Intrinsic value of Dominion Resources (Virginia) - D

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$77.05

  Intrinsic Value

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  Value-price divergence*

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$77.05

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

We calculate the intrinsic value of D 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 48.8

 

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, %
  0.46
  20.60
  19.04
  17.64
  16.37
  15.24
  14.21
  13.29
  12.46
  11.72
  11.04
  10.44
  9.90
  9.41
  8.97
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
Revenue, $m
  11,357
  14,150
  16,844
  19,815
  23,059
  26,572
  30,348
  34,382
  38,666
  43,196
  47,967
  52,974
  58,216
  63,692
  69,402
  75,349
  81,536
  87,970
  94,657
  101,607
  108,828
  116,334
  124,136
  132,250
  140,691
  149,476
  158,624
  168,154
  178,087
  188,445
  199,252
Variable operating expenses, $m
 
  9,795
  11,597
  13,584
  15,754
  18,104
  20,630
  23,328
  26,194
  29,224
  32,415
  35,436
  38,942
  42,605
  46,425
  50,403
  54,542
  58,845
  63,319
  67,967
  72,798
  77,818
  83,038
  88,465
  94,112
  99,988
  106,108
  112,482
  119,127
  126,056
  133,285
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
  8,110
  9,795
  11,597
  13,584
  15,754
  18,104
  20,630
  23,328
  26,194
  29,224
  32,415
  35,436
  38,942
  42,605
  46,425
  50,403
  54,542
  58,845
  63,319
  67,967
  72,798
  77,818
  83,038
  88,465
  94,112
  99,988
  106,108
  112,482
  119,127
  126,056
  133,285
Operating income, $m
  3,627
  4,355
  5,247
  6,231
  7,305
  8,468
  9,718
  11,054
  12,472
  13,972
  15,551
  17,538
  19,274
  21,087
  22,977
  24,946
  26,995
  29,125
  31,339
  33,639
  36,030
  38,515
  41,098
  43,785
  46,579
  49,488
  52,516
  55,671
  58,960
  62,389
  65,967
EBITDA, $m
  5,476
  5,245
  6,244
  7,345
  8,547
  9,850
  11,249
  12,744
  14,333
  16,012
  17,780
  19,636
  21,579
  23,609
  25,726
  27,930
  30,223
  32,608
  35,087
  37,663
  40,340
  43,122
  46,014
  49,022
  52,151
  55,407
  58,798
  62,330
  66,012
  69,852
  73,858
Interest expense (income), $m
  905
  987
  1,316
  1,681
  2,083
  2,523
  2,999
  3,511
  4,057
  4,638
  5,251
  5,898
  6,576
  7,287
  8,029
  8,802
  9,608
  10,446
  11,318
  12,224
  13,166
  14,144
  15,161
  16,218
  17,318
  18,462
  19,652
  20,891
  22,183
  23,529
  24,932
Earnings before tax, $m
  2,867
  3,368
  3,931
  4,550
  5,221
  5,945
  6,719
  7,543
  8,415
  9,334
  10,300
  11,640
  12,698
  13,800
  14,949
  16,144
  17,387
  18,678
  20,020
  21,415
  22,864
  24,371
  25,937
  27,566
  29,261
  31,026
  32,864
  34,780
  36,777
  38,861
  41,035
Tax expense, $m
  655
  909
  1,061
  1,228
  1,410
  1,605
  1,814
  2,037
  2,272
  2,520
  2,781
  3,143
  3,428
  3,726
  4,036
  4,359
  4,694
  5,043
  5,406
  5,782
  6,173
  6,580
  7,003
  7,443
  7,901
  8,377
  8,873
  9,391
  9,930
  10,492
  11,080
Net income, $m
  2,123
  2,459
  2,870
  3,321
  3,812
  4,340
  4,905
  5,506
  6,143
  6,814
  7,519
  8,498
  9,269
  10,074
  10,913
  11,785
  12,692
  13,635
  14,615
  15,633
  16,691
  17,791
  18,934
  20,123
  21,361
  22,649
  23,991
  25,389
  26,848
  28,368
  29,956

