Intrinsic value of DTE Energy - DTE

Previous Close

$109.88

  Intrinsic Value

$626.22

stock screener

  Rating & Target

str. buy

+470%

  Value-price divergence*

+279%

Previous close

$109.88

 
Intrinsic value

$626.22

 
Up/down potential

+470%

 
Rating

str. buy

 
Value-price divergence*

+279%

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

We calculate the intrinsic value of DTE 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 19.9

 

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, %
  2.83
  26.10
  23.99
  22.09
  20.38
  18.84
  17.46
  16.21
  15.09
  14.08
  13.17
  12.36
  11.62
  10.96
  10.36
  9.83
  9.34
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.51
  6.36
  6.23
  6.10
  5.99
Revenue, $m
  0
  13,404
  16,620
  20,292
  24,428
  29,031
  34,099
  39,628
  45,608
  52,031
  58,886
  66,163
  73,852
  81,946
  90,438
  99,325
  108,607
  118,283
  128,360
  138,843
  149,742
  161,071
  172,843
  185,077
  197,792
  211,010
  224,757
  239,059
  253,945
  269,447
  285,597
Variable operating expenses, $m
 
  3,921
  4,807
  5,819
  6,958
  8,226
  9,623
  11,146
  12,793
  14,563
  16,451
  18,228
  20,346
  22,576
  24,915
  27,364
  29,921
  32,586
  35,362
  38,250
  41,253
  44,374
  47,617
  50,988
  54,491
  58,132
  61,919
  65,860
  69,961
  74,231
  78,680
Fixed operating expenses, $m
 
  6,335
  6,493
  6,655
  6,822
  6,992
  7,167
  7,346
  7,530
  7,718
  7,911
  8,109
  8,311
  8,519
  8,732
  8,950
  9,174
  9,404
  9,639
  9,880
  10,127
  10,380
  10,639
  10,905
  11,178
  11,457
  11,744
  12,037
  12,338
  12,647
  12,963
Total operating expenses, $m
  9,185
  10,256
  11,300
  12,474
  13,780
  15,218
  16,790
  18,492
  20,323
  22,281
  24,362
  26,337
  28,657
  31,095
  33,647
  36,314
  39,095
  41,990
  45,001
  48,130
  51,380
  54,754
  58,256
  61,893
  65,669
  69,589
  73,663
  77,897
  82,299
  86,878
  91,643
Operating income, $m
  1,445
  3,148
  5,320
  7,818
  10,648
  13,812
  17,310
  21,136
  25,285
  29,750
  34,524
  39,827
  45,195
  50,851
  56,791
  63,011
  69,512
  76,293
  83,359
  90,713
  98,363
  106,317
  114,586
  123,184
  132,123
  141,421
  151,094
  161,162
  171,646
  182,569
  193,953
EBITDA, $m
  2,421
  4,121
  6,471
  9,172
  12,232
  15,652
  19,431
  23,564
  28,045
  32,867
  38,021
  43,499
  49,294
  55,399
  61,810
  68,524
  75,539
  82,858
  90,483
  98,418
  106,673
  115,256
  124,179
  133,455
  143,101
  153,132
  163,568
  174,430
  185,740
  197,523
  209,804
Interest expense (income), $m
  448
  491
  741
  1,033
  1,365
  1,740
  2,157
  2,616
  3,116
  3,658
  4,239
  4,860
  5,519
  6,216
  6,948
  7,718
  8,522
  9,363
  10,239
  11,152
  12,101
  13,088
  14,114
  15,180
  16,288
  17,439
  18,636
  19,881
  21,176
  22,524
  23,928
Earnings before tax, $m
  1,105
  2,657
  4,578
  6,785
  9,283
  12,072
  15,153
  18,520
  22,169
  26,093
  30,284
  34,966
  39,676
  44,635
  49,842
  55,294
  60,989
  66,930
  73,119
  79,561
  86,262
  93,229
  100,472
  108,004
  115,835
  123,981
  132,457
  141,281
  150,470
  160,044
  170,025
Tax expense, $m
  271
  718
  1,236
  1,832
  2,506
  3,260
  4,091
  5,000
  5,986
  7,045
  8,177
  9,441
  10,712
  12,052
  13,457
  14,929
  16,467
  18,071
  19,742
  21,481
  23,291
  25,172
  27,128
  29,161
  31,276
  33,475
  35,764
  38,146
  40,627
  43,212
  45,907
Net income, $m
  868
  1,940
  3,342
  4,953
  6,776
  8,813
  11,062
  13,520
  16,183
  19,048
  22,108
  25,526
  28,963
  32,584
  36,385
  40,364
  44,522
  48,859
  53,377
  58,080
  62,971
  68,057
  73,345
  78,843
  84,560
  90,506
  96,694
  103,135
  109,843
  116,832
  124,118

