Intrinsic value of Ameresco - AMRC

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$6.55

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$6.55

 
Intrinsic value

$8.92

 
Up/down potential

+36%

 
Rating

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

We calculate the intrinsic value of AMRC 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 0.3

 

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, %
  3.17
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  651
  664
  679
  697
  716
  738
  762
  788
  816
  846
  879
  913
  950
  990
  1,032
  1,076
  1,124
  1,174
  1,226
  1,282
  1,341
  1,403
  1,469
  1,538
  1,611
  1,687
  1,768
  1,853
  1,942
  2,037
  2,135
Variable operating expenses, $m
 
  131
  134
  138
  141
  145
  150
  155
  160
  166
  172
  173
  180
  187
  195
  204
  212
  222
  232
  242
  254
  265
  278
  291
  305
  319
  334
  350
  367
  385
  404
Fixed operating expenses, $m
 
  524
  537
  550
  564
  578
  593
  607
  623
  638
  654
  670
  687
  704
  722
  740
  759
  778
  797
  817
  837
  858
  880
  902
  924
  947
  971
  995
  1,020
  1,046
  1,072
Total operating expenses, $m
  627
  655
  671
  688
  705
  723
  743
  762
  783
  804
  826
  843
  867
  891
  917
  944
  971
  1,000
  1,029
  1,059
  1,091
  1,123
  1,158
  1,193
  1,229
  1,266
  1,305
  1,345
  1,387
  1,431
  1,476
Operating income, $m
  24
  9
  8
  9
  11
  15
  19
  26
  33
  42
  53
  70
  84
  98
  115
  133
  153
  174
  197
  223
  250
  280
  311
  345
  382
  421
  463
  507
  555
  606
  660
EBITDA, $m
  48
  33
  33
  34
  37
  41
  46
  53
  61
  71
  83
  95
  110
  126
  143
  162
  183
  206
  231
  258
  287
  318
  352
  388
  426
  467
  511
  558
  608
  662
  718
Interest expense (income), $m
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
Earnings before tax, $m
  16
  2
  0
  1
  2
  5
  9
  14
  21
  29
  38
  54
  66
  80
  95
  111
  129
  149
  170
  194
  219
  246
  276
  307
  341
  377
  416
  458
  502
  550
  600
Tax expense, $m
  4
  0
  0
  0
  1
  1
  2
  4
  6
  8
  10
  15
  18
  22
  26
  30
  35
  40
  46
  52
  59
  66
  74
  83
  92
  102
  112
  124
  136
  148
  162
Net income, $m
  12
  1
  0
  0
  2
  4
  7
  10
  15
  21
  28
  40
  48
  58
  69
  81
  94
  109
  124
  141
  160
  180
  201
  224
  249
  275
  304
  334
  367
  401
  438

