Intrinsic value of Duke Energy - DUK

Previous Close

$88.66

  Intrinsic Value

$106.48

stock screener

  Rating & Target

buy

+20%

Previous close

$88.66

 
Intrinsic value

$106.48

 
Up/down potential

+20%

 
Rating

buy

We calculate the intrinsic value of DUK 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 62.1

 

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, %
  1.66
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  22,743
  24,244
  25,805
  27,430
  29,122
  30,883
  32,719
  34,633
  36,630
  38,714
  40,890
  43,162
  45,537
  48,020
  50,616
  53,332
  56,174
  59,150
  62,265
  65,528
  68,946
  72,527
  76,280
  80,215
  84,339
  88,664
  93,199
  97,955
  102,944
  108,177
  113,668
Variable operating expenses, $m
 
  6,781
  7,093
  7,417
  7,755
  8,106
  8,473
  8,855
  9,253
  9,669
  10,104
  8,615
  9,089
  9,584
  10,102
  10,644
  11,212
  11,806
  12,427
  13,079
  13,761
  14,476
  15,225
  16,010
  16,833
  17,696
  18,601
  19,551
  20,546
  21,591
  22,687
Fixed operating expenses, $m
 
  11,503
  11,790
  12,085
  12,387
  12,697
  13,014
  13,339
  13,673
  14,015
  14,365
  14,724
  15,092
  15,470
  15,856
  16,253
  16,659
  17,076
  17,502
  17,940
  18,389
  18,848
  19,319
  19,802
  20,298
  20,805
  21,325
  21,858
  22,405
  22,965
  23,539
Total operating expenses, $m
  17,429
  18,284
  18,883
  19,502
  20,142
  20,803
  21,487
  22,194
  22,926
  23,684
  24,469
  23,339
  24,181
  25,054
  25,958
  26,897
  27,871
  28,882
  29,929
  31,019
  32,150
  33,324
  34,544
  35,812
  37,131
  38,501
  39,926
  41,409
  42,951
  44,556
  46,226
Operating income, $m
  5,314
  5,960
  6,922
  7,928
  8,980
  10,080
  11,232
  12,439
  13,704
  15,030
  16,421
  19,823
  21,356
  22,966
  24,657
  26,435
  28,303
  30,268
  32,335
  34,509
  36,796
  39,203
  41,736
  44,402
  47,208
  50,162
  53,272
  56,546
  59,993
  63,621
  67,442
EBITDA, $m
  9,194
  9,618
  10,691
  11,811
  12,983
  14,208
  15,490
  16,832
  18,238
  19,712
  21,257
  22,877
  24,578
  26,364
  28,239
  30,208
  32,278
  34,454
  36,741
  39,146
  41,675
  44,335
  47,134
  50,078
  53,176
  56,436
  59,867
  63,477
  67,277
  71,276
  75,485
Interest expense (income), $m
  1,794
  1,945
  2,181
  2,425
  2,679
  2,944
  3,219
  3,507
  3,806
  4,118
  4,444
  4,785
  5,140
  5,512
  5,900
  6,307
  6,731
  7,176
  7,642
  8,129
  8,640
  9,174
  9,735
  10,322
  10,937
  11,583
  12,259
  12,969
  13,713
  14,493
  15,312
Earnings before tax, $m
  3,734
  4,015
  4,742
  5,503
  6,301
  7,136
  8,013
  8,932
  9,898
  10,911
  11,976
  15,038
  16,216
  17,454
  18,757
  20,128
  21,572
  23,092
  24,693
  26,380
  28,157
  30,029
  32,002
  34,080
  36,271
  38,580
  41,013
  43,577
  46,280
  49,128
  52,130
Tax expense, $m
  1,156
  1,084
  1,280
  1,486
  1,701
  1,927
  2,163
  2,412
  2,672
  2,946
  3,234
  4,060
  4,378
  4,713
  5,064
  5,435
  5,824
  6,235
  6,667
  7,123
  7,602
  8,108
  8,640
  9,202
  9,793
  10,417
  11,073
  11,766
  12,496
  13,265
  14,075
Net income, $m
  2,152
  2,931
  3,461
  4,017
  4,599
  5,210
  5,849
  6,521
  7,225
  7,965
  8,743
  10,978
  11,837
  12,741
  13,692
  14,694
  15,747
  16,857
  18,026
  19,257
  20,554
  21,921
  23,361
  24,879
  26,478
  28,163
  29,939
  31,811
  33,784
  35,863
  38,055

