Intrinsic value of Atmos Energy Corporation - ATO

Previous Close

$104.99

  Intrinsic Value

$24.47

stock screener

  Rating & Target

str. sell

-77%

Previous close

$104.99

 
Intrinsic value

$24.47

 
Up/down potential

-77%

 
Rating

str. sell

We calculate the intrinsic value of ATO 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 12.3

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,178
  3,251
  3,335
  3,429
  3,533
  3,647
  3,771
  3,905
  4,050
  4,206
  4,372
  4,549
  4,738
  4,939
  5,152
  5,378
  5,617
  5,870
  6,137
  6,419
  6,716
  7,030
  7,361
  7,709
  8,076
  8,463
  8,869
  9,297
  9,748
  10,221
Variable operating expenses, $m
  2,341
  2,393
  2,453
  2,520
  2,594
  2,675
  2,764
  2,860
  2,963
  3,074
  3,120
  3,246
  3,381
  3,524
  3,676
  3,838
  4,008
  4,189
  4,379
  4,580
  4,793
  5,016
  5,252
  5,501
  5,763
  6,039
  6,329
  6,634
  6,956
  7,294
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
  2,341
  2,393
  2,453
  2,520
  2,594
  2,675
  2,764
  2,860
  2,963
  3,074
  3,120
  3,246
  3,381
  3,524
  3,676
  3,838
  4,008
  4,189
  4,379
  4,580
  4,793
  5,016
  5,252
  5,501
  5,763
  6,039
  6,329
  6,634
  6,956
  7,294
Operating income, $m
  837
  858
  882
  909
  939
  972
  1,007
  1,046
  1,087
  1,132
  1,252
  1,303
  1,357
  1,415
  1,476
  1,540
  1,609
  1,681
  1,758
  1,839
  1,924
  2,014
  2,108
  2,208
  2,313
  2,424
  2,540
  2,663
  2,792
  2,928
EBITDA, $m
  1,266
  1,295
  1,328
  1,366
  1,407
  1,453
  1,502
  1,556
  1,613
  1,675
  1,741
  1,812
  1,887
  1,967
  2,052
  2,142
  2,237
  2,338
  2,444
  2,557
  2,675
  2,800
  2,932
  3,071
  3,217
  3,371
  3,533
  3,703
  3,883
  4,071
Interest expense (income), $m
  157
  197
  205
  214
  224
  236
  249
  263
  278
  295
  312
  332
  352
  374
  397
  422
  448
  476
  505
  537
  570
  604
  641
  680
  720
  763
  809
  856
  906
  959
  1,015
Earnings before tax, $m
  641
  653
  668
  685
  703
  723
  744
  768
  793
  819
  921
  951
  983
  1,018
  1,054
  1,092
  1,133
  1,176
  1,221
  1,269
  1,319
  1,373
  1,429
  1,488
  1,550
  1,615
  1,684
  1,757
  1,833
  1,913
Tax expense, $m
  173
  176
  180
  185
  190
  195
  201
  207
  214
  221
  249
  257
  265
  275
  285
  295
  306
  317
  330
  343
  356
  371
  386
  402
  418
  436
  455
  474
  495
  517
Net income, $m
  468
  477
  488
  500
  513
  528
  543
  560
  579
  598
  672
  694
  718
  743
  769
  797
  827
  858
  891
  926
  963
  1,002
  1,043
  1,086
  1,131
  1,179
  1,230
  1,282
  1,338
  1,397

