Intrinsic value of Quanta Services - PWR

Previous Close

$34.27

  Intrinsic Value

$2.93

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

-100%

Previous close

$34.27

 
Intrinsic value

$2.93

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

-100%

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

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

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.04
  27.10
  24.89
  22.90
  21.11
  19.50
  18.05
  16.74
  15.57
  14.51
  13.56
  12.71
  11.94
  11.24
  10.62
  10.06
  9.55
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
Revenue, $m
  7,651
  9,724
  12,145
  14,926
  18,077
  21,602
  25,501
  29,771
  34,407
  39,401
  44,744
  50,429
  56,448
  62,794
  69,461
  76,446
  83,746
  91,363
  99,299
  107,558
  116,146
  125,074
  134,353
  143,994
  154,014
  164,430
  175,261
  186,526
  198,249
  210,455
  223,168
Variable operating expenses, $m
 
  9,380
  11,674
  14,311
  17,298
  20,640
  24,337
  28,385
  32,780
  37,514
  42,580
  47,809
  53,515
  59,532
  65,852
  72,474
  79,396
  86,617
  94,140
  101,970
  110,112
  118,577
  127,373
  136,514
  146,013
  155,888
  166,155
  176,836
  187,950
  199,521
  211,574
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
  7,331
  9,380
  11,674
  14,311
  17,298
  20,640
  24,337
  28,385
  32,780
  37,514
  42,580
  47,809
  53,515
  59,532
  65,852
  72,474
  79,396
  86,617
  94,140
  101,970
  110,112
  118,577
  127,373
  136,514
  146,013
  155,888
  166,155
  176,836
  187,950
  199,521
  211,574
Operating income, $m
  321
  345
  471
  615
  779
  962
  1,165
  1,386
  1,627
  1,887
  2,164
  2,620
  2,933
  3,262
  3,609
  3,971
  4,351
  4,746
  5,159
  5,588
  6,034
  6,498
  6,980
  7,481
  8,001
  8,542
  9,105
  9,690
  10,299
  10,933
  11,594
EBITDA, $m
  523
  623
  778
  956
  1,158
  1,383
  1,633
  1,906
  2,203
  2,523
  2,865
  3,229
  3,615
  4,021
  4,448
  4,895
  5,363
  5,850
  6,359
  6,887
  7,437
  8,009
  8,603
  9,221
  9,862
  10,529
  11,223
  11,944
  12,695
  13,476
  14,291
Interest expense (income), $m
  13
  12
  31
  54
  79
  108
  140
  176
  215
  258
  304
  353
  405
  460
  519
  580
  644
  711
  781
  854
  930
  1,009
  1,090
  1,176
  1,264
  1,356
  1,452
  1,551
  1,655
  1,762
  1,874
Earnings before tax, $m
  308
  333
  439
  562
  700
  854
  1,024
  1,210
  1,412
  1,629
  1,860
  2,267
  2,527
  2,802
  3,090
  3,392
  3,707
  4,035
  4,378
  4,734
  5,104
  5,489
  5,889
  6,305
  6,737
  7,186
  7,653
  8,139
  8,645
  9,171
  9,720
Tax expense, $m
  108
  90
  119
  152
  189
  231
  277
  327
  381
  440
  502
  612
  682
  756
  834
  916
  1,001
  1,090
  1,182
  1,278
  1,378
  1,482
  1,590
  1,702
  1,819
  1,940
  2,066
  2,198
  2,334
  2,476
  2,624
Net income, $m
  198
  243
  321
  410
  511
  623
  748
  883
  1,031
  1,189
  1,358
  1,655
  1,845
  2,045
  2,256
  2,476
  2,706
  2,946
  3,196
  3,456
  3,726
  4,007
  4,299
  4,603
  4,918
  5,246
  5,587
  5,942
  6,311
  6,695
  7,095

