Intrinsic value of Calpine - CPN

Previous Close

$15.09

  Intrinsic Value

$24.98

stock screener

  Rating & Target

str. buy

+66%

Previous close

$15.09

 
Intrinsic value

$24.98

 
Up/down potential

+66%

 
Rating

str. buy

We calculate the intrinsic value of CPN 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 5.4

 

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, %
  3.77
  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
  6,943
  10,746
  16,602
  24,828
  36,025
  50,825
  69,873
  93,790
  123,152
  158,467
  200,157
  248,550
  303,876
  366,273
  435,792
  512,414
  596,061
  686,612
  783,921
  887,832
  998,186
  1,114,842
  1,237,675
  1,366,595
  1,501,541
  1,642,493
  1,789,470
  1,942,534
  2,101,788
  2,267,375
  2,439,482
Variable operating expenses, $m
 
  9,380
  14,483
  21,649
  31,404
  44,299
  60,893
  81,730
  107,311
  138,078
  174,399
  216,540
  264,741
  319,102
  379,669
  446,423
  519,297
  598,187
  682,965
  773,493
  869,636
  971,267
  1,078,282
  1,190,599
  1,308,166
  1,430,965
  1,559,014
  1,692,366
  1,831,110
  1,975,373
  2,125,315
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
  5,902
  9,380
  14,483
  21,649
  31,404
  44,299
  60,893
  81,730
  107,311
  138,078
  174,399
  216,540
  264,741
  319,102
  379,669
  446,423
  519,297
  598,187
  682,965
  773,493
  869,636
  971,267
  1,078,282
  1,190,599
  1,308,166
  1,430,965
  1,559,014
  1,692,366
  1,831,110
  1,975,373
  2,125,315
Operating income, $m
  814
  1,365
  2,119
  3,179
  4,621
  6,527
  8,980
  12,060
  15,841
  20,389
  25,758
  32,009
  39,134
  47,170
  56,123
  65,991
  76,763
  88,425
  100,957
  114,339
  128,551
  143,574
  159,393
  175,996
  193,375
  211,527
  230,456
  250,168
  270,677
  292,003
  314,167
EBITDA, $m
  1,724
  2,834
  4,379
  6,548
  9,501
  13,405
  18,429
  24,737
  32,482
  41,796
  52,792
  65,555
  80,147
  96,605
  114,941
  135,150
  157,211
  181,094
  206,760
  234,166
  263,273
  294,040
  326,438
  360,440
  396,033
  433,209
  471,974
  512,345
  554,348
  598,022
  643,415
Interest expense (income), $m
  584
  565
  1,016
  1,671
  2,591
  3,842
  5,498
  7,627
  10,302
  13,585
  17,534
  22,196
  27,607
  33,794
  40,771
  48,544
  57,112
  66,466
  76,591
  87,472
  99,091
  111,431
  124,476
  138,211
  152,626
  167,716
  183,477
  199,912
  217,028
  234,836
  253,351
Earnings before tax, $m
  159
  801
  1,104
  1,508
  2,030
  2,684
  3,482
  4,433
  5,540
  6,804
  8,224
  9,814
  11,527
  13,377
  15,352
  17,447
  19,651
  21,959
  24,366
  26,867
  29,460
  32,143
  34,918
  37,785
  40,749
  43,811
  46,979
  50,256
  53,650
  57,167
  60,816
Tax expense, $m
  48
  216
  298
  407
  548
  725
  940
  1,197
  1,496
  1,837
  2,221
  2,650
  3,112
  3,612
  4,145
  4,711
  5,306
  5,929
  6,579
  7,254
  7,954
  8,679
  9,428
  10,202
  11,002
  11,829
  12,684
  13,569
  14,485
  15,435
  16,420
Net income, $m
  92
  584
  806
  1,101
  1,482
  1,960
  2,542
  3,236
  4,044
  4,967
  6,004
  7,164
  8,415
  9,765
  11,207
  12,736
  14,345
  16,030
  17,787
  19,613
  21,505
  23,464
  25,490
  27,583
  29,746
  31,982
  34,294
  36,687
  39,164
  41,732
  44,395

