Intrinsic value of NRG Energy - NRG

Previous Close

$16.84

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$16.84

 
Intrinsic value

$1.07

 
Up/down potential

-94%

 
Rating

str. sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of NRG 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 5.4

 

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, %
  -15.83
  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
  12,351
  12,598
  12,888
  13,219
  13,591
  14,003
  14,455
  14,947
  15,480
  16,054
  16,670
  17,329
  18,033
  18,782
  19,578
  20,422
  21,317
  22,264
  23,266
  24,325
  25,442
  26,622
  27,865
  29,176
  30,558
  32,012
  33,544
  35,156
  36,853
  38,637
  40,515
Variable operating expenses, $m
 
  16,049
  16,416
  16,836
  17,308
  17,831
  18,404
  19,029
  19,705
  20,433
  21,215
  21,985
  22,877
  23,827
  24,837
  25,908
  27,044
  28,245
  29,516
  30,859
  32,277
  33,773
  35,351
  37,014
  38,767
  40,612
  42,555
  44,601
  46,753
  49,017
  51,399
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
  12,234
  16,049
  16,416
  16,836
  17,308
  17,831
  18,404
  19,029
  19,705
  20,433
  21,215
  21,985
  22,877
  23,827
  24,837
  25,908
  27,044
  28,245
  29,516
  30,859
  32,277
  33,773
  35,351
  37,014
  38,767
  40,612
  42,555
  44,601
  46,753
  49,017
  51,399
Operating income, $m
  117
  -3,451
  -3,528
  -3,617
  -3,717
  -3,828
  -3,949
  -4,082
  -4,225
  -4,379
  -4,545
  -4,655
  -4,844
  -5,046
  -5,259
  -5,486
  -5,727
  -5,981
  -6,250
  -6,535
  -6,835
  -7,152
  -7,486
  -7,838
  -8,209
  -8,600
  -9,011
  -9,444
  -9,900
  -10,380
  -10,884
EBITDA, $m
  1,575
  -1,953
  -1,998
  -2,049
  -2,107
  -2,171
  -2,241
  -2,317
  -2,400
  -2,489
  -2,584
  -2,686
  -2,795
  -2,911
  -3,035
  -3,166
  -3,304
  -3,451
  -3,606
  -3,771
  -3,944
  -4,127
  -4,319
  -4,523
  -4,737
  -4,962
  -5,200
  -5,450
  -5,713
  -5,989
  -6,280
Interest expense (income), $m
  1,106
  1,026
  968
  1,002
  1,041
  1,085
  1,133
  1,187
  1,245
  1,308
  1,375
  1,448
  1,526
  1,609
  1,697
  1,791
  1,890
  1,996
  2,108
  2,226
  2,351
  2,482
  2,622
  2,768
  2,923
  3,086
  3,257
  3,438
  3,628
  3,828
  4,039
Earnings before tax, $m
  -875
  -4,477
  -4,496
  -4,619
  -4,758
  -4,913
  -5,083
  -5,268
  -5,470
  -5,687
  -5,920
  -6,103
  -6,370
  -6,654
  -6,956
  -7,277
  -7,617
  -7,977
  -8,358
  -8,760
  -9,185
  -9,634
  -10,107
  -10,606
  -11,132
  -11,685
  -12,269
  -12,882
  -13,528
  -14,208
  -14,922
Tax expense, $m
  16
  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
Net income, $m
  -774
  -4,477
  -4,496
  -4,619
  -4,758
  -4,913
  -5,083
  -5,268
  -5,470
  -5,687
  -5,920
  -6,103
  -6,370
  -6,654
  -6,956
  -7,277
  -7,617
  -7,977
  -8,358
  -8,760
  -9,185
  -9,634
  -10,107
  -10,606
  -11,132
  -11,685
  -12,269
  -12,882
  -13,528
  -14,208
  -14,922

