Intrinsic value of Dominion Resources (Virginia) - D

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$79.71

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$79.71

 
Intrinsic value

$168.12

 
Up/down potential

+111%

 
Rating

str. buy

 
Value-price divergence* premium content

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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 50.2

 

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, %
  0.46
  20.70
  19.13
  17.72
  16.45
  15.30
  14.27
  13.34
  12.51
  11.76
  11.08
  10.47
  9.93
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
  6.91
  6.72
  6.55
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
Revenue, $m
  11,357
  14,167
  16,877
  19,867
  23,134
  26,673
  30,480
  34,547
  38,869
  43,439
  48,253
  53,307
  58,599
  64,127
  69,893
  75,898
  82,146
  88,643
  95,396
  102,414
  109,707
  117,286
  125,165
  133,359
  141,882
  150,753
  159,990
  169,612
  179,641
  190,100
  201,010
Variable operating expenses, $m
 
  9,742
  11,483
  13,404
  15,503
  17,777
  20,223
  22,836
  25,612
  28,549
  31,642
  34,249
  37,649
  41,200
  44,905
  48,763
  52,777
  56,951
  61,290
  65,799
  70,484
  75,354
  80,416
  85,680
  91,156
  96,856
  102,790
  108,973
  115,416
  122,135
  129,145
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
  9,742
  11,483
  13,404
  15,503
  17,777
  20,223
  22,836
  25,612
  28,549
  31,642
  34,249
  37,649
  41,200
  44,905
  48,763
  52,777
  56,951
  61,290
  65,799
  70,484
  75,354
  80,416
  85,680
  91,156
  96,856
  102,790
  108,973
  115,416
  122,135
  129,145
Operating income, $m
  3,627
  4,425
  5,394
  6,463
  7,631
  8,896
  10,257
  11,711
  13,256
  14,890
  16,612
  19,058
  20,950
  22,927
  24,988
  27,135
  29,369
  31,692
  34,106
  36,615
  39,222
  41,932
  44,749
  47,678
  50,726
  53,897
  57,200
  60,640
  64,225
  67,964
  71,865
EBITDA, $m
  5,476
  5,898
  7,026
  8,271
  9,631
  11,105
  12,689
  14,383
  16,182
  18,084
  20,089
  22,193
  24,396
  26,697
  29,098
  31,598
  34,199
  36,904
  39,715
  42,637
  45,673
  48,829
  52,109
  55,520
  59,068
  62,762
  66,607
  70,613
  74,788
  79,142
  83,685
Interest expense (income), $m
  905
  1,216
  1,622
  2,079
  2,583
  3,134
  3,731
  4,373
  5,059
  5,788
  6,559
  7,370
  8,223
  9,115
  10,047
  11,020
  12,032
  13,086
  14,182
  15,320
  16,504
  17,734
  19,012
  20,341
  21,722
  23,160
  24,656
  26,213
  27,836
  29,527
  31,291
Earnings before tax, $m
  2,867
  3,209
  3,772
  4,384
  5,047
  5,762
  6,526
  7,338
  8,197
  9,103
  10,053
  11,688
  12,728
  13,812
  14,941
  16,115
  17,337
  18,606
  19,924
  21,295
  22,718
  24,198
  25,737
  27,338
  29,003
  30,738
  32,544
  34,427
  36,389
  38,437
  40,574
Tax expense, $m
  655
  867
  1,018
  1,184
  1,363
  1,556
  1,762
  1,981
  2,213
  2,458
  2,714
  3,156
  3,436
  3,729
  4,034
  4,351
  4,681
  5,024
  5,380
  5,750
  6,134
  6,534
  6,949
  7,381
  7,831
  8,299
  8,787
  9,295
  9,825
  10,378
  10,955
Net income, $m
  2,123
  2,343
  2,753
  3,200
  3,685
  4,206
  4,764
  5,357
  5,984
  6,645
  7,339
  8,532
  9,291
  10,083
  10,907
  11,764
  12,656
  13,582
  14,545
  15,545
  16,584
  17,665
  18,788
  19,957
  21,173
  22,438
  23,757
  25,131
  26,564
  28,059
  29,619