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  21
  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
  797
  791
  810
  830
  854
  880
  908
  939
  973
  1,009
  1,047
  1,089
  1,133
  1,180
  1,230
  1,283
  1,339
  1,399
  1,462
  1,528
  1,598
  1,672
  1,751
  1,833
  1,920
  2,011
  2,107
  2,209
  2,315
  2,427
  2,545
Adjusted assets (=assets-cash), $m
  776
  791
  810
  830
  854
  880
  908
  939
  973
  1,009
  1,047
  1,089
  1,133
  1,180
  1,230
  1,283
  1,339
  1,399
  1,462
  1,528
  1,598
  1,672
  1,751
  1,833
  1,920
  2,011
  2,107
  2,209
  2,315
  2,427
  2,545
Revenue / Adjusted assets
  0.839
  0.839
  0.838
  0.840
  0.838
  0.839
  0.839
  0.839
  0.839
  0.838
  0.840
  0.838
  0.838
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
  0.839
Average production assets, $m
  168
  171
  175
  180
  185
  190
  197
  203
  211
  218
  227
  236
  245
  255
  266
  278
  290
  303
  316
  331
  346
  362
  379
  397
  416
  435
  456
  478
  501
  525
  551
Working capital, $m
  35
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  48
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  78
  82
  86
  90
  95
  99
  104
  109
Total debt, $m
  160
  151
  162
  175
  190
  206
  224
  243
  264
  286
  311
  336
  364
  393
  424
  458
  493
  530
  569
  611
  654
  701
  749
  801
  855
  912
  972
  1,035
  1,102
  1,172
  1,245
Total liabilities, $m
  503
  494
  505
  518
  533
  549
  567
  586
  607
  629
  654
  679
  707
  736
  767
  801
  836
  873
  912
  954
  997
  1,044
  1,092
  1,144
  1,198
  1,255
  1,315
  1,378
  1,445
  1,515
  1,588
Total equity, $m
  294
  298
  304
  312
  321
  331
  341
  353
  366
  379
  394
  409
  426
  444
  462
  482
  504
  526
  550
  575
  601
  629
  658
  689
  722
  756
  792
  830
  871
  913
  957
Total liabilities and equity, $m
  797
  792
  809
  830
  854
  880
  908
  939
  973
  1,008
  1,048
  1,088
  1,133
  1,180
  1,229
  1,283
  1,340
  1,399
  1,462
  1,529
  1,598
  1,673
  1,750
  1,833
  1,920
  2,011
  2,107
  2,208
  2,316
  2,428
  2,545
Debt-to-equity ratio
  0.544
  0.510
  0.530
  0.560
  0.590
  0.620
  0.660
  0.690
  0.720
  0.760
  0.790
  0.820
  0.850
  0.890
  0.920
  0.950
  0.980
  1.010
  1.040
  1.060
  1.090
  1.110
  1.140
  1.160
  1.180
  1.210
  1.230
  1.250
  1.270
  1.280
  1.300
Adjusted equity ratio
  0.352
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  1
  0
  0
  2
  4
  7
  10
  15
  21
  28
  40
  48
  58
  69
  81
  94
  109
  124
  141
  160
  180
  201
  224
  249
  275
  304
  334
  367
  401
  438
Depreciation, amort., depletion, $m
  24
  24
  24
  25
  25
  26
  27
  27
  28
  29
  30
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  49
  51
  53
  56
  59
Funds from operations, $m
  -164
  25
  25
  25
  27
  30
  33
  38
  43
  50
  58
  65
  75
  85
  97
  111
  125
  141
  158
  177
  197
  218
  241
  266
  293
  322
  352
  385
  420
  457
  497
Change in working capital, $m
  -106
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Cash from operations, $m
  -58
  186
  24
  24
  26
  29
  32
  36
  42
  48
  56
  63
  73
  83
  95
  108
  123
  138
  155
  174
  194
  215
  238
  263
  289
  318
  348
  381
  415
  452
  492
Maintenance CAPEX, $m
  0
  -18
  -18
  -19
  -19
  -20
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
New CAPEX, $m
  -76
  -3
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
Cash from investing activities, $m
  -80
  -21
  -22
  -24
  -24
  -26
  -26
  -28
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -39
  -42
  -44
  -46
  -48
  -50
  -53
  -56
  -58
  -61
  -64
  -67
  -71
  -74
  -77
  -82
Free cash flow, $m
  -138
  164
  2
  1
  2
  3
  6
  9
  13
  18
  24
  30
  38
  47
  57
  69
  81
  95
  110
  126
  143
  162
  183
  205
  228
  254
  281
  310
  341
  375
  410
Issuance/(repayment) of debt, $m
  118
  10
  11
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
Issuance/(repurchase) of shares, $m
  -5
  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 from financing (excl. dividends), $m  
  137
  10
  11
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
Total cash flow (excl. dividends), $m
  -1
  174
  13
  14
  16
  19
  23
  28
  34
  41
  49
  56
  66
  76
  89
  102
  116
  132
  149
  167
  187
  208
  231
  256
  283
  311
  341
  373
  408
  445
  484
Retained Cash Flow (-), $m
  -4
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
Prev. year cash balance distribution, $m
 
  2
  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
 
  171
  6
  7
  8
  10
  13
  17
  21
  27
  34
  40
  49
  59
  70
  82
  95
  109
  125
  142
  161
  181
  202
  225
  250
  277
  305
  335
  368
  402
  439
Discount rate, %
 
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
 
  161
  6
  5
  6
  7
  8
  10
  12
  13
  15
  15
  16
  17
  17
  16
  16
  15
  14
  12
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  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
  100.0