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  112
  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
  5,354
  6,661
  8,318
  10,223
  12,382
  14,796
  17,467
  20,391
  23,566
  26,987
  30,647
  34,541
  38,663
  43,009
  47,576
  52,360
  57,361
  62,578
  68,013
  73,670
  79,552
  85,667
  92,022
  98,626
  105,489
  112,623
  120,041
  127,758
  135,787
  144,147
  152,855
Adjusted assets (=assets-cash), $m
  5,242
  6,661
  8,318
  10,223
  12,382
  14,796
  17,467
  20,391
  23,566
  26,987
  30,647
  34,541
  38,663
  43,009
  47,576
  52,360
  57,361
  62,578
  68,013
  73,670
  79,552
  85,667
  92,022
  98,626
  105,489
  112,623
  120,041
  127,758
  135,787
  144,147
  152,855
Revenue / Adjusted assets
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
  1.460
Average production assets, $m
  1,334
  1,692
  2,113
  2,597
  3,145
  3,759
  4,437
  5,180
  5,987
  6,856
  7,785
  8,775
  9,822
  10,926
  12,086
  13,302
  14,572
  15,897
  17,278
  18,715
  20,209
  21,763
  23,377
  25,055
  26,799
  28,611
  30,495
  32,456
  34,495
  36,619
  38,831
Working capital, $m
  1,084
  1,245
  1,555
  1,911
  2,314
  2,765
  3,264
  3,811
  4,404
  5,043
  5,727
  6,455
  7,225
  8,038
  8,891
  9,785
  10,720
  11,695
  12,710
  13,767
  14,867
  16,010
  17,197
  18,431
  19,714
  21,047
  22,433
  23,875
  25,376
  26,938
  28,566
Total debt, $m
  361
  897
  1,532
  2,262
  3,088
  4,013
  5,036
  6,156
  7,372
  8,682
  10,084
  11,575
  13,154
  14,819
  16,568
  18,400
  20,315
  22,313
  24,395
  26,561
  28,815
  31,157
  33,591
  36,120
  38,748
  41,481
  44,322
  47,277
  50,353
  53,554
  56,889
Total liabilities, $m
  2,015
  2,551
  3,186
  3,916
  4,742
  5,667
  6,690
  7,810
  9,026
  10,336
  11,738
  13,229
  14,808
  16,473
  18,222
  20,054
  21,969
  23,967
  26,049
  28,215
  30,469
  32,811
  35,245
  37,774
  40,402
  43,135
  45,976
  48,931
  52,007
  55,208
  58,543
Total equity, $m
  3,339
  4,110
  5,132
  6,308
  7,639
  9,129
  10,777
  12,582
  14,540
  16,651
  18,909
  21,312
  23,855
  26,537
  29,354
  32,306
  35,391
  38,610
  41,964
  45,454
  49,084
  52,857
  56,778
  60,852
  65,087
  69,489
  74,066
  78,826
  83,781
  88,939
  94,312
Total liabilities and equity, $m
  5,354
  6,661
  8,318
  10,224
  12,381
  14,796
  17,467
  20,392
  23,566
  26,987
  30,647
  34,541
  38,663
  43,010
  47,576
  52,360
  57,360
  62,577
  68,013
  73,669
  79,553
  85,668
  92,023
  98,626
  105,489
  112,624
  120,042
  127,757
  135,788
  144,147
  152,855
Debt-to-equity ratio
  0.108
  0.220
  0.300
  0.360
  0.400
  0.440
  0.470
  0.490
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.570
  0.580
  0.580
  0.580
  0.590
  0.590
  0.590
  0.590
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
Adjusted equity ratio
  0.616
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  198
  243
  321
  410
  511
  623
  748
  883
  1,031
  1,189
  1,358
  1,655
  1,845
  2,045
  2,256
  2,476
  2,706
  2,946
  3,196
  3,456
  3,726
  4,007
  4,299
  4,603
  4,918
  5,246
  5,587
  5,942
  6,311
  6,695
  7,095
Depreciation, amort., depletion, $m
  202
  278
  307
  341
  379
  421
  468
  520
  576
  636
  701
  609
  682
  759
  839
  924
  1,012
  1,104
