Intrinsic value of Empresa Distribuidora y Comercializadora - EDN

Previous Close

$30.80

  Intrinsic Value

$3,468

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+5000%

Previous close

$30.80

 
Intrinsic value

$3,468

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+5000%

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

We calculate the intrinsic value of EDN 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 0.7

 

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, %
  244.44
  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
  829
  1,339
  2,069
  3,094
  4,490
  6,334
  8,708
  11,689
  15,348
  19,749
  24,945
  30,976
  37,871
  45,648
  54,312
  63,861
  74,286
  85,571
  97,698
  110,648
  124,402
  138,940
  154,249
  170,316
  187,134
  204,700
  223,018
  242,094
  261,941
  282,578
  304,027
Variable operating expenses, $m
 
  550
  850
  1,272
  1,845
  2,603
  3,579
  4,804
  6,308
  8,117
  10,252
  12,731
  15,565
  18,761
  22,322
  26,247
  30,531
  35,170
  40,154
  45,477
  51,129
  57,104
  63,396
  70,000
  76,912
  84,132
  91,660
  99,500
  107,658
  116,140
  124,955
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  879
  550
  850
  1,272
  1,845
  2,603
  3,579
  4,804
  6,308
  8,117
  10,252
  12,731
  15,565
  18,761
  22,322
  26,247
  30,531
  35,170
  40,154
  45,477
  51,129
  57,104
  63,396
  70,000
  76,912
  84,132
  91,660
  99,500
  107,658
  116,140
  124,955
Operating income, $m
  -42
  789
  1,219
  1,823
  2,644
  3,731
  5,129
  6,885
  9,040
  11,632
  14,693
  18,245
  22,306
  26,887
  31,990
  37,614
  43,754
  50,401
  57,544
  65,172
  73,273
  81,836
  90,852
  100,316
  110,222
  120,568
  131,357
  142,593
  154,283
  166,438
  179,072
EBITDA, $m
  -19
  826
  1,275
  1,907
  2,768
  3,905
  5,368
  7,206
  9,461
  12,175
  15,378
  19,095
  23,346
  28,140
  33,481
  39,367
  45,794
  52,751
  60,227
  68,210
  76,688
  85,650
  95,087
  104,992
  115,359
  126,188
  137,480
  149,240
  161,475
  174,196
  187,419
Interest expense (income), $m
  17
  18
  73
  167
  299
  479
  717
  1,023
  1,407
  1,879
  2,447
  3,117
  3,894
  4,783
  5,786
  6,903
  8,135
  9,479
  10,934
  12,498
  14,168
  15,941
  17,816
  19,790
  21,861
  24,030
  26,295
  28,657
  31,117
  33,676
  36,337
Earnings before tax, $m
  -124
  771
  1,146
  1,656
  2,345
  3,252
  4,412
  5,862
  7,633
  9,753
  12,246
  15,128
  18,412
  22,103
  26,203
  30,711
  35,620
  40,922
  46,610
  52,674
  59,105
  65,895
  73,037
  80,526
  88,360
  96,539
  105,062
  113,936
  123,167
  132,763
  142,735
Tax expense, $m
  -48
  208
  309
  447
  633
  878
  1,191
  1,583
  2,061
  2,633
  3,306
  4,085
  4,971
  5,968
  7,075
  8,292
  9,617
  11,049
  12,585
  14,222
  15,958
  17,792
  19,720
  21,742
  23,857
  26,065
  28,367
  30,763
  33,255
  35,846
  38,538
Net income, $m
  -76
  563
  836
  1,209
  1,712
  2,374
  3,221
  4,279
  5,572
  7,120
  8,940
  11,044
  13,441
  16,135
  19,129
  22,419
  26,002
  29,873
  34,026
  38,452
  43,147
  48,103
  53,317
  58,784
  64,503
  70,473
  76,696
  83,173
  89,912
  96,917
  104,197