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,973
  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
  30,355
  28,961
  29,627
  30,388
  31,243
  32,191
  33,230
  34,361
  35,587
  36,906
  38,323
  39,838
  41,455
  43,176
  45,006
  46,947
  49,005
  51,182
  53,485
  55,919
  58,488
  61,199
  64,058
  67,072
  70,247
  73,592
  77,113
  80,819
  84,719
  88,822
  93,137
Adjusted assets (=assets-cash), $m
  28,382
  28,961
  29,627
  30,388
  31,243
  32,191
  33,230
  34,361
  35,587
  36,906
  38,323
  39,838
  41,455
  43,176
  45,006
  46,947
  49,005
  51,182
  53,485
  55,919
  58,488
  61,199
  64,058
  67,072
  70,247
  73,592
  77,113
  80,819
  84,719
  88,822
  93,137
Revenue / Adjusted assets
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
Average production assets, $m
  20,495
  20,900
  21,381
  21,930
  22,547
  23,231
  23,981
  24,797
  25,682
  26,634
  27,656
  28,750
  29,916
  31,159
  32,479
  33,880
  35,365
  36,937
  38,599
  40,355
  42,209
  44,165
  46,229
  48,404
  50,695
  53,108
  55,650
  58,324
  61,139
  64,100
  67,214
Working capital, $m
  2,013
  1,285
  1,315
  1,348
  1,386
  1,428
  1,474
  1,525
  1,579
  1,638
  1,700
  1,768
  1,839
  1,916
  1,997
  2,083
  2,174
  2,271
  2,373
  2,481
  2,595
  2,715
  2,842
  2,976
  3,117
  3,265
  3,421
  3,586
  3,759
  3,941
  4,133
Total debt, $m
  19,226
  16,977
  17,576
  18,262
  19,031
  19,883
  20,819
  21,837
  22,940
  24,128
  25,402
  26,766
  28,221
  29,771
  31,417
  33,165
  35,016
  36,976
  39,049
  41,239
  43,551
  45,991
  48,565
  51,277
  54,135
  57,144
  60,313
  63,649
  67,159
  70,852
  74,736
Total liabilities, $m
  28,314
  26,065
  26,664
  27,350
  28,119
  28,971
  29,907
  30,925
  32,028
  33,216
  34,490
  35,854
  37,309
  38,859
  40,505
  42,253
  44,104
  46,064
  48,137
  50,327
  52,639
  55,079
  57,653
  60,365
  63,223
  66,232
  69,401
  72,737
  76,247
  79,940
  83,824
Total equity, $m
  2,041
  2,896
  2,963
  3,039
  3,124
  3,219
  3,323
  3,436
  3,559
  3,691
  3,832
  3,984
  4,145
  4,318
  4,501
  4,695
  4,900
  5,118
  5,349
  5,592
  5,849
  6,120
  6,406
  6,707
  7,025
  7,359
  7,711
  8,082
  8,472
  8,882
  9,314
Total liabilities and equity, $m
  30,355
  28,961
  29,627
  30,389
  31,243
  32,190
  33,230
  34,361
  35,587
  36,907
  38,322
  39,838
  41,454
  43,177
  45,006
  46,948
  49,004
  51,182
  53,486
  55,919
  58,488
  61,199
  64,059
  67,072
  70,248
  73,591
  77,112
  80,819
  84,719
  88,822
  93,138
Debt-to-equity ratio
  9.420
  5.860
  5.930
  6.010
  6.090
  6.180
  6.270
  6.360
  6.450
  6.540
  6.630
  6.720
  6.810
  6.900
  6.980
  7.060
  7.150
  7.220
  7.300
  7.370
  7.450
  7.520
  7.580
  7.650
  7.710
  7.770
  7.820
  7.880
  7.930
  7.980
  8.020
Adjusted equity ratio
  0.002
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -774
  -4,477
  -4,496
  -4,619
  -4,758
  -4,913
  -5,083
  -5,268
  -5,470
  -5,687
  -5,920
  -6,103
  -6,370
  -6,654
  -6,956
  -7,277
  -7,617
  -7,977
  -8,358
  -8,760
  -9,185
  -9,634
  -10,107
  -10,606
  -11,132
  -11,685
  -12,269
  -12,882
  -13,528
  -14,208
  -14,922
Depreciation, amort., depletion, $m
  1,458
  1,498
  1,531
  1,568
  1,611
  1,657
  1,709
  1,765
  1,825
  1,890
  1,960
  1,969
  2,049
  2,134
  2,225
  2,321
  2,422
  2,530
  2,644
  2,764
  2,891
  3,025
  3,166
  3,315
  3,472
  3,638
  3,812
  3,995
  4,188
  4,390
  4,604
