Intrinsic value of National Grid ADR - NGG

Previous Close

$57.99

  Intrinsic Value

$32.88

stock screener

  Rating & Target

sell

-43%

Previous close

$57.99

 
Intrinsic value

$32.88

 
Up/down potential

-43%

 
Rating

sell

We calculate the intrinsic value of NGG 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 2017), $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 38.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.80
  13.80
  12.92
  12.13
  11.42
  10.77
  10.20
  9.68
  9.21
  8.79
  8.41
  8.07
  7.76
  7.49
  7.24
  7.01
  6.81
  6.63
  6.47
  6.32
  6.19
  6.07
  5.96
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
Revenue, $m
  6,554
  20,800
  23,488
  26,336
  29,343
  32,504
  35,818
  39,284
  42,902
  46,672
  50,597
  54,679
  58,923
  63,334
  67,917
  72,680
  77,631
  82,779
  88,133
  93,703
  99,502
  105,542
  111,835
  118,396
  125,240
  132,381
  139,836
  147,623
  155,759
  164,265
  173,159
Variable operating expenses, $m
 
  15,623
  17,546
  19,584
  21,734
  23,996
  26,367
  28,847
  31,435
  34,133
  36,941
  39,121
  42,157
  45,313
  48,592
  52,000
  55,542
  59,224
  63,055
  67,040
  71,189
  75,510
  80,013
  84,707
  89,603
  94,712
  100,046
  105,617
  111,439
  117,524
  123,887
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
  14,378
  15,623
  17,546
  19,584
  21,734
  23,996
  26,367
  28,847
  31,435
  34,133
  36,941
  39,121
  42,157
  45,313
  48,592
  52,000
  55,542
  59,224
  63,055
  67,040
  71,189
  75,510
  80,013
  84,707
  89,603
  94,712
  100,046
  105,617
  111,439
  117,524
  123,887
Operating income, $m
  3,900
  5,178
  5,942
  6,753
  7,608
  8,508
  9,451
  10,437
  11,466
  12,539
  13,656
  15,559
  16,766
  18,021
  19,326
  20,681
  22,090
  23,554
  25,078
  26,663
  28,313
  30,032
  31,822
  33,689
  35,636
  37,668
  39,790
  42,006
  44,321
  46,741
  49,272
EBITDA, $m
  5,700
  7,879
  8,897
  9,976
  11,114
  12,312
  13,567
  14,880
  16,250
  17,678
  19,165
  20,711
  22,319
  23,990
  25,726
  27,530
  29,405
  31,355
  33,383
  35,493
  37,689
  39,977
  42,361
  44,846
  47,438
  50,143
  52,967
  55,917
  58,998
  62,220
  65,589
Interest expense (income), $m
  1,020
  985
  1,216
  1,465
  1,730
  2,009
  2,303
  2,611
  2,933
  3,269
  3,619
  3,984
  4,363
  4,757
  5,167
  5,593
  6,035
  6,495
  6,973
  7,470
  7,988
  8,526
  9,087
  9,672
  10,281
  10,917
  11,580
  12,273
  12,996
  13,752
  14,542
Earnings before tax, $m
  2,655
  4,193
  4,726
  5,287
  5,878
  6,498
  7,148
  7,826
  8,534
  9,270
  10,037
  11,575
  12,404
  13,264
  14,159
  15,088
  16,055
  17,060
  18,105
  19,193
  20,325
  21,505
  22,735
  24,017
  25,355
  26,751
  28,209
  29,732
  31,324
  32,989
  34,729
Tax expense, $m
  455
  1,132
  1,276
  1,428
  1,587
  1,755
  1,930
  2,113
  2,304
  2,503
  2,710
  3,125
  3,349
  3,581
  3,823
  4,074
  4,335
  4,606
  4,888
  5,182
  5,488
  5,806
  6,138
  6,485
  6,846
  7,223
  7,617
  8,028
  8,458
  8,907
  9,377
Net income, $m
  9,476
  3,061
  3,450
  3,860
  4,291
  4,744
  5,218
  5,713
  6,230
  6,767
  7,327
  8,450
  9,055
  9,683
  10,336
  11,015
  11,720
  12,453
  13,216
  14,011
  14,837
  15,699
  16,596
  17,533
  18,509
  19,528
  20,593
  21,705
  22,867
  24,082
  25,353