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  144
  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
  1,212
  1,938
  2,994
  4,478
  6,497
  9,167
  12,602
  16,916
  22,212
  28,581
  36,100
  44,828
  54,807
  66,060
  78,599
  92,418
  107,505
  123,836
  141,387
  160,128
  180,031
  201,071
  223,225
  246,477
  270,816
  296,238
  322,746
  350,353
  379,075
  408,940
  439,981
Adjusted assets (=assets-cash), $m
  1,068
  1,938
  2,994
  4,478
  6,497
  9,167
  12,602
  16,916
  22,212
  28,581
  36,100
  44,828
  54,807
  66,060
  78,599
  92,418
  107,505
  123,836
  141,387
  160,128
  180,031
  201,071
  223,225
  246,477
  270,816
  296,238
  322,746
  350,353
  379,075
  408,940
  439,981
Revenue / Adjusted assets
  0.776
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
Average production assets, $m
  253
  404
  625
  934
  1,356
  1,913
  2,630
  3,530
  4,635
  5,964
  7,533
  9,355
  11,437
  13,786
  16,402
  19,286
  22,434
  25,842
  29,505
  33,416
  37,569
  41,960
  46,583
  51,435
  56,514
  61,819
  67,351
  73,112
  79,106
  85,339
  91,816
Working capital, $m
  -188
  -134
  -207
  -309
  -449
  -633
  -871
  -1,169
  -1,535
  -1,975
  -2,495
  -3,098
  -3,787
  -4,565
  -5,431
  -6,386
  -7,429
  -8,557
  -9,770
  -11,065
  -12,440
  -13,894
  -15,425
  -17,032
  -18,713
  -20,470
  -22,302
  -24,209
  -26,194
  -28,258
  -30,403
Total debt, $m
  181
  736
  1,687
  3,022
  4,840
  7,242
  10,334
  14,216
  18,982
  24,715
  31,482
  39,337
  48,318
  58,446
  69,731
  82,168
  95,746
  110,445
  126,240
  143,107
  161,020
  179,956
  199,895
  220,821
  242,726
  265,606
  289,464
  314,309
  340,160
  367,038
  394,975
Total liabilities, $m
  1,189
  1,744
  2,695
  4,030
  5,848
  8,250
  11,342
  15,224
  19,990
  25,723
  32,490
  40,345
  49,326
  59,454
  70,739
  83,176
  96,754
  111,453
  127,248
  144,115
  162,028
  180,964
  200,903
  221,829
  243,734
  266,614
  290,472
  315,317
  341,168
  368,046
  395,983
Total equity, $m
  23
  194
  299
  448
  650
  917
  1,260
  1,692
  2,221
  2,858
  3,610
  4,483
  5,481
  6,606
  7,860
  9,242
  10,750
  12,384
  14,139
  16,013
  18,003
  20,107
  22,323
  24,648
  27,082
  29,624
  32,275
  35,035
  37,908
  40,894
  43,998
Total liabilities and equity, $m
  1,212
  1,938
  2,994
  4,478
  6,498
  9,167
  12,602
  16,916
  22,211
  28,581
  36,100
  44,828
  54,807
  66,060
  78,599
  92,418
  107,504
  123,837
  141,387
  160,128
  180,031
  201,071
  223,226
  246,477
  270,816
  296,238
  322,747
  350,352
  379,076
  408,940
  439,981
Debt-to-equity ratio
  7.870
  3.800
  5.630
  6.750
  7.450
  7.900
  8.200
  8.400
  8.550
  8.650
  8.720
  8.780
  8.820
  8.850
  8.870
  8.890
  8.910
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
Adjusted equity ratio
  -0.113
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -76
  563
  836
  1,209
  1,712
  2,374
  3,221
  4,279
  5,572
  7,120
  8,940
  11,044
  13,441
  16,135
  19,129
  22,419
  26,002
  29,873
  34,026
  38,452
  43,147
  48,103
  53,317
  58,784
  64,503
  70,473
  76,696
  83,173
  89,912
  96,917
  104,197
Depreciation, amort., depletion, $m
  23
  37
  57
  85
  123
  174
  239
  321
  421
  542
  685
  850
  1,040
  1,253
  1,491
  1,753
  2,039
  2,349
  2,682
  3,038