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  92
  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
  32,041
  40,254
  49,910
  60,936
  73,356
  87,179
  102,400
  119,002
  136,962
  156,250
  176,836
  198,688
  221,778
  246,083
  271,586
  298,274
  326,146
  355,205
  385,465
  416,946
  449,677
  483,696
  519,048
  555,786
  593,969
  633,664
  674,946
  717,895
  762,598
  809,149
  857,648
Adjusted assets (=assets-cash), $m
  31,949
  40,254
  49,910
  60,936
  73,356
  87,179
  102,400
  119,002
  136,962
  156,250
  176,836
  198,688
  221,778
  246,083
  271,586
  298,274
  326,146
  355,205
  385,465
  416,946
  449,677
  483,696
  519,048
  555,786
  593,969
  633,664
  674,946
  717,895
  762,598
  809,149
  857,648
Revenue / Adjusted assets
  0.000
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
Average production assets, $m
  5,896
  7,439
  9,224
  11,262
  13,557
  16,112
  18,925
  21,993
  25,313
  28,877
  32,682
  36,720
  40,988
  45,480
  50,193
  55,126
  60,277
  65,647
  71,240
  77,058
  83,107
  89,394
  95,928
  102,718
  109,774
  117,111
  124,740
  132,678
  140,939
  149,543
  158,506
Working capital, $m
  325
  938
  1,163
  1,420
  1,710
  2,032
  2,387
  2,774
  3,193
  3,642
  4,122
  4,631
  5,170
  5,736
  6,331
  6,953
  7,602
  8,280
  8,985
  9,719
  10,482
  11,275
  12,099
  12,955
  13,845
  14,771
  15,733
  16,734
  17,776
  18,861
  19,992
Total debt, $m
  11,782
  17,654
  24,588
  32,504
  41,422
  51,347
  62,275
  74,196
  87,091
  100,940
  115,720
  131,410
  147,989
  165,440
  183,750
  202,913
  222,925
  243,789
  265,516
  288,119
  311,620
  336,046
  361,429
  387,806
  415,222
  443,723
  473,363
  504,200
  536,297
  569,721
  604,543
Total liabilities, $m
  23,030
  28,902
  35,836
  43,752
  52,670
  62,595
  73,523
  85,444
  98,339
  112,188
  126,968
  142,658
  159,237
  176,688
  194,998
  214,161
  234,173
  255,037
  276,764
  299,367
  322,868
  347,294
  372,677
  399,054
  426,470
  454,971
  484,611
  515,448
  547,545
  580,969
  615,791
Total equity, $m
  9,011
  11,351
  14,075
  17,184
  20,686
  24,584
  28,877
  33,559
  38,623
  44,063
  49,868
  56,030
  62,541
  69,395
  76,587
  84,113
  91,973
  100,168
  108,701
  117,579
  126,809
  136,402
  146,372
  156,732
  167,499
  178,693
  190,335
  202,446
  215,053
  228,180
  241,857
Total liabilities and equity, $m
  32,041
  40,253
  49,911
  60,936
  73,356
  87,179
  102,400
  119,003
  136,962
  156,251
  176,836
  198,688
  221,778
  246,083
  271,585
  298,274
  326,146
  355,205
  385,465
  416,946
  449,677
  483,696
  519,049
  555,786
  593,969
  633,664
  674,946
  717,894
  762,598
  809,149
  857,648
Debt-to-equity ratio
  1.308
  1.560
  1.750
  1.890
  2.000
  2.090
  2.160
  2.210
  2.250
  2.290
  2.320
  2.350
  2.370
  2.380
  2.400
  2.410
  2.420
  2.430
  2.440
  2.450
  2.460
  2.460
  2.470
  2.470
  2.480
  2.480
  2.490
  2.490
  2.490
  2.500
  2.500
Adjusted equity ratio
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  868
  1,940
  3,342
  4,953
  6,776
  8,813
  11,062
  13,520
  16,183
  19,048
  22,108
  25,526
  28,963
  32,584
  36,385
  40,364
  44,522
  48,859
  53,377
  58,080
  62,971
  68,057
  73,345
  78,843
  84,560
  90,506
  96,694
  103,135
  109,843
  116,832
  124,118
Depreciation, amort., depletion, $m
  976
  973
  1,151
  1,355
  1,584
  1,840
  2,121
  2,428
  2,760
  3,116
  3,497
  3,672
  4,099
  4,548
  5,019
  5,513
  6,028
  6,565
  7,124