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10,420
  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
  80,042
  79,089
  89,307
  100,138
  111,569
  123,589
  136,191
  149,370
  163,125
  177,461
  192,384
  207,906
  224,043
  240,813
  258,241
  276,352
  295,176
  314,748
  335,105
  356,286
  378,336
  401,301
  425,230
  450,176
  476,196
  503,349
  531,696
  561,304
  592,241
  624,581
  658,399
Adjusted assets (=assets-cash), $m
  69,622
  79,089
  89,307
  100,138
  111,569
  123,589
  136,191
  149,370
  163,125
  177,461
  192,384
  207,906
  224,043
  240,813
  258,241
  276,352
  295,176
  314,748
  335,105
  356,286
  378,336
  401,301
  425,230
  450,176
  476,196
  503,349
  531,696
  561,304
  592,241
  624,581
  658,399
Revenue / Adjusted assets
  0.094
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
Average production assets, $m
  51,666
  58,803
  66,400
  74,453
  82,952
  91,889
  101,258
  111,057
  121,284
  131,942
  143,038
  154,579
  166,576
  179,045
  192,002
  205,468
  219,464
  234,016
  249,151
  264,899
  281,293
  298,367
  316,159
  334,706
  354,052
  374,240
  395,316
  417,330
  440,332
  464,376
  489,520
Working capital, $m
  3,724
  -21
  -23
  -26
  -29
  -33
  -36
  -39
  -43
  -47
  -51
  -55
  -59
  -63
  -68
  -73
  -78
  -83
  -88
  -94
  -100
  -106
  -112
  -118
  -125
  -132
  -140
  -148
  -156
  -164
  -173
Total debt, $m
  34,815
  34,738
  41,870
  49,431
  57,409
  65,799
  74,595
  83,794
  93,395
  103,402
  113,818
  124,653
  135,916
  147,622
  159,786
  172,427
  185,567
  199,228
  213,437
  228,222
  243,613
  259,642
  276,344
  293,757
  311,919
  330,871
  350,658
  371,324
  392,918
  415,491
  439,096
Total liabilities, $m
  55,280
  55,204
  62,336
  69,897
  77,875
  86,265
  95,061
  104,260
  113,861
  123,868
  134,284
  145,119
  156,382
  168,088
  180,252
  192,893
  206,033
  219,694
  233,903
  248,688
  264,079
  280,108
  296,810
  314,223
  332,385
  351,337
  371,124
  391,790
  413,384
  435,957
  459,562
Total equity, $m
  24,761
  23,885
  26,971
  30,242
  33,694
  37,324
  41,130
  45,110
  49,264
  53,593
  58,100
  62,788
  67,661
  72,726
  77,989
  83,458
  89,143
  95,054
  101,202
  107,598
  114,257
  121,193
  128,419
  135,953
  143,811
  152,011
  160,572
  169,514
  178,857
  188,623
  198,836
Total liabilities and equity, $m
  80,041
  79,089
  89,307
  100,139
  111,569
  123,589
  136,191
  149,370
  163,125
  177,461
  192,384
  207,907
  224,043
  240,814
  258,241
  276,351
  295,176
  314,748
  335,105
  356,286
  378,336
  401,301
  425,229
  450,176
  476,196
  503,348
  531,696
  561,304
  592,241
  624,580
  658,398
Debt-to-equity ratio
  1.406
  1.450
  1.550
  1.630
  1.700
  1.760
  1.810
  1.860
  1.900
  1.930
  1.960
  1.990
  2.010
  2.030
  2.050
  2.070
  2.080
  2.100
  2.110
  2.120
  2.130
  2.140
  2.150
  2.160
  2.170
  2.180
  2.180
  2.190
  2.200
  2.200
  2.210
Adjusted equity ratio
  0.239
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9,476
  3,061
  3,450
  3,860
  4,291
  4,744
  5,218
  5,713
  6,230
  6,767
  7,327
  8,450
  9,055
  9,683
  10,336
  11,015
  11,720
  12,453
  13,216
  14,011
  14,837
  15,699
  16,596
  17,533
  18,509
  19,528
  20,593
  21,705
  22,867
  24,082
  25,353
Depreciation, amort., depletion, $m
  1,800
  2,701
  2,954
  3,223
  3,506
  3,804
  4,116
  4,443
  4,784
  5,139
