Intrinsic value of FirstEnergy Corp. - FE

Previous Close

$42.16

  Intrinsic Value

$26.74

stock screener

  Rating & Target

sell

-37%

Previous close

$42.16

 
Intrinsic value

$26.74

 
Up/down potential

-37%

 
Rating

sell

We calculate the intrinsic value of FE 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
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, %
  -3.09
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  10,780
  11,486
  11,750
  12,052
  12,391
  12,767
  13,179
  13,628
  14,114
  14,637
  15,199
  15,800
  16,441
  17,124
  17,850
  18,620
  19,436
  20,299
  21,213
  22,178
  23,197
  24,272
  25,406
  26,601
  27,861
  29,187
  30,584
  32,054
  33,600
  35,228
  36,939
Variable operating expenses, $m
 
  7,099
  7,249
  7,421
  7,614
  7,828
  8,062
  8,318
  8,594
  8,892
  9,212
  8,992
  9,357
  9,746
  10,159
  10,597
  11,061
  11,553
  12,072
  12,622
  13,202
  13,814
  14,459
  15,139
  15,856
  16,611
  17,406
  18,242
  19,122
  20,048
  21,023
Fixed operating expenses, $m
 
  836
  854
  873
  892
  912
  932
  953
  974
  995
  1,017
  1,039
  1,062
  1,085
  1,109
  1,134
  1,159
  1,184
  1,210
  1,237
  1,264
  1,292
  1,320
  1,349
  1,379
  1,409
  1,440
  1,472
  1,504
  1,538
  1,571
Total operating expenses, $m
  22,824
  7,935
  8,103
  8,294
  8,506
  8,740
  8,994
  9,271
  9,568
  9,887
  10,229
  10,031
  10,419
  10,831
  11,268
  11,731
  12,220
  12,737
  13,282
  13,859
  14,466
  15,106
  15,779
  16,488
  17,235
  18,020
  18,846
  19,714
  20,626
  21,586
  22,594
Operating income, $m
  -8,262
  3,551
  3,647
  3,758
  3,885
  4,027
  4,185
  4,358
  4,546
  4,750
  4,970
  5,769
  6,022
  6,293
  6,582
  6,889
  7,216
  7,563
  7,930
  8,319
  8,731
  9,167
  9,627
  10,113
  10,626
  11,167
  11,738
  12,339
  12,974
  13,642
  14,345
EBITDA, $m
  -6,265
  5,413
  5,539
  5,684
  5,850
  6,034
  6,238
  6,462
  6,706
  6,969
  7,253
  7,557
  7,883
  8,231
  8,602
  8,997
  9,416
  9,860
  10,331
  10,830
  11,357
  11,914
  12,503
  13,124
  13,779
  14,471
  15,200
  15,968
  16,777
  17,629
  18,526
Interest expense (income), $m
  1,050
  1,112
  1,150
  1,195
  1,246
  1,303
  1,366
  1,435
  1,511
  1,593
  1,681
  1,776
  1,877
  1,985
  2,100
  2,222
  2,351
  2,489
  2,634
  2,788
  2,950
  3,122
  3,303
  3,494
  3,695
  3,907
  4,131
  4,366
  4,613
  4,874
  5,148
Earnings before tax, $m
  -9,232
  2,440
  2,497
  2,563
  2,639
  2,725
  2,819
  2,922
  3,035
  3,158
  3,290
  3,993
  4,146
  4,308
  4,482
  4,668
  4,865
  5,074
  5,296
  5,531
  5,781
  6,045
  6,324
  6,619
  6,931
  7,260
  7,607
  7,974
  8,360
  8,768
  9,198
Tax expense, $m
  -3,055
  659
  674
  692
  713
  736
  761
  789
  820
  853
  888
  1,078
  1,119
  1,163
  1,210
  1,260
  1,313
  1,370
  1,430
  1,493
  1,561
  1,632
  1,707
  1,787
  1,871
  1,960
  2,054
  2,153
  2,257
  2,367
  2,483
Net income, $m
  -6,177
  1,781
  1,822
  1,871
  1,927
  1,989
  2,058
  2,133
  2,216
  2,305
  2,401
  2,915
  3,026
  3,145
  3,272
  3,407
  3,551
  3,704
  3,866
  4,038
  4,220
  4,413
  4,616
  4,832
  5,059
  5,300
  5,553
  5,821
  6,103
  6,401
  6,714

