Intrinsic value of SunPower - SPWR

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$6.94

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$6.94

 
Intrinsic value

$15.15

 
Up/down potential

+118%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of SPWR 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 1.0

 

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, %
  62.44
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  2,560
  4,096
  6,328
  9,464
  13,732
  19,374
  26,634
  35,751
  46,943
  60,404
  76,296
  94,742
  115,831
  139,615
  166,115
  195,322
  227,206
  261,722
  298,815
  338,423
  380,488
  424,955
  471,776
  520,918
  572,356
  626,084
  682,109
  740,454
  801,158
  864,276
  929,880
Variable operating expenses, $m
 
  4,633
  7,157
  10,704
  15,531
  21,912
  30,123
  40,434
  53,093
  68,317
  86,290
  107,153
  131,005
  157,905
  187,876
  220,909
  256,970
  296,008
  337,959
  382,756
  430,332
  480,624
  533,579
  589,158
  647,335
  708,101
  771,465
  837,453
  906,110
  977,497
  1,051,694
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
  2,966
  4,633
  7,157
  10,704
  15,531
  21,912
  30,123
  40,434
  53,093
  68,317
  86,290
  107,153
  131,005
  157,905
  187,876
  220,909
  256,970
  296,008
  337,959
  382,756
  430,332
  480,624
  533,579
  589,158
  647,335
  708,101
  771,465
  837,453
  906,110
  977,497
  1,051,694
Operating income, $m
  -407
  -537
  -829
  -1,240
  -1,799
  -2,538
  -3,489
  -4,683
  -6,150
  -7,913
  -9,995
  -12,411
  -15,174
  -18,290
  -21,761
  -25,587
  -29,764
  -34,286
  -39,145
  -44,333
  -49,844
  -55,669
  -61,803
  -68,240
  -74,979
  -82,017
  -89,356
  -96,999
  -104,952
  -113,220
  -121,814
EBITDA, $m
  -233
  -265
  -410
  -613
  -890
  -1,256
  -1,726
  -2,317
  -3,043
  -3,915
  -4,945
  -6,141
  -7,508
  -9,050
  -10,767
  -12,660
  -14,727
  -16,964
  -19,369
  -21,936
  -24,663
  -27,545
  -30,580
  -33,765
  -37,099
  -40,582
  -44,213
  -47,995
  -51,930
  -56,021
  -60,273
Interest expense (income), $m
  36
  63
  136
  243
  392
  596
  865
  1,211
  1,646
  2,179
  2,821
  3,579
  4,459
  5,464
  6,599
  7,862
  9,255
  10,775
  12,421
  14,190
  16,079
  18,085
  20,205
  22,438
  24,781
  27,234
  29,796
  32,468
  35,250
  38,145
  41,155
Earnings before tax, $m
  -565
  -600
  -965
  -1,482
  -2,191
  -3,134
  -4,354
  -5,894
  -7,795
  -10,092
  -12,816
  -15,990
  -19,633
  -23,754
  -28,360
  -33,449
  -39,019
  -45,061
  -51,566
  -58,524
  -65,923
  -73,754
  -82,008
  -90,678
  -99,760
  -109,251
  -119,153
  -129,467
  -140,202
  -151,365
  -162,969
Tax expense, $m
  7
  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
  -471
  -600
  -965
  -1,482
  -2,191
  -3,134
  -4,354
  -5,894
  -7,795
  -10,092
  -12,816
  -15,990
  -19,633
  -23,754
  -28,360
  -33,449
  -39,019
  -45,061
  -51,566
  -58,524
  -65,923
  -73,754
  -82,008
  -90,678
  -99,760
  -109,251
  -119,153
  -129,467
  -140,202
  -151,365
  -162,969