  5,509
  5,153
  5,553
  5,968
  6,400
  6,849
  7,315
  7,801
  8,305
  8,830
  9,376
  9,946
  10,539
  11,157
  11,802
  12,475
  13,177
  13,911
  14,678
  15,479
  16,317
Funds from operations, $m
  6,416
  5,762
  6,405
  7,083
  7,797
  8,548
  9,334
  10,156
  11,013
  11,907
  12,836
  13,602
  14,607
  15,651
  16,736
  17,863
  19,035
  20,254
  21,522
  22,841
  24,214
  25,644
  27,135
  28,689
  30,311
  32,003
  33,770
  35,616
  37,545
  39,561
  41,670
Change in working capital, $m
  41
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
Cash from operations, $m
  6,375
  5,765
  6,407
  7,085
  7,800
  8,551
  9,338
  10,160
  11,017
  11,910
  12,840
  13,607
  14,611
  15,656
  16,741
  17,868
  19,040
  20,259
  21,527
  22,846
  24,220
  25,650
  27,141
  28,696
  30,318
  32,010
  33,777
  35,623
  37,553
  39,570
  41,679
Maintenance CAPEX, $m
  0
  -1,722
  -1,960
  -2,213
  -2,482
  -2,765
  -3,063
  -3,375
  -3,702
  -4,043
  -4,398
  -4,768
  -5,153
  -5,553
  -5,968
  -6,400
  -6,849
  -7,315
  -7,801
  -8,305
  -8,830
  -9,376
  -9,946
  -10,539
  -11,157
  -11,802
  -12,475
  -13,177
  -13,911
  -14,678
  -15,479
New CAPEX, $m
  -4,278
  -7,137
  -7,597
  -8,053
  -8,499
  -8,937
  -9,369
  -9,798
  -10,227
  -10,659
  -11,095
  -11,541
  -11,998
  -12,469
  -12,957
  -13,465
  -13,996
  -14,552
  -15,135
  -15,748
  -16,394
  -17,074
  -17,791
  -18,548
  -19,346
  -20,188
  -21,076
  -22,013
  -23,002
  -24,045
  -25,144
Cash from investing activities, $m
  -5,245
  -8,859
  -9,557
  -10,266
  -10,981
  -11,702
  -12,432
  -13,173
  -13,929
  -14,702
  -15,493
  -16,309
  -17,151
  -18,022
  -18,925
  -19,865
  -20,845
  -21,867
  -22,936
  -24,053
  -25,224
  -26,450
  -27,737
  -29,087
  -30,503
  -31,990
  -33,551
  -35,190
  -36,913
  -38,723
  -40,623
Free cash flow, $m
  1,130
  -3,094
  -3,150
  -3,181
  -3,180
  -3,151
  -3,095
  -3,014
  -2,912
  -2,791
  -2,654
  -2,702
  -2,539
  -2,366
  -2,185
  -1,997
  -1,805
  -1,608
  -1,409
  -1,207
  -1,004
  -800
  -596
  -390
  -185
  21
  227
  433
  640
  847
  1,056
Issuance/(repayment) of debt, $m
  1,139
  6,605
  7,132
  7,560
  7,979
  8,390
  8,796
  9,199
  9,601
  10,006
  10,416
  10,835
  11,263
  11,706
  12,164
  12,641
  13,140
  13,661
  14,209
  14,785
  15,391
  16,029
  16,703
  17,413
  18,162
  18,952
  19,786
  20,666
  21,594
  22,573
  23,605
Issuance/(repurchase) of shares, $m
  -215
  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  
  1,863
  6,605
  7,132
  7,560
  7,979
  8,390
  8,796
  9,199
  9,601
  10,006
  10,416
  10,835
  11,263
  11,706
  12,164
  12,641
  13,140
  13,661
  14,209
  14,785
  15,391
  16,029
  16,703
  17,413
  18,162
  18,952
  19,786
  20,666
  21,594
  22,573
  23,605
Total cash flow (excl. dividends), $m
  3,013
  3,511
  3,982
  4,379
  4,798
  5,239
  5,701
  6,185
  6,689
  7,215
  7,763
  8,132
  8,725
  9,340
  9,979
  10,644
  11,335
  12,053
  12,800
  13,577
  14,386
  15,229
  16,107
  17,022
  17,977
  18,973
  20,013
  21,099
  22,234
  23,420
  24,661
Retained Cash Flow (-), $m
  -8,282
  -2,862
  -3,086
  -3,271
  -3,452
  -3,630
  -3,806
  -3,980
  -4,154
  -4,329
  -4,507
  -4,688
  -4,873
  -5,065
  -5,263
  -5,469
  -5,685
  -5,911
  -6,148
  -6,397
  -6,659
  -6,935
  -7,227
  -7,534
  -7,858
  -8,200
  -8,561
  -8,942
  -9,343
  -9,767
  -10,213
Prev. year cash balance distribution, $m
 
