Intrinsic value of Centrais Eletricas Brasileiras ADR - EBR

Previous Close

$4.62

  Intrinsic Value

$1,839

stock screener

  Rating & Target

str. buy

+999%

Previous close

$4.62

 
Intrinsic value

$1,839

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of EBR 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
(a)
   1
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -100.00
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  0
  29,853
  46,123
  68,976
  100,081
  141,200
  194,118
  260,562
  342,135
  440,245
  556,065
  690,506
  844,210
  1,017,557
  1,210,692
  1,423,559
  1,655,941
  1,907,505
  2,177,845
  2,466,523
  2,773,104
  3,097,188
  3,438,438
  3,796,594
  4,171,493
  4,563,077
  4,971,402
  5,396,635
  5,839,064
  6,299,089
  6,777,226
Variable operating expenses, $m
 
  9,390
  14,494
  21,664
  31,423
  44,324
  60,927
  81,774
  107,367
  138,148
  174,486
  216,643
  264,867
  319,254
  379,850
  446,636
  519,544
  598,472
  683,290
  773,861
  870,050
  971,730
  1,078,796
  1,191,166
  1,308,789
  1,431,647
  1,559,757
  1,693,172
  1,831,982
  1,976,313
  2,126,327
Fixed operating expenses, $m
 
  8,557
  8,745
  8,938
  9,134
  9,335
  9,541
  9,751
  9,965
  10,184
  10,409
  10,638
  10,872
  11,111
  11,355
  11,605
  11,860
  12,121
  12,388
  12,660
  12,939
  13,224
  13,515
  13,812
  14,116
  14,426
  14,744
  15,068
  15,399
  15,738
  16,085
Total operating expenses, $m
  0
  17,947
  23,239
  30,602
  40,557
  53,659
  70,468
  91,525
  117,332
  148,332
  184,895
  227,281
  275,739
  330,365
  391,205
  458,241
  531,404
  610,593
  695,678
  786,521
  882,989
  984,954
  1,092,311
  1,204,978
  1,322,905
  1,446,073
  1,574,501
  1,708,240
  1,847,381
  1,992,051
  2,142,412
Operating income, $m
  0
  11,906
  22,883
  38,374
  59,523
  87,540
  123,650
  169,038
  224,803
  291,912
  371,170
  463,225
  568,471
  687,192
  819,487
  965,318
  1,124,536
  1,296,912
  1,482,167
  1,680,001
  1,890,115
  2,112,235
  2,346,128
  2,591,616
  2,848,589
  3,117,005
  3,396,901
  3,688,395
  3,991,682
  4,307,038
  4,634,815
EBITDA, $m
  0
  13,222
  24,903
  41,384
  63,880
  93,678
  132,078
  180,344
  239,641
  310,998
  395,271
  493,124
  605,025
  731,252
  871,910
  1,026,958
  1,196,238
  1,379,507
  1,576,468
  1,786,801
  2,010,190
  2,246,343
  2,495,012
  2,756,009
  3,029,214
  3,314,586
  3,612,163
  3,922,070
  4,244,514
  4,579,789
  4,928,269
Interest expense (income), $m
  0
  760
  2,021
  3,849
  6,418
  9,914
  14,536
  20,484
  27,952
  37,121
  48,148
  61,166
  76,277
  93,554
  113,038
  134,746
  158,672
  184,791
  213,067
  243,453
  275,900
  310,359
  346,786
  385,142
  425,398
  467,536
  511,550
  557,445
  605,241
  654,970
  706,676
Earnings before tax, $m
  0
  11,146
  20,862
  34,525
  53,105
  77,626
  109,114
  148,554
  196,851
  254,791
  323,021
  402,059
  492,194
  593,638
  706,450
  830,572
  965,864
  1,112,121
  1,269,100
  1,436,548
  1,614,215
  1,801,876
  1,999,342
  2,206,475
  2,423,190
  2,649,468
  2,885,351
  3,130,950
  3,386,441
  3,652,068
  3,928,139
Tax expense, $m
  0
  3,009
  5,633
  9,322
  14,338
  20,959
  29,461
  40,110
  53,150
  68,794
  87,216
  108,556
  132,892
  160,282
  190,741
  224,255
  260,783
  300,273
  342,657
  387,868
  435,838
  486,506
  539,822
  595,748
  654,261
  715,356
  779,045
  845,356
  914,339
  986,058
  1,060,598
Net income, $m
  0
  8,137
  15,229
  25,203
  38,767
  56,667
  79,653
  108,444
  143,701
  185,997
  235,806
  293,503
  359,301
  433,356
  515,708
  606,318
  705,081
  811,848
  926,443
  1,048,680
  1,178,377
  1,315,369
  1,459,520
  1,610,726
  1,768,929
  1,934,112
  2,106,306
  2,285,593
  2,472,102
  2,666,010
  2,867,542