  1,200
  1,300
  1,403
  1,511
  1,623
  1,740
  1,861
  1,987
  2,118
  2,254
  2,396
  2,543
  2,697
Funds from operations, $m
  322
  521
  628
  751
  889
  1,045
  1,216
  1,403
  1,607
  1,825
  2,059
  2,264
  2,527
  2,804
  3,095
  3,400
  3,718
  4,050
  4,396
  4,755
  5,130
  5,519
  5,923
  6,343
  6,779
  7,233
  7,705
  8,195
  8,706
  9,238
  9,792
Change in working capital, $m
  -58
  265
  310
  356
  403
  451
  499
  547
  593
  639
  684
  728
  770
  812
  853
  894
  934
  975
  1,016
  1,057
  1,099
  1,143
  1,188
  1,234
  1,283
  1,333
  1,386
  1,442
  1,501
  1,562
  1,627
Cash from operations, $m
  380
  255
  318
  395
  486
  593
  717
  857
  1,013
  1,186
  1,375
  1,537
  1,757
  1,992
  2,242
  2,506
  2,783
  3,075
  3,380
  3,698
  4,030
  4,376
  4,735
  5,108
  5,497
  5,900
  6,318
  6,753
  7,206
  7,676
  8,165
Maintenance CAPEX, $m
  0
  -93
  -118
  -147
  -180
  -218
  -261
  -308
  -360
  -416
  -476
  -541
  -609
  -682
  -759
  -839
  -924
  -1,012
  -1,104
  -1,200
  -1,300
  -1,403
  -1,511
  -1,623
  -1,740
  -1,861
  -1,987
  -2,118
  -2,254
  -2,396
  -2,543
New CAPEX, $m
  -213
  -358
  -421
  -484
  -548
  -613
  -678
  -743
  -807
  -869
  -930
  -989
  -1,047
  -1,104
  -1,160
  -1,215
  -1,270
  -1,325
  -1,381
  -1,437
  -1,494
  -1,553
  -1,614
  -1,678
  -1,744
  -1,812
  -1,884
  -1,960
  -2,040
  -2,124
  -2,212
Cash from investing activities, $m
  -272
  -451
  -539
  -631
  -728
  -831
  -939
  -1,051
  -1,167
  -1,285
  -1,406
  -1,530
  -1,656
  -1,786
  -1,919
  -2,054
  -2,194
  -2,337
  -2,485
  -2,637
  -2,794
  -2,956
  -3,125
  -3,301
  -3,484
  -3,673
  -3,871
  -4,078
  -4,294
  -4,520
  -4,755
Free cash flow, $m
  108
  -196
  -221
  -236
  -242
  -238
  -223
  -194
  -153
  -99
  -31
  7
  100
  206
  323
  451
  589
  738
  895
  1,061
  1,236
  1,419
  1,609
  1,807
  2,013
  2,226
  2,447
  2,675
  2,912
  3,156
  3,409
Issuance/(repayment) of debt, $m
  -125
  544
  635
  730
  827
  925
  1,023
  1,120
  1,216
  1,310
  1,402
  1,491
  1,579
  1,665
  1,749
  1,832
  1,915
  1,998
  2,082
  2,167
  2,253
  2,342
  2,434
  2,529
  2,629
  2,732
  2,841
  2,955
  3,075
  3,202
  3,335
Issuance/(repurchase) of shares, $m
  0
  632
  702
  765
  821
  866
  900
  921
  928
  921
  900
  748
  699
  636
  562
  476
  379
  273
  158
  34
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -125
  1,176
  1,337
  1,495
  1,648
  1,791
  1,923
  2,041
  2,144
  2,231
  2,302
  2,239
  2,278
  2,301
  2,311
  2,308
  2,294
  2,271
  2,240
  2,201
  2,253
  2,342
  2,434
  2,529
  2,629
  2,732
  2,841
  2,955
  3,075
  3,202
  3,335
Total cash flow (excl. dividends), $m
  -17
  980
  1,116
  1,259
  1,405
  1,553
  1,701
  1,847
  1,991
  2,133
  2,271
  2,246
  2,378
  2,507
  2,634
  2,759
  2,884
  3,009
  3,135
  3,262
  3,489
  3,761
  4,043
  4,337
  4,642
  4,959
  5,288
  5,631
  5,987
  6,358
  6,745
Retained Cash Flow (-), $m
  -254
  -875
  -1,023
  -1,175
  -1,332
  -1,490
  -1,648
  -1,805
  -1,959
  -2,110
  -2,258
  -2,403
  -2,544
  -2,682
  -2,818
  -2,952
  -3,085
  -3,219
  -3,354
  -3,490
  -3,630
  -3,773
  -3,921
  -4,075
  -4,235
  -4,402
  -4,577
  -4,761
  -4,954
  -5,158
  -5,373
Prev. year cash balance distribution, $m
 