  3,738
  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
 
  4,387
  896
  1,108
  1,346
  1,609
  1,896
  2,205
  2,535
  2,886
  3,256
  3,445
  3,851
  4,275
  4,716
  5,175
  5,650
  6,142
  6,652
  7,181
  7,727
  8,294
  8,880
  9,488
  10,119
  10,773
  11,452
  12,158
  12,891
  13,654
  14,448
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
 
  4,108
  781
  892
  994
  1,082
  1,150
  1,197
  1,220
  1,219
  1,194
  1,085
  1,029
  956
  871
  778
  681
  584
  491
  403
  324
  255
  195
  146
  107
  76
  52
  35
  23
  14
  9
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

National Grid plc is an electricity and gas utility company focused on transmission and distribution activities in electricity and gas in both the United Kingdom and the United States. The Company's segments include UK Electricity Transmission, which is engaged in high voltage electricity transmission networks in Great Britain; UK Gas Transmission, which is the gas transmission network in Great Britain and United Kingdom liquefied natural gas (LNG) storage activities; UK Gas Distribution, which includes approximately four of the eight regional networks of Great Britain's gas distribution system, and US Regulated, which includes gas distribution networks, electricity distribution networks and high voltage electricity transmission networks in New York, and New England and electricity generation facilities in New York. Its other activities relate to non-regulated businesses and other commercial operations not included within the above segments.

FINANCIAL RATIOS  of  National Grid ADR (NGG)

Valuation Ratios
P/E Ratio 21
Price to Sales 10.9
Price to Book 8
Price to Tangible Book
Price to Cash Flow 31.3
Price to Free Cash Flow 95
Growth Rates
Sales Growth Rate 13.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15.3%
Cap. Spend. - 3 Yr. Gr. Rate 2.4%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 113.6%
Total Debt to Equity 140.6%
Interest Coverage 4
Management Effectiveness
Return On Assets 13.6%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 17.1%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 46%
Return On Equity - 3 Yr. Avg. 27.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 30%
EBITDA Margin - 3 Yr. Avg. 30.6%
Operating Margin 21.3%
Oper. Margin - 3 Yr. Avg. 22.3%
Pre-Tax Margin 14.5%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 51.8%
Net Profit Margin - 3 Yr. Avg. 28.9%
Effective Tax Rate 17.1%
Eff/ Tax Rate - 3 Yr. Avg. 19.8%
Payout Ratio 18.8%

NGG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NGG stock intrinsic value calculation we used $18278 million for the last fiscal year's total revenue generated by National Grid ADR. The default revenue input number comes from 2017 income statement of National Grid ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NGG stock valuation model: a) initial revenue growth rate of 13.8% 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 NGG is calculated based on our internal credit rating of National Grid ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of National Grid ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NGG stock the variable cost ratio is equal to 75.6%.

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 NGG 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 3.5% for National Grid ADR.

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

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NGG 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 NGG are equal to 282.7%.

Life of production assets of 32.6 years is the average useful life of capital assets used in National Grid ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NGG is equal to -0.1%. 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 - $24761 million for National Grid ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 667.957 million for National Grid ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of National Grid ADR at the current share price and the inputted number of shares is $38.7 billion.

RELATED COMPANIES Price Int.Val. Rating
ED Consolidated E 88.24 48.42  sell
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ES Eversource Ene 64.62 42.21  sell
UTL Unitil 48.00 36.92  sell

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Financial statements of NGG
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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