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
  12,131
  12,410
  12,729
  13,087
  13,484
  13,919
  14,393
  14,906
  15,459
  16,052
  16,687
  17,364
  18,085
  18,852
  19,665
  20,527
  21,439
  22,404
  23,423
  24,499
  25,635
  26,832
  28,095
  29,425
  30,826
  32,300
  33,853
  35,487
  37,205
  39,013
Adjusted assets (=assets-cash), $m
  12,131
  12,410
  12,729
  13,087
  13,484
  13,919
  14,393
  14,906
  15,459
  16,052
  16,687
  17,364
  18,085
  18,852
  19,665
  20,527
  21,439
  22,404
  23,423
  24,499
  25,635
  26,832
  28,095
  29,425
  30,826
  32,300
  33,853
  35,487
  37,205
  39,013
Revenue / Adjusted assets
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
Average production assets, $m
  10,384
  10,622
  10,895
  11,202
  11,541
  11,914
  12,320
  12,759
  13,232
  13,740
  14,283
  14,863
  15,480
  16,136
  16,832
  17,570
  18,351
  19,177
  20,049
  20,970
  21,942
  22,967
  24,048
  25,186
  26,385
  27,648
  28,977
  30,375
  31,846
  33,393
Working capital, $m
  -305
  -312
  -320
  -329
  -339
  -350
  -362
  -375
  -389
  -404
  -420
  -437
  -455
  -474
  -495
  -516
  -539
  -563
  -589
  -616
  -645
  -675
  -707
  -740
  -775
  -812
  -851
  -893
  -936
  -981
Total debt, $m
  3,794
  3,961
  4,152
  4,366
  4,603
  4,864
  5,147
  5,454
  5,784
  6,139
  6,519
  6,924
  7,355
  7,813
  8,300
  8,815
  9,360
  9,937
  10,547
  11,190
  11,870
  12,586
  13,341
  14,136
  14,974
  15,856
  16,784
  17,761
  18,789
  19,870
Total liabilities, $m
  7,254
  7,421
  7,612
  7,826
  8,063
  8,324
  8,607
  8,914
  9,245
  9,599
  9,979
  10,384
  10,815
  11,273
  11,760
  12,275
  12,821
  13,397
  14,007
  14,651
  15,330
  16,046
  16,801
  17,596
  18,434
  19,316
  20,244
  21,221
  22,249
  23,330
Total equity, $m
  4,877
  4,989
  5,117
  5,261
  5,420
  5,595
  5,786
  5,992
  6,215
  6,453
  6,708
  6,980
  7,270
  7,578
  7,905
  8,252
  8,618
  9,006
  9,416
  9,849
  10,305
  10,787
  11,294
  11,829
  12,392
  12,985
  13,609
  14,266
  14,956
  15,683
Total liabilities and equity, $m
  12,131
  12,410
  12,729
  13,087
  13,483
  13,919
  14,393
  14,906
  15,460
  16,052
  16,687
  17,364
  18,085
  18,851
  19,665
  20,527
  21,439
  22,403
  23,423
  24,500
  25,635
  26,833
  28,095
  29,425
  30,826
  32,301
  33,853
  35,487
  37,205
  39,013
Debt-to-equity ratio
  0.780
  0.790
  0.810
  0.830
  0.850
  0.870
  0.890
  0.910
  0.930
  0.950
  0.970
  0.990
  1.010
  1.030
  1.050
  1.070
  1.090
  1.100
  1.120
  1.140
  1.150
  1.170
  1.180
  1.200
  1.210
  1.220
  1.230
  1.250
  1.260
  1.270
Adjusted equity ratio
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  468
  477
  488
  500
  513
  528
  543
  560
  579
  598
  672
  694
  718
  743
  769
  797
  827
  858
  891
  926
  963
  1,002
  1,043
  1,086
  1,131
  1,179
  1,230
  1,282
  1,338
  1,397
Depreciation, amort., depletion, $m
  429
  437
  446
  457
  468
  481
  495
  510
  526
  544
  489
  509
  530
  553
  576
  602
  628
  657
  687
  718
  751
  787
  824
  863
  904
  947
  992
  1,040
  1,091
  1,144
Funds from operations, $m
  896
  914
  934
  957
  982
  1,009
  1,038
  1,070
  1,105
  1,142
  1,161
  1,203
  1,248
  1,295
  1,346
  1,399
