Intrinsic value of Northland Power Inc. - NPI

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$24.13

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$24.13

 
Intrinsic value

$410.78

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of 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
 
  619
  945
  1,403
  2,026
  2,850
  3,910
  5,241
  6,876
  8,842
  11,162
  13,835
  16,915
  20,388
  24,258
  28,523
  33,179
  38,220
  43,636
  49,420
  55,563
  62,057
  68,894
  76,070
  83,582
  91,428
  99,609
  108,130
  116,994
  126,212
  135,792
Fixed operating expenses, $m
 
  258
  265
  271
  278
  285
  292
  300
  307
  315
  323
  331
  339
  347
  356
  365
  374
  383
  393
  403
  413
  423
  434
  445
  456
  467
  479
  491
  503
  516
  529
Total operating expenses, $m
  640
  877
  1,210
  1,674
  2,304
  3,135
  4,202
  5,541
  7,183
  9,157
  11,485
  14,166
  17,254
  20,735
  24,614
  28,888
  33,553
  38,603
  44,029
  49,823
  55,976
  62,480
  69,328
  76,515
  84,038
  91,895
  100,088
  108,621
  117,497
  126,728
  136,321
Operating income, $m
  459
  881
  1,507
  2,389
  3,591
  5,182
  7,232
  9,807
  12,970
  16,775
  21,269
  26,506
  32,472
  39,201
  46,699
  54,963
  63,985
  73,753
  84,251
  95,461
  107,366
  119,952
  133,204
  147,113
  161,673
  176,881
  192,739
  209,254
  226,437
  244,304
  262,874
EBITDA, $m
  707
  1,273
  2,102
  3,268
  4,857
  6,960
  9,668
  13,070
  17,248
  22,275
  28,210
  35,100
  42,979
  51,865
  61,766
  72,680
  84,595
  97,494
  111,356
  126,158
  141,879
  158,498
  175,998
  194,365
  213,590
  233,672
  254,612
  276,419
  299,109
  322,701
  347,222
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
  668
  1,141
  1,794
  2,674
  3,828
  5,300
  7,131
  9,360
  12,019
  15,134
  18,743
  22,819
  27,388
  32,449
  37,998
  44,029
  50,530
  57,491
  64,901
  72,749
  81,025
  89,722
  98,835
  108,360
  118,298
  128,652
  139,428
  150,634
  162,282
  174,386
Tax expense, $m
  28
  180
  308
  484
  722
  1,034
  1,431
  1,925
  2,527
  3,245
  4,086
  5,061
  6,161
  7,395
  8,761
  10,260
  11,888
  13,643
  15,523
  17,523
  19,642
  21,877
  24,225
  26,685
  29,257
  31,941
  34,736
  37,646
  40,671
  43,816
  47,084
Net income, $m
  121
  488
  833
  1,309
  1,952
  2,795
  3,869
  5,206
  6,833
  8,774
  11,047
  13,683
  16,658
  19,993
  23,687
  27,739
  32,141
  36,887
  41,969
  47,378
  53,107
  59,148
  65,497
  72,149
  79,103
  86,358
  93,916
  101,782
  109,963
  118,466
  127,302

