Intrinsic value of Algonquin Power & Utilities Corp. - AQN

Previous Close

$11.46

  Intrinsic Value

$1.68

stock screener

  Rating & Target

str. sell

-85%

Previous close

$11.46

 
Intrinsic value

$1.68

 
Up/down potential

-85%

 
Rating

str. sell

We calculate the intrinsic value of AQN 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 0001), $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 5.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  1,246
  1,275
  1,309
  1,347
  1,389
  1,434
  1,484
  1,538
  1,595
  1,657
  1,723
  1,794
  1,869
  1,948
  2,033
  2,122
  2,217
  2,317
  2,423
  2,535
  2,652
  2,777
  2,908
  3,045
  3,191
  3,344
  3,504
  3,674
  3,852
  4,039
Variable operating expenses, $m
  245
  249
  254
  259
  265
  271
  278
  285
  293
  301
  236
  245
  255
  266
  278
  290
  303
  317
  331
  346
  363
  380
  397
  416
  436
  457
  479
  502
  527
  552
Fixed operating expenses, $m
  730
  746
  762
  779
  796
  814
  831
  850
  868
  888
  907
  927
  947
  968
  990
  1,011
  1,034
  1,056
  1,080
  1,103
  1,128
  1,152
  1,178
  1,204
  1,230
  1,257
  1,285
  1,313
  1,342
  1,372
Total operating expenses, $m
  975
  995
  1,016
  1,038
  1,061
  1,085
  1,109
  1,135
  1,161
  1,189
  1,143
  1,172
  1,202
  1,234
  1,268
  1,301
  1,337
  1,373
  1,411
  1,449
  1,491
  1,532
  1,575
  1,620
  1,666
  1,714
  1,764
  1,815
  1,869
  1,924
Operating income, $m
  271
  280
  293
  309
  328
  350
  375
  403
  434
  468
  581
  621
  666
  714
  765
  821
  880
  944
  1,012
  1,085
  1,162
  1,245
  1,332
  1,425
  1,524
  1,629
  1,741
  1,858
  1,983
  2,115
EBITDA, $m
  543
  558
  576
  598
  623
  652
  685
  722
  762
  806
  854
  906
  962
  1,023
  1,088
  1,158
  1,232
  1,312
  1,397
  1,487
  1,583
  1,685
  1,794
  1,909
  2,031
  2,160
  2,297
  2,442
  2,595
  2,757
Interest expense (income), $m
  0
  138
  144
  150
  157
  164
  173
  182
  192
  203
  215
  228
  241
  256
  271
  287
  304
  323
  342
  362
  384
  407
  431
  456
  483
  511
  541
  572
  605
  640
  676
Earnings before tax, $m
  133
  137
  144
  153
  164
  177
  193
  211
  231
  253
  353
  380
  410
  443
  478
  516
  558
  602
  650
  701
  755
  814
  876
  942
  1,013
  1,088
  1,168
  1,253
  1,344
  1,440
Tax expense, $m
  36
  37
  39
  41
  44
  48
  52
  57
  62
  68
  95
  103
  111
  120
  129
  139
  151
  163
  175
  189
  204
  220
  237
  254
  274
  294
  315
  338
  363
  389
Net income, $m
  97
  100
  105
  111
  120
  129
  141
  154
  168
  185
  258
  278
  299
  323
  349
  377
  407
  440
  474
  512
  551
  594
  639
  688
  740
  794
  853
  915
  981
  1,051