  3,415
  3,815
  4,235
  4,676
  5,138
  5,620
  6,123
  6,647
  7,191
  7,758
  8,347
Funds from operations, $m
  465
  600
  893
  1,293
  1,835
  2,548
  3,460
  4,600
  5,993
  7,662
  9,624
  11,894
  14,480
  17,388
  20,620
  24,172
  28,042
  32,223
  36,708
  41,490
  46,562
  51,918
  57,552
  63,460
  69,641
  76,093
  82,818
  89,820
  97,103
  104,675
  112,544
Change in working capital, $m
  277
  -50
  -73
  -103
  -140
  -184
  -237
  -298
  -366
  -440
  -520
  -603
  -690
  -778
  -866
  -955
  -1,042
  -1,129
  -1,213
  -1,295
  -1,375
  -1,454
  -1,531
  -1,607
  -1,682
  -1,757
  -1,832
  -1,908
  -1,985
  -2,064
  -2,145
Cash from operations, $m
  188
  650
  966
  1,396
  1,975
  2,732
  3,697
  4,898
  6,359
  8,102
  10,144
  12,497
  15,170
  18,166
  21,486
  25,127
  29,084
  33,351
  37,921
  42,785
  47,937
  53,372
  59,083
  65,067
  71,323
  77,850
  84,650
  91,728
  99,088
  106,738
  114,689
Maintenance CAPEX, $m
  0
  -23
  -37
  -57
  -85
  -123
  -174
  -239
  -321
  -421
  -542
  -685
  -850
  -1,040
  -1,253
  -1,491
  -1,753
  -2,039
  -2,349
  -2,682
  -3,038
  -3,415
  -3,815
  -4,235
  -4,676
  -5,138
  -5,620
  -6,123
  -6,647
  -7,191
  -7,758
New CAPEX, $m
  -158
  -152
  -220
  -310
  -421
  -557
  -717
  -900
  -1,105
  -1,329
  -1,569
  -1,821
  -2,082
  -2,348
  -2,617
  -2,884
  -3,148
  -3,408
  -3,663
  -3,911
  -4,153
  -4,391
  -4,623
  -4,852
  -5,079
  -5,305
  -5,532
  -5,761
  -5,994
  -6,232
  -6,478
Cash from investing activities, $m
  -152
  -175
  -257
  -367
  -506
  -680
  -891
  -1,139
  -1,426
  -1,750
  -2,111
  -2,506
  -2,932
  -3,388
  -3,870
  -4,375
  -4,901
  -5,447
  -6,012
  -6,593
  -7,191
  -7,806
  -8,438
  -9,087
  -9,755
  -10,443
  -11,152
  -11,884
  -12,641
  -13,423
  -14,236
Free cash flow, $m
  36
  475
  709
  1,030
  1,468
  2,052
  2,806
  3,759
  4,933
  6,352
  8,033
  9,991
  12,237
  14,778
  17,616
  20,752
  24,183
  27,904
  31,909
  36,192
  40,746
  45,566
  50,645
  55,980
  61,568
  67,407
  73,498
  79,844
  86,447
  93,315
  100,453
Issuance/(repayment) of debt, $m
  -14
  555
  951
  1,335
  1,817
  2,403
  3,092
  3,882
  4,766
  5,732
  6,767
  7,855
  8,981
  10,128
  11,285
  12,437
  13,578
  14,699
  15,796
  16,867
  17,913
  18,936
  19,939
  20,927
  21,905
  22,880
  23,858
  24,846
  25,850
  26,879
  27,937
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -32
  555
  951
  1,335
  1,817
  2,403
  3,092
  3,882
  4,766
  5,732
  6,767
  7,855
  8,981
  10,128
  11,285
  12,437
  13,578
  14,699
  15,796
  16,867
  17,913
  18,936
  19,939
  20,927
  21,905
  22,880
  23,858
  24,846
  25,850
  26,879
  27,937
Total cash flow (excl. dividends), $m
  8
  1,030
  1,660
  2,365
  3,286
  4,454
  5,898
  7,641
  9,699
  12,084
  14,800
  17,846
  21,218
  24,906
  28,901
  33,190
  37,760
  42,602
  47,704
  53,059
  58,659
  64,501
  70,584
  76,906
  83,472
  90,287
  97,356
  104,690
  112,298
  120,193
  128,390
Retained Cash Flow (-), $m
  75
  -171
  -106
  -148
  -202
  -267
  -344
  -431
  -530
  -637
  -752
  -873
  -998
  -1,125
  -1,254
  -1,382
  -1,509
  -1,633
  -1,755
  -1,874
  -1,990
  -2,104
  -2,215
  -2,325
  -2,434
  -2,542
  -2,651
  -2,761
  -2,872
  -2,987
  -3,104
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
 
