Intrinsic value of Capstone Turbine - CPST

Previous Close

$1.55

  Intrinsic Value

$0.16

stock screener

  Rating & Target

str. sell

-90%

Previous close

$1.55

 
Intrinsic value

$0.16

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of CPST 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -9.41
  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
  77
  79
  80
  82
  85
  87
  90
  93
  97
  100
  104
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  209
  219
  230
  241
  253
Variable operating expenses, $m
 
  76
  78
  80
  82
  85
  88
  91
  94
  97
  101
  105
  109
  114
  118
  124
  129
  135
  141
  147
  154
  161
  169
  177
  185
  194
  203
  213
  223
  234
  245
Fixed operating expenses, $m
 
  29
  29
  30
  31
  31
  32
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  41
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  53
  54
Total operating expenses, $m
  100
  105
  107
  110
  113
  116
  120
  124
  127
  131
  136
  141
  145
  151
  156
  163
  169
  176
  182
  189
  197
  205
  214
  223
  232
  242
  252
  263
  274
  287
  299
Operating income, $m
  -23
  -26
  -27
  -28
  -28
  -29
  -29
  -30
  -31
  -31
  -32
  -32
  -33
  -34
  -34
  -35
  -36
  -36
  -37
  -38
  -39
  -39
  -40
  -41
  -42
  -42
  -43
  -44
  -45
  -46
  -46
EBITDA, $m
  -21
  -26
  -27
  -27
  -28
  -28
  -29
  -29
  -30
  -31
  -31
  -32
  -33
  -33
  -34
  -34
  -35
  -36
  -36
  -37
  -38
  -39
  -39
  -40
  -41
  -41
  -42
  -43
  -44
  -44
  -45
Interest expense (income), $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
Earnings before tax, $m
  -24
  -27
  -28
  -28
  -29
  -30
  -30
  -31
  -32
  -32
  -33
  -34
  -35
  -35
  -36
  -37
  -38
  -39
  -39
  -40
  -41
  -42
  -43
  -44
  -45
  -46
  -47
  -48
  -49
  -50
  -51
Tax expense, $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
Net income, $m
  -24
  -27
  -28
  -28
  -29
  -30
  -30
  -31
  -32
  -32
  -33
  -34
  -35
  -35
  -36
  -37
  -38
  -39
  -39
  -40
  -41
  -42
  -43
  -44
  -45
  -46
  -47
  -48
  -49
  -50
  -51

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  14
  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
  58
  59
  61
  62
  64
  66
  68
  70
  73
  76
  78
  82
  85
  88
  92
  96
  100
  105
  110
  115
  120
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
Adjusted assets (=assets-cash), $m
  44
  59
  61
  62
  64
  66
  68
  70
  73
  76
  78
  82
  85
  88
  92
  96
  100
  105
  110
  115
  120
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
Revenue / Adjusted assets
  1.750
  1.339
  1.311
  1.323
  1.328
  1.318
  1.324
  1.329
  1.329
  1.316
  1.333
  1.317
  1.318
  1.330
  1.326
  1.323
  1.330
  1.324
  1.318
  1.322
  1.325
  1.328
  1.328
  1.328
  1.326
  1.325
  1.323
  1.319
  1.322
  1.324
  1.325
Average production assets, $m
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Working capital, $m
  17
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
Total debt, $m
  12
  13
  13
  14
  16
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  45
  48
  51
  55
  59
  63
  67
  71
  76
  81
  86
  91
  97
Total liabilities, $m
  37
  38
  39
  40
  41
  42
  44
  45
  47
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
  111
  117
  122
Total equity, $m
  21
  21
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
Total liabilities and equity, $m
  58
  59
  61
  62
  64
  66
  68
  70
  73
  75
  78
  81
  84
  89
  92
  97
  100
  105
  109
  114
  120
  125
  131
  137
  144
  151
  158
  165
  173
  182
  190
Debt-to-equity ratio
  0.571
  0.590
  0.620
  0.650
  0.680
  0.710
  0.750
  0.780
  0.810
  0.850
  0.880
  0.920
  0.950
  0.990
  1.020
  1.050
  1.080
  1.110
  1.140
  1.170
  1.190
  1.220
  1.250
  1.270
  1.290
  1.320
  1.340
  1.360
  1.380
  1.400
  1.410
Adjusted equity ratio
  0.432
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -24
  -27
  -28
  -28
  -29
  -30
  -30
  -31
  -32
  -32
  -33
  -34
  -35
  -35
  -36
  -37
  -38
  -39
  -39
  -40
  -41
  -42
  -43
  -44
  -45
  -46
  -47
  -48
  -49
  -50
  -51
Depreciation, amort., depletion, $m
  2
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Funds from operations, $m
  -22
  -27
  -27
  -28
  -28
  -29
  -30
  -30
  -31
  -32
  -33
  -33
  -34
  -35
  -36
  -36
  -37
  -38
  -39
  -40
  -40
  -41
  -42
  -43
  -44
  -45
  -46
  -47
  -48
  -49
  -50
Change in working capital, $m
  -3
  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 operations, $m
  -19
  -27
  -27
  -28
  -28
  -29
  -30
  -30
  -31
  -32
  -33
  -33
  -34
  -35
  -36
  -36
  -37
  -38
  -39
  -40
  -41
  -41
  -42
  -43
  -44
  -45
  -46
  -47
  -48
  -49
  -50
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
New CAPEX, $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
  -1
  -1
Cash from investing activities, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
Free cash flow, $m
  -19
  -27
  -28
  -28
  -29
  -30
  -30
  -31
  -32
  -32
  -33
  -34
  -35
  -36
  -36
  -37
  -38
  -39
  -40
  -41
  -42
  -43
  -43
  -44
  -45
  -46
  -48
  -49
  -50
  -51
  -52
Issuance/(repayment) of debt, $m
  2
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Issuance/(repurchase) of shares, $m
  20
  27
  28
  29
  30
  30
  31
  32
  33
  33
  34
  35
  36
  37
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  50
  51
  52
  53
  54
Cash from financing (excl. dividends), $m  
  22
  28
  29
  30
  31
  31
  32
  33
  35
  35
  36
  37
  38
  39
  39
  41
  42
  43
  44
  45
  46
  48
  49
  50
  51
  52
  55
  56
  57
  58
  60
Total cash flow (excl. dividends), $m
  3
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Retained Cash Flow (-), $m
  4
  -27
  -28
  -29
  -30
  -30
  -31
  -32
  -33
  -33
  -34
  -35
  -36
  -37
  -37
  -38
  -39
  -40
  -41
  -42
  -43
  -44
  -45
  -46
  -47
  -48
  -50
  -51
  -52
  -53
  -54
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
 