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  7,118
  7,288
  7,481
  7,697
  7,935
  8,196
  8,480
  8,786
  9,116
  9,469
  9,847
  10,250
  10,678
  11,133
  11,616
  12,128
  12,669
  13,241
  13,845
  14,483
  15,157
  15,866
  16,614
  17,402
  18,232
  19,106
  20,025
  20,993
  22,011
  23,081
Adjusted assets (=assets-cash), $m
  7,118
  7,288
  7,481
  7,697
  7,935
  8,196
  8,480
  8,786
  9,116
  9,469
  9,847
  10,250
  10,678
  11,133
  11,616
  12,128
  12,669
  13,241
  13,845
  14,483
  15,157
  15,866
  16,614
  17,402
  18,232
  19,106
  20,025
  20,993
  22,011
  23,081
Revenue / Adjusted assets
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
Average production assets, $m
  5,339
  5,466
  5,611
  5,773
  5,952
  6,148
  6,360
  6,590
  6,837
  7,102
  7,386
  7,688
  8,009
  8,351
  8,713
  9,096
  9,502
  9,931
  10,385
  10,863
  11,368
  11,901
  12,462
  13,053
  13,675
  14,330
  15,020
  15,746
  16,509
  17,312
Working capital, $m
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
Total debt, $m
  2,659
  2,772
  2,899
  3,042
  3,200
  3,373
  3,561
  3,763
  3,982
  4,215
  4,466
  4,732
  5,016
  5,317
  5,637
  5,975
  6,334
  6,712
  7,113
  7,535
  7,981
  8,450
  8,946
  9,467
  10,017
  10,595
  11,204
  11,844
  12,518
  13,227
Total liabilities, $m
  4,712
  4,825
  4,953
  5,095
  5,253
  5,426
  5,614
  5,816
  6,035
  6,269
  6,519
  6,785
  7,069
  7,370
  7,690
  8,028
  8,387
  8,766
  9,166
  9,588
  10,034
  10,503
  10,999
  11,520
  12,070
  12,648
  13,257
  13,897
  14,571
  15,280
Total equity, $m
  2,406
  2,463
  2,529
  2,602
  2,682
  2,770
  2,866
  2,970
  3,081
  3,201
  3,328
  3,464
  3,609
  3,763
  3,926
  4,099
  4,282
  4,475
  4,680
  4,895
  5,123
  5,363
  5,616
  5,882
  6,162
  6,458
  6,769
  7,096
  7,440
  7,801
Total liabilities and equity, $m
  7,118
  7,288
  7,482
  7,697
  7,935
  8,196
  8,480
  8,786
  9,116
  9,470
  9,847
  10,249
  10,678
  11,133
  11,616
  12,127
  12,669
  13,241
  13,846
  14,483
  15,157
  15,866
  16,615
  17,402
  18,232
  19,106
  20,026
  20,993
  22,011
  23,081
Debt-to-equity ratio
  1.110
  1.130
  1.150
  1.170
  1.190
  1.220
  1.240
  1.270
  1.290
  1.320
  1.340
  1.370
  1.390
  1.410
  1.440
  1.460
  1.480
  1.500
  1.520
  1.540
  1.560
  1.580
  1.590
  1.610
  1.630
  1.640
  1.660
  1.670
  1.680
  1.700
Adjusted equity ratio
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  97
  100
  105
  111
  120
  129
  141
  154
  168
  185
  258
  278
  299
  323
  349
  377
  407
  440
  474
  512
  551
  594
  639
  688
  740
  794
  853
  915
  981
  1,051
Depreciation, amort., depletion, $m
  273
  277
  283
  289
  295
  302
  310
  319
  328
  338
  274
  285
  297
  309
  323
  337
  352
  368
  385
  402
  421
  441
  462
  483
  506
  531
  556
  583
  611
  641
Funds from operations, $m
  370
  377
  387
  400
  415
  432
  451
  473
  496
  523
  531
  562
  596
  633
  672
  714
  759
  807
  859
  914
  972
  1,035
  1,101
  1,171
  1,246
  1,325
  1,409
  1,498
  1,592
  1,692
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Cash from operations, $m
  370
  378
  388
  401
  416
  433
  452
  474
  498
  524
  533
  564
  598
  634
  674
  716
  761
  810
  861
  916
  975
  1,037
  1,104
  1,174
  1,249
  1,329
  1,413
  1,502
  1,596
  1,696
Maintenance CAPEX, $m
  -194
  -198
  -202
  -208
  -214
  -220
  -228
  -236
  -244
  -253
  -263
  -274
  -285
  -297
  -309
  -323
  -337
  -352
  -368
  -385
  -402
  -421
  -441
  -462
  -483
  -506
  -531
  -556
  -583
  -611
New CAPEX, $m
  -110
  -128
  -145
  -162
  -179
  -196
  -213
  -230
  -247
  -265
  -283
  -302
  -321
  -341
  -362
  -384
  -406
  -429
  -453
  -479
  -505
  -532
  -561
  -591
  -622
  -655
  -690
  -726
  -763
  -803
Cash from investing activities, $m
  -304
  -326
  -347
  -370
  -393
  -416
  -441
  -466
  -491
  -518
  -546
  -576
  -606
  -638
  -671
  -707
  -743
  -781
  -821
  -864
  -907
  -953
  -1,002
  -1,053
  -1,105
  -1,161
  -1,221
  -1,282
  -1,346
  -1,414
Free cash flow, $m
  67
  53
  41
  31
  23
  17
  12
  8
  6
  6
  -14
  -12
  -8
  -4
  2
  10
  18
  28
  40
  53
  68
  84
  102
  122
  143
  167
  192
  220
  250
  282
Issuance/(repayment) of debt, $m
  111
  113
  128
  143
  158
  173
  188
  203
  218
  234
  250
  267
  284
  301
  320
  339
  358
  379
  400
  422
  446
  470
  495
  522
  549
  578
  609
  640
  674
  709
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
Cash from financing (excl. dividends), $m  
  111
  113
  128
  143
  158
  173
  188
  203
  218
  234
  250
  267
  284
  301
  320
  339
  358
  379
  400
  422
  446
  470
  495
  522
  549
  578
  609
  640
  674
  709
Total cash flow (excl. dividends), $m
  178
  165
  169
  174
  181
  189
  199
  211
  225
  240
  236
  255
  275
  298
  322
  348
  377
  407
  440
  476
  513
  554
  597
  643
  693
  745
  801
  860
  923
  990
Retained Cash Flow (-), $m
  -52
  -57
  -65
  -73
  -81
  -88
  -96
  -104
  -111
  -119
  -128
  -136
  -145
  -154
  -163
  -173
  -183
  -193
  -204
  -216
  -228
  -240
  -253
  -266
  -280
  -295
  -311
  -327
  -344
  -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
  126
  108
  103
  101
  100
  101
  104
  108
  113
  120
  109
  119
  130
  144
  159
  175
  194
  214
  236
  260
  286
  314
  344
  377
  412
  450
  490
  533
  579
  629
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
  116
  91
  80
  70
  62
  56
  50
  45
  40
  36
  27
  25
  22
  19
  17
  14
  12
  10
  8
  6
  5
  3
  2
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  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