  859
  1,554
  2,217
  3,084
  4,187
  5,555
  7,210
  9,170
  11,447
  14,048
  16,973
  20,220
  23,781
  27,647
  31,808
  36,252
  40,969
  45,949
  51,185
  56,669
  62,397
  68,368
  74,581
  81,039
  87,744
  94,705
  101,929
  109,426
  117,207
  125,286
Discount rate, %
 
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
 
  802
  1,346
  1,768
  2,248
  2,768
  3,301
  3,816
  4,281
  4,664
  4,941
  5,093
  5,111
  4,997
  4,761
  4,423
  4,006
  3,537
  3,045
  2,555
  2,089
  1,664
  1,289
  972
  712
  507
  350
  234
  151
  95
  57
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

Empresa Distribuidora y Comercializadora Norte S.A., a public service company, engages in the distribution and sale of electricity in Argentina. The company, through a concession, distributes electricity to the northwestern zone of the greater Buenos Aires metropolitan area and the northern part of the city of Buenos Aires. As of December 31, 2015, it served approximately 2,835,229 residential, small and medium commercial, industrial, wheeling system, and public lighting customers. The company was formerly known as Empresa Distribuidora Norte Sociedad AnĂ³nima and changed its name to Empresa Distribuidora y Comercializadora Norte S.A. in June 1996. The company was founded in 1992 and is headquartered in Buenos Aires, Argentina. Empresa Distribuidora y Comercializadora Norte S.A. is a subsidiary of Electricidad Argentina S.A.

FINANCIAL RATIOS  of  Empresa Distribuidora y Comercializadora (EDN)

Valuation Ratios
P/E Ratio -363.5
Price to Sales 33
Price to Book 1201.3
Price to Tangible Book
Price to Cash Flow 147
Price to Free Cash Flow 921
Growth Rates
Sales Growth Rate 244.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.9%
Cap. Spend. - 3 Yr. Gr. Rate 22.6%
Financial Strength
Quick Ratio 48
Current Ratio 0
LT Debt to Equity 773.9%
Total Debt to Equity 787%
Interest Coverage -6
Management Effectiveness
Return On Assets -6.4%
Ret/ On Assets - 3 Yr. Avg. -0.9%
Return On Total Capital -32.8%
Ret/ On T. Cap. - 3 Yr. Avg. -9.9%
Return On Equity -125.6%
Return On Equity - 3 Yr. Avg. -35.6%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -10%
EBITDA Margin - 3 Yr. Avg. 7.2%
Operating Margin -5%
Oper. Margin - 3 Yr. Avg. 15.6%
Pre-Tax Margin -14.8%
Pre-Tax Margin - 3 Yr. Avg. -2%
Net Profit Margin -9.1%
Net Profit Margin - 3 Yr. Avg. -0.3%
Effective Tax Rate 38.7%
Eff/ Tax Rate - 3 Yr. Avg. 23.2%
Payout Ratio 0%

EDN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EDN stock intrinsic value calculation we used $837 million for the last fiscal year's total revenue generated by Empresa Distribuidora y Comercializadora. The default revenue input number comes from 2016 income statement of Empresa Distribuidora y Comercializadora. 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 EDN 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 7.1%, whose default value for EDN is calculated based on our internal credit rating of Empresa Distribuidora y Comercializadora, 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 Empresa Distribuidora y Comercializadora.
    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 EDN stock the variable cost ratio is equal to 41.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for EDN 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 9.9% for Empresa Distribuidora y Comercializadora.

Corporate tax rate of 27% is the nominal tax rate for Empresa Distribuidora y Comercializadora. 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 EDN 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 EDN are equal to 30.2%.

Life of production assets of 11 years is the average useful life of capital assets used in Empresa Distribuidora y Comercializadora 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 EDN is equal to -10%. 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 - $23 million for Empresa Distribuidora y Comercializadora - 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 21.818 million for Empresa Distribuidora y Comercializadora 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 Empresa Distribuidora y Comercializadora at the current share price and the inputted number of shares is $0.7 billion.

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Stock chart of EDN Financial statements of EDN Annual reports of EDN
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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