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  418
  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
  19,317
  30,269
  46,766
  69,939
  101,477
  143,170
  196,826
  264,198
  346,908
  446,387
  563,823
  700,140
  855,988
  1,031,754
  1,227,583
  1,443,420
  1,679,044
  1,934,117
  2,208,229
  2,500,935
  2,811,793
  3,140,399
  3,486,410
  3,849,563
  4,229,692
  4,626,740
  5,040,761
  5,471,927
  5,920,528
  6,386,972
  6,871,780
Adjusted assets (=assets-cash), $m
  18,899
  30,269
  46,766
  69,939
  101,477
  143,170
  196,826
  264,198
  346,908
  446,387
  563,823
  700,140
  855,988
  1,031,754
  1,227,583
  1,443,420
  1,679,044
  1,934,117
  2,208,229
  2,500,935
  2,811,793
  3,140,399
  3,486,410
  3,849,563
  4,229,692
  4,626,740
  5,040,761
  5,471,927
  5,920,528
  6,386,972
  6,871,780
Revenue / Adjusted assets
  0.367
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
Average production assets, $m
  13,508
  21,609
  33,387
  49,930
  72,445
  102,210
  140,515
  188,612
  247,660
  318,678
  402,516
  499,833
  611,094
  736,574
  876,378
  1,030,465
  1,198,678
  1,380,776
  1,576,466
  1,785,430
  2,007,353
  2,241,947
  2,488,965
  2,748,222
  3,019,598
  3,303,053
  3,598,624
  3,906,436
  4,226,695
  4,559,691
  4,905,798
Working capital, $m
  730
  1,698
  2,623
  3,923
  5,692
  8,030
  11,040
  14,819
  19,458
  25,038
  31,625
  39,271
  48,012
  57,871
  68,855
  80,961
  94,178
  108,485
  123,860
  140,277
  157,713
  176,145
  195,553
  215,922
  237,243
  259,514
  282,736
  306,920
  332,082
  358,245
  385,438
Total debt, $m
  12,179
  21,163
  34,806
  53,969
  80,052
  114,532
  158,905
  214,622
  283,023
  365,292
  462,411
  575,146
  704,032
  849,390
  1,011,341
  1,189,838
  1,384,699
  1,595,645
  1,822,336
  2,064,403
  2,321,483
  2,593,240
  2,879,391
  3,179,718
  3,494,085
  3,822,444
  4,164,839
  4,521,414
  4,892,407
  5,278,156
  5,679,092
Total liabilities, $m
  16,049
  25,033
  38,676
  57,839
  83,922
  118,402
  162,775
  218,492
  286,893
  369,162
  466,281
  579,016
  707,902
  853,260
  1,015,211
  1,193,708
  1,388,569
  1,599,515
  1,826,206
  2,068,273
  2,325,353
  2,597,110
  2,883,261
  3,183,588
  3,497,955
  3,826,314
  4,168,709
  4,525,284
  4,896,277
  5,282,026
  5,682,962
Total equity, $m
  3,268
  5,237
  8,091
  12,099
  17,556
  24,768
  34,051
  45,706
  60,015
  77,225
  97,541
  121,124
  148,086
  178,493
  212,372
  249,712
  290,475
  334,602
  382,024
  432,662
  486,440
  543,289
  603,149
  665,974
  731,737
  800,426
  872,052
  946,643
  1,024,251
  1,104,946
  1,188,818
Total liabilities and equity, $m
  19,317
  30,270
  46,767
  69,938
  101,478
  143,170
  196,826
  264,198
  346,908
  446,387
  563,822
  700,140
  855,988
  1,031,753
  1,227,583
  1,443,420
  1,679,044
  1,934,117
  2,208,230
  2,500,935
  2,811,793
  3,140,399
  3,486,410
  3,849,562
  4,229,692
  4,626,740
  5,040,761
  5,471,927
  5,920,528
  6,386,972
  6,871,780
Debt-to-equity ratio
  3.727
  4.040
  4.300
  4.460
  4.560
  4.620
  4.670
  4.700
  4.720
  4.730
  4.740
  4.750
  4.750
  4.760
  4.760
  4.760
  4.770
  4.770
  4.770
  4.770
  4.770
  4.770
  4.770
  4.770
  4.780
  4.780
  4.780
  4.780
  4.780
  4.780
  4.780
Adjusted equity ratio
  0.151
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  92
  584
  806
  1,101
  1,482
  1,960
  2,542
  3,236
  4,044
  4,967
  6,004
  7,164
  8,415
  9,765
  11,207
  12,736
  14,345
  16,030
  17,787
  19,613
  21,505
  23,464
  25,490
  27,583
  29,746
  31,982
  34,294
  36,687
  39,164
  41,732
  44,395
Depreciation, amort., depletion, $m
  910
  1,469
  2,259
  3,370
  4,881
  6,878
  9,449
  12,677
  16,640
  21,406
  27,033
  33,546
  41,013
  49,434
  58,817
  69,159
  80,448
  92,670
  105,803
  119,827
  134,722
  150,466
  167,045
  184,444
  202,658
  221,681
  241,518
  262,177
  283,671
  306,020
  329,248
Funds from operations, $m
  1,085
  2,053
  3,065
  4,471
