Intrinsic value of CPFL Energia ADR - CPL

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$16.03

  Intrinsic Value

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  Value-price divergence*

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$16.03

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

We calculate the intrinsic value of CPL 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 8.2

 

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, %
  -7.22
  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
  6,043
  20,610
  21,084
  21,626
  22,234
  22,908
  23,648
  24,453
  25,325
  26,264
  27,272
  28,351
  29,501
  30,726
  32,028
  33,410
  34,874
  36,424
  38,063
  39,795
  41,623
  43,553
  45,587
  47,732
  49,992
  52,372
  54,877
  57,515
  60,290
  63,210
  66,281
Variable operating expenses, $m
 
  17,519
  17,922
  18,382
  18,899
  19,472
  20,101
  20,785
  21,526
  22,325
  23,181
  24,097
  25,075
  26,117
  27,223
  28,398
  29,642
  30,959
  32,352
  33,824
  35,379
  37,018
  38,748
  40,571
  42,491
  44,514
  46,644
  48,886
  51,245
  53,727
  56,337
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
  5,147
  17,519
  17,922
  18,382
  18,899
  19,472
  20,101
  20,785
  21,526
  22,325
  23,181
  24,097
  25,075
  26,117
  27,223
  28,398
  29,642
  30,959
  32,352
  33,824
  35,379
  37,018
  38,748
  40,571
  42,491
  44,514
  46,644
  48,886
  51,245
  53,727
  56,337
Operating income, $m
  896
  3,092
  3,163
  3,244
  3,335
  3,436
  3,547
  3,668
  3,799
  3,940
  4,091
  4,253
  4,426
  4,610
  4,805
  5,013
  5,232
  5,465
  5,711
  5,970
  6,245
  6,534
  6,839
  7,161
  7,500
  7,857
  8,233
  8,629
  9,045
  9,483
  9,944
EBITDA, $m
  1,304
  4,401
  4,503
  4,618
  4,748
  4,892
  5,050
  5,222
  5,408
  5,609
  5,824
  6,054
  6,300
  6,562
  6,840
  7,135
  7,447
  7,778
  8,128
  8,498
  8,889
  9,301
  9,735
  10,193
  10,676
  11,184
  11,719
  12,282
  12,875
  13,499
  14,154
Interest expense (income), $m
  497
  1,429
  1,475
  1,530
  1,592
  1,662
  1,740
  1,825
  1,918
  2,018
  2,126
  2,242
  2,366
  2,499
  2,640
  2,790
  2,949
  3,117
  3,296
  3,484
  3,684
  3,894
  4,116
  4,350
  4,597
  4,857
  5,131
  5,420
  5,723
  6,043
  6,379
Earnings before tax, $m
  436
  1,662
  1,687
  1,714
  1,743
  1,774
  1,808
  1,843
  1,881
  1,922
  1,965
  2,011
  2,060
  2,111
  2,165
  2,223
  2,284
  2,348
  2,415
  2,486
  2,561
  2,640
  2,723
  2,811
  2,903
  3,000
  3,102
  3,209
  3,322
  3,441
  3,565
Tax expense, $m
  158
  449
  456
  463
  471
  479
  488
  498
  508
  519
  531
  543
  556
  570
  585
  600
  617
  634
  652
  671
  692
  713
  735
  759
  784
  810
  838
  866
  897
  929
  963
Net income, $m
  285
  1,213
  1,232
  1,251
  1,272
  1,295
  1,319
  1,346
  1,373
  1,403
  1,434
  1,468
  1,504
  1,541
  1,581
  1,623
  1,667
  1,714
  1,763
  1,815
  1,870
  1,927
  1,988
  2,052
  2,119
  2,190
  2,264
  2,343
  2,425
  2,512
  2,603