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  362
  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
  71,610
  70,049
  83,387
  98,093
  114,153
  131,545
  150,239
  170,207
  191,417
  213,842
  237,458
  262,247
  288,198
  315,306
  343,574
  373,014
  403,645
  435,496
  468,601
  503,003
  538,753
  575,909
  614,534
  654,702
  696,489
  739,980
  785,267
  832,445
  881,618
  932,897
  986,397
Adjusted assets (=assets-cash), $m
  71,248
  70,049
  83,387
  98,093
  114,153
  131,545
  150,239
  170,207
  191,417
  213,842
  237,458
  262,247
  288,198
  315,306
  343,574
  373,014
  403,645
  435,496
  468,601
  503,003
  538,753
  575,909
  614,534
  654,702
  696,489
  739,980
  785,267
  832,445
  881,618
  932,897
  986,397
Revenue / Adjusted assets
  0.159
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
Average production assets, $m
  3,446
  2,802
  3,335
  3,923
  4,566
  5,261
  6,009
  6,808
  7,656
  8,553
  9,497
  10,489
  11,527
  12,611
  13,742
  14,919
  16,144
  17,418
  18,742
  20,118
  21,548
  23,034
  24,579
  26,185
  27,857
  29,596
  31,408
  33,294
  35,261
  37,312
  39,452
Working capital, $m
  -3,867
  962
  1,145
  1,347
  1,568
  1,807
  2,064
  2,338
  2,629
  2,937
  3,262
  3,602
  3,959
  4,331
  4,719
  5,124
  5,544
  5,982
  6,437
  6,909
  7,400
  7,911
  8,441
  8,993
  9,567
  10,164
  10,786
  11,434
  12,110
  12,814
  13,549
Total debt, $m
  35,095
  37,597
  48,027
  59,527
  72,086
  85,686
  100,305
  115,920
  132,506
  150,043
  168,510
  187,896
  208,189
  229,387
  251,493
  274,515
  298,469
  323,376
  349,264
  376,166
  404,123
  433,179
  463,384
  494,795
  527,472
  561,483
  596,896
  633,790
  672,244
  712,343
  754,180
Total liabilities, $m
  57,005
  54,779
  65,209
  76,709
  89,268
  102,868
  117,487
  133,102
  149,688
  167,225
  185,692
  205,078
  225,371
  246,569
  268,675
  291,697
  315,651
  340,558
  366,446
  393,348
  421,305
  450,361
  480,566
  511,977
  544,654
  578,665
  614,078
  650,972
  689,426
  729,525
  771,362
Total equity, $m
  14,605
  15,271
  18,178
  21,384
  24,885
  28,677
  32,752
  37,105
  41,729
  46,618
  51,766
  57,170
  62,827
  68,737
  74,899
  81,317
  87,995
  94,938
  102,155
  109,655
  117,448
  125,548
  133,969
  142,725
  151,835
  161,316
  171,188
  181,473
  192,193
  203,372
  215,034
Total liabilities and equity, $m
  71,610
  70,050
  83,387
  98,093
  114,153
  131,545
  150,239
  170,207
  191,417
  213,843
  237,458
  262,248
  288,198
  315,306
  343,574
  373,014
  403,646
  435,496
  468,601
  503,003
  538,753
  575,909
  614,535
  654,702
  696,489
  739,981
  785,266
  832,445
  881,619
  932,897
  986,396
Debt-to-equity ratio
  2.403
  2.460
  2.640
  2.780
  2.900
  2.990
  3.060
  3.120
  3.180
  3.220
  3.260
  3.290
  3.310
  3.340
  3.360
  3.380
  3.390
  3.410
  3.420
  3.430
  3.440
  3.450
  3.460
  3.470
  3.470
  3.480
  3.490
  3.490
  3.500
  3.500
  3.510
Adjusted equity ratio
  0.205
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,123
  2,459
  2,870
  3,321
  3,812
  4,340
  4,905
  5,506
  6,143
  6,814
  7,519
  8,498
  9,269
  10,074
  10,913
  11,785
  12,692
  13,635
  14,615
  15,633
  16,691
  17,791
  18,934
  20,123
  21,361
  22,649
  23,991
  25,389
  26,848
  28,368
  29,956
Depreciation, amort., depletion, $m
  1,849
  890
  996
  1,114
  1,243
  1,382
  1,531
  1,691
  1,861
  2,040
  2,229
  2,098
  2,305
