Intrinsic value of Public Service Enterprise Group - PEG

Previous Close

$46.22

  Intrinsic Value

$10.69

stock screener

  Rating & Target

str. sell

-77%

  Value-price divergence*

-68%

Previous close

$46.22

 
Intrinsic value

$10.69

 
Up/down potential

-77%

 
Rating

str. sell

 
Value-price divergence*

-68%

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

We calculate the intrinsic value of PEG 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 23.4

 

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, %
  -13.00
  12.00
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
Revenue, $m
  9,061
  10,148
  11,295
  12,500
  13,763
  15,083
  16,461
  17,896
  19,390
  20,944
  22,560
  24,238
  25,982
  27,795
  29,680
  31,639
  33,677
  35,797
  38,005
  40,305
  42,701
  45,200
  47,806
  50,526
  53,365
  56,332
  59,431
  62,672
  66,060
  69,605
  73,315
Variable operating expenses, $m
 
  7,317
  8,143
  9,012
  9,922
  10,874
  11,867
  12,902
  13,979
  15,099
  16,263
  17,471
  18,729
  20,035
  21,394
  22,806
  24,275
  25,804
  27,395
  29,053
  30,780
  32,581
  34,460
  36,420
  38,467
  40,605
  42,839
  45,175
  47,618
  50,173
  52,847
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
  7,513
  7,317
  8,143
  9,012
  9,922
  10,874
  11,867
  12,902
  13,979
  15,099
  16,263
  17,471
  18,729
  20,035
  21,394
  22,806
  24,275
  25,804
  27,395
  29,053
  30,780
  32,581
  34,460
  36,420
  38,467
  40,605
  42,839
  45,175
  47,618
  50,173
  52,847
Operating income, $m
  1,548
  2,832
  3,152
  3,488
  3,841
  4,209
  4,594
  4,995
  5,412
  5,846
  6,296
  6,767
  7,254
  7,760
  8,286
  8,833
  9,402
  9,994
  10,610
  11,252
  11,921
  12,619
  13,346
  14,106
  14,898
  15,726
  16,592
  17,496
  18,442
  19,432
  20,468
EBITDA, $m
  3,024
  4,485
  4,991
  5,524
  6,082
  6,666
  7,274
  7,909
  8,569
  9,256
  9,969
  10,711
  11,482
  12,283
  13,116
  13,982
  14,882
  15,819
  16,795
  17,811
  18,870
  19,974
  21,126
  22,328
  23,583
  24,894
  26,263
  27,695
  29,193
  30,760
  32,399
Interest expense (income), $m
  365
  398
  507
  624
  748
  877
  1,012
  1,153
  1,299
  1,452
  1,611
  1,776
  1,948
  2,126
  2,312
  2,504
  2,705
  2,913
  3,130
  3,355
  3,591
  3,836
  4,091
  4,358
  4,636
  4,926
  5,229
  5,546
  5,878
  6,224
  6,587
Earnings before tax, $m
  1,298
  2,434
  2,645
  2,864
  3,093
  3,333
  3,582
  3,842
  4,112
  4,393
  4,685
  4,991
  5,306
  5,634
  5,974
  6,329
  6,697
  7,081
  7,480
  7,897
  8,331
  8,783
  9,255
  9,748
  10,263
  10,800
  11,362
  11,950
  12,565
  13,208
  13,881
Tax expense, $m
  411
  657
  714
  773
  835
  900
  967
  1,037
  1,110
  1,186
  1,265
  1,347
  1,433
  1,521
  1,613
  1,709
  1,808
  1,912
  2,020
  2,132
  2,249
  2,371
  2,499
  2,632
  2,771
  2,916
  3,068
  3,227
  3,393
  3,566
  3,748
Net income, $m
  887
  1,777
  1,931
  2,091
  2,258
  2,433
  2,615
  2,805
  3,002
  3,207
  3,420
  3,643
  3,873
  4,113
  4,361
  4,620
  4,889
  5,169
  5,461
  5,765
  6,081
  6,412
  6,756
  7,116
  7,492
  7,884
  8,295
  8,724
  9,172
  9,642
  10,133

