Intrinsic value of Northland Power Inc. - NPI

Previous Close

$23.98

  Intrinsic Value

$159.96

stock screener

  Rating & Target

str. buy

+567%

  Value-price divergence*

+183%

Previous close

$23.98

 
Intrinsic value

$159.96

 
Up/down potential

+567%

 
Rating

str. buy

 
Value-price divergence*

+183%

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

We calculate the intrinsic value of NPI 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 4.1

 

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, %
  50.96
  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
  1,099
  1,758
  2,717
  4,063
  5,895
  8,317
  11,434
  15,348
  20,153
  25,931
  32,754
  40,672
  49,726
  59,936
  71,313
  83,851
  97,539
  112,357
  128,280
  145,284
  163,342
  182,432
  202,532
  223,628
  245,711
  268,776
  292,827
  317,874
  343,935
  371,031
  399,195
Variable operating expenses, $m
 
  556
  847
  1,256
  1,814
  2,550
  3,499
  4,689
  6,150
  7,908
  9,983
  12,371
  15,125
  18,231
  21,691
  25,504
  29,668
  34,175
  39,018
  44,190
  49,683
  55,489
  61,603
  68,020
  74,737
  81,752
  89,068
  96,686
  104,613
  112,855
  121,421
Fixed operating expenses, $m
 
  286
  293
  300
  308
  316
  324
  332
  340
  348
  357
  366
  375
  385
  394
  404
  414
  425
  435
  446
  457
  469
  480
  492
  505
  517
  530
  543
  557
  571
  585
Total operating expenses, $m
  627
  842
  1,140
  1,556
  2,122
  2,866
  3,823
  5,021
  6,490
  8,256
  10,340
  12,737
  15,500
  18,616
  22,085
  25,908
  30,082
  34,600
  39,453
  44,636
  50,140
  55,958
  62,083
  68,512
  75,242
  82,269
  89,598
  97,229
  105,170
  113,426
  122,006
Operating income, $m
  472
  917
  1,577
  2,506
  3,773
  5,451
  7,612
  10,327
  13,662
  17,675
  22,413
  27,935
  34,226
  41,321
  49,228
  57,942
  67,457
  77,757
  88,827
  100,648
  113,202
  126,474
  140,449
  155,116
  170,470
  186,507
  203,229
  220,645
  238,765
  257,606
  277,188
EBITDA, $m
  720
  1,322
  2,192
  3,416
  5,084
  7,292
  10,135
  13,706
  18,093
  23,370
  29,601
  36,836
  45,108
  54,437
  64,833
  76,292
  88,802
  102,345
  116,899
  132,441
  148,947
  166,396
  184,770
  204,054
  224,239
  245,324
  267,310
  290,207
  314,029
  338,800
  364,546
Interest expense (income), $m
  197
  213
  367
  595
  916
  1,354
  1,932
  2,675
  3,609
  4,756
  6,135
  7,763
  9,653
  11,813
  14,250
  16,965
  19,957
  23,223
  26,759
  30,559
  34,617
  38,926
  43,482
  48,278
  53,313
  58,582
  64,087
  69,826
  75,803
  82,022
  88,488
Earnings before tax, $m
  219
  703
  1,210
  1,911
  2,857
  4,097
  5,680
  7,652
  10,053
  12,919
  16,278
  20,172
  24,573
  29,508
  34,978
  40,978
  47,500
  54,534
  62,067
  70,088
  78,585
  87,547
  96,967
  106,838
  117,157
  127,924
  139,143
  150,819
  162,961
  175,583
  188,700
Tax expense, $m
  28
  190
  327
  516
  771
  1,106
  1,534
  2,066
  2,714
  3,488
  4,395
  5,446
  6,635
  7,967
  9,444
  11,064
  12,825
  14,724
  16,758
  18,924
  21,218
  23,638
  26,181
  28,846
  31,632
  34,540
  37,569
  40,721
  44,000
  47,408
  50,949
Net income, $m
  121
  514
  883
  1,395
  2,085
  2,991
  4,147
  5,586
  7,339
  9,431
  11,883
  14,726
  17,938
  21,541
  25,534
  29,914
  34,675
  39,810
  45,309
  51,165
  57,367
  63,910
  70,786
  77,992
  85,524
  93,385
  101,574
  110,098
  118,962
  128,176
  137,751