  2,522
  2,748
  2,984
  3,229
  3,484
  3,748
  4,024
  4,310
  4,607
  4,916
  5,237
  5,571
  5,919
  6,282
  6,659
  7,052
  7,462
  7,890
Funds from operations, $m
  3,641
  3,349
  3,866
  4,435
  5,054
  5,721
  6,436
  7,197
  8,003
  8,854
  9,748
  10,595
  11,575
  12,596
  13,661
  14,769
  15,921
  17,119
  18,363
  19,657
  21,001
  22,397
  23,850
  25,360
  26,932
  28,568
  30,273
  32,048
  33,900
  35,831
  37,846
Change in working capital, $m
  -486
  164
  183
  202
  221
  239
  257
  274
  291
  308
  324
  341
  356
  372
  388
  404
  421
  437
  455
  473
  491
  510
  531
  552
  574
  597
  622
  648
  675
  704
  735
Cash from operations, $m
  4,127
  863
  3,683
  4,233
  4,834
  5,483
  6,179
  6,923
  7,712
  8,546
  9,423
  10,255
  11,218
  12,224
  13,273
  14,364
  15,500
  16,681
  17,909
  19,184
  20,510
  21,887
  23,319
  24,809
  26,358
  27,971
  29,650
  31,400
  33,224
  35,127
  37,111
Maintenance CAPEX, $m
  0
  -464
  -560
  -667
  -785
  -913
  -1,052
  -1,202
  -1,362
  -1,531
  -1,711
  -1,899
  -2,098
  -2,305
  -2,522
  -2,748
  -2,984
  -3,229
  -3,484
  -3,748
  -4,024
  -4,310
  -4,607
  -4,916
  -5,237
  -5,571
  -5,919
  -6,282
  -6,659
  -7,052
  -7,462
New CAPEX, $m
  -6,085
  -481
  -533
  -588
  -642
  -696
  -748
  -799
  -848
  -897
  -945
  -991
  -1,038
  -1,084
  -1,131
  -1,177
  -1,225
  -1,274
  -1,324
  -1,376
  -1,430
  -1,486
  -1,545
  -1,607
  -1,671
  -1,739
  -1,811
  -1,887
  -1,967
  -2,051
  -2,140
Cash from investing activities, $m
  -10,703
  -945
  -1,093
  -1,255
  -1,427
  -1,609
  -1,800
  -2,001
  -2,210
  -2,428
  -2,656
  -2,890
  -3,136
  -3,389
  -3,653
  -3,925
  -4,209
  -4,503
  -4,808
  -5,124
  -5,454
  -5,796
  -6,152
  -6,523
  -6,908
  -7,310
  -7,730
  -8,169
  -8,626
  -9,103
  -9,602
Free cash flow, $m
  -6,576
  -82
  2,589
  2,978
  3,407
  3,874
  4,379
  4,923
  5,502
  6,118
  6,768
  7,364
  8,082
  8,834
  9,620
  10,439
  11,291
  12,179
  13,101
  14,060
  15,056
  16,091
  17,168
  18,286
  19,450
  20,660
  21,920
  23,232
  24,599
  26,023
  27,509
Issuance/(repayment) of debt, $m
  4,858
  9,402
  10,430
  11,500
  12,559
  13,600
  14,619
  15,615
  16,586
  17,536
  18,468
  19,385
  20,293
  21,198
  22,106
  23,022
  23,954
  24,907
  25,888
  26,903
  27,957
  29,056
  30,205
  31,411
  32,678
  34,010
  35,414
  36,893
  38,454
  40,100
  41,837
Issuance/(repurchase) of shares, $m
  2,642
  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  
  7,957
  9,402
  10,430
  11,500
  12,559
  13,600
  14,619
  15,615
  16,586
  17,536
  18,468
  19,385
  20,293
  21,198
  22,106
  23,022
  23,954
  24,907
  25,888
  26,903
  27,957
  29,056
  30,205
  31,411
  32,678
  34,010
  35,414
  36,893
  38,454
  40,100
  41,837
Total cash flow (excl. dividends), $m
  1,381
  9,320
  13,019
  14,478
  15,966
  17,474
  18,999
  20,537
  22,089
  23,654
  25,236
  26,749
  28,376
  30,033
  31,725
  33,461
  35,245
  37,086
  38,989
  40,962
  43,013
  45,147
  47,373
  49,697
  52,127
  54,670
  57,334
  60,125
  63,052
  66,123
  69,346
Retained Cash Flow (-), $m
  -1,941
  -2,607
  -2,908
  -3,206
  -3,501
  -3,791
  -4,075
  -4,353
  -4,624
  -4,889
  -5,148
  -5,404
  -5,657
  -5,909
  -6,162
  -6,418
  -6,678
  -6,943
  -7,217
  -7,500
  -7,794
  -8,100
  -8,420
  -8,757
  -9,110
  -9,481
  -9,872
  -10,285
  -10,720
  -11,179
  -11,663
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
 