Funds from operations, $m
  1,997
  -2,979
  -2,965
  -3,051
  -3,148
  -3,255
  -3,374
  -3,504
  -3,644
  -3,796
  -3,959
  -4,134
  -4,321
  -4,520
  -4,732
  -4,956
  -5,195
  -5,447
  -5,714
  -5,996
  -6,294
  -6,609
  -6,941
  -7,291
  -7,660
  -8,048
  -8,457
  -8,887
  -9,341
  -9,817
  -10,319
Change in working capital, $m
  -75
  25
  30
  34
  38
  42
  46
  50
  54
  59
  63
  67
  72
  76
  81
  86
  91
  97
  102
  108
  114
  120
  127
  134
  141
  148
  156
  164
  173
  182
  191
Cash from operations, $m
  2,072
  -3,551
  -2,995
  -3,085
  -3,186
  -3,297
  -3,420
  -3,554
  -3,699
  -3,855
  -4,022
  -4,201
  -4,393
  -4,596
  -4,813
  -5,043
  -5,286
  -5,544
  -5,816
  -6,104
  -6,408
  -6,729
  -7,068
  -7,425
  -7,800
  -8,196
  -8,613
  -9,052
  -9,514
  -9,999
  -10,510
Maintenance CAPEX, $m
  0
  -1,404
  -1,432
  -1,464
  -1,502
  -1,544
  -1,591
  -1,643
  -1,698
  -1,759
  -1,824
  -1,894
  -1,969
  -2,049
  -2,134
  -2,225
  -2,321
  -2,422
  -2,530
  -2,644
  -2,764
  -2,891
  -3,025
  -3,166
  -3,315
  -3,472
  -3,638
  -3,812
  -3,995
  -4,188
  -4,390
New CAPEX, $m
  -1,244
  -405
  -481
  -549
  -617
  -684
  -750
  -817
  -884
  -952
  -1,022
  -1,094
  -1,167
  -1,242
  -1,320
  -1,401
  -1,485
  -1,572
  -1,662
  -1,756
  -1,854
  -1,956
  -2,063
  -2,175
  -2,291
  -2,413
  -2,541
  -2,675
  -2,814
  -2,961
  -3,114
Cash from investing activities, $m
  -824
  -1,809
  -1,913
  -2,013
  -2,119
  -2,228
  -2,341
  -2,460
  -2,582
  -2,711
  -2,846
  -2,988
  -3,136
  -3,291
  -3,454
  -3,626
  -3,806
  -3,994
  -4,192
  -4,400
  -4,618
  -4,847
  -5,088
  -5,341
  -5,606
  -5,885
  -6,179
  -6,487
  -6,809
  -7,149
  -7,504
Free cash flow, $m
  1,248
  -5,360
  -4,907
  -5,099
  -5,305
  -5,525
  -5,761
  -6,013
  -6,281
  -6,566
  -6,869
  -7,189
  -7,529
  -7,888
  -8,267
  -8,668
  -9,091
  -9,538
  -10,008
  -10,504
  -11,027
  -11,577
  -12,156
  -12,766
  -13,407
  -14,082
  -14,792
  -15,538
  -16,323
  -17,148
  -18,015
Issuance/(repayment) of debt, $m
  -386
  -1,029
  599
  685
  769
  852
  935
  1,019
  1,103
  1,188
  1,275
  1,364
  1,455
  1,549
  1,647
  1,747
  1,852
  1,960
  2,073
  2,190
  2,312
  2,440
  2,573
  2,712
  2,858
  3,010
  3,169
  3,336
  3,510
  3,693
  3,884
Issuance/(repurchase) of shares, $m
  -225
  7,244
  4,374
  4,490
  4,621
  4,768
  4,930
  5,108
  5,301
  5,510
  5,735
  5,977
  6,235
  6,511
  6,804
  7,115
  7,445
  7,795
  8,166
  8,557
  8,971
  9,408
  9,869
  10,355
  10,867
  11,407
  11,975
  12,573
  13,203
  13,865
  14,563
Cash from financing (excl. dividends), $m  
  -718
  6,215
  4,973
  5,175
  5,390
  5,620
  5,865
  6,127
  6,404
  6,698
  7,010
  7,341
  7,690
  8,060
  8,451
  8,862
  9,297
  9,755
  10,239
  10,747
  11,283
  11,848
  12,442
  13,067
  13,725
  14,417
  15,144
  15,909
  16,713
  17,558
  18,447
Total cash flow (excl. dividends), $m
  531
  -6,389
  -4,308
  -4,413
  -4,535
  -4,673
  -4,826
  -4,995
  -5,179
  -5,378
  -5,594
  -5,825
  -6,073
  -6,338
  -6,621
  -6,921
  -7,240
  -7,578
  -7,936
  -8,314
  -8,714
  -9,137
  -9,583
  -10,053
  -10,549
  -11,072
  -11,623
  -12,203
  -12,813
  -13,455
  -14,131
Retained Cash Flow (-), $m
  968
  -1,608
  -67
  -76
  -85
  -95
  -104
  -113
  -123
  -132
  -142
  -152
  -162
  -172
  -183
  -194
  -206
  -218
  -230
  -243
  -257
  -271
  -286
  -301
  -318
  -334
  -352
  -371
  -390
  -410
  -432
Prev. year cash balance distribution, $m
 