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  0
  83,856
  129,558
  193,754
  281,127
  396,629
  545,274
  731,917
  961,053
  1,236,642
  1,561,980
  1,939,624
  2,371,377
  2,858,306
  3,400,820
  3,998,760
  4,651,518
  5,358,159
  6,117,542
  6,928,434
  7,789,617
  8,699,967
  9,658,533
  10,664,589
  11,717,677
  12,817,633
  13,964,611
  15,159,087
  16,401,865
  17,694,071
  19,037,152
Adjusted assets (=assets-cash), $m
  0
  83,856
  129,558
  193,754
  281,127
  396,629
  545,274
  731,917
  961,053
  1,236,642
  1,561,980
  1,939,624
  2,371,377
  2,858,306
  3,400,820
  3,998,760
  4,651,518
  5,358,159
  6,117,542
  6,928,434
  7,789,617
  8,699,967
  9,658,533
  10,664,589
  11,717,677
  12,817,633
  13,964,611
  15,159,087
  16,401,865
  17,694,071
  19,037,152
Revenue / Adjusted assets
  0.000
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
Average production assets, $m
  0
  12,926
  19,971
  29,867
  43,335
  61,140
  84,053
  112,824
  148,144
  190,626
  240,776
  298,989
  365,543
  440,602
  524,230
  616,401
  717,022
  825,950
  943,007
  1,068,004
  1,200,754
  1,341,083
  1,488,844
  1,643,925
  1,806,256
  1,975,812
  2,152,617
  2,336,743
  2,528,315
  2,727,506
  2,934,539
Working capital, $m
  0
  269
  415
  621
  901
  1,271
  1,747
  2,345
  3,079
  3,962
  5,005
  6,215
  7,598
  9,158
  10,896
  12,812
  14,903
  17,168
  19,601
  22,199
  24,958
  27,875
  30,946
  34,169
  37,543
  41,068
  44,743
  48,570
  52,552
  56,692
  60,995
Total debt, $m
  0
  37,422
  71,287
  118,856
  183,599
  269,187
  379,332
  517,635
  687,425
  891,636
  1,132,711
  1,412,546
  1,732,474
  2,093,289
  2,495,292
  2,938,366
  3,422,060
  3,945,680
  4,508,383
  5,109,254
  5,747,390
  6,421,960
  7,132,258
  7,877,745
  8,658,083
  9,473,150
  10,323,061
  11,208,168
  12,129,066
  13,086,591
  14,081,814
Total liabilities, $m
  0
  62,137
  96,002
  143,571
  208,315
  293,902
  404,048
  542,351
  712,141
  916,352
  1,157,427
  1,437,262
  1,757,190
  2,118,005
  2,520,008
  2,963,081
  3,446,775
  3,970,396
  4,533,098
  5,133,970
  5,772,106
  6,446,676
  7,156,973
  7,902,461
  8,682,798
  9,497,866
  10,347,777
  11,232,884
  12,153,782
  13,111,307
  14,106,530
Total equity, $m
  0
  21,719
  33,555
  50,182
  72,812
  102,727
  141,226
  189,567
  248,913
  320,290
  404,553
  502,363
  614,187
  740,301
  880,812
  1,035,679
  1,204,743
  1,387,763
  1,584,443
  1,794,464
  2,017,511
  2,253,291
  2,501,560
  2,762,129
  3,034,878
  3,319,767
  3,616,834
  3,926,204
  4,248,083
  4,582,764
  4,930,622
Total liabilities and equity, $m
  0
  83,856
  129,557
  193,753
  281,127
  396,629
  545,274
  731,918
  961,054
  1,236,642
  1,561,980
  1,939,625
  2,371,377
  2,858,306
  3,400,820
  3,998,760
  4,651,518
  5,358,159
  6,117,541
  6,928,434
  7,789,617
  8,699,967
  9,658,533
  10,664,590
  11,717,676
  12,817,633
  13,964,611
  15,159,088
  16,401,865
  17,694,071
  19,037,152
Debt-to-equity ratio
  0.000
  1.720
  2.120
  2.370
  2.520
  2.620
  2.690
  2.730
  2.760
  2.780
  2.800
  2.810
  2.820
  2.830
  2.830
  2.840
  2.840
  2.840
  2.850
  2.850
  2.850
  2.850
  2.850
  2.850
  2.850
  2.850
  2.850
  2.850
  2.860
  2.860
  2.860
Adjusted equity ratio
  0.000
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259
  0.259