Ameresco, Inc. provides comprehensive services, energy efficiency, infrastructure upgrades, asset sustainability, and renewable energy solutions for businesses and organizations in North America and Europe. The company operates through U.S. Regions, U.S. Federal, Canada, and Small-Scale Infrastructure segments. It designs, develops, engineers, and installs projects that reduce the energy, and operations and maintenance costs of facilities. The company’s projects primarily include various measures customized for the facility and designed to enhance the efficiency of building systems, such as heating, ventilation, air conditioning, and lighting systems. It also provides renewable energy products and services, including the construction of small-scale plants for customers that produce electricity, gas, heat, or cooling from renewable sources of energy; and sells electricity and processed LFG, heat, or cooling. In addition, the company offers enterprise energy management and consulting services; and sells solar photovoltaic (PV) energy products and systems. It serves governments, healthcare and educational institutions, housing authorities, and commercial and industrial customers. As of December 31, 2015, the company owned and operated 49 small-scale renewable energy plants and solar PV installations. Ameresco, Inc. was founded in 2000 and is headquartered in Framingham, Massachusetts.

FINANCIAL RATIOS  of  Ameresco (AMRC)

Valuation Ratios
P/E Ratio 24.2
Price to Sales 0.4
Price to Book 1
Price to Tangible Book
Price to Cash Flow -5
Price to Free Cash Flow -2.2
Growth Rates
Sales Growth Rate 3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 43.4%
Cap. Spend. - 3 Yr. Gr. Rate 23%
Financial Strength
Quick Ratio 1
Current Ratio 0.4
LT Debt to Equity 48%
Total Debt to Equity 54.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.3%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 2.8%
Ret/ On T. Cap. - 3 Yr. Avg. 1.9%
Return On Equity 4.1%
Return On Equity - 3 Yr. Avg. 2.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 20.6%
Gross Margin - 3 Yr. Avg. 19.6%
EBITDA Margin 7.2%
EBITDA Margin - 3 Yr. Avg. 6%
Operating Margin 3.7%
Oper. Margin - 3 Yr. Avg. 2.3%
Pre-Tax Margin 2.5%
Pre-Tax Margin - 3 Yr. Avg. 1.2%
Net Profit Margin 1.8%
Net Profit Margin - 3 Yr. Avg. 1.2%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. -13.9%
Payout Ratio 0%

AMRC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMRC stock intrinsic value calculation we used $651 million for the last fiscal year's total revenue generated by Ameresco. The default revenue input number comes from 2016 income statement of Ameresco. 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 AMRC stock valuation model: a) initial revenue growth rate of 2% 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 5.7%, whose default value for AMRC is calculated based on our internal credit rating of Ameresco, 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 Ameresco.
    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 AMRC stock the variable cost ratio is equal to 19.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $511 million in the base year in the intrinsic value calculation for AMRC 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 5.1% for Ameresco.

Corporate tax rate of 27% is the nominal tax rate for Ameresco. 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 AMRC 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 AMRC are equal to 25.8%.

Life of production assets of 9.4 years is the average useful life of capital assets used in Ameresco 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 AMRC is equal to 5.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $294 million for Ameresco - 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 48.744 million for Ameresco 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 Ameresco at the current share price and the inputted number of shares is $0.3 billion.


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COMPANY NEWS

▶ ETFs with exposure to Ameresco, Inc. : April 26, 2017   [Apr-26-17 03:04PM  Capital Cube]
▶ Why Ameresco Stock Jumped 26% in March   [Apr-06-17 11:51AM  Motley Fool]
▶ Ameresco Blows by Earnings Estimates, Shares Surge   [Mar-02-17 11:28AM  Motley Fool]
▶ Ameresco to Present at 29th Annual ROTH Conference   [Feb-27-17 08:30AM  Business Wire]
▶ This Is How Ameresco Inc (AMRC) Stacks Up Against Its Peers   [Dec-12-16 06:13PM  at Insider Monkey]
▶ Ameresco to Participate in MEUC Year-End Meeting   [Dec-07-16 07:00AM  Business Wire]
▶ Ameresco to Attend Investor Conferences in December   [Nov-29-16 08:00AM  Business Wire]
▶ Ameresco to Present at Upcoming Investor Conferences   [Jul-27-16 04:00PM  Business Wire]
▶ Ameresco Boosts Public Sector Offering with Framework Wins   [Jun-07-16 06:00AM  Business Wire]
▶ Ameresco Inc Stock Up 19% After Earnings: What to Know   [May-05-16 02:03PM  at Motley Fool]
▶ Ameresco Appoints New VP of UK Operations   [Apr-20-16 07:00AM  Business Wire]
Stock chart of AMRC Financial statements of AMRC
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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