Intrinsic value of Sempra Energy - SRE

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$112.81

  Intrinsic Value

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  Value-price divergence*

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$112.81

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

We calculate the intrinsic value of SRE 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 28.6

 

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, %
  0.12
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  0
  10,515
  10,870
  11,255
  11,671
  12,116
  12,593
  13,102
  13,645
  14,221
  14,833
  15,482
  16,168
  16,895
  17,662
  18,472
  19,328
  20,230
  21,180
  22,182
  23,237
  24,348
  25,518
  26,748
  28,043
  29,405
  30,837
  32,343
  33,927
  35,591
  37,340
Variable operating expenses, $m
 
  8,788
  9,082
  9,401
  9,745
  10,114
  10,509
  10,930
  11,379
  11,857
  12,363
  12,818
  13,387
  13,988
  14,624
  15,295
  16,003
  16,749
  17,536
  18,366
  19,240
  20,159
  21,128
  22,147
  23,219
  24,346
  25,532
  26,779
  28,090
  29,468
  30,916
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
  8,637
  8,788
  9,082
  9,401
  9,745
  10,114
  10,509
  10,930
  11,379
  11,857
  12,363
  12,818
  13,387
  13,988
  14,624
  15,295
  16,003
  16,749
  17,536
  18,366
  19,240
  20,159
  21,128
  22,147
  23,219
  24,346
  25,532
  26,779
  28,090
  29,468
  30,916
Operating income, $m
  1,564
  1,727
  1,788
  1,854
  1,926
  2,003
  2,085
  2,172
  2,266
  2,365
  2,470
  2,663
  2,782
  2,907
  3,039
  3,178
  3,325
  3,480
  3,644
  3,816
  3,998
  4,189
  4,390
  4,602
  4,824
  5,059
  5,305
  5,564
  5,837
  6,123
  6,424
EBITDA, $m
  2,876
  3,059
  3,163
  3,275
  3,395
  3,525
  3,664
  3,812
  3,970
  4,137
  4,315
  4,504
  4,704
  4,915
  5,138
  5,374
  5,623
  5,885
  6,162
  6,453
  6,760
  7,084
  7,424
  7,782
  8,159
  8,555
  8,972
  9,410
  9,870
  10,355
  10,863
Interest expense (income), $m
  532
  528
  563
  600
  640
  684
  731
  781
  834
  891
  952
  1,016
  1,084
  1,157
  1,233
  1,314
  1,399
  1,489
  1,583
  1,683
  1,789
  1,899
  2,016
  2,139
  2,268
  2,404
  2,548
  2,698
  2,856
  3,023
  3,198
Earnings before tax, $m
  1,830
  1,199
  1,226
  1,255
  1,286
  1,319
  1,354
  1,391
  1,431
  1,473
  1,518
  1,647
  1,697
  1,750
  1,806
  1,864
  1,926
  1,992
  2,060
  2,133
  2,209
  2,289
  2,374
  2,463
  2,556
  2,654
  2,758
  2,866
  2,980
  3,100
  3,226
Tax expense, $m
  389
  324
  331
  339
  347
  356
  366
  376
  386
  398
  410
  445
  458
  472
  488
  503
  520
  538
  556
  576
  596
  618
  641
  665
  690
  717
  745
  774
  805
  837
  871
Net income, $m
  1,371
  876
  895
  916
  938
  963
  988
  1,016
  1,045
  1,075
  1,108
  1,202
  1,239
  1,277
  1,318
  1,361
  1,406
  1,454
  1,504
  1,557
  1,613
  1,671
  1,733
  1,798
  1,866
  1,938
  2,013
  2,092
  2,176
  2,263
  2,355