  6,363
  8,838
  11,991
  15,913
  20,684
  26,374
  33,037
  40,710
  49,428
  59,199
  70,025
  81,895
  94,793
  108,700
  123,590
  139,440
  156,227
  173,931
  192,535
  212,028
  232,404
  253,664
  275,813
  298,864
  322,835
  347,751
  373,644
Change in working capital, $m
  55
  637
  925
  1,300
  1,769
  2,339
  3,010
  3,779
  4,639
  5,580
  6,587
  7,646
  8,742
  9,859
  10,984
  12,106
  13,216
  14,307
  15,375
  16,418
  17,436
  18,432
  19,408
  20,369
  21,321
  22,270
  23,222
  24,184
  25,162
  26,163
  27,193
Cash from operations, $m
  1,030
  1,417
  2,140
  3,171
  4,594
  6,499
  8,982
  12,134
  16,045
  20,794
  26,450
  33,064
  40,687
  49,341
  59,041
  69,788
  81,577
  94,393
  108,215
  123,022
  138,791
  155,499
  173,127
  191,658
  211,083
  231,393
  252,590
  274,680
  297,673
  321,589
  346,451
Maintenance CAPEX, $m
  0
  -907
  -1,450
  -2,241
  -3,351
  -4,862
  -6,860
  -9,431
  -12,659
  -16,621
  -21,388
  -27,014
  -33,546
  -41,013
  -49,434
  -58,817
  -69,159
  -80,448
  -92,670
  -105,803
  -119,827
  -134,722
  -150,466
  -167,045
  -184,444
  -202,658
  -221,681
  -241,518
  -262,177
  -283,671
  -306,020
New CAPEX, $m
  -489
  -8,101
  -11,777
  -16,543
  -22,516
  -29,765
  -38,305
  -48,097
  -59,048
  -71,018
  -83,838
  -97,318
  -111,261
  -125,480
  -139,804
  -154,087
  -168,213
  -182,098
  -195,690
  -208,964
  -221,923
  -234,594
  -247,019
  -259,257
  -271,376
  -283,454
  -295,572
  -307,812
  -320,259
  -332,996
  -346,107
Cash from investing activities, $m
  -1,919
  -9,008
  -13,227
  -18,784
  -25,867
  -34,627
  -45,165
  -57,528
  -71,707
  -87,639
  -105,226
  -124,332
  -144,807
  -166,493
  -189,238
  -212,904
  -237,372
  -262,546
  -288,360
  -314,767
  -341,750
  -369,316
  -397,485
  -426,302
  -455,820
  -486,112
  -517,253
  -549,330
  -582,436
  -616,667
  -652,127
Free cash flow, $m
  -889
  -7,591
  -11,088
  -15,613
  -21,273
  -28,127
  -36,183
  -45,394
  -55,661
  -66,846
  -78,776
  -91,268
  -104,120
  -117,152
  -130,198
  -143,116
  -155,795
  -168,154
  -180,144
  -191,744
  -202,960
  -213,816
  -224,358
  -234,643
  -244,738
  -254,719
  -264,663
  -274,651
  -284,763
  -295,079
  -305,675
Issuance/(repayment) of debt, $m
  469
  9,402
  13,643
  19,164
  26,083
  34,480
  44,373
  55,717
  68,402
  82,269
  97,120
  112,734
  128,886
  145,358
  161,951
  178,497
  194,861
  210,946
  226,690
  242,067
  257,080
  271,757
  286,151
  300,327
  314,367
  328,358
  342,395
  356,574
  370,993
  385,749
  400,936
Issuance/(repurchase) of shares, $m
  1
  1,384
  2,048
  2,908
  3,974
  5,253
  6,740
  8,420
  10,265
  12,243
  14,313
  16,419
  18,547
  20,642
  22,671
  24,604
  26,418
  28,097
  29,634
  31,025
  32,273
  33,384
  34,370
  35,242
  36,016
  36,707
  37,331
  37,905
  38,444
  38,963
  39,476
Cash from financing (excl. dividends), $m  
  401
  10,786
  15,691
  22,072
  30,057
  39,733
  51,113
  64,137
  78,667
  94,512
  111,433
  129,153
  147,433
  166,000
  184,622
  203,101
  221,279
  239,043
  256,324
  273,092
  289,353
  305,141
  320,521
  335,569
  350,383
  365,065
  379,726
  394,479
  409,437
  424,712
  440,412
Total cash flow (excl. dividends), $m
  -488
  3,195
  4,603
  6,459
  8,784
  11,606
  14,931
  18,743
  23,005
  27,666
  32,656
  37,885
  43,313
  48,848
  54,425
  59,985
  65,484
  70,890
  76,181
  81,348
  86,393
  91,326
  96,163
  100,927
  105,645
  110,347
  115,064
  119,829
  124,674
  129,633
  134,737
Retained Cash Flow (-), $m
  -159
  -1,969
  -2,854
  -4,009
  -5,456
  -7,213
  -9,282
  -11,655
  -14,309
  -17,210
  -20,316
  -23,583
  -26,962
  -30,407
  -33,879
  -37,340
  -40,763
  -44,128
  -47,421
  -50,638
  -53,778
  -56,849
  -59,860
  -62,825
  -65,762
  -68,689
  -71,626
  -74,592
  -77,608
  -80,695
  -83,872
Prev. year cash balance distribution, $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 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
 
