Intrinsic value of NextEra Energy - NEE

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$133.56

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$133.56

 
Intrinsic value

$59.67

 
Up/down potential

-55%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of NEE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 62.6

 

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, %
  -7.61
  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
  16,155
  16,478
  16,857
  17,290
  17,777
  18,316
  18,907
  19,551
  20,248
  20,999
  21,805
  22,667
  23,587
  24,566
  25,607
  26,712
  27,882
  29,122
  30,432
  31,817
  33,278
  34,821
  36,448
  38,162
  39,969
  41,872
  43,875
  45,984
  48,203
  50,537
  52,993
Variable operating expenses, $m
 
  12,111
  12,390
  12,708
  13,066
  13,462
  13,897
  14,370
  14,882
  15,434
  16,026
  16,660
  17,336
  18,056
  18,821
  19,633
  20,494
  21,404
  22,367
  23,385
  24,460
  25,593
  26,789
  28,049
  29,377
  30,776
  32,248
  33,798
  35,429
  37,145
  38,950
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
  11,547
  12,111
  12,390
  12,708
  13,066
  13,462
  13,897
  14,370
  14,882
  15,434
  16,026
  16,660
  17,336
  18,056
  18,821
  19,633
  20,494
  21,404
  22,367
  23,385
  24,460
  25,593
  26,789
  28,049
  29,377
  30,776
  32,248
  33,798
  35,429
  37,145
  38,950
Operating income, $m
  4,608
  4,367
  4,467
  4,582
  4,711
  4,854
  5,010
  5,181
  5,366
  5,565
  5,778
  6,007
  6,250
  6,510
  6,786
  7,079
  7,389
  7,717
  8,064
  8,431
  8,819
  9,228
  9,659
  10,113
  10,592
  11,096
  11,627
  12,186
  12,774
  13,392
  14,043
EBITDA, $m
  7,985
  5,533
  5,661
  5,806
  5,969
  6,150
  6,349
  6,565
  6,799
  7,051
  7,322
  7,612
  7,920
  8,249
  8,599
  8,970
  9,363
  9,779
  10,219
  10,684
  11,175
  11,693
  12,239
  12,815
  13,422
  14,061
  14,733
  15,441
  16,187
  16,970
  17,795
Interest expense (income), $m
  1,193
  1,152
  1,206
  1,265
  1,332
  1,408
  1,492
  1,584
  1,684
  1,792
  1,909
  2,035
  2,169
  2,312
  2,464
  2,626
  2,798
  2,980
  3,173
  3,377
  3,592
  3,820
  4,059
  4,313
  4,579
  4,860
  5,156
  5,468
  5,796
  6,141
  6,505
Earnings before tax, $m
  4,388
  3,214
  3,261
  3,317
  3,379
  3,446
  3,519
  3,597
  3,682
  3,772
  3,869
  3,972
  4,082
  4,198
  4,322
  4,453
  4,591
  4,737
  4,892
  5,055
  5,227
  5,408
  5,599
  5,800
  6,012
  6,236
  6,471
  6,718
  6,978
  7,251
  7,539
Tax expense, $m
  1,383
  868
  881
  896
  912
  930
  950
  971
  994
  1,019
  1,045
  1,072
  1,102
  1,134
  1,167
  1,202
  1,240
  1,279
  1,321
  1,365
  1,411
  1,460
  1,512
  1,566
  1,623
  1,684
  1,747
  1,814
  1,884
  1,958
  2,035
Net income, $m
  2,912
  2,346
  2,381
  2,421
  2,466
  2,515
  2,569
  2,626
  2,688
  2,754
  2,824
  2,900
  2,980
  3,065
  3,155
  3,250
  3,351
  3,458
  3,571
  3,690
  3,815
  3,948
  4,087
  4,234
  4,389
  4,552
  4,724
  4,904
  5,094
  5,293
  5,503