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  308
  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
  8,663
  13,321
  20,581
  30,779
  44,659
  63,008
  86,621
  116,271
  152,671
  196,450
  248,133
  308,125
  376,712
  454,064
  540,247
  635,234
  738,930
  851,186
  971,819
  1,100,636
  1,237,442
  1,382,058
  1,534,334
  1,694,154
  1,861,445
  2,036,182
  2,218,388
  2,408,140
  2,605,565
  2,810,842
  3,024,201
Adjusted assets (=assets-cash), $m
  8,355
  13,321
  20,581
  30,779
  44,659
  63,008
  86,621
  116,271
  152,671
  196,450
  248,133
  308,125
  376,712
  454,064
  540,247
  635,234
  738,930
  851,186
  971,819
  1,100,636
  1,237,442
  1,382,058
  1,534,334
  1,694,154
  1,861,445
  2,036,182
  2,218,388
  2,408,140
  2,605,565
  2,810,842
  3,024,201
Revenue / Adjusted assets
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
  0.132
Average production assets, $m
  6,807
  10,890
  16,825
  25,161
  36,508
  51,507
  70,811
  95,049
  124,805
  160,593
  202,843
  251,884
  307,953
  371,187
  441,639
  519,289
  604,058
  695,824
  794,439
  899,744
  1,011,579
  1,129,799
  1,254,281
  1,384,930
  1,521,686
  1,664,530
  1,813,479
  1,968,597
  2,129,987
  2,297,796
  2,472,212
Working capital, $m
  190
  -5
  -8
  -12
  -18
  -25
  -34
  -46
  -60
  -78
  -98
  -122
  -149
  -180
  -214
  -252
  -293
  -337
  -385
  -436
  -490
  -547
  -608
  -671
  -737
  -806
  -878
  -954
  -1,032
  -1,113
  -1,198
Total debt, $m
  6,212
  10,472
  17,006
  26,184
  38,676
  55,190
  76,442
  103,127
  135,887
  175,288
  221,802
  275,795
  337,524
  407,141
  484,705
  570,194
  663,520
  764,550
  873,121
  989,056
  1,112,181
  1,242,335
  1,379,383
  1,523,221
  1,673,783
  1,831,046
  1,995,032
  2,165,809
  2,343,491
  2,528,241
  2,720,264
Total liabilities, $m
  7,729
  11,989
  18,523
  27,701
  40,193
  56,707
  77,959
  104,644
  137,404
  176,805
  223,319
  277,312
  339,041
  408,658
  486,222
  571,711
  665,037
  766,067
  874,638
  990,573
  1,113,698
  1,243,852
  1,380,900
  1,524,738
  1,675,300
  1,832,563
  1,996,549
  2,167,326
  2,345,008
  2,529,758
  2,721,781
Total equity, $m
  934
  1,332
  2,058
  3,078
  4,466
  6,301
  8,662
  11,627
  15,267
  19,645
  24,813
  30,812
  37,671
  45,406
  54,025
  63,523
  73,893
  85,119
  97,182
  110,064
  123,744
  138,206
  153,433
  169,415
  186,144
  203,618
  221,839
  240,814
  260,556
  281,084
  302,420
Total liabilities and equity, $m
  8,663
  13,321
  20,581
  30,779
  44,659
  63,008
  86,621
  116,271
  152,671
  196,450
  248,132
  308,124
  376,712
  454,064
  540,247
  635,234
  738,930
  851,186
  971,820
  1,100,637
  1,237,442
  1,382,058
  1,534,333
  1,694,153
  1,861,444
  2,036,181
  2,218,388
  2,408,140
  2,605,564
  2,810,842
  3,024,201
Debt-to-equity ratio
  6.651
  7.860
  8.260
  8.510
  8.660
  8.760
  8.820
  8.870
  8.900
  8.920
  8.940
  8.950
  8.960
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
Adjusted equity ratio
  0.075
  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
  121
  514
  883
  1,395
  2,085
  2,991
  4,147
  5,586
  7,339
  9,431
  11,883
  14,726
  17,938
  21,541
  25,534
  29,914
  34,675
  39,810
  45,309
  51,165
  57,367
  63,910
  70,786
  77,992
  85,524
  93,385
  101,574
  110,098
  118,962
  128,176
  137,751
Depreciation, amort., depletion, $m
  248
  405
  615
  910
  1,311
  1,841
  2,523
  3,379
  4,431
  5,695
  7,188
  8,901
  10,882
  13,116
  15,606
  18,349
  21,345
  24,587
  28,072
  31,793
  35,745
  39,922
  44,321