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  8,137
  15,229
  25,203
  38,767
  56,667
  79,653
  108,444
  143,701
  185,997
  235,806
  293,503
  359,301
  433,356
  515,708
  606,318
  705,081
  811,848
  926,443
  1,048,680
  1,178,377
  1,315,369
  1,459,520
  1,610,726
  1,768,929
  1,934,112
  2,106,306
  2,285,593
  2,472,102
  2,666,010
  2,867,542
Depreciation, amort., depletion, $m
  0
  1,316
  2,021
  3,010
  4,357
  6,137
  8,429
  11,306
  14,838
  19,086
  24,101
  29,899
  36,554
  44,060
  52,423
  61,640
  71,702
  82,595
  94,301
  106,800
  120,075
  134,108
  148,884
  164,393
  180,626
  197,581
  215,262
  233,674
  252,831
  272,751
  293,454
Funds from operations, $m
  0
  9,453
  17,250
  28,213
  43,124
  62,804
  88,082
  119,750
  158,539
  205,083
  259,907
  323,402
  395,856
  477,416
  568,131
  667,958
  776,783
  894,443
  1,020,744
  1,155,481
  1,298,452
  1,449,477
  1,608,404
  1,775,119
  1,949,555
  2,131,693
  2,321,568
  2,519,268
  2,724,934
  2,938,761
  3,160,996
Change in working capital, $m
  0
  101
  146
  206
  280
  370
  476
  598
  734
  883
  1,042
  1,210
  1,383
  1,560
  1,738
  1,916
  2,091
  2,264
  2,433
  2,598
  2,759
  2,917
  3,071
  3,223
  3,374
  3,524
  3,675
  3,827
  3,982
  4,140
  4,303
Cash from operations, $m
  0
  9,352
  17,103
  28,007
  42,844
  62,434
  87,605
  119,152
  157,805
  204,200
  258,864
  322,192
  394,472
  475,856
  566,393
  666,042
  774,692
  892,179
  1,018,311
  1,152,883
  1,295,693
  1,446,561
  1,605,333
  1,771,895
  1,946,181
  2,128,169
  2,317,893
  2,515,441
  2,720,952
  2,934,620
  3,156,692
Maintenance CAPEX, $m
  0
  -809
  -1,293
  -1,997
  -2,987
  -4,334
  -6,114
  -8,405
  -11,282
  -14,814
  -19,063
  -24,078
  -29,899
  -36,554
  -44,060
  -52,423
  -61,640
  -71,702
  -82,595
  -94,301
  -106,800
  -120,075
  -134,108
  -148,884
  -164,393
  -180,626
  -197,581
  -215,262
  -233,674
  -252,831
  -272,751
New CAPEX, $m
  0
  -4,840
  -7,045
  -9,896
  -13,468
  -17,804
  -22,913
  -28,771
  -35,321
  -42,481
  -50,150
  -58,213
  -66,554
  -75,059
  -83,627
  -92,171
  -100,621
  -108,927
  -117,057
  -124,997
  -132,750
  -140,329
  -147,761
  -155,082
  -162,331
  -169,556
  -176,804
  -184,126
  -191,572
  -199,191
  -207,033
Cash from investing activities, $m
  0
  -5,649
  -8,338
  -11,893
  -16,455
  -22,138
  -29,027
  -37,176
  -46,603
  -57,295
  -69,213
  -82,291
  -96,453
  -111,613
  -127,687
  -144,594
  -162,261
  -180,629
  -199,652
  -219,298
  -239,550
  -260,404
  -281,869
  -303,966
  -326,724
  -350,182
  -374,385
  -399,388
  -425,246
  -452,022
  -479,784
Free cash flow, $m
  0
  3,703
  8,766
  16,115
  26,389
  40,296
  58,578
  81,976
  111,201
  146,904
  189,652
  239,901
  298,020
  364,243
  438,705
  521,448
  612,430
  711,549
  818,659
  933,584
  1,056,143
  1,186,157
  1,323,463
  1,467,930
  1,619,457
  1,777,987
  1,943,508
  2,116,053
  2,295,706
  2,482,598
  2,676,908
Issuance/(repayment) of debt, $m
  0
  23,349
  33,865
  47,569
  64,744
  85,587
  110,146
  138,303
  169,790
  204,211
  241,075
  279,835
  319,928
  360,815
  402,003
  443,074
  483,694
  523,621
  562,702
  600,871
  638,136
  674,570
  710,298
  745,487
  780,338
  815,068
  849,911
  885,107
  920,898
  957,525
  995,223
Issuance/(repurchase) of shares, $m
  0
  6
  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  
  0
  23,355
  33,865
  47,569
  64,744
  85,587
  110,146
  138,303
  169,790
  204,211
  241,075
  279,835
  319,928
  360,815
  402,003
  443,074
  483,694
  523,621
  562,702
  600,871
  638,136
  674,570
  710,298
  745,487
  780,338
  815,068
  849,911
  885,107
  920,898
  957,525
  995,223
Total cash flow (excl. dividends), $m
  0
  27,058
  42,631
  63,684
  91,132
  125,883
  168,724
  220,279
  280,991
  351,116
  430,727
  519,736
  617,948
  725,057
  840,708
  964,522
  1,096,124
  1,235,170
  1,381,361
  1,534,456
  1,694,279
  1,860,726
  2,033,761
  2,213,417
  2,399,794
  2,593,055
  2,793,418
  3,001,160
  3,216,604
  3,440,123
  3,672,132
Retained Cash Flow (-), $m
  0
  -8,143
  -11,837
  -16,627
  -22,630
  -29,915
  -38,499
  -48,341
  -59,346
  -71,377
  -84,262
  -97,810
  -111,824
  -126,115
  -140,511
  -154,867
  -169,064
  -183,020
  -196,680
  -210,021
  -223,046
  -235,781
  -248,269
  -260,569
  -272,750
  -284,889
  -297,067
  -309,369
  -321,879
  -334,681
  -347,858
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
 