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
  85,858
  102,283
  120,404
  140,205
  161,657
  184,727
  209,376
  235,567
  263,266
  292,443
  323,074
  355,145
  388,650
  423,592
  459,986
  497,854
  537,230
  578,158
  620,691
  664,889
  710,824
  758,577
  808,234
  859,892
  913,655
  969,636
  1,027,954
  1,088,736
  1,152,118
  1,218,244
Adjusted assets (=assets-cash), $m
  71,248
  85,858
  102,283
  120,404
  140,205
  161,657
  184,727
  209,376
  235,567
  263,266
  292,443
  323,074
  355,145
  388,650
  423,592
  459,986
  497,854
  537,230
  578,158
  620,691
  664,889
  710,824
  758,577
  808,234
  859,892
  913,655
  969,636
  1,027,954
  1,088,736
  1,152,118
  1,218,244
Revenue / Adjusted assets
  0.159
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
Average production assets, $m
  3,446
  4,165
  4,962
  5,841
  6,801
  7,842
  8,961
  10,157
  11,427
  12,771
  14,186
  15,672
  17,228
  18,853
  20,548
  22,314
  24,151
  26,061
  28,046
  30,110
  32,254
  34,482
  36,799
  39,207
  41,713
  44,321
  47,037
  49,866
  52,815
  55,889
  59,097
Working capital, $m
  -3,867
  765
  911
  1,073
  1,249
  1,440
  1,646
  1,866
  2,099
  2,346
  2,606
  2,879
  3,164
  3,463
  3,774
  4,098
  4,436
  4,787
  5,151
  5,530
  5,924
  6,333
  6,759
  7,201
  7,662
  8,141
  8,639
  9,159
  9,701
  10,265
  10,855
Total debt, $m
  35,095
  46,347
  59,405
  73,811
  89,553
  106,607
  124,948
  144,544
  165,366
  187,387
  210,582
  234,934
  260,430
  287,067
  314,846
  343,779
  373,884
  405,188
  437,726
  471,539
  506,677
  543,195
  581,159
  620,636
  661,704
  704,446
  748,951
  795,313
  843,635
  894,024
  946,594
Total liabilities, $m
  57,005
  68,257
  81,315
  95,721
  111,463
  128,517
  146,858
  166,454
  187,276
  209,297
  232,492
  256,844
  282,340
  308,977
  336,756
  365,689
  395,794
  427,098
  459,636
  493,449
  528,587
  565,105
  603,069
  642,546
  683,614
  726,356
  770,861
  817,223
  865,545
  915,934
  968,504
Total equity, $m
  14,605
  17,601
  20,968
  24,683
  28,742
  33,140
  37,869
  42,922
  48,291
  53,970
  59,951
  66,230
  72,805
  79,673
  86,836
  94,297
  102,060
  110,132
  118,522
  127,242
  136,302
  145,719
  155,508
  165,688
  176,278
  187,299
  198,775
  210,730
  223,191
  236,184
  249,740
Total liabilities and equity, $m
  71,610
  85,858
  102,283
  120,404
  140,205
  161,657
  184,727
  209,376
  235,567
  263,267
  292,443
  323,074
  355,145
  388,650
  423,592
  459,986
  497,854
  537,230
  578,158
  620,691
  664,889
  710,824
  758,577
  808,234
  859,892
  913,655
  969,636
  1,027,953
  1,088,736
  1,152,118
  1,218,244
Debt-to-equity ratio
  2.403
  2.630
  2.830
  2.990
  3.120
  3.220
  3.300
  3.370
  3.420
  3.470
  3.510
  3.550
  3.580
  3.600
  3.630
  3.650
  3.660
  3.680
  3.690
  3.710
  3.720
  3.730
  3.740
  3.750
  3.750
  3.760
  3.770
  3.770
  3.780
  3.790
  3.790
Adjusted equity ratio
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,123
  2,343
  2,753
  3,200
  3,685
  4,206
  4,764
  5,357
  5,984
  6,645
  7,339
  8,532
  9,291
  10,083
  10,907
  11,764
  12,656
  13,582
  14,545
  15,545
  16,584
  17,665
  18,788
  19,957
  21,173
  22,438
  23,757
  25,131
  26,564
  28,059
  29,619
Depreciation, amort., depletion, $m
  1,849
  1,473
  1,632
  1,808
  2,000
  2,208
  2,432
  2,671
  2,925
  3,194
  3,477
  3,134
  3,446
  3,771
  4,110
