Intrinsic value of DTE Energy - DTE

Previous Close

$105.07

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$105.07

 
Intrinsic value

$189.41

 
Up/down potential

+80%

 
Rating

str. buy

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

*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 19.0

 

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
  15.60
  14.54
  13.59
  12.73
  11.95
  11.26
  10.63
  10.07
  9.56
  9.11
  8.70
  8.33
  7.99
  7.69
  7.42
  7.18
  6.96
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.68
  5.62
  5.55
  5.50
Revenue, $m
  0
  12,288
  14,075
  15,987
  18,022
  20,176
  22,448
  24,835
  27,336
  29,950
  32,678
  35,519
  38,477
  41,552
  44,750
  48,072
  51,525
  55,113
  58,843
  62,722
  66,756
  70,954
  75,325
  79,877
  84,621
  89,568
  94,728
  100,113
  105,736
  111,609
  117,747
Variable operating expenses, $m
 
  3,614
  4,106
  4,633
  5,194
  5,787
  6,413
  7,071
  7,760
  8,480
  9,231
  9,785
  10,600
  11,447
  12,328
  13,244
  14,195
  15,183
  16,211
  17,279
  18,391
  19,547
  20,752
  22,006
  23,313
  24,676
  26,097
  27,581
  29,130
  30,748
  32,439
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
  9,949
  10,599
  11,288
  12,016
  12,779
  13,580
  14,417
  15,290
  16,198
  17,142
  17,894
  18,911
  19,966
  21,060
  22,194
  23,369
  24,587
  25,850
  27,159
  28,518
  29,927
  31,391
  32,911
  34,491
  36,133
  37,841
  39,618
  41,468
  43,395
  45,402
Operating income, $m
  1,445
  2,340
  3,476
  4,699
  6,007
  7,397
  8,868
  10,419
  12,047
  13,752
  15,536
  17,625
  19,565
  21,586
  23,689
  25,878
  28,156
  30,526
  32,994
  35,563
  38,238
  41,027
  43,934
  46,966
  50,131
  53,435
  56,887
  60,495
  64,268
  68,215
  72,345
EBITDA, $m
  2,421
  3,400
  4,657
  6,010
  7,455
  8,991
  10,616
  12,328
  14,126
  16,008
  17,976
  20,029
  22,169
  24,398
  26,718
  29,132
  31,643
  34,257
  36,976
  39,808
  42,757
  45,829
  49,032
  52,372
  55,858
  59,497
  63,299
  67,271
  71,424
  75,769
  80,315
Interest expense (income), $m
  448
  491
  640
  802
  975
  1,160
  1,355
  1,560
  1,777
  2,003
  2,240
  2,487
  2,744
  3,012
  3,291
  3,580
  3,881
  4,194
  4,519
  4,856
  5,208
  5,573
  5,953
  6,349
  6,761
  7,191
  7,639
  8,106
  8,594
  9,103
  9,635
Earnings before tax, $m
  1,105
  1,849
  2,836
  3,897
  5,031
  6,238
  7,514
  8,858
  10,270
  11,749
  13,296
  15,138
  16,821
  18,574
  20,399
  22,298
  24,275
  26,333
  28,475
  30,706
  33,031
  35,454
  37,981
  40,617
  43,370
  46,244
  49,248
  52,389
  55,674
  59,112
  62,711
Tax expense, $m
  271
  499
  766
  1,052
  1,359
  1,684
  2,029
  2,392
  2,773
  3,172
  3,590
  4,087
  4,542
  5,015
  5,508
  6,020
  6,554
  7,110
  7,688
  8,291
  8,918
  9,573
  10,255
  10,967
  11,710
  12,486
  13,297
  14,145
  15,032
  15,960
  16,932
Net income, $m
  868
  1,350
  2,070
  2,845
  3,673
  4,553
  5,485
  6,466
  7,497
  8,577
  9,706
  11,051
  12,279
  13,559
  14,891
  16,278
  17,721
  19,223
  20,787
  22,416
  24,112
  25,881
  27,726
  29,651
  31,660
  33,758
  35,951
  38,244
  40,642
  43,152
  45,779