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
  3,228
  5,164
  7,979
  11,933
  17,314
  24,427
  33,582
  45,076
  59,188
  76,161
  96,197
  119,455
  146,045
  176,033
  209,445
  246,270
  286,471
  329,991
  376,759
  426,699
  479,736
  535,802
  594,837
  656,796
  721,652
  789,395
  860,034
  933,597
  1,010,136
  1,089,718
  1,172,434
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
  488
  833
  1,309
  1,952
  2,795
  3,869
  5,206
  6,833
  8,774
  11,047
  13,683
  16,658
  19,993
  23,687
  27,739
  32,141
  36,887
  41,969
  47,378
  53,107
  59,148
  65,497
  72,149
  79,103
  86,358
  93,916
  101,782
  109,963
  118,466
  127,302
Depreciation, amort., depletion, $m
  248
  392
  595
  879
  1,266
  1,778
  2,437
  3,264
  4,279
  5,500
  6,941
  8,594
  10,507
  12,664
  15,068
  17,717
  20,609
  23,740
  27,105
  30,698
  34,513
  38,547
  42,794
  47,252
  51,917
  56,791
  61,873
  67,165
  72,672
  78,397
  84,348
Funds from operations, $m
  711
  880
  1,427
  2,188
  3,219
  4,573
  6,306
  8,469
  11,112
  14,274
  17,989
  22,277
  27,165
  32,657
  38,755
  45,456
  52,750
  60,627
  69,074
  78,076
  87,620
  97,695
  108,291
  119,401
  131,020
  143,149
  155,789
  168,948
  182,634
  196,863
  211,649
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
  709
  -2,112
  1,430
  2,192
  3,224
  4,580
  6,315
  8,481
  11,126
  14,291
  18,009
  22,300
  27,192
  32,688
  38,790
  45,494
  52,791
  60,672
  69,122
  78,127
  87,674
  97,753
  108,352
  119,464
  131,087
  143,218
  155,861
  169,023
  182,712
  196,944
  211,734
Maintenance CAPEX, $m
  0
  -232
  -372
  -574
  -858
  -1,246
  -1,757
  -2,416
  -3,243
  -4,258
  -5,479
  -6,921
  -8,594
  -10,507
  -12,664
  -15,068
  -17,717
  -20,609
  -23,740
  -27,105
  -30,698
  -34,513
  -38,547
  -42,794
  -47,252
  -51,917
  -56,791
  -61,873
  -67,165
  -72,672
  -78,397
New CAPEX, $m
  -1,623
  -1,936
  -2,815
  -3,954
  -5,381
  -7,113
  -9,155
  -11,495
  -14,112
  -16,973
  -20,036
  -23,258
  -26,590
  -29,988
  -33,412
  -36,825
  -40,201
  -43,520
  -46,768
  -49,940
  -53,037
  -56,065
  -59,035
  -61,960
  -64,856
  -67,743
  -70,639
  -73,564
  -76,539
  -79,583
  -82,716
Cash from investing activities, $m
  -1,537
  -2,168
  -3,187
  -4,528
  -6,239
  -8,359
  -10,912
  -13,911
  -17,355
  -21,231
  -25,515
  -30,179
  -35,184
  -40,495
  -46,076
  -51,893
  -57,918
  -64,129
  -70,508
  -77,045
  -83,735
  -90,578
  -97,582
  -104,754
  -112,108
  -119,660
  -127,430
  -135,437
  -143,704
  -152,255
  -161,113
Free cash flow, $m
  -828
  -4,281
  -1,756
  -2,335
  -3,015
  -3,779
  -4,597
  -5,430
  -6,228
  -6,940
  -7,506
  -7,878
  -7,992
  -7,807
  -7,286
  -6,400
  -5,127
  -3,457
  -1,387
  1,082
  3,939
  7,174
  10,770
  14,711
  18,979
  23,558
  28,432
  33,586
  39,009
  44,690
  50,621
Issuance/(repayment) of debt, $m
  1,314
  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
  304
  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  
  1,133
  4,679
  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
  94
  4,778
  6,843
  9,477
  12,735
  16,655
  21,255
  26,532
  32,462
  39,008
  46,114
  53,736
  61,810
  70,278
  79,089
  88,199
  97,573
  107,184
  117,017
  127,064
  137,328
  147,818
  158,548
  169,541
  180,821
  192,417
  204,363
  216,691
  229,439
  242,644
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
 
  0
  4,052
  5,823
  8,089
  10,900
  14,294
  18,290
  22,892
  28,084
  33,840
  40,115
  46,878
  54,075
  61,660
  69,590
  77,830
  86,347
  95,120
  104,135
  113,384
  122,867
  132,590
  142,566
  152,812
  163,347
  174,197
  185,388
  196,949
  208,911
  221,308
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
 
  0
  3,190
  4,000
  4,788
  5,489
  6,039
  6,388
  6,508
  6,391
  6,058
  5,545
  4,906
  4,196
  3,471
  2,776
  2,148
  1,606
  1,161
  810
  546
  355
  222
  134
  78
  43
  23
  12
  6
  3
  1
Current shareholders' claim on cash, %
  100
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5
  91.5

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 34.4
Price to Sales 3.8
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 5.9
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 -19.3%
Cap. Spend. - 3 Yr. Gr. Rate 31%
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 41.8%
Oper. Margin - 3 Yr. Avg. 31.7%
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 35.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $252 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 293.7%.

Life of production assets of 13.9 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 171.311 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
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