Intrinsic value of MDU Resources Group - MDU

Previous Close

$26.36

  Intrinsic Value

$61.89

stock screener

  Rating & Target

str. buy

+135%

  Value-price divergence*

-53%

Previous close

$26.36

 
Intrinsic value

$61.89

 
Up/down potential

+135%

 
Rating

str. buy

 
Value-price divergence*

-53%

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

We calculate the intrinsic value of MDU 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 5.1

 

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, %
  2.86
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.62
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
  5.24
  5.21
  5.19
Revenue, $m
  1,141
  4,505
  4,896
  5,304
  5,727
  6,168
  6,625
  7,101
  7,595
  8,109
  8,643
  9,199
  9,778
  10,380
  11,007
  11,660
  12,342
  13,053
  13,795
  14,569
  15,378
  16,224
  17,108
  18,032
  19,000
  20,012
  21,071
  22,180
  23,342
  24,560
  25,835
Variable operating expenses, $m
 
  1,012
  1,095
  1,181
  1,270
  1,363
  1,459
  1,559
  1,664
  1,772
  1,884
  1,938
  2,060
  2,187
  2,319
  2,457
  2,600
  2,750
  2,906
  3,070
  3,240
  3,418
  3,605
  3,799
  4,003
  4,216
  4,440
  4,673
  4,918
  5,175
  5,443
Fixed operating expenses, $m
 
  2,927
  3,001
  3,076
  3,152
  3,231
  3,312
  3,395
  3,480
  3,567
  3,656
  3,747
  3,841
  3,937
  4,035
  4,136
  4,240
  4,346
  4,454
  4,566
  4,680
  4,797
  4,917
  5,040
  5,166
  5,295
  5,427
  5,563
  5,702
  5,845
  5,991
Total operating expenses, $m
  3,720
  3,939
  4,096
  4,257
  4,422
  4,594
  4,771
  4,954
  5,144
  5,339
  5,540
  5,685
  5,901
  6,124
  6,354
  6,593
  6,840
  7,096
  7,360
  7,636
  7,920
  8,215
  8,522
  8,839
  9,169
  9,511
  9,867
  10,236
  10,620
  11,020
  11,434
Operating income, $m
  409
  565
  801
  1,047
  1,305
  1,574
  1,854
  2,147
  2,452
  2,771
  3,103
  3,514
  3,876
  4,256
  4,652
  5,067
  5,502
  5,957
  6,434
  6,934
  7,458
  8,009
  8,587
  9,193
  9,831
  10,500
  11,204
  11,944
  12,722
  13,540
  14,401
EBITDA, $m
  625
  801
  1,052
  1,314
  1,588
  1,874
  2,172
  2,482
  2,807
  3,145
  3,498
  3,867
  4,252
  4,654
  5,075
  5,515
  5,975
  6,458
  6,963
  7,493
  8,048
  8,631
  9,243
  9,885
  10,560
  11,268
  12,013
  12,795
  13,618
  14,483
  15,392
Interest expense (income), $m
  88
  86
  103
  121
  140
  160
  180
  202
  224
  247
  271
  296
  322
  348
  377
  406
  436
  468
  501
  536
  572
  609
  649
  690
  733
  778
  825
  874
  926
  980
  1,037
Earnings before tax, $m
  326
  479
  698
  926
  1,165
  1,414
  1,674
  1,945
  2,228
  2,524
  2,832
  3,218
  3,555
  3,907
  4,276
  4,662
  5,066
  5,489
  5,933
  6,398
  6,887
  7,400
  7,938
  8,504
  9,098
  9,723
  10,379
  11,070
  11,796
  12,560
  13,364
Tax expense, $m
  93
  129
  188
  250
  314
  382
  452
  525
  602
  681
  765
  869
  960
  1,055
  1,154
  1,259
  1,368
  1,482
  1,602
  1,728
  1,859
  1,998
  2,143
  2,296
  2,456
  2,625
  2,802
  2,989
  3,185
  3,391
  3,608
Net income, $m
  64
  350
  509
  676
  850
  1,032
  1,222
  1,420
  1,627
  1,842
  2,068
  2,349
  2,595
  2,852
  3,121
  3,403
  3,698
  4,007
  4,331
  4,671
  5,027
  5,402
  5,795
  6,208
  6,641
  7,097
  7,577
  8,081
  8,611
  9,169
  9,756