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  349
  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
  47,786
  42,060
  43,482
  45,022
  46,682
  48,465
  50,373
  52,410
  54,579
  56,885
  59,333
  61,927
  64,674
  67,579
  70,648
  73,890
  77,311
  80,918
  84,721
  88,728
  92,949
  97,393
  102,071
  106,994
  112,173
  117,620
  123,349
  129,373
  135,706
  142,364
  149,361
Adjusted assets (=assets-cash), $m
  47,437
  42,060
  43,482
  45,022
  46,682
  48,465
  50,373
  52,410
  54,579
  56,885
  59,333
  61,927
  64,674
  67,579
  70,648
  73,890
  77,311
  80,918
  84,721
  88,728
  92,949
  97,393
  102,071
  106,994
  112,173
  117,620
  123,349
  129,373
  135,706
  142,364
  149,361
Revenue / Adjusted assets
  0.000
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
Average production assets, $m
  30,961
  28,254
  29,209
  30,243
  31,359
  32,556
  33,838
  35,206
  36,664
  38,213
  39,857
  41,600
  43,445
  45,396
  47,458
  49,636
  51,933
  54,357
  56,911
  59,603
  62,439
  65,424
  68,566
  71,873
  75,352
  79,011
  82,860
  86,906
  91,161
  95,633
  100,333
Working capital, $m
  -2,817
  -610
  -630
  -653
  -677
  -703
  -730
  -760
  -791
  -825
  -860
  -898
  -938
  -980
  -1,024
  -1,071
  -1,121
  -1,173
  -1,228
  -1,287
  -1,348
  -1,412
  -1,480
  -1,551
  -1,627
  -1,705
  -1,789
  -1,876
  -1,968
  -2,064
  -2,166
Total debt, $m
  17,121
  15,205
  16,214
  17,308
  18,486
  19,752
  21,107
  22,553
  24,093
  25,731
  27,468
  29,310
  31,260
  33,323
  35,502
  37,804
  40,232
  42,794
  45,494
  48,339
  51,336
  54,491
  57,812
  61,307
  64,984
  68,852
  72,920
  77,197
  81,693
  86,420
  91,389
Total liabilities, $m
  34,815
  29,863
  30,872
  31,966
  33,144
  34,410
  35,765
  37,211
  38,751
  40,389
  42,126
  43,968
  45,918
  47,981
  50,160
  52,462
  54,890
  57,452
  60,152
  62,997
  65,994
  69,149
  72,470
  75,965
  79,642
  83,510
  87,578
  91,855
  96,351
  101,078
  106,047
Total equity, $m
  12,971
  12,197
  12,610
  13,056
  13,538
  14,055
  14,608
  15,199
  15,828
  16,497
  17,207
  17,959
  18,755
  19,598
  20,488
  21,428
  22,420
  23,466
  24,569
  25,731
  26,955
  28,244
  29,601
  31,028
  32,530
  34,110
  35,771
  37,518
  39,355
  41,286
  43,315
Total liabilities and equity, $m
  47,786
  42,060
  43,482
  45,022
  46,682
  48,465
  50,373
  52,410
  54,579
  56,886
  59,333
  61,927
  64,673
  67,579
  70,648
  73,890
  77,310
  80,918
  84,721
  88,728
  92,949
  97,393
  102,071
  106,993
  112,172
  117,620
  123,349
  129,373
  135,706
  142,364
  149,362
Debt-to-equity ratio
  1.320
  1.250
  1.290
  1.330
  1.370
  1.410
  1.440
  1.480
  1.520
  1.560
  1.600
  1.630
  1.670
  1.700
  1.730
  1.760
  1.790
  1.820
  1.850
  1.880
  1.900
  1.930
  1.950
  1.980
  2.000
  2.020
  2.040
  2.060
  2.080
  2.090
  2.110
Adjusted equity ratio
  0.273
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,371
  876
  895
  916
  938
  963
  988
  1,016
  1,045
  1,075
  1,108
  1,202
  1,239
  1,277
  1,318
  1,361
  1,406
  1,454
  1,504
  1,557
  1,613
  1,671
  1,733
  1,798
  1,866
  1,938
  2,013
  2,092
  2,176
  2,263
  2,355
Depreciation, amort., depletion, $m
  1,312
  1,332
  1,374
  1,420
  1,469
  1,522
  1,579
  1,640
  1,704
  1,773
  1,845
  1,841
  1,922
  2,009
  2,100
  2,196
  2,298
  2,405
  2,518
  2,637
  2,763
  2,895
  3,034
  3,180
  3,334
  3,496
  3,666
  3,845
  4,034
  4,232
  4,440
Funds from operations, $m
  2,409
  2,208
  2,269
  2,336
  2,408
  2,485
  2,567
  2,655
  2,749
  2,848
  2,954
  3,043
  3,161
  3,286
  3,418
  3,557
  3,704
  3,859
  4,022
  4,194
  4,375
  4,566
  4,767
  4,978
  5,200
  5,434
  5,679
  5,938
  6,209
  6,495
  6,795
Change in working capital, $m
  90
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -31
  -33
  -35
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -101
Cash from operations, $m
  2,319
  3,290
  2,290
  2,358
  2,432
  2,511
  2,595
  2,685
  2,780
  2,882
  2,989
  3,081
  3,201
  3,328
  3,463
  3,604
  3,754
  3,911
  4,077
  4,252
  4,437
  4,631
  4,835
  5,049
  5,275
  5,513
  5,763
  6,025
  6,301
  6,591
  6,896
Maintenance CAPEX, $m
  0
  -1,212
  -1,250
  -1,292
  -1,338
  -1,388
  -1,441
  -1,497
  -1,558
  -1,622
  -1,691
  -1,764
  -1,841
  -1,922
  -2,009
  -2,100
  -2,196
  -2,298
  -2,405
  -2,518
  -2,637
  -2,763
  -2,895
  -3,034
  -3,180
  -3,334
  -3,496
  -3,666
  -3,845
  -4,034
  -4,232
New CAPEX, $m
  -4,214
  -874
  -955
  -1,035
  -1,115
  -1,198
  -1,282
  -1,368
  -1,457
  -1,549
  -1,644
  -1,743
  -1,845
  -1,951
  -2,062
  -2,177
  -2,298
  -2,423
  -2,555
  -2,692
  -2,835
  -2,985
  -3,142
  -3,307
  -3,479
  -3,659
  -3,848
  -4,047
  -4,254
  -4,472
  -4,701
Cash from investing activities, $m
  -4,886
  -2,086
  -2,205
  -2,327
  -2,453
  -2,586
  -2,723
  -2,865
  -3,015
  -3,171
  -3,335
  -3,507
  -3,686
  -3,873
  -4,071
  -4,277
  -4,494
  -4,721
  -4,960
  -5,210
  -5,472
  -5,748
  -6,037
  -6,341
  -6,659
  -6,993
  -7,344
  -7,713
  -8,099
  -8,506
  -8,933
Free cash flow, $m
  -2,567
  1,204
  85
  31
  -22
  -74
  -127
  -181
  -235
  -290
  -346
  -426
  -485
  -545
  -608
  -673
  -740
  -810
  -882
  -958
  -1,036
  -1,117
  -1,203
  -1,291
  -1,384
  -1,481
  -1,582
  -1,688
  -1,799
  -1,914
  -2,036
Issuance/(repayment) of debt, $m
  1,586
  945
  1,009
  1,093
  1,179
  1,266
  1,355
  1,446
  1,540
  1,637
  1,738
  1,842
  1,950
  2,062
  2,180
  2,301
  2,429
  2,561
  2,700
  2,845
  2,997
  3,155
  3,321
  3,495
  3,677
  3,868
  4,068
  4,277
  4,497
  4,727
  4,968
Issuance/(repurchase) of shares, $m
  -5
  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  
  3,200
  945
  1,009
  1,093
  1,179
  1,266
  1,355
  1,446
  1,540
  1,637
  1,738
  1,842
  1,950
  2,062
  2,180
  2,301
  2,429
  2,561
  2,700
  2,845
  2,997
  3,155
  3,321
  3,495
  3,677
  3,868
  4,068
  4,277
  4,497
  4,727
  4,968
Total cash flow (excl. dividends), $m
  633
  2,149
  1,094
  1,125
  1,157
  1,191
  1,228
  1,266
  1,305
  1,348
  1,392
  1,416
  1,465
  1,517
  1,571
  1,628
  1,688
  1,751
  1,818
  1,887
  1,961
  2,038
  2,119
  2,204
  2,293
  2,387
  2,486
  2,589
  2,698
  2,812
  2,932
Retained Cash Flow (-), $m
  -1,142
  -368
  -412
  -447
  -481
  -517
  -553
  -591
  -629
  -669
  -710
  -752
  -797
  -842
  -890
  -940
  -992
  -1,046
  -1,103
  -1,162
  -1,224
  -1,289
  -1,357
  -1,428
  -1,502
  -1,580
  -1,661
  -1,747
  -1,837
  -1,931
  -2,029
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
 