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  423
  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
  40,070
  44,316
  49,323
  54,586
  60,101
  65,866
  71,882
  78,151
  84,675
  91,460
  98,513
  105,843
  113,460
  121,377
  129,605
  138,161
  147,060
  156,321
  165,962
  176,003
  186,468
  197,378
  208,759
  220,636
  233,036
  245,989
  259,525
  273,675
  288,473
  303,953
  320,153
Adjusted assets (=assets-cash), $m
  39,647
  44,316
  49,323
  54,586
  60,101
  65,866
  71,882
  78,151
  84,675
  91,460
  98,513
  105,843
  113,460
  121,377
  129,605
  138,161
  147,060
  156,321
  165,962
  176,003
  186,468
  197,378
  208,759
  220,636
  233,036
  245,989
  259,525
  273,675
  288,473
  303,953
  320,153
Revenue / Adjusted assets
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
  0.229
Average production assets, $m
  28,013
  31,379
  34,924
  38,651
  42,556
  46,638
  50,898
  55,336
  59,955
  64,760
  69,754
  74,944
  80,338
  85,943
  91,769
  97,827
  104,129
  110,686
  117,512
  124,622
  132,032
  139,757
  147,815
  156,225
  165,006
  174,177
  183,761
  193,781
  204,258
  215,220
  226,690
Working capital, $m
  -22
  497
  553
  613
  674
  739
  807
  877
  950
  1,026
  1,105
  1,188
  1,273
  1,362
  1,454
  1,550
  1,650
  1,754
  1,862
  1,975
  2,092
  2,215
  2,342
  2,476
  2,615
  2,760
  2,912
  3,071
  3,237
  3,411
  3,592
Total debt, $m
  11,783
  14,490
  17,840
  21,361
  25,051
  28,908
  32,932
  37,126
  41,490
  46,030
  50,748
  55,652
  60,748
  66,044
  71,549
  77,273
  83,226
  89,422
  95,871
  102,589
  109,590
  116,889
  124,503
  132,448
  140,744
  149,410
  158,465
  167,932
  177,831
  188,188
  199,025
Total liabilities, $m
  26,940
  29,647
  32,997
  36,518
  40,208
  44,065
  48,089
  52,283
  56,647
  61,187
  65,905
  70,809
  75,905
  81,201
  86,706
  92,430
  98,383
  104,579
  111,028
  117,746
  124,747
  132,046
  139,660
  147,605
  155,901
  164,567
  173,622
  183,089
  192,988
  203,345
  214,182
Total equity, $m
  13,130
  14,669
  16,326
  18,068
  19,893
  21,802
  23,793
  25,868
  28,027
  30,273
  32,608
  35,034
  37,555
  40,176
  42,899
  45,731
  48,677
  51,742
  54,933
  58,257
  61,721
  65,332
  69,099
  73,030
  77,135
  81,423
  85,903
  90,586
  95,485
  100,609
  105,971
Total liabilities and equity, $m
  40,070
  44,316
  49,323
  54,586
  60,101
  65,867
  71,882
  78,151
  84,674
  91,460
  98,513
  105,843
  113,460
  121,377
  129,605
  138,161
  147,060
  156,321
  165,961
  176,003
  186,468
  197,378
  208,759
  220,635
  233,036
  245,990
  259,525
  273,675
  288,473
  303,954
  320,153
Debt-to-equity ratio
  0.897
  0.990
  1.090
  1.180
  1.260
  1.330
  1.380
  1.440
  1.480
  1.520
  1.560
  1.590
  1.620
  1.640
  1.670
  1.690
  1.710
  1.730
  1.750
  1.760
  1.780
  1.790
  1.800
  1.810
  1.820
  1.830
  1.840
  1.850
  1.860
  1.870
  1.880
Adjusted equity ratio
  0.330
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331
  0.331