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
  36,902
  42,267
  48,010
  54,120
  60,590
  67,412
  74,580
  82,090
  89,940
  98,131
  106,664
  115,546
  124,782
  134,383
  144,361
  154,730
  165,506
  176,707
  188,353
  200,468
  213,075
  226,200
  239,871
  254,118
  268,973
  284,468
  300,640
  317,525
  335,163
  353,594
Adjusted assets (=assets-cash), $m
  31,949
  36,902
  42,267
  48,010
  54,120
  60,590
  67,412
  74,580
  82,090
  89,940
  98,131
  106,664
  115,546
  124,782
  134,383
  144,361
  154,730
  165,506
  176,707
  188,353
  200,468
  213,075
  226,200
  239,871
  254,118
  268,973
  284,468
  300,640
  317,525
  335,163
  353,594
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
  6,820
  7,812
  8,873
  10,002
  11,198
  12,459
  13,783
  15,171
  16,622
  18,136
  19,713
  21,355
  23,062
  24,836
  26,680
  28,596
  30,588
  32,658
  34,811
  37,050
  39,379
  41,805
  44,332
  46,965
  49,710
  52,574
  55,563
  58,683
  61,943
  65,350
Working capital, $m
  325
  860
  985
  1,119
  1,262
  1,412
  1,571
  1,738
  1,914
  2,097
  2,287
  2,486
  2,693
  2,909
  3,132
  3,365
  3,607
  3,858
  4,119
  4,391
  4,673
  4,967
  5,273
  5,591
  5,923
  6,270
  6,631
  7,008
  7,402
  7,813
  8,242
Total debt, $m
  11,782
  15,247
  19,100
  23,223
  27,610
  32,256
  37,154
  42,300
  47,693
  53,329
  59,210
  65,337
  71,714
  78,346
  85,239
  92,403
  99,848
  107,585
  115,627
  123,990
  132,688
  141,740
  151,164
  160,980
  171,209
  181,875
  193,000
  204,612
  216,735
  229,399
  242,633
Total liabilities, $m
  23,030
  26,495
  30,348
  34,471
  38,858
  43,504
  48,402
  53,548
  58,941
  64,577
  70,458
  76,585
  82,962
  89,594
  96,487
  103,651
  111,096
  118,833
  126,875
  135,238
  143,936
  152,988
  162,412
  172,228
  182,457
  193,123
  204,248
  215,860
  227,983
  240,647
  253,881
Total equity, $m
  9,011
  10,406
  11,919
  13,539
  15,262
  17,086
  19,010
  21,032
  23,149
  25,363
  27,673
  30,079
  32,584
  35,189
  37,896
  40,710
  43,634
  46,673
  49,831
  53,116
  56,532
  60,087
  63,788
  67,644
  71,661
  75,850
  80,220
  84,780
  89,542
  94,516
  99,714
Total liabilities and equity, $m
  32,041
  36,901
  42,267
  48,010
  54,120
  60,590
  67,412
  74,580
  82,090
  89,940
  98,131
  106,664
  115,546
  124,783
  134,383
  144,361
  154,730
  165,506
  176,706
  188,354
  200,468
  213,075
  226,200
  239,872
  254,118
  268,973
  284,468
  300,640
  317,525
  335,163
  353,595
Debt-to-equity ratio
  1.308
  1.470
  1.600
  1.720
  1.810
  1.890
  1.950
  2.010
  2.060
  2.100
  2.140
  2.170
  2.200
  2.230
  2.250
  2.270
  2.290
  2.310
  2.320
  2.330
  2.350
  2.360
  2.370
  2.380
  2.390
  2.400
  2.410
  2.410
  2.420
  2.430
  2.430
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
  1,350
  2,070
  2,845
  3,673
  4,553
  5,485
  6,466
  7,497
  8,577
  9,706
  11,051
  12,279
  13,559
  14,891
  16,278
  17,721
  19,223
  20,787
  22,416
  24,112
  25,881
  27,726
  29,651
  31,660
  33,758
  35,951
  38,244
  40,642
  43,152
  45,779
Depreciation, amort., depletion, $m
  976
  1,060
  1,181
  1,311
  1,448
  1,594
  1,748
  1,910
  2,079
  2,256
  2,440
  2,404
  2,604
  2,812
  3,029
  3,254
  3,487
  3,730
  3,983
  4,245
  4,518
  4,802
  5,098
  5,406
  5,727
  6,062
  6,411
  6,776
  7,157
  7,554
  7,969
Funds from operations, $m
  1,990
  2,410
  3,251
  4,155
  5,121
  6,148
  7,233
  8,376
  9,576
  10,833
  12,146
  13,455
  14,884
  16,371
  17,920
  19,531
  21,208
  22,953
  24,769
  26,661
  28,631
  30,684
  32,824
  35,057
  37,387
  39,821
  42,363
  45,020
  47,799
  50,706
  53,748
Change in working capital, $m
  -94
  116
  125
  134
  142
  151
  159
  167
  175
  183
  191
  199
  207
  215
  224
  233
  242
  251
  261
  271
  282
  294
  306
  319
  332
  346
  361
  377
  394
  411
  430
Cash from operations, $m
  2,084
  -9,934
  3,126
  4,022
  4,979
  5,997
  7,074
  8,209
  9,401
  10,650
  11,955
  13,256
  14,677
  16,156
  17,696
  19,299
  20,966
  22,702
  24,508
  26,389
  28,348
  30,390
  32,518
  34,738
  37,055
  39,474
  42,002
  44,643
  47,405
  50,295
  53,318
Maintenance CAPEX, $m
  0
  -719
  -832
  -953
  -1,082
  -1,220
  -1,366
  -1,519
  -1,681
  -1,850
  -2,027
  -2,212
  -2,404
  -2,604
  -2,812
  -3,029
  -3,254
  -3,487
  -3,730
  -3,983
  -4,245
  -4,518
  -4,802
  -5,098
  -5,406
  -5,727
  -6,062
  -6,411
  -6,776
  -7,157
  -7,554
New CAPEX, $m
  -2,045
  -924
  -992
  -1,061
  -1,129
  -1,196
  -1,261
  -1,325
  -1,388
  -1,451
  -1,514
  -1,577
  -1,641
  -1,707
  -1,774
  -1,844
  -1,916
  -1,992
  -2,070
  -2,152
  -2,239
  -2,330
  -2,426
  -2,527
  -2,633
  -2,745
  -2,864
  -2,989
  -3,121
  -3,260
  -3,406
Cash from investing activities, $m
  -3,388
  -1,643
  -1,824
  -2,014
  -2,211
  -2,416
  -2,627
  -2,844
  -3,069
  -3,301
  -3,541
  -3,789
  -4,045
  -4,311
  -4,586
  -4,873
  -5,170
  -5,479
  -5,800
  -6,135
  -6,484
  -6,848
  -7,228
  -7,625
  -8,039
  -8,472
  -8,926
  -9,400
  -9,897
  -10,417
  -10,960
Free cash flow, $m
  -1,304
  -11,577
  1,303
  2,008
  2,768
  3,581
  4,447
  5,365
  6,332
  7,349
  8,414
  9,467
  10,631
  11,845
  13,109
  14,426
  15,796
  17,223
  18,708
  20,254
  21,864
  23,542
  25,290
  27,113
  29,016
  31,002
  33,076
  35,243
  37,508
  39,878
  42,358
Issuance/(repayment) of debt, $m
  1,169
  3,557
  3,852
  4,123
  4,387
  4,645
  4,898
  5,147
  5,392
  5,636
  5,881
  6,127
  6,377
  6,632
  6,894
  7,164
  7,445
  7,737
  8,042
  8,362
  8,698
  9,052
  9,424
  9,816
  10,229
  10,666
  11,126
  11,611
  12,124
  12,664
  13,234
Issuance/(repurchase) of shares, $m
  621
  9,415
  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
  12,972
  3,852
  4,123
  4,387
  4,645
  4,898
  5,147
  5,392
  5,636
  5,881
  6,127
  6,377
  6,632
  6,894
  7,164
  7,445
  7,737
  8,042
  8,362
  8,698
  9,052
  9,424
  9,816
  10,229
  10,666
  11,126
  11,611
  12,124
  12,664
  13,234
Total cash flow (excl. dividends), $m
  586
  -8,020
  5,155
  6,131
  7,155
  8,227
  9,346
  10,511
  11,724
  12,985
  14,295
  15,594
  17,008
  18,476
  20,003
  21,590
  23,241
  24,960
  26,750
  28,616
  30,562
  32,593
  34,714
  36,929
  39,245
  41,667
  44,201
  46,854
  49,632
  52,542
  55,592
Retained Cash Flow (-), $m
  -239
  -1,395
  -1,513
  -1,619
  -1,723
  -1,825
  -1,924
  -2,021
  -2,118
  -2,214
  -2,310
  -2,406
  -2,505
  -2,605
  -2,708
  -2,814
  -2,924
  -3,039
  -3,159
  -3,284
  -3,416
  -3,555
  -3,701
  -3,855
  -4,018
  -4,189
  -4,370
  -4,560
  -4,762
  -4,974
  -5,198
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
 