  753
  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
 
  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
Discount rate, %
 
  11.90
  12.50
  13.12
  13.78
  14.46
  15.19
  15.95
  16.74
  17.58
  18.46
  19.38
  20.35
  21.37
  22.44
  23.56
  24.74
  25.98
  27.28
  28.64
  30.07
  31.57
  33.15
  34.81
  36.55
  38.38
  40.30
  42.31
  44.43
  46.65
  48.98
PV of cash for 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
Current shareholders' claim on cash, %
  100
  32.1
  20.4
  13.0
  8.3
  5.3
  3.3
  2.1
  1.3
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  0.1
  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

NRG Energy, Inc., together with its subsidiaries, operates as a power company. The company provides electricity; system power, distributed generation, solar and wind products, backup generation, storage and distributed solar, demand response, energy efficiency, electric vehicle charging stations, and on-site energy solutions; carbon management and specialty services; and various energy services, such as operations, maintenance, technical, development, and asset management services. It owns and operates approximately 50,000 megawatts of generation. The company also offers retail energy, rooftop solar, portable solar, and battery products home services; and various bundled products, which combine energy with protection products, energy efficiency, and renewable energy solutions, as well as offers installation and contract management services for residential solar customers. As of December 31, 2015, it served approximately 2.77 million recurring and 624,000 discrete customers. In addition, the company owns, operates, and develops solar and wind power projects; develops, constructs, and finances a range of solutions for utilities, schools, municipalities, and commercial markets; and trades in electric power, natural gas, and related commodity and financial products, including forwards, futures, options, and swaps. As of December 31, 2015, it operated 90 active fossil fuel and nuclear plants, 16 utility scale solar facilities, and 36 wind farms and multiple distributed solar facilities. Further, the company transacts in and trades fuel and transportation services; directly sells energy, services, and products and services to retail customers under the NRG, Reliant, and other names; and provides steam, hot water, and chilled water, as well as electricity to commercial businesses, universities, hospitals, and governmental units. NRG Energy, Inc. was founded in 1989 and is headquartered in Princeton, New Jersey.