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  425
  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
  4,567
  6,628
  10,240
  15,314
  22,220
  31,349
  43,097
  57,849
  75,960
  97,742
  123,456
  153,304
  187,429
  225,915
  268,794
  316,054
  367,647
  423,499
  483,519
  547,610
  615,676
  687,629
  763,392
  842,909
  926,143
  1,013,081
  1,103,736
  1,198,145
  1,296,372
  1,398,505
  1,504,660
Adjusted assets (=assets-cash), $m
  4,142
  6,628
  10,240
  15,314
  22,220
  31,349
  43,097
  57,849
  75,960
  97,742
  123,456
  153,304
  187,429
  225,915
  268,794
  316,054
  367,647
  423,499
  483,519
  547,610
  615,676
  687,629
  763,392
  842,909
  926,143
  1,013,081
  1,103,736
  1,198,145
  1,296,372
  1,398,505
  1,504,660
Revenue / Adjusted assets
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
Average production assets, $m
  932
  1,491
  2,304
  3,445
  4,998
  7,052
  9,695
  13,013
  17,087
  21,987
  27,772
  34,486
  42,163
  50,820
  60,466
  71,097
  82,703
  95,267
  108,769
  123,186
  138,498
  154,683
  171,727
  189,614
  208,338
  227,895
  248,288
  269,525
  291,621
  314,597
  338,476
Working capital, $m
  825
  754
  1,164
  1,741
  2,527
  3,565
  4,901
  6,578
  8,638
  11,114
  14,038
  17,433
  21,313
  25,689
  30,565
  35,939
  41,806
  48,157
  54,982
  62,270
  70,010
  78,192
  86,807
  95,849
  105,314
  115,199
  125,508
  136,243
  147,413
  159,027
  171,098
Total debt, $m
  1,870
  3,892
  6,933
  11,205
  17,020
  24,707
  34,599
  47,020
  62,269
  80,610
  102,261
  127,393
  156,126
  188,531
  224,636
  264,429
  307,870
  354,897
  405,434
  459,399
  516,711
  577,294
  641,087
  708,040
  778,123
  851,325
  927,657
  1,007,149
  1,089,856
  1,175,853
  1,265,235
Total liabilities, $m
  3,559
  5,581
  8,622
  12,894
  18,709
  26,396
  36,288
  48,709
  63,958
  82,299
  103,950
  129,082
  157,815
  190,220
  226,325
  266,118
  309,559
  356,586
  407,123
  461,088
  518,400
  578,983
  642,776
  709,729
  779,812
  853,014
  929,346
  1,008,838
  1,091,545
  1,177,542
  1,266,924
Total equity, $m
  1,008
  1,047
  1,618
  2,420
  3,511
  4,953
  6,809
  9,140
  12,002
  15,443
  19,506
  24,222
  29,614
  35,695
  42,470
  49,937
  58,088
  66,913
  76,396
  86,522
  97,277
  108,645
  120,616
  133,180
  146,331
  160,067
  174,390
  189,307
  204,827
  220,964
  237,736
Total liabilities and equity, $m
  4,567
  6,628
  10,240
  15,314
  22,220
  31,349
  43,097
  57,849
  75,960
  97,742
  123,456
  153,304
  187,429
  225,915
  268,795
  316,055
  367,647
  423,499
  483,519
  547,610
  615,677
  687,628
  763,392
  842,909
  926,143
  1,013,081
  1,103,736
  1,198,145
  1,296,372
  1,398,506
  1,504,660
Debt-to-equity ratio
  1.855
  3.720
  4.290
  4.630
  4.850
  4.990
  5.080
  5.140
  5.190
  5.220
  5.240
  5.260
  5.270
  5.280
  5.290
  5.300
  5.300
  5.300
  5.310
  5.310
  5.310
  5.310
  5.320
  5.320
  5.320
  5.320
  5.320
  5.320
  5.320
  5.320
  5.320
Adjusted equity ratio
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -471
  -600
  -965
  -1,482
  -2,191
  -3,134
  -4,354
  -5,894
  -7,795
  -10,092
  -12,816
  -15,990
  -19,633
  -23,754
  -28,360
  -33,449
  -39,019
  -45,061
  -51,566
  -58,524
  -65,923
  -73,754
  -82,008
  -90,678
  -99,760
  -109,251
  -119,153
  -129,467
  -140,202
  -151,365
  -162,969
Depreciation, amort., depletion, $m
  174
  271
  419
  626
  909
  1,282
  1,763
  2,366
  3,107
  3,998
  5,049
  6,270
  7,666
  9,240
  10,994
  12,927
  15,037
  17,321
  19,776
  22,397
  25,181
  28,124
  31,223
  34,475
  37,880
  41,435
  45,143
  49,005
  53,022
  57,199
  61,541
Funds from operations, $m
  -314