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  887
  1,777
  1,931
  2,091
  2,258
  2,433
  2,615
  2,805
  3,002
  3,207
  3,420
  3,643
  3,873
  4,113
  4,361
  4,620
  4,889
  5,169
  5,461
  5,765
  6,081
  6,412
  6,756
  7,116
  7,492
  7,884
  8,295
  8,724
  9,172
  9,642
  10,133
Depreciation, amort., depletion, $m
  1,476
  1,653
  1,840
  2,036
  2,241
  2,456
  2,680
  2,914
  3,157
  3,410
  3,673
  3,944
  4,228
  4,523
  4,830
  5,149
  5,480
  5,826
  6,185
  6,559
  6,949
  7,356
  7,780
  8,222
  8,685
  9,167
  9,672
  10,199
  10,750
  11,327
  11,931
Funds from operations, $m
  3,270
  3,430
  3,770
  4,126
  4,499
  4,889
  5,295
  5,719
  6,159
  6,617
  7,093
  7,588
  8,102
  8,636
  9,191
  9,769
  10,369
  10,995
  11,646
  12,324
  13,030
  13,767
  14,536
  15,338
  16,176
  17,052
  17,966
  18,923
  19,923
  20,969
  22,064
Change in working capital, $m
  -41
  53
  56
  59
  62
  65
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  100
  104
  108
  113
  117
  122
  128
  133
  139
  145
  152
  159
  166
  174
  182
Cash from operations, $m
  3,311
  3,377
  3,714
  4,067
  4,437
  4,824
  5,228
  5,648
  6,086
  6,541
  7,014
  7,505
  8,016
  8,547
  9,099
  9,673
  10,270
  10,891
  11,537
  12,211
  12,913
  13,645
  14,408
  15,205
  16,037
  16,906
  17,814
  18,764
  19,757
  20,796
  21,883
Maintenance CAPEX, $m
  0
  -1,474
  -1,652
  -1,838
  -2,034
  -2,240
  -2,455
  -2,679
  -2,912
  -3,156
  -3,408
  -3,671
  -3,944
  -4,228
  -4,523
  -4,830
  -5,149
  -5,480
  -5,826
  -6,185
  -6,559
  -6,949
  -7,356
  -7,780
  -8,222
  -8,685
  -9,167
  -9,672
  -10,199
  -10,750
  -11,327
New CAPEX, $m
  -4,298
  -3,366
  -3,546
  -3,726
  -3,905
  -4,082
  -4,260
  -4,438
  -4,619
  -4,804
  -4,994
  -5,190
  -5,393
  -5,605
  -5,826
  -6,058
  -6,301
  -6,557
  -6,826
  -7,110
  -7,410
  -7,725
  -8,058
  -8,410
  -8,780
  -9,172
  -9,584
  -10,019
  -10,478
  -10,961
  -11,471
Cash from investing activities, $m
  -4,248
  -4,840
  -5,198
  -5,564
  -5,939
  -6,322
  -6,715
  -7,117
  -7,531
  -7,960
  -8,402
  -8,861
  -9,337
  -9,833
  -10,349
  -10,888
  -11,450
  -12,037
  -12,652
  -13,295
  -13,969
  -14,674
  -15,414
  -16,190
  -17,002
  -17,857
  -18,751
  -19,691
  -20,677
  -21,711
  -22,798
Free cash flow, $m
  -937
  -1,464
  -1,483
  -1,497
  -1,502
  -1,498
  -1,486
  -1,469
  -1,446
  -1,419
  -1,389
  -1,356
  -1,322
  -1,286
  -1,251
  -1,215
  -1,181
  -1,147
  -1,115
  -1,084
  -1,056
  -1,029
  -1,006
  -984
  -966
  -950
  -937
  -927
  -920
  -916
  -915
Issuance/(repayment) of debt, $m
  1,875
  3,130
  3,350
  3,521
  3,689
  3,857
  4,025
  4,193
  4,365
  4,539
  4,719
  4,904
  5,096
  5,296
  5,505
  5,724
  5,954
  6,195
  6,450
  6,718
  7,001
  7,299
  7,614
  7,946
  8,296
  8,666
  9,055
  9,466
  9,900
  10,356
  10,838
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  
  1,796
  3,130
  3,350
  3,521
  3,689
  3,857
  4,025
  4,193
  4,365
  4,539
  4,719
  4,904
  5,096
  5,296
  5,505
  5,724
  5,954
  6,195
  6,450
  6,718
  7,001
  7,299
  7,614
  7,946
  8,296
  8,666
  9,055
  9,466
  9,900
  10,356
  10,838
Total cash flow (excl. dividends), $m
  859
  1,666
  1,867
  2,024
  2,188
  2,359
  2,538
  2,725
  2,919
  3,120
  3,330
  3,548
  3,774
  4,009
  4,254
  4,508
  4,773
  5,048
  5,335
  5,634
  5,945
  6,270
  6,608
  6,961
  7,330
  7,716
  8,118
  8,539
  8,980
  9,440
  9,922
Retained Cash Flow (-), $m
  -64
  -1,539
  -1,658
  -1,742
  -1,825
  -1,908
  -1,991
  -2,075
  -2,159
  -2,246
  -2,335
  -2,426
  -2,521
  -2,620
  -2,724
  -2,832
  -2,946
  -3,065
  -3,191
  -3,324
  -3,464
  -3,611
  -3,767
  -3,931
  -4,105
  -4,287
  -4,480
  -4,684
  -4,898
  -5,124
  -5,362
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
 
  128
  209
  282
  362
  451
  547
  650
  759
  875
  995
  1,121
  1,253
  1,389
  1,530
  1,677
  1,827
  1,983
  2,144
  2,310
  2,481
  2,658
  2,841
  3,030
  3,226
  3,428
  3,638
  3,856
  4,082
  4,316
  4,560
Discount rate, %
 
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
 
  120
  182
  226
  266
  301
  330
  350
  362
  365
  360
  347
  328
  304
  276
  246
  214
  183
  153
  125
  100
  78
  59
  44
  32
  23
  15
  10
  7
  4
  3
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