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,292
  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
  89,993
  90,539
  92,621
  95,002
  97,674
  100,635
  103,884
  107,422
  111,252
  115,378
  119,806
  124,543
  129,598
  134,979
  140,699
  146,768
  153,200
  160,009
  167,209
  174,816
  182,848
  191,324
  200,262
  209,684
  219,610
  230,065
  241,073
  252,659
  264,852
  277,678
  291,170
Adjusted assets (=assets-cash), $m
  88,701
  90,539
  92,621
  95,002
  97,674
  100,635
  103,884
  107,422
  111,252
  115,378
  119,806
  124,543
  129,598
  134,979
  140,699
  146,768
  153,200
  160,009
  167,209
  174,816
  182,848
  191,324
  200,262
  209,684
  219,610
  230,065
  241,073
  252,659
  264,852
  277,678
  291,170
Revenue / Adjusted assets
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
Average production assets, $m
  5,727
  5,833
  5,967
  6,121
  6,293
  6,484
  6,693
  6,921
  7,168
  7,434
  7,719
  8,024
  8,350
  8,696
  9,065
  9,456
  9,870
  10,309
  10,773
  11,263
  11,781
  12,327
  12,902
  13,509
  14,149
  14,823
  15,532
  16,278
  17,064
  17,890
  18,759
Working capital, $m
  -3,510
  -1,813
  -1,854
  -1,902
  -1,955
  -2,015
  -2,080
  -2,151
  -2,227
  -2,310
  -2,399
  -2,493
  -2,595
  -2,702
  -2,817
  -2,938
  -3,067
  -3,203
  -3,348
  -3,500
  -3,661
  -3,830
  -4,009
  -4,198
  -4,397
  -4,606
  -4,826
  -5,058
  -5,302
  -5,559
  -5,829
Total debt, $m
  30,840
  30,919
  32,431
  34,159
  36,099
  38,249
  40,608
  43,177
  45,957
  48,952
  52,167
  55,606
  59,276
  63,183
  67,336
  71,742
  76,411
  81,354
  86,581
  92,104
  97,936
  104,089
  110,578
  117,418
  124,625
  132,215
  140,207
  148,619
  157,470
  166,783
  176,577
Total liabilities, $m
  65,652
  65,731
  67,243
  68,971
  70,911
  73,061
  75,420
  77,989
  80,769
  83,764
  86,979
  90,418
  94,088
  97,995
  102,148
  106,554
  111,223
  116,166
  121,393
  126,916
  132,748
  138,901
  145,390
  152,230
  159,437
  167,027
  175,019
  183,431
  192,282
  201,595
  211,389
Total equity, $m
  24,341
  24,808
  25,378
  26,030
  26,763
  27,574
  28,464
  29,434
  30,483
  31,614
  32,827
  34,125
  35,510
  36,984
  38,552
  40,215
  41,977
  43,842
  45,815
  47,900
  50,100
  52,423
  54,872
  57,453
  60,173
  63,038
  66,054
  69,229
  72,569
  76,084
  79,781
Total liabilities and equity, $m
  89,993
  90,539
  92,621
  95,001
  97,674
  100,635
  103,884
  107,423
  111,252
  115,378
  119,806
  124,543
  129,598
  134,979
  140,700
  146,769
  153,200
  160,008
  167,208
  174,816
  182,848
  191,324
  200,262
  209,683
  219,610
  230,065
  241,073
  252,660
  264,851
  277,679
  291,170
Debt-to-equity ratio
  1.267
  1.250
  1.280
  1.310
  1.350
  1.390
  1.430
  1.470
  1.510
  1.550
  1.590
  1.630
  1.670
  1.710
  1.750
  1.780
  1.820
  1.860
  1.890
  1.920
  1.950
  1.990
  2.020
  2.040
  2.070
  2.100
  2.120
  2.150
  2.170
  2.190
  2.210
Adjusted equity ratio
  0.265
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,912
  2,346
  2,381
  2,421
  2,466
  2,515
  2,569
  2,626
  2,688
  2,754
  2,824
  2,900
  2,980
  3,065
  3,155
  3,250
  3,351
  3,458
  3,571
  3,690
  3,815
  3,948
  4,087
  4,234
  4,389
  4,552
  4,724
  4,904
  5,094
  5,293
  5,503
Depreciation, amort., depletion, $m
  3,377
  1,167
  1,193
  1,224
  1,259
  1,297
