,416
  -116,680
  -127,064
  -137,552
  -148,146
  -158,851
  -169,686
  -180,677
  -191,856
  -203,260
  -214,930
  -226,907
  -239,237
  -251,966
  -265,141
  -278,809
Free cash flow, $m
  -8,052
  -4,792
  -6,807
  -9,293
  -12,262
  -15,702
  -19,575
  -23,825
  -28,375
  -33,140
  -38,027
  -43,115
  -47,982
  -52,724
  -57,279
  -61,601
  -65,659
  -69,435
  -72,926
  -76,138
  -79,088
  -81,798
  -84,298
  -86,620
  -88,799
  -90,869
  -92,866
  -94,825
  -96,779
  -98,759
  -100,796
Issuance/(repayment) of debt, $m
  7,366
  11,889
  16,511
  22,329
  29,343
  37,558
  46,925
  57,348
  68,689
  80,786
  93,458
  106,525
  119,813
  133,168
  146,459
  159,585
  172,473
  185,080
  197,390
  209,411
  221,169
  232,709
  244,087
  255,371
  266,631
  277,944
  289,388
  301,042
  312,984
  325,288
  338,030
Issuance/(repurchase) of shares, $m
  354
  3,036
  4,074
  5,378
  6,923
  8,694
  10,664
  12,797
  15,043
  17,351
  19,664
  21,476
  23,644
  25,673
  27,528
  29,183
  30,623
  31,839
  32,829
  33,599
  34,160
  34,527
  34,716
  34,746
  34,637
  34,409
  34,081
  33,672
  33,201
  32,682
  32,130
Cash from financing (excl. dividends), $m  
  7,697
  14,925
  20,585
  27,707
  36,266
  46,252
  57,589
  70,145
  83,732
  98,137
  113,122
  128,001
  143,457
  158,841
  173,987
  188,768
  203,096
  216,919
  230,219
  243,010
  255,329
  267,236
  278,803
  290,117
  301,268
  312,353
  323,469
  334,714
  346,185
  357,970
  370,160
Total cash flow (excl. dividends), $m
  -420
  10,133
  13,778
  18,414
  24,004
  30,550
  38,014
  46,320
  55,357
  64,997
  75,095
  84,886
  95,475
  106,117
  116,708
  127,167
  137,438
  147,484
  157,293
  166,872
  176,242
  185,437
  194,505
  203,496
  212,469
  221,484
  230,603
  239,890
  249,406
  259,211
  269,365
Retained Cash Flow (-), $m
  -2,504
  -3,625
  -5,016
  -6,783
  -8,914
  -11,409
  -14,255
  -17,421
  -20,866
  -24,541
  -28,391
  -32,360
  -36,397
  -40,454
  -44,491
  -48,479
  -52,394
  -56,224
  -59,963
  -63,615
  -67,187
  -70,692
  -74,149
  -77,577
  -80,997
  -84,434
  -87,911
  -91,451
  -95,078
  -98,816
  -102,687
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
 
  6,508
  8,763
  11,631
  15,090
  19,141
  23,759
  28,898
  34,491
  40,456
  46,704
  52,526
  59,078
  65,663
  72,217
  78,689
  85,044
  91,260
  97,330
  103,257
  109,055
  114,745
  120,356
  125,919
  131,471
  137,050
  142,693
  148,439
  154,327
  160,394
  166,677
Discount rate, %
 
  11.20
  11.76
  12.35
  12.97
  13.61
  14.29
  15.01
  15.76
  16.55
  17.37
  18.24
  19.16
  20.11
  21.12
  22.18
  23.28
  24.45
  25.67
  26.95
  28.30
  29.72
  31.20
  32.76
  34.40
  36.12
  37.93
  39.82
  41.81
  43.91
  46.10
PV of cash for distribution, $m
 
  5,852
  7,016
  8,202
  9,266
  10,111
  10,658
  10,858
  10,697
  10,197
  9,410
  8,314
  7,212
  6,062
  4,939
  3,901
  2,986
  2,216
  1,592
  1,108
  746
  486
  306
  186
  109
  61
  33
  17
  9
  4
  2
Current shareholders' claim on cash, %
  100
  76.3
  60.0
  48.3
  39.8
  33.4
  28.4
  24.6
  21.6
  19.2
  17.2
  15.7
  14.4
  13.3
  12.4
  11.6
  11.0
  10.4
  9.9
  9.5
  9.1
  8.8
  8.5
  8.3
  8.0
  7.9
  7.7
  7.5
  7.4
  7.3
  7.1

Emera Incorporated is an energy and services company, which invests in electricity generation, transmission and distribution, gas transmission and utility services. The Company operates through six segments: Emera Florida and New Mexico; Nova Scotia Power Inc. (NSPI); Emera Maine; Emera Caribbean; Emera Energy, and Corporate and Other. The Emera Florida and New Mexico segment represents TECO Energy, Inc., a holding company with regulated electric and gas utilities. NSPI is an integrated electric utility and primary electricity supplier. Its Emera Maine segment provides electric transmission and distribution services in the United States. Its Emera Caribbean segment includes Emera (Caribbean) Incorporated and its subsidiaries, and investment in St. Lucia Electricity Services Limited. The Emera Energy segment includes Emera Energy Services, New England gas generating facilities, Bayside Power Limited Partnership, Brooklyn Power Corporation and investment in Bear Swamp Power Company LLC.

FINANCIAL RATIOS  of  Emera Incorporated (EMA)

Valuation Ratios
P/E Ratio 37.9
Price to Sales 2.3
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 439
Growth Rates
Sales Growth Rate 53.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 141.5%
Cap. Spend. - 3 Yr. Gr. Rate 26.6%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 212.9%
Total Debt to Equity 234.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 5.1%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4.3%
Return On Equity 4.7%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 30.8%
EBITDA Margin - 3 Yr. Avg. 35.6%
Operating Margin 13%
Oper. Margin - 3 Yr. Avg. 17.9%
Pre-Tax Margin 5.7%
Pre-Tax Margin - 3 Yr. Avg. 14.8%
Net Profit Margin 6%
Net Profit Margin - 3 Yr. Avg. 12%
Effective Tax Rate -9%
Eff/ Tax Rate - 3 Yr. Avg. 9.3%
Payout Ratio 97.6%

EMA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EMA stock intrinsic value calculation we used $4277 million for the last fiscal year's total revenue generated by Emera Incorporated. The default revenue input number comes from 2016 income statement of Emera Incorporated. 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 EMA stock valuation model: a) initial revenue growth rate of 53.4% 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 11.2%, whose default value for EMA is calculated based on our internal credit rating of Emera Incorporated, 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 Emera Incorporated.
    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 EMA stock the variable cost ratio is equal to 81.8%.

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 EMA 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 4.7% for Emera Incorporated.

Corporate tax rate of 27% is the nominal tax rate for Emera Incorporated. 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 EMA 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 EMA are equal to 277.8%.

Life of production assets of 25.5 years is the average useful life of capital assets used in Emera Incorporated 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 EMA is equal to -4.2%. 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 - $6704 million for Emera Incorporated - 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 212.033 million for Emera Incorporated 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 Emera Incorporated at the current share price and the inputted number of shares is $9.8 billion.

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Financial statements of EMA
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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