  -328
  -546
  -856
  -1,282
  -1,851
  -2,591
  -3,528
  -4,688
  -6,095
  -7,767
  -9,720
  -11,967
  -14,514
  -17,366
  -20,523
  -23,982
  -27,740
  -31,790
  -36,126
  -40,741
  -45,630
  -50,785
  -56,203
  -61,880
  -67,816
  -74,009
  -80,463
  -87,180
  -94,166
  -101,428
Change in working capital, $m
  -2
  283
  411
  577
  785
  1,038
  1,336
  1,677
  2,059
  2,477
  2,924
  3,394
  3,880
  4,376
  4,876
  5,374
  5,867
  6,351
  6,825
  7,288
  7,740
  8,182
  8,615
  9,042
  9,465
  9,886
  10,309
  10,735
  11,170
  11,614
  12,071
Cash from operations, $m
  -312
  -472
  -957
  -1,433
  -2,068
  -2,890
  -3,927
  -5,206
  -6,748
  -8,572
  -10,691
  -13,114
  -15,847
  -18,890
  -22,242
  -25,897
  -29,849
  -34,091
  -38,615
  -43,414
  -48,481
  -53,811
  -59,400
  -65,245
  -71,345
  -77,702
  -84,318
  -91,198
  -98,349
  -105,780
  -113,499
Maintenance CAPEX, $m
  0
  -169
  -271
  -419
  -626
  -909
  -1,282
  -1,763
  -2,366
  -3,107
  -3,998
  -5,049
  -6,270
  -7,666
  -9,240
  -10,994
  -12,927
  -15,037
  -17,321
  -19,776
  -22,397
  -25,181
  -28,124
  -31,223
  -34,475
  -37,880
  -41,435
  -45,143
  -49,005
  -53,022
  -57,199
New CAPEX, $m
  -188
  -559
  -813
  -1,141
  -1,553
  -2,054
  -2,643
  -3,318
  -4,074
  -4,900
  -5,784
  -6,714
  -7,676
  -8,657
  -9,646
  -10,631
  -11,606
  -12,564
  -13,502
  -14,417
  -15,312
  -16,186
  -17,043
  -17,887
  -18,724
  -19,557
  -20,393
  -21,238
  -22,096
  -22,975
  -23,880
Cash from investing activities, $m
  -377
  -728
  -1,084
  -1,560
  -2,179
  -2,963
  -3,925
  -5,081
  -6,440
  -8,007
  -9,782
  -11,763
  -13,946
  -16,323
  -18,886
  -21,625
  -24,533
  -27,601
  -30,823
  -34,193
  -37,709
  -41,367
  -45,167
  -49,110
  -53,199
  -57,437
  -61,828
  -66,381
  -71,101
  -75,997
  -81,079
Free cash flow, $m
  -689
  -1,200
  -2,041
  -2,993
  -4,247
  -5,852
  -7,852
  -10,287
  -13,188
  -16,578
  -20,473
  -24,878
  -29,794
  -35,214
  -41,128
  -47,522
  -54,381
  -61,692
  -69,438
  -77,608
  -86,191
  -95,179
  -104,568
  -114,355
  -124,544
  -135,138
  -146,146
  -157,579
  -169,450
  -181,777
  -194,578
Issuance/(repayment) of debt, $m
  60
  2,093
  3,041
  4,272
  5,815
  7,687
  9,892
  12,421
  15,249
  18,340
  21,651
  25,132
  28,733
  32,405
  36,104
  39,793
  43,441
  47,027
  50,537
  53,965
  57,312
  60,584
  63,793
  66,953
  70,083
  73,202
  76,331
  79,492
  82,707
  85,996
  89,382
Issuance/(repurchase) of shares, $m
  -22
  0
  0
  0
  0
  0
  0
  197
  800
  1,679
  2,884
  4,462
  6,452
  8,889
  11,798
  15,196
  19,092
  23,489
  28,384
  33,769
  39,633
  45,963
  52,745
  59,966
  67,612
  75,673
  84,138
  93,003
  102,263
  111,917
  121,968
Cash from financing (excl. dividends), $m  
  160
  2,093
  3,041
  4,272
  5,815
  7,687
  9,892
  12,618
  16,049
  20,019
  24,535
  29,594
  35,185
  41,294
  47,902
  54,989
  62,533
  70,516
  78,921
  87,734
  96,945
  106,547
  116,538
  126,919
  137,695
  148,875
  160,469
  172,495
  184,970
  197,913
  211,350
Total cash flow (excl. dividends), $m
  -529
  892
  1,001
  1,279
  1,567
  1,835
  2,040
  2,134
  2,061
  1,762
  1,178
  254
  -1,061
  -2,809
  -5,023
  -7,729
  -10,940
  -14,665
  -18,901
  -23,643
  -28,879
  -34,595
  -40,775
  -47,402
  -54,461
  -61,936
  -69,815
  -78,087
  -86,743
  -95,780
  -105,196
Retained Cash Flow (-), $m
  441
  -393
  -571
  -802
  -1,091
  -1,442
  -1,856
  -2,331
  -2,861
  -3,442
  -4,063
  -4,716
  -5,392
  -6,081
  -6,775
  -7,467
  -8,152
  -8,825
  -9,483
  -10,126
  -10,754
  -11,368
  -11,971
  -12,564
  -13,151
  -13,736
  -14,323
  -14,917
  -15,520
  -16,137
  -16,772
Prev. year cash balance distribution, $m
 