  1,780
  682
  678
  676
  674
  674
  675
  676
  679
  682
  664
  669
  675
  681
  688
  696
  705
  715
  725
  737
  749
  762
  776
  791
  807
  824
  842
  861
  882
  903
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  1,646
  578
  523
  470
  419
  371
  325
  282
  243
  206
  167
  138
  113
  91
  72
  56
  43
  32
  24
  17
  12
  8
  6
  4
  2
  1
  1
  0
  0
  0
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

Sempra Energy operates as an energy services holding company worldwide. The company’s San Diego Gas & Electric Company segment transmits and distributes electricity and/or natural gas. As of December 31, 2015, this segment had approximately 1.4 million electric meters and 873,000 natural gas meters. Its Southern California Gas Company segment transmits, distributes, and stores natural gas. As of December 31, 2015, this segment had approximately 5.9 million customer meters. The company’s Sempra South American Utilities segment provides electricity distribution services through 13,458 miles of distribution lines, 185 miles of transmission lines, and 36 substations. Its Sempra Mexico segment owns and operates a natural gas-fired power plant and a wind generation facility in Baja California, Mexico; natural gas distribution systems; natural gas pipelines and propane systems; and liquefied natural gas regasification terminals. The company’s Sempra Renewables segment develops solar electric generation facilities in Nevada, Arizona, and California, as well as develops wind electric generation facilities in Mexico. Its Sempra Natural Gas segment owns and operates a natural gas distribution utility located in Mobile and Baldwin counties in Alabama; and a natural gas distribution utility in Forrest County, Mississippi. The company primarily serves residential, commercial, and industrial customers. Sempra Energy was founded in 1998 and is headquartered in San Diego, California.