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  503
  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
  132,761
  140,954
  150,031
  159,477
  169,311
  179,554
  190,228
  201,357
  212,966
  225,081
  237,730
  250,943
  264,750
  279,184
  294,279
  310,070
  326,595
  343,893
  362,005
  380,974
  400,847
  421,669
  443,490
  466,364
  490,343
  515,486
  541,852
  569,505
  598,510
  628,937
  660,858
Adjusted assets (=assets-cash), $m
  132,258
  140,954
  150,031
  159,477
  169,311
  179,554
  190,228
  201,357
  212,966
  225,081
  237,730
  250,943
  264,750
  279,184
  294,279
  310,070
  326,595
  343,893
  362,005
  380,974
  400,847
  421,669
  443,490
  466,364
  490,343
  515,486
  541,852
  569,505
  598,510
  628,937
  660,858
Revenue / Adjusted assets
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
Average production assets, $m
  12,716
  13,552
  14,425
  15,333
  16,279
  17,264
  18,290
  19,360
  20,476
  21,641
  22,857
  24,128
  25,455
  26,843
  28,294
  29,813
  31,401
  33,065
  34,806
  36,630
  38,541
  40,543
  42,641
  44,840
  47,146
  49,563
  52,098
  54,757
  57,546
  60,471
  63,540
Working capital, $m
  -3,512
  849
  903
  960
  1,019
  1,081
  1,145
  1,212
  1,282
  1,355
  1,431
  1,511
  1,594
  1,681
  1,772
  1,867
  1,966
  2,070
  2,179
  2,293
  2,413
  2,538
  2,670
  2,808
  2,952
  3,103
  3,262
  3,428
  3,603
  3,786
  3,978
Total debt, $m
  50,382
  55,912
  62,175
  68,693
  75,479
  82,546
  89,911
  97,590
  105,600
  113,960
  122,688
  131,805
  141,332
  151,291
  161,706
  172,602
  184,004
  195,940
  208,437
  221,526
  235,238
  249,605
  264,662
  280,445
  296,991
  314,339
  332,532
  351,613
  371,626
  392,621
  414,646
Total liabilities, $m
  91,728
  97,258
  103,521
  110,039
  116,825
  123,892
  131,257
  138,936
  146,946
  155,306
  164,034
  173,151
  182,678
  192,637
  203,052
  213,948
  225,350
  237,286
  249,783
  262,872
  276,584
  290,951
  306,008
  321,791
  338,337
  355,685
  373,878
  392,959
  412,972
  433,967
  455,992
Total equity, $m
  41,033
  43,696
  46,510
  49,438
  52,486
  55,662
  58,971
  62,421
  66,019
  69,775
  73,696
  77,792
  82,073
  86,547
  91,226
  96,122
  101,244
  106,607
  112,221
  118,102
  124,262
  130,717
  137,482
  144,573
  152,006
  159,801
  167,974
  176,547
  185,538
  194,970
  204,866
Total liabilities and equity, $m
  132,761
  140,954
  150,031
  159,477
  169,311
  179,554
  190,228
  201,357
  212,965
  225,081
  237,730
  250,943
  264,751
  279,184
  294,278
  310,070
  326,594
  343,893
  362,004
  380,974
  400,846
  421,668
  443,490
  466,364
  490,343
  515,486
  541,852
  569,506
  598,510
  628,937
  660,858
Debt-to-equity ratio
  1.228
  1.280
  1.340
  1.390
  1.440
  1.480
  1.520
  1.560
  1.600
  1.630
  1.660
  1.690
  1.720
  1.750
  1.770
  1.800
  1.820
  1.840
  1.860
  1.880
  1.890
  1.910
  1.930
  1.940
  1.950
  1.970
  1.980
  1.990
  2.000
  2.010
  2.020
Adjusted equity ratio
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310
  0.310