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  46
  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
  6,284
  6,805
  7,396
  8,012
  8,652
  9,317
  10,008
  10,727
  11,473
  12,250
  13,057
  13,896
  14,770
  15,679
  16,627
  17,614
  18,643
  19,717
  20,838
  22,008
  23,230
  24,507
  25,843
  27,239
  28,700
  30,229
  31,829
  33,505
  35,260
  37,099
  39,026
Adjusted assets (=assets-cash), $m
  6,238
  6,805
  7,396
  8,012
  8,652
  9,317
  10,008
  10,727
  11,473
  12,250
  13,057
  13,896
  14,770
  15,679
  16,627
  17,614
  18,643
  19,717
  20,838
  22,008
  23,230
  24,507
  25,843
  27,239
  28,700
  30,229
  31,829
  33,505
  35,260
  37,099
  39,026
Revenue / Adjusted assets
  0.183
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
Average production assets, $m
  1,743
  1,901
  2,066
  2,238
  2,417
  2,603
  2,796
  2,997
  3,205
  3,422
  3,648
  3,882
  4,126
  4,380
  4,645
  4,921
  5,208
  5,508
  5,821
  6,148
  6,490
  6,846
  7,220
  7,610
  8,018
  8,445
  8,892
  9,360
  9,850
  10,364
  10,902
Working capital, $m
  307
  333
  362
  392
  424
  456
  490
  525
  562
  600
  640
  681
  724
  768
  815
  863
  913
  966
  1,021
  1,078
  1,138
  1,201
  1,266
  1,334
  1,406
  1,481
  1,559
  1,641
  1,727
  1,817
  1,912
Total debt, $m
  1,790
  2,102
  2,474
  2,861
  3,264
  3,682
  4,117
  4,569
  5,039
  5,527
  6,035
  6,563
  7,112
  7,684
  8,280
  8,901
  9,549
  10,224
  10,929
  11,665
  12,434
  13,237
  14,077
  14,955
  15,874
  16,836
  17,843
  18,897
  20,001
  21,157
  22,369
Total liabilities, $m
  3,968
  4,280
  4,652
  5,039
  5,442
  5,860
  6,295
  6,747
  7,217
  7,705
  8,213
  8,741
  9,290
  9,862
  10,458
  11,079
  11,727
  12,402
  13,107
  13,843
  14,612
  15,415
  16,255
  17,133
  18,052
  19,014
  20,021
  21,075
  22,179
  23,335
  24,547
Total equity, $m
  2,316
  2,525
  2,744
  2,972
  3,210
  3,457
  3,713
  3,980
  4,257
  4,545
  4,844
  5,155
  5,480
  5,817
  6,168
  6,535
  6,917
  7,315
  7,731
  8,165
  8,618
  9,092
  9,588
  10,106
  10,648
  11,215
  11,809
  12,430
  13,082
  13,764
  14,479
Total liabilities and equity, $m
  6,284
  6,805
  7,396
  8,011
  8,652
  9,317
  10,008
  10,727
  11,474
  12,250
  13,057
  13,896
  14,770
  15,679
  16,626
  17,614
  18,644
  19,717
  20,838
  22,008
  23,230
  24,507
  25,843
  27,239
  28,700
  30,229
  31,830
  33,505
  35,261
  37,099
  39,026
Debt-to-equity ratio
  0.773
  0.830
  0.900
  0.960
  1.020
  1.070
  1.110
  1.150
  1.180
  1.220
  1.250
  1.270
  1.300
  1.320
  1.340
  1.360
  1.380
  1.400
  1.410
  1.430
  1.440
  1.460
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.540
Adjusted equity ratio
  0.364
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371
  0.371