  7,706
  8,311
  8,939
  9,593
  10,272
  10,977
  11,711
  12,474
  13,268
  14,094
  14,954
  15,851
Funds from operations, $m
  1,990
  2,913
  4,493
  6,308
  8,361
  10,653
  13,183
  15,948
  18,943
  22,164
  25,604
  29,198
  33,062
  37,132
  41,404
  45,877
  50,550
  55,424
  60,501
  65,785
  71,282
  76,996
  82,938
  89,114
  95,537
  102,217
  109,168
  116,403
  123,937
  131,786
  139,969
Change in working capital, $m
  -94
  194
  225
  257
  290
  322
  355
  387
  419
  450
  480
  509
  538
  567
  594
  622
  650
  677
  705
  734
  763
  793
  824
  856
  890
  925
  962
  1,001
  1,042
  1,085
  1,131
Cash from operations, $m
  2,084
  2,718
  4,268
  6,051
  8,071
  10,330
  12,828
  15,561
  18,525
  21,714
  25,125
  28,688
  32,524
  36,565
  40,810
  45,255
  49,900
  54,747
  59,796
  65,052
  70,519
  76,203
  82,114
  88,258
  94,647
  101,292
  108,206
  115,402
  122,895
  130,701
  138,838
Maintenance CAPEX, $m
  0
  -590
  -744
  -922
  -1,126
  -1,356
  -1,611
  -1,893
  -2,199
  -2,531
  -2,888
  -3,268
  -3,672
  -4,099
  -4,548
  -5,019
  -5,513
  -6,028
  -6,565
  -7,124
  -7,706
  -8,311
  -8,939
  -9,593
  -10,272
  -10,977
  -11,711
  -12,474
  -13,268
  -14,094
  -14,954
New CAPEX, $m
  -2,045
  -1,544
  -1,785
  -2,038
  -2,295
  -2,555
  -2,813
  -3,068
  -3,319
  -3,565
  -3,804
  -4,039
  -4,267
  -4,492
  -4,713
  -4,932
  -5,151
  -5,371
  -5,592
  -5,818
  -6,049
  -6,287
  -6,534
  -6,790
  -7,057
  -7,336
  -7,629
  -7,938
  -8,262
  -8,603
  -8,963
Cash from investing activities, $m
  -3,388
  -2,134
  -2,529
  -2,960
  -3,421
  -3,911
  -4,424
  -4,961
  -5,518
  -6,096
  -6,692
  -7,307
  -7,939
  -8,591
  -9,261
  -9,951
  -10,664
  -11,399
  -12,157
  -12,942
  -13,755
  -14,598
  -15,473
  -16,383
  -17,329
  -18,313
  -19,340
  -20,412
  -21,530
  -22,697
  -23,917
Free cash flow, $m
  -1,304
  585
  1,740
  3,091
  4,650
  6,420
  8,404
  10,600
  13,006
  15,618
  18,432
  21,381
  24,584
  27,974
  31,548
  35,303
  39,237
  43,348
  47,639
  52,109
  56,764
  61,605
  66,641
  71,876
  77,319
  82,978
  88,865
  94,990
  101,365
  108,004
  114,921
Issuance/(repayment) of debt, $m
  1,169
  5,964
  6,934
  7,916
  8,918
  9,925
  10,929
  11,921
  12,895
  13,849
  14,780
  15,690
  16,579
  17,451
  18,311
  19,163
  20,012
  20,864
  21,726
  22,603
  23,501
  24,426
  25,383
  26,378
  27,415
  28,501
  29,640
  30,837
  32,097
  33,424
  34,822
Issuance/(repurchase) of shares, $m
  621
  401
  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  
  1,890
  6,365
  6,934
  7,916
  8,918
  9,925
  10,929
  11,921
  12,895
  13,849
  14,780
  15,690
  16,579
  17,451
  18,311
  19,163
  20,012
  20,864
  21,726
  22,603
  23,501
  24,426
  25,383
  26,378
  27,415
  28,501
  29,640
  30,837
  32,097
  33,424
  34,822
Total cash flow (excl. dividends), $m
  586
  6,949
  8,673
  11,007
  13,567
  16,345
  19,332
  22,520
  25,901
  29,467
  33,213
  37,071
  41,163
  45,426
  49,859
  54,466
  59,248
  64,213
  69,365
  74,713
  80,265
  86,031
  92,023
  98,253
  104,734
  111,480
  118,505
  125,827
  133,462
  141,428
  149,743
Retained Cash Flow (-), $m
  -239
  -2,340
  -2,723
  -3,109
  -3,502
  -3,898
  -4,292
  -4,682
  -5,065
  -5,439
  -5,805
  -6,162
  -6,511
  -6,854
  -7,192
  -7,526
  -7,860
  -8,195
  -8,533
  -8,878
  -9,230
  -9,593
  -9,969
  -10,360
  -10,768
  -11,194
  -11,641
  -12,112
  -12,606
  -13,127
  -13,677
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
 