  48,937
  53,770
  58,817
  64,081
  69,562
  75,265
  81,194
  87,357
Funds from operations, $m
  722
  919
  1,499
  2,305
  3,396
  4,832
  6,669
  8,965
  11,769
  15,126
  19,071
  23,626
  28,820
  34,657
  41,139
  48,263
  56,020
  64,397
  73,381
  82,958
  93,112
  103,832
  115,107
  126,929
  139,294
  152,202
  165,655
  179,659
  194,226
  209,370
  225,108
Change in working capital, $m
  2
  -2
  -3
  -4
  -5
  -7
  -9
  -12
  -14
  -17
  -20
  -24
  -27
  -31
  -34
  -38
  -41
  -44
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -84
Cash from operations, $m
  720
  921
  1,501
  2,309
  3,402
  4,839
  6,679
  8,977
  11,784
  15,143
  19,092
  23,650
  28,847
  34,688
  41,173
  48,301
  56,061
  64,442
  73,429
  83,009
  93,166
  103,889
  115,167
  126,992
  139,361
  152,271
  165,727
  179,735
  194,305
  209,451
  225,193
Maintenance CAPEX, $m
  0
  -241
  -385
  -595
  -889
  -1,290
  -1,820
  -2,502
  -3,359
  -4,410
  -5,675
  -7,168
  -8,901
  -10,882
  -13,116
  -15,606
  -18,349
  -21,345
  -24,587
  -28,072
  -31,793
  -35,745
  -39,922
  -44,321
  -48,937
  -53,770
  -58,817
  -64,081
  -69,562
  -75,265
  -81,194
New CAPEX, $m
  -1,626
  -4,083
  -5,935
  -8,337
  -11,347
  -14,999
  -19,303
  -24,238
  -29,756
  -35,789
  -42,249
  -49,042
  -56,068
  -63,234
  -70,452
  -77,650
  -84,769
  -91,766
  -98,615
  -105,305
  -111,835
  -118,220
  -124,482
  -130,649
  -136,757
  -142,843
  -148,949
  -155,118
  -161,390
  -167,809
  -174,416
Cash from investing activities, $m
  -1,536
  -4,324
  -6,320
  -8,932
  -12,236
  -16,289
  -21,123
  -26,740
  -33,115
  -40,199
  -47,924
  -56,210
  -64,969
  -74,116
  -83,568
  -93,256
  -103,118
  -113,111
  -123,202
  -133,377
  -143,628
  -153,965
  -164,404
  -174,970
  -185,694
  -196,613
  -207,766
  -219,199
  -230,952
  -243,074
  -255,610
Free cash flow, $m
  -816
  -3,403
  -4,818
  -6,622
  -8,834
  -11,450
  -14,445
  -17,763
  -21,331
  -25,055
  -28,832
  -32,560
  -36,122
  -39,428
  -42,395
  -44,955
  -47,057
  -48,669
  -49,774
  -50,368
  -50,462
  -50,076
  -49,237
  -47,978
  -46,333
  -44,342
  -42,040
  -39,464
  -36,647
  -33,622
  -30,417
Issuance/(repayment) of debt, $m
  1,303
  4,375
  6,534
  9,178
  12,492
  16,514
  21,252
  26,685
  32,760
  39,401
  46,514
  53,993
  61,729
  69,617
  77,564
  85,489
  93,326
  101,030
  108,570
  115,935
  123,125
  130,155
  137,048
  143,838
  150,562
  157,263
  163,986
  170,777
  177,682
  184,749
  192,023
Issuance/(repurchase) of shares, $m
  0
  78
  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  
  1,122
  4,453
  6,534
  9,178
  12,492
  16,514
  21,252
  26,685
  32,760
  39,401
  46,514
  53,993
  61,729
  69,617
  77,564
  85,489
  93,326
  101,030
  108,570
  115,935
  123,125
  130,155
  137,048
  143,838
  150,562
  157,263
  163,986
  170,777
  177,682
  184,749
  192,023
Total cash flow (excl. dividends), $m
  307
  1,050
  1,716
  2,556
  3,658
  5,063
  6,807
  8,921
  11,429
  14,346
  17,682
  21,433
  25,607
  30,189
  35,169
  40,534
  46,269
  52,361
  58,797
  65,567
  72,663
  80,079
  87,811
  95,860
  104,229
  112,921
  121,946
  131,313
  141,035
  151,127
  161,606
Retained Cash Flow (-), $m
  59
  -591
  -726
  -1,020
  -1,388
  -1,835
  -2,361
  -2,965
  -3,640
  -4,378
  -5,168
  -5,999
  -6,859
  -7,735
  -8,618
  -9,499
  -10,370
  -11,226
  -12,063
  -12,882
  -13,681
  -14,462
  -15,228
  -15,982
  -16,729
  -17,474
  -18,221
  -18,975
  -19,742
  -20,528
  -21,336
Prev. year cash balance distribution, $m
 