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  199
  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
  43,148
  40,876
  41,816
  42,891
  44,098
  45,434
  46,901
  48,499
  50,228
  52,090
  54,090
  56,228
  58,510
  60,940
  63,522
  66,263
  69,166
  72,240
  75,491
  78,925
  82,552
  86,378
  90,414
  94,667
  99,149
  103,869
  108,839
  114,070
  119,574
  125,365
  131,456
Adjusted assets (=assets-cash), $m
  42,949
  40,876
  41,816
  42,891
  44,098
  45,434
  46,901
  48,499
  50,228
  52,090
  54,090
  56,228
  58,510
  60,940
  63,522
  66,263
  69,166
  72,240
  75,491
  78,925
  82,552
  86,378
  90,414
  94,667
  99,149
  103,869
  108,839
  114,070
  119,574
  125,365
  131,456
Revenue / Adjusted assets
  0.251
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
Average production assets, $m
  1,947
  33,023
  33,782
  34,651
  35,625
  36,705
  37,890
  39,181
  40,578
  42,083
  43,698
  45,425
  47,269
  49,232
  51,318
  53,532
  55,878
  58,361
  60,987
  63,762
  66,692
  69,783
  73,043
  76,479
  80,100
  83,913
  87,928
  92,154
  96,601
  101,279
  106,200
Working capital, $m
  -4,176
  -942
  -964
  -988
  -1,016
  -1,047
  -1,081
  -1,118
  -1,157
  -1,200
  -1,246
  -1,296
  -1,348
  -1,404
  -1,464
  -1,527
  -1,594
  -1,665
  -1,739
  -1,819
  -1,902
  -1,990
  -2,083
  -2,181
  -2,285
  -2,393
  -2,508
  -2,628
  -2,755
  -2,889
  -3,029
Total debt, $m
  22,552
  20,182
  20,963
  21,855
  22,856
  23,966
  25,183
  26,509
  27,944
  29,490
  31,149
  32,924
  34,819
  36,835
  38,979
  41,253
  43,663
  46,214
  48,912
  51,763
  54,773
  57,949
  61,298
  64,829
  68,549
  72,466
  76,591
  80,933
  85,502
  90,308
  95,364
Total liabilities, $m
  36,907
  33,927
  34,708
  35,600
  36,601
  37,711
  38,928
  40,254
  41,689
  43,235
  44,894
  46,669
  48,564
  50,580
  52,724
  54,998
  57,408
  59,959
  62,657
  65,508
  68,518
  71,694
  75,043
  78,574
  82,294
  86,211
  90,336
  94,678
  99,247
  104,053
  109,109
Total equity, $m
  6,241
  6,949
  7,109
  7,291
  7,497
  7,724
  7,973
  8,245
  8,539
  8,855
  9,195
  9,559
  9,947
  10,360
  10,799
  11,265
  11,758
  12,281
  12,833
  13,417
  14,034
  14,684
  15,370
  16,093
  16,855
  17,658
  18,503
  19,392
  20,328
  21,312
  22,348
Total liabilities and equity, $m
  43,148
  40,876
  41,817
  42,891
  44,098
  45,435
  46,901
  48,499
  50,228
  52,090
  54,089
  56,228
  58,511
  60,940
  63,523
  66,263
  69,166
  72,240
  75,490
  78,925
  82,552
  86,378
  90,413
  94,667
  99,149
  103,869
  108,839
  114,070
  119,575
  125,365
  131,457
Debt-to-equity ratio
  3.614
  2.900
  2.950
  3.000
  3.050
  3.100
  3.160
  3.220
  3.270
  3.330
  3.390
  3.440
  3.500
  3.560
  3.610
  3.660
  3.710
  3.760
  3.810
  3.860
  3.900
  3.950
  3.990
  4.030
  4.070
  4.100
  4.140
  4.170
  4.210
  4.240
  4.270
Adjusted equity ratio
  0.145
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6,177
  1,781
  1,822
  1,871
  1,927
  1,989
  2,058
  2,133
  2,216
  2,305
  2,401
  2,915
  3,026
  3,145
  3,272
  3,407
  3,551
  3,704
  3,866
  4,038
  4,220
  4,413
  4,616
  4,832
  5,059
  5,300
  5,553
  5,821
  6,103
  6,401
  6,714
Depreciation, amort., depletion, $m
  1,997
  1,862
  1,892
  1,926