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,152
  2,931
  3,461
  4,017
  4,599
  5,210
  5,849
  6,521
  7,225
  7,965
  8,743
  10,978
  11,837
  12,741
  13,692
  14,694
  15,747
  16,857
  18,026
  19,257
  20,554
  21,921
  23,361
  24,879
  26,478
  28,163
  29,939
  31,811
  33,784
  35,863
  38,055
Depreciation, amort., depletion, $m
  3,880
  3,658
  3,768
  3,883
  4,003
  4,128
  4,258
  4,393
  4,534
  4,682
  4,836
  3,054
  3,222
  3,398
  3,582
  3,774
  3,975
  4,185
  4,406
  4,637
  4,879
  5,132
  5,398
  5,676
  5,968
  6,274
  6,595
  6,931
  7,284
  7,655
  8,043
Funds from operations, $m
  7,358
  6,589
  7,230
  7,901
  8,603
  9,337
  10,107
  10,914
  11,760
  12,647
  13,579
  14,032
  15,060
  16,139
  17,274
  18,467
  19,722
  21,043
  22,432
  23,894
  25,433
  27,053
  28,759
  30,555
  32,446
  34,437
  36,534
  38,743
  41,068
  43,518
  46,098
Change in working capital, $m
  86
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  99
  104
  109
  114
  120
  125
  131
  138
  144
  151
  159
  166
  175
  183
  192
Cash from operations, $m
  7,272
  6,536
  7,175
  7,844
  8,543
  9,276
  10,043
  10,847
  11,690
  12,574
  13,502
  13,953
  14,976
  16,052
  17,183
  18,372
  19,623
  20,939
  22,323
  23,780
  25,313
  26,928
  28,627
  30,417
  32,301
  34,286
  36,375
  38,576
  40,894
  43,335
  45,906
Maintenance CAPEX, $m
  0
  -1,610
  -1,715
  -1,826
  -1,941
  -2,061
  -2,185
  -2,315
  -2,451
  -2,592
  -2,739
  -2,893
  -3,054
  -3,222
  -3,398
  -3,582
  -3,774
  -3,975
  -4,185
  -4,406
  -4,637
  -4,879
  -5,132
  -5,398
  -5,676
  -5,968
  -6,274
  -6,595
  -6,931
  -7,284
  -7,655
New CAPEX, $m
  -7,901
  -836
  -873
  -908
  -946
  -985
  -1,026
  -1,070
  -1,116
  -1,165
  -1,216
  -1,270
  -1,328
  -1,388
  -1,451
  -1,518
  -1,589
  -1,663
  -1,741
  -1,824
  -1,911
  -2,002
  -2,098
  -2,199
  -2,306
  -2,417
  -2,535
  -2,659
  -2,789
  -2,925
  -3,069
Cash from investing activities, $m
  -11,533
  -2,446
  -2,588
  -2,734
  -2,887
  -3,046
  -3,211
  -3,385
  -3,567
  -3,757
  -3,955
  -4,163
  -4,382
  -4,610
  -4,849
  -5,100
  -5,363
  -5,638
  -5,926
  -6,230
  -6,548
  -6,881
  -7,230
  -7,597
  -7,982
  -8,385
  -8,809
  -9,254
  -9,720
  -10,209
  -10,724
Free cash flow, $m
  -4,261
  4,090
  4,587
  5,110
  5,657
  6,230
  6,831
  7,462
  8,123
  8,817
  9,547
  9,789
  10,595
  11,442
  12,334
  13,272
  14,260
  15,300
  16,396
  17,550
  18,766
  20,047
  21,397
  22,820
  24,320
  25,900
  27,566
  29,323
  31,174
  33,125
  35,182
Issuance/(repayment) of debt, $m
  5,868
  6,033
  6,263
  6,518
  6,785
  7,068
  7,365
  7,679
  8,010
  8,359
  8,728
  9,117
  9,527
  9,959
  10,415
  10,896
  11,402
  11,936
  12,497
  13,089
  13,712
  14,367
  15,057
  15,783
  16,546
  17,349
  18,193
  19,080
  20,014
  20,994
  22,025
Issuance/(repurchase) of shares, $m
  731
  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  
  6,602
  6,033
  6,263
  6,518
  6,785
  7,068
  7,365
  7,679
  8,010
  8,359
  8,728
  9,117
  9,527
  9,959
  10,415
  10,896
  11,402
  11,936
  12,497
  13,089
  13,712
  14,367
  15,057
  15,783
  16,546
  17,349
  18,193
  19,080
  20,014
  20,994
  22,025
Total cash flow (excl. dividends), $m
  2,341
  10,123
  10,850
  11,627
  12,442
  13,298
  14,196
  15,141
  16,133
  17,177
  18,275
  18,906
  20,122
  21,402
  22,749
  24,168
  25,662
  27,236
  28,894
  30,639
  32,478
  34,414
  36,454
  38,603
  40,866
  43,249
  45,759
  48,403
  51,187
  54,120
  57,207
Retained Cash Flow (-), $m
  -1,306
  -2,663
  -2,814
  -2,928
  -3,049
  -3,175
  -3,309
  -3,450
  -3,599
  -3,756
  -3,921
  -4,096
  -4,280
  -4,475
  -4,679
  -4,895
  -5,123
  -5,362
  -5,615
  -5,881
  -6,160
  -6,455
  -6,765
  -7,091
  -7,434
  -7,794
  -8,174
  -8,572
  -8,992
  -9,432
  -9,895
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
 