  1,226
  1,750
  2,450
  3,328
  4,393
  5,648
  7,087
  8,697
  10,456
  12,340
  14,302
  16,351
  18,441
  20,546
  22,645
  24,721
  26,762
  28,759
  30,710
  32,615
  34,477
  36,303
  38,101
  39,882
  41,657
  43,438
  45,237
  47,066
  48,938
  50,865
Discount rate, %
 
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.31
  19.22
  20.18
  21.19
  22.25
  23.36
  24.53
  25.76
  27.05
  28.40
  29.82
  31.31
  32.87
  34.52
  36.24
  38.06
  39.96
  41.96
  44.05
  46.26
  48.57
PV of cash for distribution, $m
 
  1,097
  1,385
  1,697
  1,994
  2,248
  2,434
  2,536
  2,545
  2,462
  2,297
  2,068
  1,801
  1,516
  1,234
  971
  739
  544
  387
  266
  176
  113
  70
  42
  24
  13
  7
  4
  2
  1
  0
Current shareholders' claim on cash, %
  100
  79.7
  64.5
  53.1
  44.3
  37.6
  32.3
  28.1
  24.8
  22.1
  19.9
  18.0
  16.5
  15.2
  14.2
  13.2
  12.4
  11.8
  11.2
  10.6
  10.2
  9.8
  9.4
  9.1
  8.8
  8.6
  8.3
  8.1
  7.9
  7.7
  7.6

Calpine Corporation is a power generation company. The Company is engaged in the ownership and operation of primarily natural gas-fired and geothermal power plants in North America. The Company's segments include West (including geothermal), Texas and East (including Canada). In the Northeast and Mid-Atlantic regions, the Company has generating units capable of burning either natural gas or fuel oil. As of December 31, 2016, the Company's portfolio consisted of two types of power generation technologies, including natural gas-fired combustion turbines, such as combined-cycle plants, and renewable geothermal conventional steam turbines. As of December 31, 2016, the Company's portfolio included 80 power plants, including one under construction, with an aggregate generation capacity of 25,908 Megawatt (MW) and 828 MW under construction. As of December 31, 2016, it had four MW of capacity from solar power generation technology at its Vineland Solar Energy Center in New Jersey.