  1,339
  1,384
  1,434
  1,487
  1,544
  1,605
  1,670
  1,739
  1,813
  1,891
  1,974
  2,062
  2,155
  2,253
  2,356
  2,465
  2,580
  2,702
  2,830
  2,965
  3,106
  3,256
  3,413
  3,578
  3,752
Funds from operations, $m
  6,113
  3,513
  3,574
  3,646
  3,725
  3,812
  3,907
  4,010
  4,121
  4,241
  4,368
  4,505
  4,650
  4,804
  4,968
  5,142
  5,325
  5,520
  5,725
  5,943
  6,172
  6,413
  6,668
  6,936
  7,219
  7,517
  7,830
  8,160
  8,506
  8,871
  9,255
Change in working capital, $m
  -223
  -36
  -42
  -48
  -54
  -59
  -65
  -71
  -77
  -83
  -89
  -95
  -101
  -108
  -115
  -122
  -129
  -136
  -144
  -152
  -161
  -170
  -179
  -189
  -199
  -209
  -220
  -232
  -244
  -257
  -270
Cash from operations, $m
  6,336
  2,554
  3,616
  3,693
  3,778
  3,871
  3,972
  4,081
  4,198
  4,323
  4,457
  4,599
  4,751
  4,912
  5,082
  5,263
  5,454
  5,656
  5,870
  6,095
  6,332
  6,583
  6,847
  7,125
  7,418
  7,726
  8,050
  8,392
  8,751
  9,128
  9,525
Maintenance CAPEX, $m
  0
  -1,145
  -1,167
  -1,193
  -1,224
  -1,259
  -1,297
  -1,339
  -1,384
  -1,434
  -1,487
  -1,544
  -1,605
  -1,670
  -1,739
  -1,813
  -1,891
  -1,974
  -2,062
  -2,155
  -2,253
  -2,356
  -2,465
  -2,580
  -2,702
  -2,830
  -2,965
  -3,106
  -3,256
  -3,413
  -3,578
New CAPEX, $m
  -4,240
  -107
  -134
  -153
  -172
  -191
  -209
  -228
  -247
  -266
  -285
  -305
  -326
  -347
  -369
  -391
  -414
  -439
  -464
  -490
  -518
  -546
  -576
  -607
  -640
  -674
  -709
  -746
  -786
  -826
  -869
Cash from investing activities, $m
  -8,110
  -1,252
  -1,301
  -1,346
  -1,396
  -1,450
  -1,506
  -1,567
  -1,631
  -1,700
  -1,772
  -1,849
  -1,931
  -2,017
  -2,108
  -2,204
  -2,305
  -2,413
  -2,526
  -2,645
  -2,771
  -2,902
  -3,041
  -3,187
  -3,342
  -3,504
  -3,674
  -3,852
  -4,042
  -4,239
  -4,447
Free cash flow, $m
  -1,774
  1,302
  2,315
  2,346
  2,382
  2,422
  2,466
  2,514
  2,567
  2,624
  2,685
  2,750
  2,820
  2,895
  2,975
  3,059
  3,149
  3,244
  3,344
  3,450
  3,562
  3,681
  3,806
  3,937
  4,076
  4,222
  4,377
  4,539
  4,709
  4,889
  5,078
Issuance/(repayment) of debt, $m
  2,079
  1,371
  1,512
  1,728
  1,940
  2,150
  2,359
  2,569
  2,780
  2,995
  3,215
  3,439
  3,670
  3,907
  4,152
  4,406
  4,670
  4,943
  5,227
  5,523
  5,831
  6,153
  6,489
  6,840
  7,207
  7,590
  7,992
  8,412
  8,852
  9,312
  9,795
Issuance/(repurchase) of shares, $m
  537
  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  
  4,107
  1,371
  1,512
  1,728
  1,940
  2,150
  2,359
  2,569
  2,780
  2,995
  3,215
  3,439
  3,670
  3,907
  4,152
  4,406
  4,670
  4,943
  5,227
  5,523
  5,831
  6,153
  6,489
  6,840
  7,207
  7,590
  7,992
  8,412
  8,852
  9,312
  9,795
Total cash flow (excl. dividends), $m
  2,333
  2,673
  3,827
  4,075
  4,322
  4,572
  4,825
  5,083
  5,347
  5,619
  5,900
  6,189
  6,490
  6,802
  7,127
  7,465
  7,818
  8,186
  8,571
  8,973
  9,394
  9,834
  10,295
  10,777
  11,283
  11,813
  12,368
  12,950
  13,561
  14,201
  14,873
Retained Cash Flow (-), $m
  -1,767
  -467
  -571
  -652
  -732
  -811
  -890
  -969
  -1,049
  -1,130
  -1,213
  -1,298
  -1,385
  -1,475
  -1,567
  -1,663
  -1,762
  -1,865
  -1,973
  -2,084
  -2,201
  -2,322
  -2,449
  -2,581
  -2,720
  -2,865
  -3,016
  -3,175
  -3,341
  -3,515
  -3,697
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
 