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  64
  350
  509
  676
  850
  1,032
  1,222
  1,420
  1,627
  1,842
  2,068
  2,349
  2,595
  2,852
  3,121
  3,403
  3,698
  4,007
  4,331
  4,671
  5,027
  5,402
  5,795
  6,208
  6,641
  7,097
  7,577
  8,081
  8,611
  9,169
  9,756
Depreciation, amort., depletion, $m
  216
  236
  251
  267
  283
  300
  317
  336
  355
  374
  395
  353
  375
  398
  422
  447
  473
  501
  529
  559
  590
  622
  656
  692
  729
  768
  808
  851
  895
  942
  991
Funds from operations, $m
  438
  586
  760
  943
  1,133
  1,332
  1,539
  1,756
  1,981
  2,217
  2,462
  2,702
  2,970
  3,250
  3,544
  3,850
  4,171
  4,508
  4,860
  5,230
  5,617
  6,024
  6,451
  6,899
  7,370
  7,865
  8,385
  8,932
  9,507
  10,111
  10,747
Change in working capital, $m
  -24
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  78
  82
  86
  90
  94
Cash from operations, $m
  462
  558
  731
  913
  1,102
  1,299
  1,505
  1,720
  1,945
  2,179
  2,423
  2,661
  2,927
  3,206
  3,497
  3,802
  4,121
  4,455
  4,805
  5,172
  5,557
  5,961
  6,386
  6,831
  7,299
  7,790
  8,307
  8,850
  9,421
  10,021
  10,653
Maintenance CAPEX, $m
  0
  -158
  -173
  -188
  -203
  -220
  -237
  -254
  -272
  -291
  -311
  -332
  -353
  -375
  -398
  -422
  -447
  -473
  -501
  -529
  -559
  -590
  -622
  -656
  -692
  -729
  -768
  -808
  -851
  -895
  -942
New CAPEX, $m
  -388
  -158
  -165
  -172
  -179
  -186
  -193
  -201
  -209
  -217
  -225
  -235
  -244
  -254
  -265
  -276
  -288
  -300
  -313
  -327
  -341
  -357
  -373
  -390
  -408
  -427
  -447
  -468
  -490
  -514
  -538
Cash from investing activities, $m
  -305
  -316
  -338
  -360
  -382
  -406
  -430
  -455
  -481
  -508
  -536
  -567
  -597
  -629
  -663
  -698
  -735
  -773
  -814
  -856
  -900
  -947
  -995
  -1,046
  -1,100
  -1,156
  -1,215
  -1,276
  -1,341
  -1,409
  -1,480
Free cash flow, $m
  157
  241
  393
  553
  720
  894
  1,076
  1,265
  1,464
  1,670
  1,886
  2,095
  2,330
  2,577
  2,834
  3,104
  3,386
  3,682
  3,991
  4,316
  4,657
  5,015
  5,390
  5,785
  6,199
  6,634
  7,092
  7,573
  8,080
  8,612
  9,172
Issuance/(repayment) of debt, $m
  -7
  356
  372
  387
  403
  418
  435
  452
  470
  488
  508
  528
  549
  572
  596
  621
  647
  675
  705
  736
  769
  803
  840
  878
  919
  962
  1,007
  1,054
  1,104
  1,157
  1,212
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  
  -48
  356
  372
  387
  403
  418
  435
  452
  470
  488
  508
  528
  549
  572
  596
  621
  647
  675
  705
  736
  769
  803
  840
  878
  919
  962
  1,007
  1,054
  1,104
  1,157
  1,212
Total cash flow (excl. dividends), $m
  109
  597
  765
  940
  1,122
  1,312
  1,510
  1,717
  1,933
  2,159
  2,394
  2,623
  2,880
  3,149
  3,430
  3,725
  4,034
  4,357
  4,696
  5,052
  5,426
  5,818
  6,230
  6,663
  7,118
  7,596
  8,099
  8,627
  9,184
  9,769
  10,384
Retained Cash Flow (-), $m
  81
  -211
  -219
  -228
  -237
  -247
  -257
  -267
  -277
  -288
  -299
  -311
  -324
  -337
  -351
  -366
  -382
  -398
  -416
  -434
  -453
  -474
  -495
  -518
  -542
  -567
  -594
  -622
  -651
  -682
  -715
Prev. year cash balance distribution, $m
 
  2
  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
 
  389
  546
  712
  885
  1,065
  1,254
  1,451
  1,656
  1,871
  2,095
  2,311
  2,556
  2,811
  3,079
  3,359
  3,652
  3,959
  4,281
  4,618
  4,972
  5,344
  5,735
  6,145
  6,576
  7,029
  7,505
  8,006
  8,532
  9,086
  9,669
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
 
  364
  476
  573
  653
  716
  761
  788
  797
  790
  768
  728
  683
  629
  569
  505
  440
  376
  316
  259
  209
  164
  126
  95
  69
  49
  34
  23
  15
  10
  6
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