  4,463
  4,830
  5,212
  5,609
  6,022
  6,451
  6,896
  7,360
  7,841
  8,343
  8,864
  9,407
  9,973
  10,563
  11,178
  11,819
Funds from operations, $m
  3,641
  3,816
  4,386
  5,008
  5,685
  6,415
  7,196
  8,028
  8,909
  9,839
  10,816
  11,667
  12,737
  13,853
  15,016
  16,227
  17,486
  18,794
  20,154
  21,567
  23,035
  24,561
  26,148
  27,798
  29,515
  31,303
  33,165
  35,105
  37,127
  39,237
  41,439
Change in working capital, $m
  -486
  131
  146
  161
  176
  191
  206
  220
  233
  247
  260
  273
  286
  299
  311
  324
  337
  351
  365
  379
  394
  409
  425
  442
  460
  479
  499
  520
  542
  565
  589
Cash from operations, $m
  4,127
  7,130
  4,239
  4,847
  5,508
  6,223
  6,991
  7,809
  8,676
  9,592
  10,556
  11,394
  12,451
  13,555
  14,705
  15,903
  17,148
  18,444
  19,789
  21,188
  22,641
  24,152
  25,722
  27,356
  29,055
  30,824
  32,666
  34,585
  36,586
  38,672
  40,849
Maintenance CAPEX, $m
  0
  -689
  -833
  -992
  -1,168
  -1,360
  -1,568
  -1,792
  -2,031
  -2,285
  -2,554
  -2,837
  -3,134
  -3,446
  -3,771
  -4,110
  -4,463
  -4,830
  -5,212
  -5,609
  -6,022
  -6,451
  -6,896
  -7,360
  -7,841
  -8,343
  -8,864
  -9,407
  -9,973
  -10,563
  -11,178
New CAPEX, $m
  -6,085
  -719
  -797
  -879
  -961
  -1,041
  -1,119
  -1,196
  -1,271
  -1,344
  -1,415
  -1,486
  -1,556
  -1,625
  -1,695
  -1,765
  -1,837
  -1,910
  -1,985
  -2,063
  -2,144
  -2,228
  -2,316
  -2,409
  -2,506
  -2,608
  -2,716
  -2,829
  -2,949
  -3,075
  -3,208
Cash from investing activities, $m
  -10,703
  -1,408
  -1,630
  -1,871
  -2,129
  -2,401
  -2,687
  -2,988
  -3,302
  -3,629
  -3,969
  -4,323
  -4,690
  -5,071
  -5,466
  -5,875
  -6,300
  -6,740
  -7,197
  -7,672
  -8,166
  -8,679
  -9,212
  -9,769
  -10,347
  -10,951
  -11,580
  -12,236
  -12,922
  -13,638
  -14,386
Free cash flow, $m
  -6,576
  5,722
  2,609
  2,975
  3,380
  3,823
  4,303
  4,821
  5,374
  5,963
  6,586
  7,071
  7,761
  8,484
  9,239
  10,028
  10,849
  11,703
  12,592
  13,516
  14,475
  15,473
  16,510
  17,587
  18,707
  19,873
  21,086
  22,349
  23,664
  25,035
  26,464
Issuance/(repayment) of debt, $m
  4,858
  11,614
  13,058
  14,407
  15,742
  17,055
  18,340
  19,596
  20,822
  22,021
  23,195
  24,352
  25,496
  26,636
  27,779
  28,933
  30,105
  31,304
  32,538
  33,813
  35,138
  36,519
  37,963
  39,477
  41,068
  42,742
  44,505
  46,363
  48,322
  50,389
  52,570
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
  11,614
  13,058
  14,407
  15,742
  17,055
  18,340
  19,596
  20,822
  22,021
  23,195
  24,352
  25,496
  26,636
  27,779
  28,933
  30,105
  31,304
  32,538
  33,813
  35,138
  36,519
  37,963
  39,477
  41,068
  42,742
  44,505
  46,363
  48,322
  50,389
  52,570
Total cash flow (excl. dividends), $m
  1,381
  17,336
  15,667
  17,382
  19,121
  20,877
  22,643
  24,417
  26,196
  27,984
  29,782
  31,422
  33,257
  35,120
  37,019
  38,960
  40,954
  43,007
  45,130
  47,329
  49,613
  51,992
  54,473
  57,064
  59,776
  62,615
  65,590
  68,711
  71,986
  75,424
  79,034
Retained Cash Flow (-), $m
  -1,941
  -2,996
  -3,367
  -3,715
  -4,059
  -4,398
  -4,729
  -5,053
  -5,369
  -5,678
  -5,981
  -6,279
  -6,575
  -6,868
  -7,163
  -7,461
  -7,763
  -8,072
  -8,390
  -8,719
  -9,061
  -9,417
  -9,789
  -10,180
  -10,590
  -11,021
  -11,476
  -11,955
  -12,460
  -12,993
  -13,556
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
 