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Cash available for distribution, $m
 
  -26
  -27
  -27
  -28
  -28
  -29
  -30
  -30
  -31
  -31
  -32
  -33
  -33
  -34
  -35
  -35
  -36
  -37
  -37
  -38
  -39
  -40
  -40
  -41
  -42
  -43
  -44
  -45
  -45
  -46
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -25
  -25
  -24
  -23
  -22
  -21
  -20
  -19
  -18
  -16
  -15
  -14
  -13
  -11
  -10
  -9
  -8
  -7
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  100
  64.5
  41.3
  26.5
  17.0
  10.9
  7.0
  4.5
  2.9
  1.9
  1.2
  0.8
  0.5
  0.4
  0.2
  0.2
  0.1
  0.1
  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

Capstone Turbine Corporation (Capstone) develops, manufactures, markets and services microturbine technology solutions for use in stationary distributed power generation applications, including cogeneration (combined heat and power), integrated combined heat and power (ICHP), and combined cooling, heat and power (CCHP), renewable energy, natural resources and critical power supply. The Company's microturbines are used as battery charging generators for hybrid electric vehicle applications. Capstone offers micro turbines for commercial, industrial and utility users with product offerings ranging from 30 kilowatts (kW) to 1 megawatt in electric power output. The Company sells complete microturbine units, subassemblies, components and various accessories. It also remanufactures micro turbine engines and provides after-market parts and services. Its products include C30, C65, TA100, C200, C600, C800, C1000 and waste heat recovery generator. It also offers C65 and C200 ICHP systems.

FINANCIAL RATIOS  of  Capstone Turbine (CPST)

Valuation Ratios
P/E Ratio -2.5
Price to Sales 0.8
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow -3.2
Price to Free Cash Flow -3.2
Growth Rates
Sales Growth Rate -9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 57.1%
Interest Coverage 0
Management Effectiveness
Return On Assets -42.1%
Ret/ On Assets - 3 Yr. Avg. -39.5%
Return On Total Capital -70.6%
Ret/ On T. Cap. - 3 Yr. Avg. -65.8%
Return On Equity -104.3%
Return On Equity - 3 Yr. Avg. -93.5%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 2.6%
Gross Margin - 3 Yr. Avg. 11.2%
EBITDA Margin -28.6%
EBITDA Margin - 3 Yr. Avg. -26.9%
Operating Margin -29.9%
Oper. Margin - 3 Yr. Avg. -28.7%
Pre-Tax Margin -31.2%
Pre-Tax Margin - 3 Yr. Avg. -29.2%
Net Profit Margin -31.2%
Net Profit Margin - 3 Yr. Avg. -29.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -1.1%
Payout Ratio 0%

CPST stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPST stock intrinsic value calculation we used $77 million for the last fiscal year's total revenue generated by Capstone Turbine. The default revenue input number comes from 2017 income statement of Capstone Turbine. 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 CPST 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 4.3%, whose default value for CPST is calculated based on our internal credit rating of Capstone Turbine, 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 Capstone Turbine.
    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 CPST stock the variable cost ratio is equal to 97.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $28 million in the base year in the intrinsic value calculation for CPST 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 5.4% for Capstone Turbine.

Corporate tax rate of 27% is the nominal tax rate for Capstone Turbine. 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 CPST stock is equal to 1%.

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 CPST are equal to 4.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Capstone Turbine 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 CPST is equal to 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 - $21 million for Capstone Turbine - 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 32 million for Capstone Turbine 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 Capstone Turbine at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ 4 Top-Ranked Nasdaq Stocks That Have Doubled This Year   [Jun-14-18 01:15PM  InvestorPlace]
▶ Capstone Turbine's Earnings Preview   [07:41AM  Benzinga]
▶ Capstone Turbine reports 3Q loss   [Feb-05-18 04:28PM  Associated Press]
▶ The AlphaDirect EnergyTech Monitor: December In Review   [Jan-04-18 09:00AM  ACCESSWIRE]
▶ Capstone Turbine reports 2Q loss   [Nov-06-17 05:37AM  Associated Press]
▶ 2 Reasons Capstone Turbine Shares Are Now A Buy   [Oct-04-17 02:14PM  Benzinga]
Financial statements of CPST
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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