  4,609
  5,950
  7,898
  10,065
  12,447
  15,040
  17,839
  20,837
  24,028
  27,408
  30,909
  34,652
  38,572
  42,667
  46,939
  51,389
  56,018
  60,832
  65,835
  71,035
  76,438
  82,054
  87,893
  93,966
  100,286
  106,864
  113,716
  120,856
  128,300
  136,066
Discount rate, %
 
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
 
  4,244
  5,005
  6,019
  6,885
  7,571
  8,051
  8,313
  8,355
  8,188
  7,834
  7,308
  6,677
  5,962
  5,204
  4,438
  3,697
  3,007
  2,386
  1,846
  1,391
  1,020
  728
  504
  339
  221
  139
  85
  50
  28
  15
Current shareholders' claim on cash, %
  100
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0

DTE Energy Company engages in the utility operations. The company’s Electric segment generates, purchases, distributes, and sells electricity to approximately 2.2 million residential, commercial, and industrial customers in southeastern Michigan. It generates electricity through fossil-fuel, hydroelectric pumped storage, and nuclear plants, as well as wind and other renewable assets. This segment owns and operates approximately 690 distribution substations and 438,000 line transformers. Its Gas segment engages in the purchase, storage, transportation, distribution, and sale of natural gas to approximately 1.3 million residential, commercial, and industrial customers in Michigan, as well as the sale of storage and transportation capacity. This segment has approximately 19,000 miles of distribution mains; 1,149,000 service pipelines; and 1,297,000 active meters, as well as owns approximately 2,000 miles of transmission pipelines. The company’s Gas Storage and Pipelines segment owns natural gas storage fields, and lateral and gathering pipeline systems, as well as has ownership interests in interstate pipelines serving the Midwest, Ontario, and northeast markets. Its Power and Industrial Projects segment provides metallurgical coke; pulverized coal and petroleum coke to the steel, pulp and paper, and other industries; and power, steam, chilled water, and wastewater treatment services, as well as supplies compressed air to industrial customers. This segment also owns and operates 4 renewable generating plants with a capacity of 191 MWs; and 11 reduced emissions fuel facilities, as well as develops landfill gas recovery systems. The company’s Energy Trading segment engages in power and gas marketing and trading; structured transactions; and the optimization of contracted natural gas pipeline transportation and storage positions. DTE Energy Company was founded in 1995 and is based in Detroit, Michigan.