  354
  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
 
  853
  430
  477
  476
  392
  184
  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, %
 
  9.80
  10.29
  10.80
  11.34
  11.91
  12.51
  13.13
  13.79
  14.48
  15.20
  15.96
  16.76
  17.60
  18.48
  19.40
  20.37
  21.39
  22.46
  23.58
  24.76
  26.00
  27.30
  28.67
  30.10
  31.61
  33.19
  34.85
  36.59
  38.42
  40.34
PV of cash for distribution, $m
 
  777
  353
  351
  310
  224
  91
  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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  97.1
  88.9
  77.6
  64.9
  52.4
  41.0
  31.2
  23.2
  16.9
  12.0
  8.5
  5.9
  4.0
  2.7
  1.8
  1.2
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0

SunPower Corporation researches, develops, manufactures, and delivers solar solutions worldwide. It operates through three segments: Residential, Commercial, and Power Plant. The company provides solar power components, including panels and other system components. It also offers commercial rooftop and ground-mounted solar power systems, residential mounting systems, and power plant systems, as well as utility-scale photovoltaic power plants. In addition, the company offers operations and maintenance services, including remote monitoring, and preventative and corrective maintenance services, as well as rapid-response outage restoration services. Further, it leases solar power systems to residential customers; and sells inverters manufactured by third parties. The company serves investors, financial institutions, project developers, electric utilities, independent power producers, commercial and governmental entities, production home builders, residential owners, and small commercial building owners. SunPower Corporation also sells its products to dealers, systems integrators, and distributors. The company was incorporated in 1985 and is headquartered in San Jose, California. SunPower Corporation is a subsidiary of Total Energies Nouvelles Activit├ęs USA.

FINANCIAL RATIOS  of  SunPower (SPWR)

Valuation Ratios
P/E Ratio -2
Price to Sales 0.4
Price to Book 1
Price to Tangible Book
Price to Cash Flow -3.1
Price to Free Cash Flow -1.9
Growth Rates
Sales Growth Rate 62.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.7%
Cap. Spend. - 3 Yr. Gr. Rate 40.8%
Financial Strength
Quick Ratio 6
Current Ratio 0.6
LT Debt to Equity 178.5%
Total Debt to Equity 185.5%
Interest Coverage -15
Management Effectiveness
Return On Assets -9.2%
Ret/ On Assets - 3 Yr. Avg. -1.8%
Return On Total Capital -15.4%
Ret/ On T. Cap. - 3 Yr. Avg. -3.9%
Return On Equity -38.3%
Return On Equity - 3 Yr. Avg. -10.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 7.4%
Gross Margin - 3 Yr. Avg. 14.5%
EBITDA Margin -13.9%
EBITDA Margin - 3 Yr. Avg. -2.4%
Operating Margin -15.9%
Oper. Margin - 3 Yr. Avg. -6.9%
Pre-Tax Margin -22.1%
Pre-Tax Margin - 3 Yr. Avg. -10.4%
Net Profit Margin -18.4%
Net Profit Margin - 3 Yr. Avg. -7.4%
Effective Tax Rate -1.2%
Eff/ Tax Rate - 3 Yr. Avg. -8%
Payout Ratio 0%

SPWR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPWR stock intrinsic value calculation we used $2560 million for the last fiscal year's total revenue generated by SunPower. The default revenue input number comes from 2017 income statement of SunPower. 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 SPWR stock valuation model: a) initial revenue growth rate of 60% 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 9.8%, whose default value for SPWR is calculated based on our internal credit rating of SunPower, 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 SunPower.
    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 SPWR stock the variable cost ratio is equal to 113.1%.

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 SPWR 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 SunPower.

Corporate tax rate of 27% is the nominal tax rate for SunPower. 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 SPWR 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 SPWR are equal to 36.4%.

Life of production assets of 5.5 years is the average useful life of capital assets used in SunPower 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 SPWR is equal to 18.4%. 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 - $1008 million for SunPower - 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 138.928 million for SunPower 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 SunPower at the current share price and the inputted number of shares is $1.0 billion.


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Stock chart of SPWR Financial statements of SPWR
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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