  193
  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
 
  652
  990
  1,536
  2,270
  3,228
  4,446
  5,956
  7,789
  9,968
  12,514
  15,434
  18,748
  22,454
  26,551
  31,035
  35,899
  41,135
  46,733
  52,685
  58,982
  65,617
  72,584
  79,878
  87,500
  95,448
  103,725
  112,338
  121,293
  130,599
  140,270
Discount rate, %
 
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.10
  33.71
  35.40
  37.17
  39.02
  40.97
  43.02
  45.17
  47.43
  49.81
PV of cash for distribution, $m
 
  581
  779
  1,055
  1,344
  1,626
  1,878
  2,080
  2,214
  2,269
  2,240
  2,133
  1,962
  1,742
  1,495
  1,238
  991
  765
  570
  410
  284
  190
  122
  75
  44
  25
  14
  7
  4
  2
  1
Current shareholders' claim on cash, %
  100
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7
  97.7

Northland Power Inc. develops, builds, owns, and operates power generation projects primarily in Canada and Europe. It generates electricity from thermal, wind, solar, hydro, and biomass power plants. As of August 24, 2016, the company owned or had a net economic interest in power producing facilities with a total capacity of approximately 1,394 megawatts. It also sells steam and natural gas. The company was founded in 1987 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Northland Power Inc. (NPI)

Valuation Ratios
P/E Ratio 34.1
Price to Sales 3.8
Price to Book 4.4
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow -4.6
Growth Rates
Sales Growth Rate 51%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.1%
Cap. Spend. - 3 Yr. Gr. Rate 31.1%
Financial Strength
Quick Ratio 3
Current Ratio 0.4
LT Debt to Equity 652.8%
Total Debt to Equity 665.1%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 2.4%
Return On Total Capital 1.8%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity 12.6%
Return On Equity - 3 Yr. Avg. 0.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 82.4%
Gross Margin - 3 Yr. Avg. 71%
EBITDA Margin 60.4%
EBITDA Margin - 3 Yr. Avg. 34.4%
Operating Margin 42.9%
Oper. Margin - 3 Yr. Avg. 32.1%
Pre-Tax Margin 19.9%
Pre-Tax Margin - 3 Yr. Avg. -2.9%
Net Profit Margin 11%
Net Profit Margin - 3 Yr. Avg. -1%
Effective Tax Rate 12.8%
Eff/ Tax Rate - 3 Yr. Avg. -16.6%
Payout Ratio 124.8%

NPI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NPI stock intrinsic value calculation we used $1099 million for the last fiscal year's total revenue generated by Northland Power Inc.. The default revenue input number comes from 2016 income statement of Northland Power 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 NPI 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 12.1%, whose default value for NPI is calculated based on our internal credit rating of Northland Power 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 Northland Power 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 NPI stock the variable cost ratio is equal to 32.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $279 million in the base year in the intrinsic value calculation for NPI 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 Northland Power Inc..

Corporate tax rate of 27% is the nominal tax rate for Northland Power 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 NPI 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 NPI are equal to 619.3%.

Life of production assets of 28.3 years is the average useful life of capital assets used in Northland Power 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 NPI is equal to -0.3%. 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 - $934 million for Northland Power 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 171.842 million for Northland Power 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 Northland Power Inc. at the current share price and the inputted number of shares is $4.1 billion.

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Stock chart of NPI Financial statements of NPI
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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