MDU Resources Group, Inc. operates as a diversified natural resource company in the United States. Its Electric segment generates, transmits, and distributes electricity in Montana, North Dakota, South Dakota, and Wyoming. As of December 31, 2015, it served approximately 142,000 residential, commercial, industrial, and municipal customers in 177 communities and adjacent rural areas. The company’s Natural Gas Distribution segment distributes natural gas in Montana, North Dakota, South Dakota, and Wyoming, as well as Idaho, Minnesota, Oregon, and Washington; and offers related value-added services. It served approximately 906,000 residential, commercial, and industrial customers in 334 communities and adjacent rural areas. The company’s Pipeline and Midstream segment provides natural gas transportation, underground storage, processing, and gathering services, as well as oil gathering and processing facilities in the Rocky Mountain and northern Great Plains regions. It also provides cathodic protection and other energy-related services. The company’s Construction Materials and Contracting segment mines aggregates and markets crushed stone, sand, gravel, and related construction materials; and provides integrated contracting services in the central, southern, and western United States, as well as Alaska and Hawaii. Its Construction Services segment constructs and maintains electric and communication lines, gas pipelines, fire suppression systems, and external lighting and traffic signalization equipment. This segment also offers utility excavation services, as well as electrical and mechanical services; and manufactures and distributes transmission line construction equipment and other supplies. The company’s Refining segment refines crude oil and produces and sells diesel fuel, naphtha, ATBs, and other by-products of the production process. MDU Resources Group, Inc. was founded in 1924 and is headquartered in Bismarck, North Dakota.

FINANCIAL RATIOS  of  MDU Resources Group (MDU)

Valuation Ratios
P/E Ratio 80.4
Price to Sales 1.2
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 11.1
Price to Free Cash Flow 69.6
Growth Rates
Sales Growth Rate 2.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -27.7%
Cap. Spend. - 3 Yr. Gr. Rate -6.1%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 75.4%
Total Debt to Equity 77.3%
Interest Coverage 5
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. -0.3%
Return On Total Capital 1.5%
Ret/ On T. Cap. - 3 Yr. Avg. -1.9%
Return On Equity 2.7%
Return On Equity - 3 Yr. Avg. -3.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 15.3%
EBITDA Margin - 3 Yr. Avg. 14%
Operating Margin 9.9%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 7.9%
Pre-Tax Margin - 3 Yr. Avg. 6.7%
Net Profit Margin 1.6%
Net Profit Margin - 3 Yr. Avg. -2.2%
Effective Tax Rate 28.5%
Eff/ Tax Rate - 3 Yr. Avg. 27.7%
Payout Ratio 229.7%

MDU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MDU stock intrinsic value calculation we used $4129 million for the last fiscal year's total revenue generated by MDU Resources Group. The default revenue input number comes from 2016 income statement of MDU Resources Group. 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 MDU stock valuation model: a) initial revenue growth rate of 9.1% 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 MDU is calculated based on our internal credit rating of MDU Resources Group, 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 MDU Resources Group.
    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 MDU stock the variable cost ratio is equal to 22.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2856 million in the base year in the intrinsic value calculation for MDU 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 4.9% for MDU Resources Group.

Corporate tax rate of 27% is the nominal tax rate for MDU Resources Group. 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 MDU 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 MDU are equal to 42.2%.

Life of production assets of 11 years is the average useful life of capital assets used in MDU Resources Group 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 MDU is equal to 7.4%. 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 - $2316 million for MDU Resources Group - 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 193.881 million for MDU Resources Group 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 MDU Resources Group at the current share price and the inputted number of shares is $5.1 billion.

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COMPANY NEWS

▶ MDU Resources posts 2Q profit   [12:35AM  Associated Press]
▶ MDU Resources posts 2Q profit   [Aug-01-17 07:34PM  Associated Press]
▶ The Best Stock in North Dakota: MDU Resources   [Jul-21-17 11:50PM  Kiplinger]
▶ What 2017's top stock picker is buying   [Jun-19-17 02:35PM  CNBC Videos]
▶ The highest-paid CEOs by state   [May-25-17 06:35AM  Associated Press]
▶ MDU Resources misses 1Q profit forecasts   [May-04-17 05:03AM  Associated Press]
▶ Defaulting to individual stocks   [Mar-17-17 07:35PM  CNBC Videos]
▶ MDU Resources Announces Webcast of Analyst Seminar   [Mar-07-17 11:15AM  PR Newswire]
▶ KC-based Capital Electric plugs 45 jobs into new KCK location   [Feb-15-17 02:25PM  at bizjournals.com]
▶ Should You Buy MDU Resources Group Inc (MDU)?   [Dec-12-16 01:29PM  at Insider Monkey]
▶ MDU Resources Provides Five-Year Capital Plan Forecast   [Nov-22-16 04:15PM  PR Newswire]
▶ MDU Resources Announces Director's Intent to Sell Stock   [Aug-10-16 05:30PM  Marketwired]
Stock chart of MDU Financial statements of MDU
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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