  0
  3,642
  4,511
  5,432
  6,402
  7,422
  8,490
  9,606
  10,771
  11,986
  13,188
  14,503
  15,872
  17,295
  18,776
  20,317
  21,921
  23,592
  25,332
  27,146
  29,038
  31,013
  33,074
  35,227
  37,478
  39,832
  42,294
  44,870
  47,568
  50,394
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
 
  0
  3,064
  3,438
  3,716
  3,894
  3,973
  3,956
  3,852
  3,671
  3,426
  3,118
  2,794
  2,453
  2,109
  1,775
  1,462
  1,177
  925
  710
  532
  388
  275
  190
  127
  82
  52
  31
  18
  10
  6
Current shareholders' claim on cash, %
  100
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9
  66.9

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 21.7
Price to Sales 1.8
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow 483.4
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 15.6% 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 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 8.2 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 180.883 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 $19.0 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
CMS CMS Energy 45.49 42.02  hold
WEC WEC Energy Gro 60.83 59.52  hold
MGEE MGE Energy 64.75 42.35  sell
ENB Enbridge 41.46 24.80  sell
AEE Ameren 55.03 41.56  sell
SO Southern 50.07 546.69  str.buy

COMPANY NEWS

▶ 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]
▶ DTE Energy declares dividend   [Feb-03-17 10:21AM  PR Newswire]
▶ Fermi 2 to operate until 2045   [Dec-16-16 12:49PM  PR Newswire]
▶ DTE Energy sets 2017 annual meeting date   [Dec-08-16 10:24AM  PR Newswire]
▶ 5 Dividend Retirement Stocks to Buy Now and Hold Forever   [Dec-02-16 10:05AM  at 24/7 Wall St.]
▶ Is DTE Energy Co (DTE) Worthy of Your Portfolio?   [Dec-01-16 05:48PM  at Insider Monkey]
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.