  2,207
  3,256
  3,422
  3,590
  3,761
  3,935
  4,114
  4,298
  4,489
  4,686
  4,892
  5,105
  5,328
  5,560
  5,802
  6,056
  6,321
  6,598
  6,889
  7,193
  7,512
  7,846
  8,196
  8,563
  8,948
  9,352
  9,776
  10,220
  10,687
  11,176
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
 
  2,041
  2,766
  2,648
  2,508
  2,351
  2,181
  2,000
  1,812
  1,623
  1,435
  1,251
  1,076
  912
  760
  623
  502
  397
  308
  234
  174
  126
  89
  62
  41
  27
  17
  11
  6
  4
  2
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

NextEra Energy, Inc., through its subsidiaries, generates, transmits, and distributes electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear, and natural gas-fired facilities. It also provides risk management services related to power and gas consumption. As of December 31, 2016, it served approximately 10 million people through approximately 4.9 million customer accounts in the east and lower west coasts of Florida. The company had approximately 45,900 megawatts of generating capacity. The company was formerly known as FPL Group, Inc. and changed its name to NextEra Energy, Inc. in 2010. NextEra Energy, Inc. was founded in 1984 and is headquartered in Juno Beach, Florida.

FINANCIAL RATIOS  of  NextEra Energy (NEE)

Valuation Ratios
P/E Ratio 21.5
Price to Sales 3.9
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 9.9
Price to Free Cash Flow 29.8
Growth Rates
Sales Growth Rate -7.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.5%
Cap. Spend. - 3 Yr. Gr. Rate 5.6%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 114.3%
Total Debt to Equity 126.7%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.3%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 12.4%
Return On Equity - 3 Yr. Avg. 12.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 55.5%
EBITDA Margin - 3 Yr. Avg. 49.5%
Operating Margin 28.5%
Oper. Margin - 3 Yr. Avg. 26.9%
Pre-Tax Margin 27.2%
Pre-Tax Margin - 3 Yr. Avg. 23.8%
Net Profit Margin 18%
Net Profit Margin - 3 Yr. Avg. 16.1%
Effective Tax Rate 31.5%
Eff/ Tax Rate - 3 Yr. Avg. 31.5%
Payout Ratio 55.4%

NEE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEE stock intrinsic value calculation we used $16155 million for the last fiscal year's total revenue generated by NextEra Energy. The default revenue input number comes from 2016 income statement of NextEra Energy. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NEE 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 8.1%, whose default value for NEE is calculated based on our internal credit rating of NextEra Energy, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of NextEra Energy.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NEE stock the variable cost ratio is equal to 73.5%.

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 NEE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.9% for NextEra Energy.

Corporate tax rate of 27% is the nominal tax rate for NextEra Energy. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NEE 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 NEE are equal to 35.4%.

Life of production assets of 1.8 years is the average useful life of capital assets used in NextEra Energy operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NEE is equal to -11%. 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 - $24341 million for NextEra Energy - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 469.035 million for NextEra Energy is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of NextEra Energy at the current share price and the inputted number of shares is $62.6 billion.


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COMPANY NEWS

▶ [$$] NextEra: Steady Growth and a Rising Dividend   [Apr-29-17 12:01AM  Barrons.com]
▶ [$$] NextEra May Face Elliott Management in Deal Talks on Oncor   [Apr-28-17 09:08AM  The Wall Street Journal]
▶ NextEra Beats on Q1 Earnings: ETFs in Focus   [Apr-25-17 12:00PM  Zacks]
▶ Analyzing NextEra Energys Implied Volatility   [Apr-24-17 04:36PM  Market Realist]
▶ What Drove NextEra Energys 1Q17 Earnings?   [01:21PM  Market Realist]
▶ NextEra Energy Partners posts 1Q profit   [08:00AM  Associated Press]
▶ NextEra beats 1Q profit forecasts   [07:47AM  Associated Press]
▶ 5 Dividend Stocks to Buy in April   [09:03AM  Motley Fool]
▶ NextEra Energy Stock: Is It Fairly Valued?   [07:37AM  Market Realist]
▶ Where Southern Company Stock Could Go from Here   [Apr-17-17 04:06PM  Market Realist]
▶ [$$] Texas Regulators Finalize No Vote on NextEra Takeover of Oncor   [Apr-14-17 12:32AM  The Wall Street Journal]
▶ NextEra Needs Oncor Or An Encore   [Apr-11-17 01:39PM  Bloomberg]
▶ NextEra Energy: Cramer's Top Takeaways   [06:25AM  TheStreet.com]
▶ Inside NextEra Energys Implied Volatility   [09:06AM  Market Realist]
▶ Where NextEra Energys Current Valuation Stands Next to Peers   [Apr-05-17 05:35PM  Market Realist]
▶ Where NextEra Energy Stock Could Go Now   [04:05PM  Market Realist]
▶ NextEra Energys Oncor Deal Hits a Roadblock   [02:18PM  Market Realist]
▶ Utilities That Are Fairly ValuedAnd Those That Arent   [Apr-04-17 09:07AM  Market Realist]
▶ Have US Utilities Become Overvalued?   [05:05PM  Market Realist]
▶ [$$] Texas Regulators Give Preliminary 'No' to NextEra Takeover of Oncor   [Mar-30-17 05:59PM  at The Wall Street Journal]
▶ 3 Dividend Stocks That Prove Boring Is Beautiful   [Mar-15-17 05:50PM  at Motley Fool]
Stock chart of NEE Financial statements of NEE
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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