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,953
  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
  13,333
  34,010
  34,792
  35,686
  36,690
  37,803
  39,023
  40,352
  41,791
  43,341
  45,004
  46,783
  48,682
  50,704
  52,852
  55,132
  57,548
  60,106
  62,810
  65,668
  68,685
  71,869
  75,227
  78,766
  82,494
  86,422
  90,557
  94,909
  99,489
  104,307
  109,375
Adjusted assets (=assets-cash), $m
  11,380
  34,010
  34,792
  35,686
  36,690
  37,803
  39,023
  40,352
  41,791
  43,341
  45,004
  46,783
  48,682
  50,704
  52,852
  55,132
  57,548
  60,106
  62,810
  65,668
  68,685
  71,869
  75,227
  78,766
  82,494
  86,422
  90,557
  94,909
  99,489
  104,307
  109,375
Revenue / Adjusted assets
  0.531
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
Average production assets, $m
  6,144
  18,590
  19,018
  19,507
  20,055
  20,663
  21,331
  22,057
  22,843
  23,691
  24,600
  25,572
  26,610
  27,715
  28,890
  30,136
  31,457
  32,855
  34,333
  35,895
  37,544
  39,284
  41,120
  43,054
  45,092
  47,239
  49,499
  51,878
  54,382
  57,016
  59,786
Working capital, $m
  747
  -804
  -822
  -843
  -867
  -893
  -922
  -954
  -988
  -1,024
  -1,064
  -1,106
  -1,151
  -1,198
  -1,249
  -1,303
  -1,360
  -1,421
  -1,484
  -1,552
  -1,623
  -1,699
  -1,778
  -1,862
  -1,950
  -2,042
  -2,140
  -2,243
  -2,351
  -2,465
  -2,585
Total debt, $m
  7,162
  18,674
  19,365
  20,154
  21,041
  22,023
  23,100
  24,274
  25,544
  26,913
  28,381
  29,953
  31,629
  33,414
  35,312
  37,325
  39,458
  41,716
  44,104
  46,628
  49,292
  52,103
  55,068
  58,193
  61,486
  64,953
  68,605
  72,448
  76,492
  80,746
  85,221
Total liabilities, $m
  10,813
  30,031
  30,722
  31,511
  32,398
  33,380
  34,457
  35,631
  36,901
  38,270
  39,738
  41,310
  42,986
  44,771
  46,669
  48,682
  50,815
  53,073
  55,461
  57,985
  60,649
  63,460
  66,425
  69,550
  72,843
  76,310
  79,962
  83,805
  87,849
  92,103
  96,578
Total equity, $m
  2,520
  3,979
  4,071
  4,175
  4,293
  4,423
  4,566
  4,721
  4,890
  5,071
  5,265
  5,474
  5,696
  5,932
  6,184
  6,450
  6,733
  7,032
  7,349
  7,683
  8,036
  8,409
  8,802
  9,216
  9,652
  10,111
  10,595
  11,104
  11,640
  12,204
  12,797
Total liabilities and equity, $m
  13,333
  34,010
  34,793
  35,686
  36,691
  37,803
  39,023
  40,352
  41,791
  43,341
  45,003
  46,784
  48,682
  50,703
  52,853
  55,132
  57,548
  60,105
  62,810
  65,668
  68,685
  71,869
  75,227
  78,766
  82,495
  86,421
  90,557
  94,909
  99,489
  104,307
  109,375
Debt-to-equity ratio
  2.842
  4.690
  4.760
  4.830
  4.900
  4.980
  5.060
  5.140
  5.220
  5.310
  5.390
  5.470
  5.550
  5.630
  5.710
  5.790
  5.860
  5.930
  6.000
  6.070
  6.130
  6.200
  6.260
  6.310
  6.370
  6.420
  6.480
  6.520
  6.570
  6.620
  6.660
Adjusted equity ratio
  0.050
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  285
  1,213
  1,232
  1,251
  1,272
  1,295
  1,319
  1,346
  1,373
  1,403
  1,434
  1,468
  1,504
  1,541
  1,581
  1,623
  1,667
  1,714
  1,763
  1,815
  1,870
  1,927
  1,988
  2,052
  2,119
  2,190
  2,264
  2,343
  2,425
  2,512
  2,603
Depreciation, amort., depletion, $m