Algonquin Power & Utilities Corp., through its subsidiaries, engages in the generation, distribution, and transmission utility assets in North America. The company generates and sells electrical energy through a portfolio of non-regulated renewable and clean energy power generation facilities. It owns or has interests in hydroelectric facilities with a combined generating capacity of approximately 120 megawatts (MW); wind powered generating facilities with a combined generating capacity of 700 MW; and solar energy facilities with a generating capacity of 30 MW, as well as interests in thermal energy facilities with an installed generating capacity of approximately 335 MW. The company also owns and operates electricity, natural gas, water distribution, and wastewater collection utility systems to approximately 489,000 connections. It serves approximately 93,000 electric connections; 292,000 natural gas connections; and 104,000 regulated water distribution and wastewater collection connections in the states of California, New Hampshire, Georgia, Illinois, Iowa, Massachusetts, Missouri, Arizona, Arkansas, and Texas. The company was founded in 1996 and is headquartered in Oakville, Canada.

FINANCIAL RATIOS  of  Algonquin Power & Utilities Corp. (AQN)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

AQN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AQN stock intrinsic value calculation we used $1220 million for the last fiscal year's total revenue generated by Algonquin Power & Utilities Corp.. The default revenue input number comes from 0001 income statement of Algonquin Power & Utilities Corp.. 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 AQN stock valuation model: a) initial revenue growth rate of 2.1% 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 8.2%, whose default value for AQN is calculated based on our internal credit rating of Algonquin Power & Utilities Corp., 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 Algonquin Power & Utilities Corp..
    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 AQN stock the variable cost ratio is equal to 19.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $714 million in the base year in the intrinsic value calculation for AQN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Algonquin Power & Utilities Corp..

Corporate tax rate of 27% is the nominal tax rate for Algonquin Power & Utilities Corp.. 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 AQN 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 AQN are equal to 428.6%.

Life of production assets of 27 years is the average useful life of capital assets used in Algonquin Power & Utilities Corp. 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 AQN is equal to -2.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2353.79703704 million for Algonquin Power & Utilities Corp. - 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 488.869 million for Algonquin Power & Utilities Corp. 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 Algonquin Power & Utilities Corp. at the current share price and the inputted number of shares is $5.6 billion.

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