FINANCIAL RATIOS  of  Calpine (CPN)

Valuation Ratios
P/E Ratio 58.9
Price to Sales 0.8
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 5.3
Price to Free Cash Flow 10
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.5%
Cap. Spend. - 3 Yr. Gr. Rate -3.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.6
LT Debt to Equity 349.8%
Total Debt to Equity 372.7%
Interest Coverage 1
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 5.8%
Return On Total Capital 0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 2.9%
Return On Equity 2.9%
Return On Equity - 3 Yr. Avg. 12.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 24.6%
EBITDA Margin - 3 Yr. Avg. 25.5%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. 15.1%
Pre-Tax Margin 2.4%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin 1.4%
Net Profit Margin - 3 Yr. Avg. 5.6%
Effective Tax Rate 30.2%
Eff/ Tax Rate - 3 Yr. Avg. -3.8%
Payout Ratio 0%

CPN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPN stock intrinsic value calculation we used $6716 million for the last fiscal year's total revenue generated by Calpine. The default revenue input number comes from 2016 income statement of Calpine. 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 CPN 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 11.8%, whose default value for CPN is calculated based on our internal credit rating of Calpine, 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 Calpine.
    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 CPN stock the variable cost ratio is equal to 87.4%.

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 CPN 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 4.8% for Calpine.

Corporate tax rate of 27% is the nominal tax rate for Calpine. 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 CPN 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 CPN are equal to 201.1%.

Life of production assets of 14.9 years is the average useful life of capital assets used in Calpine 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 CPN is equal to 15.8%. 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 - $3268 million for Calpine - 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 360.403 million for Calpine 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 Calpine at the current share price and the inputted number of shares is $5.4 billion.

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PCG PG&E 53.71 38.90  sell

COMPANY NEWS

▶ ETFs with exposure to Calpine Corp. : November 21, 2017   [Nov-21-17 11:31AM  Capital Cube]
▶ ETFs with exposure to Calpine Corp. : November 9, 2017   [Nov-09-17 12:25PM  Capital Cube]
▶ Will NRG Energys Transformation Plan Lead to Growth?   [Nov-06-17 07:34AM  Market Realist]
▶ Does Calpine Corporations (CPN) PE Ratio Warrant A Sell?   [Nov-01-17 08:01PM  Simply Wall St.]
▶ Calpine beats 3Q profit forecasts   [09:19AM  Associated Press]
▶ Calpine Reports Third Quarter 2017 Results   [07:30AM  Business Wire]
▶ What Is Calpine Corporations (CPN) Share Price Doing?   [Sep-15-17 06:43PM  Simply Wall St.]
▶ Two U.S. Utility Giants Just Got Even Larger   [Aug-26-17 03:00PM  Oilprice.com]
▶ Major Houston power co. to be sold for $5.6B (Video)   [11:21AM  American City Business Journals]
▶ Company News For August 21, 2017   [10:58AM  Zacks]
▶ [$$] Charting the Market   [Aug-18-17 11:28PM  Barrons.com]
▶ Calpine Winds Down the Party   [12:24PM  Bloomberg]
▶ Calpine Confirms Deal to Be Acquired   [07:41AM  Bloomberg Video]
▶ [$$] Energy Capital Partners Is Nearing Deal to Buy Calpine   [12:16AM  The Wall Street Journal]
▶ ETFs with exposure to Calpine Corp. : August 15, 2017   [Aug-15-17 03:50PM  Capital Cube]
▶ Calpine reports 2Q loss   [Jul-28-17 11:35PM  Associated Press]
▶ Major Houston power co. confirms sales talks, reports larger net loss   [09:30AM  American City Business Journals]
▶ PE firm reportedly in talks to buy major Houston power company   [Jul-27-17 10:30AM  American City Business Journals]
▶ [$$] The private equity arms race is hotting up   [Jul-08-17 01:02AM  Financial Times]
▶ 31 Undervalued Stocks   [Jul-06-17 06:00AM  Morningstar]
▶ Why Calpine Corporation's Shares Popped 26% in May   [Jun-13-17 01:33PM  Motley Fool]
▶ Power Producers Would Like You to Take Them Home   [May-22-17 12:27PM  Bloomberg]
▶ The Curious Calculus Of A Calpine Buyout   [May-19-17 11:39AM  Bloomberg]
▶ ETFs with exposure to Calpine Corp. : May 18, 2017   [May-18-17 01:37PM  Capital Cube]
▶ [$$] Noble Group: coal bunkered   [May-15-17 11:45AM  Financial Times]
▶ A Sand-Eradicating Sprayer and Other Gear   [May-12-17 10:50PM  The Wall Street Journal]
▶ Major Houston-based power co. reportedly considers selling itself   [May-11-17 09:05AM  American City Business Journals]
Financial statements of CPN
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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