  408
  1,310
  1,340
  1,374
  1,413
  1,456
  1,503
  1,554
  1,609
  1,669
  1,733
  1,801
  1,874
  1,952
  2,034
  2,122
  2,215
  2,314
  2,418
  2,528
  2,644
  2,767
  2,896
  3,032
  3,176
  3,327
  3,486
  3,653
  3,830
  4,015
  4,210
Funds from operations, $m
  1,344
  2,523
  2,572
  2,626
  2,685
  2,751
  2,822
  2,899
  2,983
  3,072
  3,167
  3,269
  3,378
  3,493
  3,615
  3,745
  3,882
  4,027
  4,181
  4,343
  4,514
  4,694
  4,884
  5,084
  5,295
  5,517
  5,750
  5,996
  6,255
  6,527
  6,813
Change in working capital, $m
  -121
  -16
  -18
  -21
  -24
  -26
  -29
  -31
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -68
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -120
Cash from operations, $m
  1,465
  2,690
  2,590
  2,647
  2,709
  2,777
  2,851
  2,931
  3,017
  3,109
  3,207
  3,311
  3,422
  3,541
  3,666
  3,799
  3,939
  4,088
  4,245
  4,410
  4,585
  4,769
  4,963
  5,168
  5,383
  5,609
  5,848
  6,099
  6,363
  6,641
  6,933
Maintenance CAPEX, $m
  0
  -1,283
  -1,309
  -1,339
  -1,374
  -1,412
  -1,455
  -1,502
  -1,553
  -1,609
  -1,668
  -1,732
  -1,801
  -1,874
  -1,952
  -2,034
  -2,122
  -2,215
  -2,314
  -2,418
  -2,528
  -2,644
  -2,767
  -2,896
  -3,032
  -3,176
  -3,327
  -3,486
  -3,653
  -3,830
  -4,015
New CAPEX, $m
  -708
  -365
  -428
  -489
  -549
  -608
  -667
  -726
  -786
  -847
  -909
  -973
  -1,038
  -1,105
  -1,174
  -1,246
  -1,321
  -1,398
  -1,478
  -1,562
  -1,649
  -1,740
  -1,835
  -1,935
  -2,038
  -2,147
  -2,260
  -2,379
  -2,503
  -2,634
  -2,770
Cash from investing activities, $m
  -1,206
  -1,648
  -1,737
  -1,828
  -1,923
  -2,020
  -2,122
  -2,228
  -2,339
  -2,456
  -2,577
  -2,705
  -2,839
  -2,979
  -3,126
  -3,280
  -3,443
  -3,613
  -3,792
  -3,980
  -4,177
  -4,384
  -4,602
  -4,831
  -5,070
  -5,323
  -5,587
  -5,865
  -6,156
  -6,464
  -6,785
Free cash flow, $m
  259
  1,042
  853
  819
  787
  757
  729
  702
  677
  653
  629
  606
  584
  562
  540
  518
  496
  475
  453
  430
  408
  385
  361
  337
  313
  287
  261
  234
  206
  177
  147
Issuance/(repayment) of debt, $m
  -77
  581
  691
  790
  886
  982
  1,078
  1,174
  1,270
  1,369
  1,469
  1,571
  1,677
  1,785
  1,897
  2,013
  2,133
  2,258
  2,388
  2,523
  2,664
  2,811
  2,965
  3,125
  3,293
  3,468
  3,651
  3,843
  4,044
  4,255
  4,475
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -33
  581
  691
  790
  886
  982
  1,078
  1,174
  1,270
  1,369
  1,469
  1,571
  1,677
  1,785
  1,897
  2,013
  2,133
  2,258
  2,388
  2,523
  2,664
  2,811
  2,965
  3,125
  3,293
  3,468
  3,651
  3,843
  4,044
  4,255
  4,475
Total cash flow (excl. dividends), $m
  225
  1,623
  1,544
  1,608
  1,673
  1,739
  1,806
  1,876
  1,947
  2,021
  2,098
  2,177
  2,260
  2,347
  2,437
  2,531
  2,630
  2,733
  2,841
  2,954
  3,072
  3,196
  3,326
  3,462
  3,605
  3,755
  3,912
  4,077
  4,250
  4,432
  4,622
Retained Cash Flow (-), $m
  -94
  -77
  -92
  -105
  -117
  -130
  -143
  -155
  -168
  -181
  -195
  -208
  -222
  -237
  -251
  -267
  -283
  -299
  -316
  -334
  -353
  -372
  -393
  -414
  -436
  -459
  -484
  -509
  -536
  -564
  -593
Prev. year cash balance distribution, $m
 