FINANCIAL RATIOS  of  Sempra Energy (SRE)

Valuation Ratios
P/E Ratio 20.6
Price to Sales 2.8
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 12.2
Price to Free Cash Flow -14.9
Growth Rates
Sales Growth Rate 0.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.5%
Cap. Spend. - 3 Yr. Gr. Rate 10.4%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 111.2%
Total Debt to Equity 132%
Interest Coverage 4
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.9%
Return On Equity 11.1%
Return On Equity - 3 Yr. Avg. 11%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 36%
EBITDA Margin - 3 Yr. Avg. 33.2%
Operating Margin 15.3%
Oper. Margin - 3 Yr. Avg. 16.6%
Pre-Tax Margin 17.9%
Pre-Tax Margin - 3 Yr. Avg. 16.2%
Net Profit Margin 13.4%
Net Profit Margin - 3 Yr. Avg. 12.4%
Effective Tax Rate 21.3%
Eff/ Tax Rate - 3 Yr. Avg. 20.3%
Payout Ratio 50.1%

SRE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SRE stock intrinsic value calculation we used $10189 million for the last fiscal year's total revenue generated by Sempra Energy. The default revenue input number comes from 2016 income statement of Sempra 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 SRE stock valuation model: a) initial revenue growth rate of 3.2% 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 8.2%, whose default value for SRE is calculated based on our internal credit rating of Sempra 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 Sempra 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 SRE stock the variable cost ratio is equal to 83.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SRE 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 3.7% for Sempra Energy.

Corporate tax rate of 27% is the nominal tax rate for Sempra 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 SRE 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 SRE are equal to 268.7%.

Life of production assets of 22.6 years is the average useful life of capital assets used in Sempra 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 SRE is equal to -5.8%. 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 - $11829 million for Sempra 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 253.443 million for Sempra 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 Sempra Energy at the current share price and the inputted number of shares is $28.6 billion.


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COMPANY NEWS

▶ ETFs with exposure to Sempra Energy : June 22, 2017   [Jun-22-17 04:26PM  Capital Cube]
▶ Sempra Energy Declares Common Dividend   [Jun-21-17 02:23PM  PR Newswire]
▶ 5 Companies Reach 52-Week Highs   [01:14PM  GuruFocus.com]
▶ SoCalGas Declares Preferred Dividends   [May-30-17 02:15PM  PR Newswire]
▶ The 3 Best Dividend Stocks of Tomorrow   [May-20-17 02:35PM  Motley Fool]
▶ Sempra Energy Value Analysis (NYSE:SRE) : May 18, 2017   [May-18-17 02:18PM  Capital Cube]
▶ Sempra beats 1Q profit forecasts   [08:35AM  Associated Press]
▶ SDG&E Offers Tips For Safe Tree Planting This Arbor Day   [Apr-28-17 03:25PM  PR Newswire]
▶ Split results for stocks on Syria strike and weak jobs gains   [Apr-07-17 12:10PM  Associated Press]
▶ Sempra Energy To Webcast Analyst Conference April 5   [Mar-22-17 09:00AM  PR Newswire]
▶ Sempra Energy Stock Trades Ex-Dividend Tuesday   [Mar-20-17 11:22AM  Investopedia]
▶ Sempra Energys Dividend Profile, Inside Out   [Mar-15-17 07:37AM  Market Realist]
▶ [$$] How California Utilities Are Managing Excess Solar Power   [Mar-06-17 12:17AM  at The Wall Street Journal]
▶ [$$] How California Utilities Are Managing Excess Solar Power   [07:30AM  at The Wall Street Journal]
▶ Sempra Energy Appoints Two New Directors   [04:43PM  PR Newswire]
▶ [$$] Sempra Energy Increases Earnings Guidance   [10:11AM  at The Wall Street Journal]
▶ Sempra Energy Announces 2016 Earnings   [08:30AM  PR Newswire]
▶ Sempra Energy Raises Annualized Dividend By 9 Percent   [Feb-23-17 01:41PM  PR Newswire]
▶ SoCalGas Declares Preferred Dividends   [Feb-10-17 01:06PM  PR Newswire]
▶ TransCanada Corporation's 3 Biggest Growth Opportunities   [Feb-06-17 12:46PM  at Motley Fool]
▶ SoCalGas Advisory Lifted   [Jan-26-17 05:50PM  PR Newswire]
▶ SoCalGas Advisory Now in Effect   [09:45AM  PR Newswire]
▶ SoCalGas Announces "SoCalGas Advisory"   [Jan-22-17 04:41PM  PR Newswire]
Stock chart of SRE Financial statements of SRE Annual reports of SRE
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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