  18,915
  30,794
  47,057
  68,502
  95,968
  130,225
  171,938
  221,645
  279,738
  346,464
  421,926
  506,124
  598,943
  700,197
  809,655
  927,060
  1,052,150
  1,184,681
  1,324,435
  1,471,233
  1,624,946
  1,785,492
  1,952,849
  2,127,045
  2,308,166
  2,496,351
  2,691,790
  2,894,725
  3,105,441
  3,324,274
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  17,711
  26,827
  37,882
  50,591
  64,518
  79,036
  93,378
  106,704
  118,184
  127,089
  132,860
  135,167
  133,932
  129,326
  121,746
  111,764
  100,061
  87,363
  74,371
  61,712
  49,893
  39,281
  30,096
  22,424
  16,235
  11,410
  7,776
  5,134
  3,280
  2,025
Current shareholders' claim on cash, %
  100
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9

Centrais Eletricas Brasileiras S.A. (Eletrobras) is a power generation company. The Company operates in the generation, transmission, distribution and trading segments. The Company operates through various companies, including Eletrobras holding, CGTEE, Chesf, Eletronorte, Eletronuclear, Eletrosul, Furnas, Amazonas Energia, Distribuicao Acre, Distribuicao Alagoas, Distribuicao Piaui, Distribuicao Rondonia, Distribuicao Roraima and half the capital of Itaipu Binacional. The Company has a total installed capacity for generation of over 44,150 megawatts. It has a nationwide network of transmission lines of approximately 60,500 kilometers in length. The Eletrobras Eletrosul's Megawatt Solar Plant has over 4,000 photovoltaic panels, totaling an area of approximately 8,300 square meters. The Eletrobras Eletrosul's Megawatt Solar Plant has an installed capacity of approximately one megawatt-peak (MWp), and the Megawatt Solar Plant can produce approximately 1.2 gigawatt hour (GWh).

FINANCIAL RATIOS  of  Centrais Eletricas Brasileiras ADR (EBR)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

EBR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EBR stock intrinsic value calculation we used $18658 million for the last fiscal year's total revenue generated by Centrais Eletricas Brasileiras ADR. The default revenue input number comes from income statement of Centrais Eletricas Brasileiras ADR. 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 EBR stock valuation model: a) initial revenue growth rate of 60% 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 6.8%, whose default value for EBR is calculated based on our internal credit rating of Centrais Eletricas Brasileiras ADR, 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 Centrais Eletricas Brasileiras ADR.
    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 EBR stock the variable cost ratio is equal to 31.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $8373 million in the base year in the intrinsic value calculation for EBR 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 5.4% for Centrais Eletricas Brasileiras ADR.

Corporate tax rate of 27% is the nominal tax rate for Centrais Eletricas Brasileiras ADR. 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 EBR 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 EBR are equal to 43.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Centrais Eletricas Brasileiras ADR 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 EBR is equal to 0.9%. 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 - $13576 million for Centrais Eletricas Brasileiras ADR - 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 1087 million for Centrais Eletricas Brasileiras ADR 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 Centrais Eletricas Brasileiras ADR at the current share price and the inputted number of shares is $5.0 billion.

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COMPANY NEWS

▶ [$$] Brazil's Government to Reduce Stake in Electrobras   [Aug-21-17 09:41PM  The Wall Street Journal]
▶ Brazil Court Tells Petrobras: Forget Electrobras Debts   [May-30-17 04:46PM  Barrons.com]
Financial statements of EBR
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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