  14,340
  12,300
  13,667
  15,062
  16,479
  17,914
  19,364
  20,827
  22,305
  23,800
  25,143
  26,683
  28,252
  29,855
  31,500
  33,191
  34,935
  36,739
  38,609
  40,552
  42,575
  44,683
  46,885
  49,186
  51,593
  54,114
  56,756
  59,525
  62,430
  65,478
Discount rate, %
 
  10.50
  11.03
  11.58
  12.16
  12.76
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.07
  25.27
  26.53
  27.86
  29.25
  30.72
  32.25
  33.86
  35.56
  37.33
  39.20
  41.16
  43.22
PV of cash for distribution, $m
 
  12,978
  9,978
  9,839
  9,519
  9,039
  8,424
  7,705
  6,916
  6,091
  5,263
  4,427
  3,677
  2,991
  2,380
  1,853
  1,409
  1,046
  757
  534
  366
  244
  158
  99
  60
  35
  20
  11
  6
  3
  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

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 23.6
Price to Sales 4.3
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow -25.6
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 $11737 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 20.7% 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 10.5%, 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 29.4%.

Life of production assets of 4.5 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 5.4%. 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 - $14605 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 629.496 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 $50.2 billion.


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COMPANY NEWS

▶ Virginia-based energy giant changes name to Dominion Energy   [May-10-17 04:03PM  Associated Press]
▶ Looking at Dominion Resources Implied Volatility   [May-09-17 07:36AM  Market Realist]
▶ Analyzing Dominion Resources Chart Indicators   [May-08-17 10:36AM  Market Realist]
▶ Dominion Resources 1Q17 Revenues Rise 15.8% YoY   [May-05-17 05:52PM  Market Realist]
▶ Dominion beats 1Q profit forecasts   [07:45AM  Associated Press]
▶ Dominion Announces First-Quarter Earnings   [07:30AM  PR Newswire]
▶ Which Utility Stocks Could Be a Concern for Investors?   [May-01-17 02:05PM  Market Realist]
▶ Analyzing Dominion Resources Chart Indicators   [Apr-25-17 03:35PM  Market Realist]
▶ Is Dominion Resources Stock Pricey?   [02:05PM  Market Realist]
▶ Why these Utility Stocks Look Weak   [Apr-24-17 04:36PM  Market Realist]
▶ Traders Are Most Bearish on These Utility Stocks   [Apr-11-17 09:07AM  Market Realist]
▶ Top US Utilities: Reviewing Their Current Valuations   [Apr-07-17 10:36AM  Market Realist]
▶ Analyzing Dominion Resources Chart Indicators   [09:06AM  Market Realist]
▶ Analysts Are the Most Bearish on These Utility Stocks   [Apr-03-17 05:35PM  Market Realist]
▶ Why These Utility Stocks Should Concern You   [Mar-29-17 02:35PM  Market Realist]
▶ Buy Alert: 2 Cheap Funds Paying 6.7%+   [07:42AM  at Forbes]
▶ NextEra Energy and Dominion Continue to Trade at a Premium   [Mar-22-17 10:37AM  Market Realist]
▶ Hands-On 'Dominion Solar for Schools' Program Expanding   [Mar-16-17 10:45AM  PR Newswire]
▶ Dominion Sets Annual Meeting   [Feb-24-17 04:30PM  PR Newswire]
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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