  3,772
  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
 
  5,318
  1,453
  1,504
  1,556
  1,609
  1,664
  1,720
  1,779
  1,840
  1,903
  1,969
  2,038
  2,110
  2,186
  2,265
  2,347
  2,434
  2,524
  2,619
  2,719
  2,824
  2,933
  3,048
  3,169
  3,296
  3,428
  3,568
  3,714
  3,868
  4,029
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  4,970
  1,261
  1,203
  1,139
  1,070
  996
  918
  839
  759
  679
  600
  525
  453
  385
  323
  267
  217
  173
  136
  105
  79
  58
  42
  30
  20
  14
  9
  6
  3
  2
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

CPFL Energia S.A., together with its subsidiaries, generates, transmits, distributes, and commercializes electricity to industrial, residential, commercial, rural, and other consumers; and provides energy-related services in Brazil. The company generates electricity through hydroelectric, thermoelectric biomass, solar energy, and wind power plants. It also manufactures, commercializes, rents, and maintains electro-mechanical equipment; and provides administrative, call center, IT, collection, telecommunication, energy transmission, and energy efficiency management services, as well as maintenance services for energy generation companies. As of December 31, 2015, the company distributed electricity to approximately 7.8 million consumers; and had installed capacity of approximately 3,164 megawatts, as well as 247,422 kilometers of distribution lines, including 369,526 distribution transformers. CPFL Energia S.A. was founded in 1998 and is headquartered in São Paulo, Brazil.

FINANCIAL RATIOS  of  CPFL Energia ADR (CPL)

Valuation Ratios
P/E Ratio 57.3
Price to Sales 2.7
Price to Book 6.5
Price to Tangible Book
Price to Cash Flow 11.1
Price to Free Cash Flow 21.6
Growth Rates
Sales Growth Rate -7.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 57%
Cap. Spend. - 3 Yr. Gr. Rate 5.2%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 237.6%
Total Debt to Equity 284.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 4.9%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 3.3%
Return On Equity 11.5%
Return On Equity - 3 Yr. Avg. 12.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 22.2%
EBITDA Margin - 3 Yr. Avg. 22.1%
Operating Margin 14.8%
Oper. Margin - 3 Yr. Avg. 14.7%
Pre-Tax Margin 7.2%
Pre-Tax Margin - 3 Yr. Avg. 7.7%
Net Profit Margin 4.7%
Net Profit Margin - 3 Yr. Avg. 4.8%
Effective Tax Rate 36.2%
Eff/ Tax Rate - 3 Yr. Avg. 39.1%
Payout Ratio 25.6%

CPL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPL stock intrinsic value calculation we used $20206 million for the last fiscal year's total revenue generated by CPFL Energia ADR. The default revenue input number comes from 2016 income statement of CPFL Energia ADR. 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 CPL 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 7%, whose default value for CPL is calculated based on our internal credit rating of CPFL Energia ADR, 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 CPFL Energia ADR.
    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 CPL stock the variable cost ratio is equal to 85%.

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 CPL 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 7.9% for CPFL Energia ADR.

Corporate tax rate of 27% is the nominal tax rate for CPFL Energia ADR. 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 CPL 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 CPL are equal to 90.2%.

Life of production assets of 14.2 years is the average useful life of capital assets used in CPFL Energia ADR 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 CPL is equal to -3.9%. 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 - $7674 million for CPFL Energia ADR - 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 510.043 million for CPFL Energia ADR 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 CPFL Energia ADR at the current share price and the inputted number of shares is $8.2 billion.


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COMPANY NEWS

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▶ [$$] China's State Grid to Acquire Additional Stake in Brazil's CPFL   [Sep-26-16 06:51AM  at The Wall Street Journal]
▶ [$$] Chinas State Grid Pursues Energy Deal in Brazil   [Aug-10-16 12:08AM  at The Wall Street Journal]
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Stock chart of CPL Financial statements of CPL Annual reports of CPL
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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