  104
  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
 
  210
  94
  84
  73
  63
  53
  42
  32
  23
  13
  -157
  -166
  -175
  -184
  -193
  -201
  -210
  -219
  -228
  -140
  -12
  122
  262
  407
  557
  711
  870
  1,033
  1,200
  1,372
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  201
  86
  73
  60
  49
  38
  29
  20
  13
  7
  -74
  -71
  -67
  -62
  -57
  -51
  -46
  -40
  -35
  -18
  -1
  10
  17
  21
  22
  21
  19
  16
  13
  10
Current shareholders' claim on cash, %
  100
  88.6
  79.6
  72.5
  66.8
  62.2
  58.4
  55.3
  52.7
  50.6
  48.8
  47.6
  46.6
  45.8
  45.2
  44.7
  44.3
  44.1
  44.0
  44.0
  44.0
  44.0
  44.0
  44.0
  44.0
  44.0
  44.0
  44.0
  44.0
  44.0
  44.0

Quanta Services, Inc. provides specialty contracting services to the electric power, and oil and gas industries in North America and internationally. The company operates through two segments, Electric Power Infrastructure Services and Oil and Gas Infrastructure Services. The company’s Electric Power Infrastructure Services segment provides network solutions comprising design, installation, upgrade, repair, and maintenance of electric power transmission and distribution infrastructure, and substation facilities. It also provides emergency restoration services, including the repair of infrastructure. In addition, this segment designs, installs, and maintains renewable energy generation facilities comprising solar, wind, and various types of natural gas generation facilities, as well as related switchyards and transmission infrastructure to transport power; and commercial and industrial wiring. Further, it installs traffic networks; cable and control systems for light rail lines; and ancillary telecommunication infrastructure services. The company’s Oil and Gas Infrastructure Services segment provides network solutions to customers involved in the development and transportation of natural gas, oil, and other pipeline products. Its services include the design, installation, repair, and maintenance of pipeline transmission and distribution systems, gathering systems, production systems, and compressor and pump stations, as well as related trenching, directional boring, and automatic welding services. This segment also provides pipeline protection; integrity testing; rehabilitation and replacement; fabrication of pipeline support systems, and related structures and facilities; and infrastructure services for the offshore and inland water energy markets. In addition, it designs, installs, and maintains fueling systems, as well as water and sewer infrastructure. The company was founded in 1997 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Quanta Services (PWR)

Valuation Ratios
P/E Ratio 26.2
Price to Sales 0.7
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 13.6
Price to Free Cash Flow 31
Growth Rates
Sales Growth Rate 1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1.4%
Cap. Spend. - 3 Yr. Gr. Rate -0.8%
Financial Strength
Quick Ratio 14
Current Ratio 0
LT Debt to Equity 10.6%
Total Debt to Equity 10.8%
Interest Coverage 25
Management Effectiveness
Return On Assets 3.9%
Ret/ On Assets - 3 Yr. Avg. 4.8%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 6.2%
Return On Equity - 3 Yr. Avg. 7%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 13.3%
Gross Margin - 3 Yr. Avg. 13.5%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 6.8%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 4.3%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 4.2%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 35.1%
Eff/ Tax Rate - 3 Yr. Avg. 36.8%
Payout Ratio 0%

PWR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PWR stock intrinsic value calculation we used $7651 million for the last fiscal year's total revenue generated by Quanta Services. The default revenue input number comes from 2016 income statement of Quanta Services. 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 PWR stock valuation model: a) initial revenue growth rate of 27.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PWR is calculated based on our internal credit rating of Quanta Services, 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 Quanta Services.
    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 PWR stock the variable cost ratio is equal to 96.9%.

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 PWR 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 Quanta Services.

Corporate tax rate of 27% is the nominal tax rate for Quanta Services. 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 PWR 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 PWR are equal to 17.4%.

Life of production assets of 14.4 years is the average useful life of capital assets used in Quanta Services 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 PWR is equal to 12.8%. 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 - $3339 million for Quanta Services - 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 147.974 million for Quanta Services 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 Quanta Services at the current share price and the inputted number of shares is $5.1 billion.

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COMPANY NEWS

▶ Quanta Services misses 2Q profit forecasts   [Aug-03-17 07:42PM  Associated Press]
▶ Quanta Services Acquires Stronghold   [Jul-21-17 06:56AM  PR Newswire]
▶ Houston companies shuffle around Forbes Global 2000 list   [May-24-17 01:40PM  American City Business Journals]
▶ Quanta Services misses 1Q profit forecasts   [06:20AM  Associated Press]
▶ Will Heavy Construction's Rebound Receive A Trump Infrastructure Boost?   [Feb-24-17 11:33AM  Investor's Business Daily]
▶ [$$] Energy poised to be year's big winner in turnround   [Dec-23-16 04:22PM  at Financial Times]
▶ 10 Best S&P 500 Stocks of 2016   [Dec-20-16 08:40AM  at Kiplinger]
▶ How Quanta Services Inc (PWR) Stacks Up Against Its Peers   [Dec-10-16 04:18PM  at Insider Monkey]
▶ Investors Pile Into Infrastructure Stocks After Election   [12:31PM  at The Wall Street Journal]
▶ The earnings recession is finally at an end. Or not   [Oct-08-16 11:23AM  at MarketWatch]
Stock chart of PWR Financial statements of PWR
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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