  1,964
  2,007
  2,054
  2,104
  2,159
  2,219
  2,282
  1,788
  1,861
  1,938
  2,020
  2,108
  2,200
  2,298
  2,401
  2,510
  2,626
  2,747
  2,876
  3,011
  3,154
  3,304
  3,462
  3,628
  3,803
  3,987
  4,181
Funds from operations, $m
  3,546
  3,643
  3,714
  3,797
  3,891
  3,996
  4,111
  4,238
  4,375
  4,524
  4,684
  4,704
  4,887
  5,083
  5,292
  5,515
  5,751
  6,002
  6,267
  6,548
  6,846
  7,160
  7,492
  7,843
  8,213
  8,603
  9,015
  9,449
  9,906
  10,388
  10,895
Change in working capital, $m
  175
  -18
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -56
  -60
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -109
  -115
  -121
  -127
  -133
  -140
Cash from operations, $m
  3,371
  3,661
  3,736
  3,822
  3,919
  4,027
  4,145
  4,274
  4,415
  4,567
  4,730
  4,753
  4,940
  5,139
  5,352
  5,578
  5,818
  6,072
  6,342
  6,627
  6,929
  7,248
  7,585
  7,941
  8,316
  8,712
  9,130
  9,570
  10,033
  10,521
  11,036
Maintenance CAPEX, $m
  0
  -1,275
  -1,300
  -1,330
  -1,364
  -1,403
  -1,445
  -1,492
  -1,543
  -1,598
  -1,657
  -1,720
  -1,788
  -1,861
  -1,938
  -2,020
  -2,108
  -2,200
  -2,298
  -2,401
  -2,510
  -2,626
  -2,747
  -2,876
  -3,011
  -3,154
  -3,304
  -3,462
  -3,628
  -3,803
  -3,987
New CAPEX, $m
  -3,067
  -642
  -760
  -868
  -975
  -1,080
  -1,185
  -1,290
  -1,397
  -1,505
  -1,615
  -1,728
  -1,844
  -1,963
  -2,086
  -2,214
  -2,346
  -2,483
  -2,626
  -2,775
  -2,930
  -3,091
  -3,260
  -3,436
  -3,621
  -3,813
  -4,015
  -4,226
  -4,447
  -4,678
  -4,921
Cash from investing activities, $m
  -3,281
  -1,917
  -2,060
  -2,198
  -2,339
  -2,483
  -2,630
  -2,782
  -2,940
  -3,103
  -3,272
  -3,448
  -3,632
  -3,824
  -4,024
  -4,234
  -4,454
  -4,683
  -4,924
  -5,176
  -5,440
  -5,717
  -6,007
  -6,312
  -6,632
  -6,967
  -7,319
  -7,688
  -8,075
  -8,481
  -8,908
Free cash flow, $m
  90
  1,745
  1,676
  1,624
  1,580
  1,544
  1,515
  1,492
  1,475
  1,464
  1,458
  1,305
  1,308
  1,316
  1,328
  1,344
  1,364
  1,389
  1,418
  1,452
  1,489
  1,531
  1,578
  1,629
  1,685
  1,745
  1,811
  1,882
  1,958
  2,040
  2,128
Issuance/(repayment) of debt, $m
  620
  678
  780
  892
  1,001
  1,110
  1,217
  1,326
  1,435
  1,546
  1,659
  1,775
  1,894
  2,017
  2,143
  2,274
  2,410
  2,551
  2,698
  2,851
  3,010
  3,176
  3,349
  3,530
  3,720
  3,918
  4,125
  4,342
  4,569
  4,807
  5,056
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  
  589
  678
  780
  892
  1,001
  1,110
  1,217
  1,326
  1,435
  1,546
  1,659
  1,775
  1,894
  2,017
  2,143
  2,274
  2,410
  2,551
  2,698
  2,851
  3,010
  3,176
  3,349
  3,530
  3,720
  3,918
  4,125
  4,342
  4,569
  4,807
  5,056
Total cash flow (excl. dividends), $m
  679
  2,423
  2,457
  2,516
  2,581
  2,654
  2,732
  2,818
  2,911
  3,010
  3,117
  3,080
  3,202
  3,332
  3,471
  3,618
  3,775
  3,941
  4,116
  4,302
  4,499
  4,707
  4,927
  5,159
  5,404
  5,663
  5,936
  6,224
  6,527
  6,846
  7,183
Retained Cash Flow (-), $m
  6,180
  -135
  -160
  -183
  -205
  -227
  -249
  -272
  -294
  -317
  -340
  -364
  -388
  -413
  -439
  -466
  -494
  -523
  -553
  -584
  -616
  -651
  -686
  -723
  -762
  -802
  -845
  -889
  -936
  -984
  -1,035
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
 
