Intrinsic value of Northland Power Inc. - NPI

Previous Close

$23.84

  Intrinsic Value

$146.86

stock screener

  Rating & Target

str. buy

+516%

Previous close

$23.84

 
Intrinsic value

$146.86

 
Up/down potential

+516%

 
Rating

str. buy

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
 
  622
  950
  1,411
  2,038
  2,866
  3,933
  5,272
  6,916
  8,894
  11,228
  13,917
  17,014
  20,508
  24,401
  28,691
  33,374
  38,444
  43,893
  49,711
  55,890
  62,422
  69,299
  76,518
  84,074
  91,966
  100,195
  108,765
  117,682
  126,954
  136,590
Fixed operating expenses, $m
 
  242
  248
  254
  260
  267
  274
  281
  288
  295
  302
  310
  317
  325
  333
  342
  350
  359
  368
  377
  387
  396
  406
  416
  427
  438
  448
  460
  471
  483
  495
Total operating expenses, $m
  627
  864
  1,198
  1,665
  2,298
  3,133
  4,207
  5,553
  7,204
  9,189
  11,530
  14,227
  17,331
  20,833
  24,734
  29,033
  33,724
  38,803
  44,261
  50,088
  56,277
  62,818
  69,705
  76,934
  84,501
  92,404
  100,643
  109,225
  118,153
  127,437
  137,085
Operating income, $m
  472
  894
  1,519
  2,398
  3,597
  5,184
  7,227
  9,795
  12,949
  16,743
  21,224
  26,446
  32,394
  39,103
  46,578
  54,818
  63,814
  73,553
  84,019
  95,196
  107,066
  119,614
  132,826
  146,694
  161,210
  176,373
  192,184
  208,649
  225,781
  243,594
  262,109
EBITDA, $m
  720
  1,300
  2,134
  3,308
  4,907
  7,024
  9,750
  13,174
  17,380
  22,439
  28,412
  35,347
  43,276
  52,219
  62,184
  73,168
  85,159
  98,140
  112,091
  126,989
  142,810
  159,536
  177,147
  195,632
  214,980
  235,190
  256,264
  278,211
  301,046
  324,789
  349,467
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
  681
  1,152
  1,803
  2,680
  3,830
  5,296
  7,120
  9,339
  11,987
  15,089
  18,683
  22,741
  27,290
  32,329
  37,854
  43,857
  50,330
  57,260
  64,636
  72,449
  80,687
  89,345
  98,416
  107,898
  117,790
  128,097
  138,823
  149,978
  161,572
  173,621
Tax expense, $m
  28
  184
  311
  487
  724
  1,034
  1,430
  1,922
  2,522
  3,237
  4,074
  5,044
  6,140
  7,368
  8,729
  10,220
  11,841
  13,589
  15,460
  17,452
  19,561
  21,786
  24,123
  26,572
  29,132
  31,803
  34,586
  37,482
  40,494
  43,625
  46,878
Net income, $m
  121
  497
  841
  1,316
  1,957
  2,796
  3,866
  5,197
  6,818
  8,751
  11,015
  13,639
  16,601
  19,921
  23,600
  27,633
  32,016
  36,741
  41,800
  47,185
  52,888
  58,902
  65,222
  71,843
  78,765
  85,987
  93,511
  101,341
  109,484
  117,948
  126,743

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
  497
  841
  1,316
  1,957
  2,796
  3,866
  5,197
  6,818
  8,751
  11,015
  13,639
  16,601
  19,921
  23,600
  27,633
  32,016
  36,741
  41,800
  47,185
  52,888
  58,902
  65,222
  71,843
  78,765
  85,987
  93,511
  101,341
  109,484
  117,948
  126,743
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
  902
  1,456
  2,226
  3,267
  4,637
  6,389
  8,577
  11,249
  14,446
  18,203
  22,539
  27,483
  33,038
  39,205
  45,983
  53,361
  61,328
  69,872
  78,978
  88,632
  98,824
  109,543
  120,781
  132,535
  144,804
  157,591
  170,903
  184,748
  199,142
  214,100
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
  904
  1,459
  2,230
  3,273
  4,644
  6,398
  8,588
  11,263
  14,463
  18,223
  22,563
  27,510
  33,068
  39,240
  46,020
  53,402
  61,373
  69,920
  79,029
  88,687
  98,881
  109,603
  120,844
  132,601
  144,873
  157,663
  170,978
  184,827
  199,223
  214,185
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
  -3,419
  -4,861
  -6,701
  -8,963
  -11,646
  -14,725
  -18,152
  -21,852
  -25,735
  -29,700
  -33,647
  -37,459
  -41,047
  -44,329
  -47,235
  -49,717
  -51,738
  -53,283
  -54,348
  -54,942
  -55,084
  -54,801
  -54,126
  -53,093
  -51,739
  -50,103
  -48,220
  -46,125
  -43,850
  -41,425
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
  94
  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
  4,469
  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
  1,673
  2,477
  3,529
  4,868
  6,527
  8,533
  10,908
  13,666
  16,814
  20,346
  24,270
  28,570
  33,236
  38,253
  43,610
  49,292
  55,287
  61,587
  68,183
  75,071
  82,247
  89,712
  97,469
  105,524
  113,883
  122,556
  131,557
  140,899
  150,598
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
  947
  1,457
  2,141
  3,033
  4,165
  5,568
  7,268
  9,288
  11,645
  14,347
  17,411
  20,835
  24,617
  28,755
  33,240
  38,066
  43,224
  48,705
  54,503
  60,609
  67,019
  73,730
  80,740
  88,050
  95,662
  103,581
  111,815
  120,371
  129,262
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
  746
  1,001
  1,267
  1,527
  1,760
  1,945
  2,066
  2,114
  2,085
  1,983
  1,822
  1,617
  1,386
  1,147
  917
  708
  528
  379
  263
  175
  112
  69
  41
  23
  13
  7
  3
  2
  1
Current shareholders' claim on cash, %
  100
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2
  97.2

Northland Power Inc. (Northland) is an independent power producer. The Company develops, finances, builds, owns and operates facilities in Canada and internationally that produce clean and green energy using natural gas, biomass, wind and solar technology. Northland segments include thermal; renewable; managed, which includes management and operations services for Kirkland Lake, Cochrane and Canadian Environmental Energy Corporation (CEEC); offshore wind, including Gemini and Nordsee, and other, which includes investment income and administration of Northland. Northland owns power-producing facilities with a total capacity of approximately 1,340 megawatts (MW). Northland's offshore wind facilities consist of the 600 MW Gemini wind farm, located off the coast of the Netherlands, and the 332 MW Nordsee One wind farm, located off the coast of Germany. The Company's other projects include Grand Bend 100 MW Wind Project, Ground-Mounted Solar Projects and Frampton 24 MW Wind Project.

FINANCIAL RATIOS  of  Northland Power Inc. (NPI)

Valuation Ratios
P/E Ratio 33.9
Price to Sales 3.7
Price to Book 4.4
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow -4.5
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. 33.4%
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 36.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $236 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 174.022 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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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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