  7,461
  8,036
  8,699
  9,394
  10,123
  10,887
  11,691
  12,534
  13,421
  14,354
  14,810
  15,841
  16,927
  18,070
  19,273
  20,540
  21,874
  23,279
  24,759
  26,317
  27,960
  29,689
  31,512
  33,432
  35,455
  37,586
  39,831
  42,196
  44,687
  47,312
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  6,851
  6,721
  6,569
  6,346
  6,057
  5,709
  5,312
  4,877
  4,415
  3,938
  3,340
  2,893
  2,463
  2,059
  1,689
  1,358
  1,069
  824
  620
  455
  326
  227
  154
  101
  65
  40
  24
  14
  8
  4
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

Duke Energy Corporation (Duke Energy) is an energy company. The Company operates through three segments: Electric Utilities and Infrastructure; Gas Utilities and Infrastructure, and Commercial Renewables. The Company operates in the United States through its direct and indirect subsidiaries. The Electric Utilities and Infrastructure segment provides retail electric service through the generation, transmission, distribution and sale of electricity to approximately 7.5 million customers within the Southeast and Midwest regions of the United States. The operations include electricity sold wholesale to municipalities, electric cooperative utilities and other load-serving entities. The Gas Utilities and Infrastructure segment serves residential, commercial, industrial and power generation natural gas customers. The Commercial Renewables primarily acquires, builds, develops and operates wind and solar renewable generation throughout the continental United States.

FINANCIAL RATIOS  of  Duke Energy (DUK)

Valuation Ratios
P/E Ratio 28.8
Price to Sales 2.7
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow -98.7
Growth Rates
Sales Growth Rate 1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.8%
Cap. Spend. - 3 Yr. Gr. Rate 7.4%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 111.1%
Total Debt to Equity 122.8%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.7%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 2.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity 5.3%
Return On Equity - 3 Yr. Avg. 5.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 41.4%
EBITDA Margin - 3 Yr. Avg. 40.6%
Operating Margin 23.4%
Oper. Margin - 3 Yr. Avg. 22.5%
Pre-Tax Margin 16.4%
Pre-Tax Margin - 3 Yr. Avg. 16.9%
Net Profit Margin 9.5%
Net Profit Margin - 3 Yr. Avg. 10.1%
Effective Tax Rate 31%
Eff/ Tax Rate - 3 Yr. Avg. 31.9%
Payout Ratio 108.4%

DUK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DUK stock intrinsic value calculation we used $22743 million for the last fiscal year's total revenue generated by Duke Energy. The default revenue input number comes from 2016 income statement of Duke 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 DUK stock valuation model: a) initial revenue growth rate of 6.6% 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 8.9%, whose default value for DUK is calculated based on our internal credit rating of Duke 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 Duke 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 DUK stock the variable cost ratio is equal to 28.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11222 million in the base year in the intrinsic value calculation for DUK 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 3.9% for Duke Energy.

Corporate tax rate of 27% is the nominal tax rate for Duke 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 DUK 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 DUK are equal to 55.9%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Duke 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 DUK is equal to 3.5%. 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 - $41033 million for Duke 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 699.989 million for Duke 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 Duke Energy at the current share price and the inputted number of shares is $62.1 billion.

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Financial statements of DUK
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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