  2,288
  2,297
  2,333
  2,376
  2,426
  2,483
  2,547
  2,617
  2,694
  2,777
  2,716
  2,814
  2,919
  3,032
  3,152
  3,281
  3,418
  3,564
  3,718
  3,883
  4,057
  4,241
  4,436
  4,642
  4,861
  5,091
  5,334
  5,591
  5,862
  6,148
Discount rate, %
 
  11.20
  11.76
  12.35
  12.97
  13.61
  14.29
  15.01
  15.76
  16.55
  17.37
  18.24
  19.16
  20.11
  21.12
  22.18
  23.28
  24.45
  25.67
  26.95
  28.30
  29.72
  31.20
  32.76
  34.40
  36.12
  37.93
  39.82
  41.81
  43.91
  46.10
PV of cash for distribution, $m
 
  2,058
  1,839
  1,645
  1,459
  1,282
  1,114
  957
  812
  679
  560
  430
  344
  270
  207
  156
  115
  83
  58
  40
  27
  17
  11
  7
  4
  2
  1
  1
  0
  0
  0
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

FirstEnergy Corp. is a holding company. The Company is engaged in holding, directly or indirectly, all of the outstanding equity of its principal subsidiaries. Its segments include Regulated Distribution, Regulated Transmission, Competitive Energy Services (CES) and Corporate/Other. As of December 31, 2016, the Regulated Distribution segment distributed electricity through the Company's 10 utility operating companies, serving approximately six million customers, and purchased power for its provider of last resort (POLR), standard offer service (SOS), standard offer service (SSO) and default service requirements in Ohio, Pennsylvania, New Jersey and Maryland. The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAIL). The CES segment primarily supplies electricity to end use customers through retail and wholesale arrangements.

FINANCIAL RATIOS  of  FirstEnergy Corp. (FE)

Valuation Ratios
P/E Ratio -3
Price to Sales 1.3
Price to Book 3
Price to Tangible Book
Price to Cash Flow 5.5
Price to Free Cash Flow 61.3
Growth Rates
Sales Growth Rate -3.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 6%
Cap. Spend. - 3 Yr. Gr. Rate 1.2%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 291.5%
Total Debt to Equity 361.4%
Interest Coverage -8
Management Effectiveness
Return On Assets -11.5%
Ret/ On Assets - 3 Yr. Avg. -2.1%
Return On Total Capital -19.6%
Ret/ On T. Cap. - 3 Yr. Avg. -5.7%
Return On Equity -66.2%
Return On Equity - 3 Yr. Avg. -19.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -42.5%
EBITDA Margin - 3 Yr. Avg. -0.7%
Operating Margin -56.7%
Oper. Margin - 3 Yr. Avg. -12.3%
Pre-Tax Margin -63.4%
Pre-Tax Margin - 3 Yr. Avg. -18.8%
Net Profit Margin -42.4%
Net Profit Margin - 3 Yr. Avg. -12.2%
Effective Tax Rate 33.1%
Eff/ Tax Rate - 3 Yr. Avg. 14.6%
Payout Ratio -9.9%

FE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FE stock intrinsic value calculation we used $11261 million for the last fiscal year's total revenue generated by FirstEnergy Corp.. The default revenue input number comes from 2016 income statement of FirstEnergy Corp.. 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 FE stock valuation model: a) initial revenue growth rate of 2% 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 11.2%, whose default value for FE is calculated based on our internal credit rating of FirstEnergy Corp., 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 FirstEnergy Corp..
    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 FE stock the variable cost ratio is equal to 61.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $818 million in the base year in the intrinsic value calculation for FE 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 5.7% for FirstEnergy Corp..

Corporate tax rate of 27% is the nominal tax rate for FirstEnergy Corp.. 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 FE 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 FE are equal to 287.5%.

Life of production assets of 25.4 years is the average useful life of capital assets used in FirstEnergy Corp. 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 FE is equal to -8.2%. 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 - $6814 million for FirstEnergy Corp. - 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 530.196 million for FirstEnergy Corp. 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 FirstEnergy Corp. at the current share price and the inputted number of shares is $22.4 billion.

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