Public Service Enterprise Group Incorporated (PSEG) is a holding company. The Company is an energy company with operations located primarily in the Northeastern and Mid-Atlantic United States. The Company's segments include Public Service Electric and Gas Company (PSE&G), PSEG Power LLC (Power) and Other. PSEG is engaged in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey. PSE&G is also the provider of last resort for gas and electric commodity service for end users in its service territory. Power is a multi-regional energy supply company that integrates the operations of its merchant nuclear and fossil generating assets with its power marketing businesses through energy sales in energy markets and fuel supply functions primarily in the Northeast and Mid-Atlantic United States through its principal subsidiaries. In addition, Power owns and operates solar generation in various states.

FINANCIAL RATIOS  of  Public Service Enterprise Group (PEG)

Valuation Ratios
P/E Ratio 26.3
Price to Sales 2.6
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 7
Price to Free Cash Flow -23.6
Growth Rates
Sales Growth Rate -13%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.3%
Cap. Spend. - 3 Yr. Gr. Rate 8.9%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 83%
Total Debt to Equity 89.7%
Interest Coverage 5
Management Effectiveness
Return On Assets 2.9%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 3.7%
Ret/ On T. Cap. - 3 Yr. Avg. 6.2%
Return On Equity 6.8%
Return On Equity - 3 Yr. Avg. 10.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 34.6%
EBITDA Margin - 3 Yr. Avg. 37.7%
Operating Margin 17.1%
Oper. Margin - 3 Yr. Avg. 23%
Pre-Tax Margin 14.3%
Pre-Tax Margin - 3 Yr. Avg. 20.9%
Net Profit Margin 9.8%
Net Profit Margin - 3 Yr. Avg. 13.3%
Effective Tax Rate 31.7%
Eff/ Tax Rate - 3 Yr. Avg. 35.7%
Payout Ratio 93.6%

PEG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PEG stock intrinsic value calculation we used $9061 million for the last fiscal year's total revenue generated by Public Service Enterprise Group. The default revenue input number comes from 2016 income statement of Public Service Enterprise 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 PEG stock valuation model: a) initial revenue growth rate of 12% 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 6.9%, whose default value for PEG is calculated based on our internal credit rating of Public Service Enterprise 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 Public Service Enterprise 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 PEG stock the variable cost ratio is equal to 72.1%.

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 PEG 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 Public Service Enterprise Group.

Corporate tax rate of 27% is the nominal tax rate for Public Service Enterprise 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 PEG 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 PEG are equal to 309.2%.

Life of production assets of 19 years is the average useful life of capital assets used in Public Service Enterprise 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 PEG is equal to 4.9%. 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 - $13130 million for Public Service Enterprise 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 506.661 million for Public Service Enterprise 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 Public Service Enterprise Group at the current share price and the inputted number of shares is $23.4 billion.

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DUK Duke Energy 85.16 100.46  hold
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COMPANY NEWS

▶ NJ BPU Approves PSE&G Energy Efficiency Programs   [Aug-23-17 01:53PM  PR Newswire]
▶ PSEG beats 2Q profit forecasts   [Jul-28-17 11:08PM  Associated Press]
▶ A Look at Top Competitive Utilities and Their Dividends   [Jun-26-17 10:36AM  Market Realist]
▶ EXC, FE, and PEG: Which Stocks Are Looking Cheap?   [Jun-23-17 07:36AM  Market Realist]
▶ PSE&G Files for Gas Supply Rate Increase This Fall   [Jun-01-17 10:19AM  PR Newswire]
▶ PSE&G prepared for 2017 summer electric demand   [May-31-17 03:45PM  PR Newswire]
▶ PSEG closing its 2 final New Jersey coal-fired power plants   [May-30-17 09:40AM  Associated Press]
▶ PSEG Power Reports PJM Auction Results   [08:00AM  PR Newswire]
▶ PSEG beats 1Q profit forecasts   [07:44AM  Associated Press]
▶ PSEG Announces 2017 First Quarter Results   [07:30AM  PR Newswire]
▶ A Look at FirstEnergys 1Q17 Expected Revenues and Drivers   [Apr-24-17 07:39AM  Market Realist]
▶ PSEG Strategy Continues to Produce Results   [Apr-18-17 01:00PM  PR Newswire]
▶ PSEG Spends Record Level in 2016 with Diverse Suppliers   [Mar-28-17 08:30AM  PR Newswire]
▶ Looking at Exelons Current Valuation   [Mar-22-17 07:36AM  Market Realist]
▶ PSE&G Prepares for Winter Storm   [Mar-13-17 10:47AM  PR Newswire]
Financial statements of PEG
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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