  6,713
  10,112
  11,272
  12,464
  13,683
  14,923
  16,184
  17,465
  18,765
  20,088
  21,345
  22,718
  24,123
  25,563
  27,043
  28,568
  30,142
  31,772
  33,463
  35,219
  37,047
  38,953
  40,941
  43,018
  45,189
  47,461
  49,840
  52,333
  54,945
  57,683
Discount rate, %
 
  10.10
  10.61
  11.14
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.05
  20.00
  21.00
  22.05
  23.15
  24.31
  25.52
  26.80
  28.14
  29.55
  31.02
  32.57
  34.20
  35.91
  37.71
  39.59
  41.57
PV of cash for distribution, $m
 
  6,098
  8,266
  8,212
  8,009
  7,669
  7,210
  6,656
  6,032
  5,367
  4,686
  3,997
  3,357
  2,763
  2,227
  1,756
  1,354
  1,019
  749
  536
  374
  253
  167
  106
  66
  39
  23
  13
  7
  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

Dominion Resources, Inc. produces and transports energy in the United States. The company operates through three segments: Dominion Virginia Power (DVP), Dominion Generation, and Dominion Energy. The DVP segment engages in regulated electric transmission and distribution operations that serve residential, commercial, industrial, and governmental customers in Virginia and North Carolina. The Dominion Generation segment is involved in electricity generation through coal, nuclear, gas, oil, hydro, and renewable sources; and related energy supply operations. It also comprises generation operations of the company’s merchant fleet and energy marketing, and price risk management activities for its assets. The Dominion Energy segment engages in regulated natural gas distribution operations, gas transmission pipeline and storage operations, natural gas gathering and processing activities, and liquefied natural gas operations. As of December 31, 2015, the company’s portfolio of assets included approximately 24,300 megawatts of generating capacity; 6,500 miles of electric transmission lines; 57,300 miles of electric distribution lines; 12,200 miles of natural gas transmission, gathering, and storage pipelines; and 22,000 miles of gas distribution pipelines. It served approximately 5 million utility and retail energy customers in 14 states; and operated underground natural gas storage systems with approximately 933 billion cubic feet of storage capacity. In addition, the company sells electricity at wholesale prices to rural electric cooperatives, municipalities, and into wholesale electricity markets. Dominion Resources, Inc. was founded in 1909 and is headquartered in Richmond, Virginia.

FINANCIAL RATIOS  of  Dominion Resources (Virginia) (D)

Valuation Ratios
P/E Ratio 22.8
Price to Sales 4.1
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow -24.7
Growth Rates
Sales Growth Rate 0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.1%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 207%
Total Debt to Equity 240.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.3%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity 15.6%
Return On Equity - 3 Yr. Avg. 14.2%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 47.9%
EBITDA Margin - 3 Yr. Avg. 42.5%
Operating Margin 30.9%
Oper. Margin - 3 Yr. Avg. 27.7%
Pre-Tax Margin 24.4%
Pre-Tax Margin - 3 Yr. Avg. 21%
Net Profit Margin 18.1%
Net Profit Margin - 3 Yr. Avg. 15%
Effective Tax Rate 22.8%
Eff/ Tax Rate - 3 Yr. Avg. 26.8%
Payout Ratio 81.3%

D stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the D stock intrinsic value calculation we used $11733 million for the last fiscal year's total revenue generated by Dominion Resources (Virginia). The default revenue input number comes from 2016 income statement of Dominion Resources (Virginia). 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 D stock valuation model: a) initial revenue growth rate of 20.6% 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 10.1%, whose default value for D is calculated based on our internal credit rating of Dominion Resources (Virginia), 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 Dominion Resources (Virginia).
    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 D stock the variable cost ratio is equal to 69.7%.

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 D 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 Dominion Resources (Virginia).

Corporate tax rate of 27% is the nominal tax rate for Dominion Resources (Virginia). 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 D 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 D are equal to 19.8%.

Life of production assets of 3.3 years is the average useful life of capital assets used in Dominion Resources (Virginia) 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 D is equal to 6.8%. 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 - $12664 million for Dominion Resources (Virginia) - 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 633.049 million for Dominion Resources (Virginia) 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 Dominion Resources (Virginia) at the current share price and the inputted number of shares is $48.8 billion.


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Stock chart of D Financial statements of D Annual reports of D
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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