FINANCIAL RATIOS  of  NRG Energy (NRG)

Valuation Ratios
P/E Ratio -6.9
Price to Sales 0.4
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 2.6
Price to Free Cash Flow 6.4
Growth Rates
Sales Growth Rate -15.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3%
Cap. Spend. - 3 Yr. Gr. Rate -8.9%
Financial Strength
Quick Ratio 2
Current Ratio 0.4
LT Debt to Equity 882.2%
Total Debt to Equity 942%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.1%
Ret/ On Assets - 3 Yr. Avg. -3%
Return On Total Capital -3.5%
Ret/ On T. Cap. - 3 Yr. Avg. -9.1%
Return On Equity -30.7%
Return On Equity - 3 Yr. Avg. -42.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 30.7%
Gross Margin - 3 Yr. Avg. 27.7%
EBITDA Margin 13.7%
EBITDA Margin - 3 Yr. Avg. 5.2%
Operating Margin 0.9%
Oper. Margin - 3 Yr. Avg. -6.3%
Pre-Tax Margin -7.1%
Pre-Tax Margin - 3 Yr. Avg. -13.6%
Net Profit Margin -6.3%
Net Profit Margin - 3 Yr. Avg. -16.3%
Effective Tax Rate -1.8%
Eff/ Tax Rate - 3 Yr. Avg. -8.7%
Payout Ratio -9.8%

NRG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NRG stock intrinsic value calculation we used $12351 million for the last fiscal year's total revenue generated by NRG Energy. The default revenue input number comes from 2016 income statement of NRG 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 NRG 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 11.9%, whose default value for NRG is calculated based on our internal credit rating of NRG 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 NRG 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 NRG stock the variable cost ratio is equal to 127.4%.

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 NRG 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 NRG Energy.

Corporate tax rate of 27% is the nominal tax rate for NRG 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 NRG 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 NRG are equal to 165.9%.

Life of production assets of 14.6 years is the average useful life of capital assets used in NRG 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 NRG is equal to 10.2%. 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 - $2041 million for NRG 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 321.925 million for NRG 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 NRG Energy at the current share price and the inputted number of shares is $5.4 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
SRE Sempra Energy 113.41 30.65  str.sell
SPKE Spark Energy 35.65 3,187.43  str.buy
AT Atlantic Power 2.45 0.54  str.sell
EIX Edison Interna 80.35 322.57  str.buy
PCG PG&E 67.28 228.61  str.buy
ALE Allete 70.78 26.19  str.sell
CPN Calpine 9.59 3.97  str.sell

COMPANY NEWS

▶ Can AES Succeed Where NRG Energy Failed?   [Apr-25-17 08:49AM  Motley Fool]
▶ Why these Utility Stocks Look Weak   [Apr-24-17 04:36PM  Market Realist]
▶ Hawaiian Electric, NRG Energy strike deal on 3rd Oahu solar farm   [03:50PM  American City Business Journals]
▶ Why NRGs Implied Volatility Is Rising   [01:09PM  Market Realist]
▶ Will NRG Energy Profit From Distributed Energy?   [Apr-21-17 11:49AM  Motley Fool]
▶ Houstons NRG Energy sets construction start date for 3 Oahu solar projects   [Apr-13-17 11:35PM  American City Business Journals]
▶ Analyzing NRG Energys Current Valuation   [10:16AM  Market Realist]
▶ What Do NRG Energys Chart Indicators Suggest?   [10:16AM  Market Realist]
▶ Analysts Are Still Positive on NRG Energy   [10:16AM  Market Realist]
▶ Traders Are Most Bearish on These Utility Stocks   [Apr-11-17 09:07AM  Market Realist]
▶ What Does Dominion Resources Implied Volatility Indicate?   [Apr-10-17 09:06AM  Market Realist]
▶ [$$] Activists clash over direction for NRG Energy   [Apr-09-17 12:53PM  Financial Times]
▶ Here's Why NRG Energy Gained 11% in March   [11:12AM  Motley Fool]
▶ Inside Southern Companys Implied Volatility   [Apr-04-17 10:37AM  Market Realist]
▶ 5 stocks that can outperform the Street's Q2 jitters   [Apr-03-17 07:25PM  CNBC Videos]
▶ The 5 Best Performing S&P 500 Stocks for Q1   [Apr-01-17 09:15AM  24/7 Wall St.]
▶ First Quarter Wrap: The Top 10 Stocks   [12:50PM  at Barrons.com]
▶ [$$] Trump/coal: Appalachia's false spring   [Mar-28-17 01:26PM  at Financial Times]
▶ Investing in EV Infrastructure: Where the Money Is Going   [Mar-15-17 01:35PM  at Motley Fool]
Stock chart of NRG Financial statements of NRG
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.