FINANCIAL RATIOS  of  DTE Energy (DTE)

Valuation Ratios
P/E Ratio 22.7
Price to Sales 1.9
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 505.5
Growth Rates
Sales Growth Rate 2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1.2%
Cap. Spend. - 3 Yr. Gr. Rate 1.7%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 125.1%
Total Debt to Equity 130.8%
Interest Coverage 3
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 9.8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 23.8%
EBITDA Margin - 3 Yr. Avg. 22.8%
Operating Margin 13.6%
Oper. Margin - 3 Yr. Avg. 12.8%
Pre-Tax Margin 10.4%
Pre-Tax Margin - 3 Yr. Avg. 10%
Net Profit Margin 8.2%
Net Profit Margin - 3 Yr. Avg. 7.5%
Effective Tax Rate 24.5%
Eff/ Tax Rate - 3 Yr. Avg. 25.8%
Payout Ratio 61.2%

DTE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DTE stock intrinsic value calculation we used $10630 million for the last fiscal year's total revenue generated by DTE Energy. The default revenue input number comes from 2016 income statement of DTE Energy. 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 DTE stock valuation model: a) initial revenue growth rate of 26.1% 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 8.6%, whose default value for DTE is calculated based on our internal credit rating of DTE Energy, 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 DTE Energy.
    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 DTE stock the variable cost ratio is equal to 29.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6180 million in the base year in the intrinsic value calculation for DTE 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 4.2% for DTE Energy.

Corporate tax rate of 27% is the nominal tax rate for DTE Energy. 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 DTE 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 DTE are equal to 55.5%.

Life of production assets of 10 years is the average useful life of capital assets used in DTE Energy 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 DTE is equal to 7%. 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 - $9011 million for DTE Energy - 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 180.836 million for DTE Energy 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 DTE Energy at the current share price and the inputted number of shares is $19.9 billion.

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COMPANY NEWS

▶ ETFs with exposure to DTE Energy Co. : August 11, 2017   [Aug-11-17 05:19PM  Capital Cube]
▶ The $50 Billion Backlog Of U.S. Energy Projects   [Aug-08-17 04:00PM  Oilprice.com]
▶ DTE seeks permission for nearly $1B natural gas power plant   [Aug-01-17 10:38AM  Associated Press]
▶ DTE Energy beats 2Q profit forecasts   [Jul-26-17 09:56PM  Associated Press]
▶ ETFs with exposure to DTE Energy Co. : July 14, 2017   [Jul-14-17 02:01PM  Capital Cube]
▶ DTE Energy Co. Value Analysis (NYSE:DTE) : June 30, 2017   [Jun-30-17 03:48PM  Capital Cube]
▶ 5 Companies Reach Yearly Highs   [Jun-06-17 01:47PM  GuruFocus.com]
▶ U.S. Pipeline Cos. Ready to Blow Past Regulatory Roadblock   [Jun-02-17 11:19AM  TheStreet.com]
▶ DTE Biomass Acquires Renewable Natural Gas Facilities   [May-25-17 10:28AM  PR Newswire]
▶ ETFs with exposure to DTE Energy Co. : May 8, 2017   [May-08-17 04:25PM  Capital Cube]
▶ DTE Energy declares dividend   [10:27AM  PR Newswire]
▶ DTE Energy recognized as national safety leader   [May-03-17 09:00AM  PR Newswire]
▶ ETFs with exposure to DTE Energy Co. : April 28, 2017   [Apr-28-17 03:51PM  Capital Cube]
▶ DTE Energy beats 1Q profit forecasts   [07:22AM  Associated Press]
▶ ETFs with exposure to DTE Energy Co. : April 5, 2017   [Apr-05-17 04:39PM  Capital Cube]
▶ Deutsche Telekom Says Doing Everything to Support BT   [Mar-02-17 08:33AM  Bloomberg Video]
▶ Why Telecom Mergers Will Rise Even Higher in 2017   [Feb-28-17 06:00AM  Investopedia]
▶ CEO Says 5G Is Topic at Deutsche Telecom   [Feb-27-17 02:51AM  Bloomberg Video]
Stock chart of DTE Financial statements of DTE
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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