  1,455
  1,515
  1,578
  1,645
  1,715
  1,789
  1,867
  1,949
  2,035
  2,126
  2,222
  2,323
  2,429
  2,540
Change in working capital, $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
Cash from operations, $m
  902
  921
  942
  966
  992
  1,020
  1,050
  1,083
  1,119
  1,157
  1,177
  1,220
  1,266
  1,315
  1,366
  1,421
  1,478
  1,539
  1,604
  1,672
  1,743
  1,819
  1,898
  1,982
  2,070
  2,163
  2,261
  2,364
  2,472
  2,586
Maintenance CAPEX, $m
  -349
  -356
  -364
  -373
  -384
  -395
  -408
  -422
  -437
  -453
  -471
  -489
  -509
  -530
  -553
  -576
  -602
  -628
  -657
  -687
  -718
  -751
  -787
  -824
  -863
  -904
  -947
  -992
  -1,040
  -1,091
New CAPEX, $m
  -203
  -239
  -273
  -306
  -340
  -373
  -406
  -439
  -473
  -508
  -543
  -580
  -617
  -656
  -696
  -738
  -781
  -826
  -872
  -921
  -972
  -1,025
  -1,081
  -1,138
  -1,199
  -1,262
  -1,329
  -1,398
  -1,471
  -1,547
Cash from investing activities, $m
  -552
  -595
  -637
  -679
  -724
  -768
  -814
  -861
  -910
  -961
  -1,014
  -1,069
  -1,126
  -1,186
  -1,249
  -1,314
  -1,383
  -1,454
  -1,529
  -1,608
  -1,690
  -1,776
  -1,868
  -1,962
  -2,062
  -2,166
  -2,276
  -2,390
  -2,511
  -2,638
Free cash flow, $m
  350
  326
  305
  286
  268
  252
  237
  222
  209
  196
  163
  151
  140
  129
  118
  107
  96
  85
  74
  64
  53
  42
  31
  20
  9
  -3
  -15
  -27
  -39
  -52
Issuance/(repayment) of debt, $m
  150
  167
  191
  214
  237
  260
  283
  307
  331
  355
  380
  405
  431
  458
  486
  515
  546
  577
  610
  644
  679
  716
  755
  795
  838
  882
  928
  977
  1,028
  1,081
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  
  150
  167
  191
  214
  237
  260
  283
  307
  331
  355
  380
  405
  431
  458
  486
  515
  546
  577
  610
  644
  679
  716
  755
  795
  838
  882
  928
  977
  1,028
  1,081
Total cash flow (excl. dividends), $m
  500
  493
  496
  500
  506
  512
  520
  529
  539
  550
  543
  556
  571
  587
  604
  622
  641
  662
  684
  707
  732
  758
  786
  815
  846
  879
  914
  950
  988
  1,029
Retained Cash Flow (-), $m
  -107
  -112
  -128
  -144
  -159
  -175
  -191
  -206
  -222
  -238
  -255
  -272
  -290
  -308
  -327
  -346
  -367
  -388
  -410
  -433
  -457
  -481
  -507
  -535
  -563
  -593
  -624
  -657
  -691
  -727
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
  393
  381
  368
  356
  346
  337
  329
  323
  317
  312
  288
  284
  281
  279
  277
  276
  275
  274
  274
  275
  276
  277
  279
  281
  283
  286
  290
  293
  297
  302
Discount rate, %
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
  370
  335
  301
  269
  239
  212
  187
  164
  142
  123
  98
  83
  70
  58
  47
  38
  31
  24
  19
  14
  11
  8
  6
  4
  3
  2
  1
  1
  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

Atmos Energy Corporation is a fully-regulated, natural-gas-only distributor engaged primarily in the regulated natural gas distribution and pipeline businesses, as well as other nonregulated natural gas businesses. It operates through three segments: regulated distribution segment, which includes its regulated distribution and related sales operations; regulated pipeline segment, which includes pipeline and storage operations of its Atmos Pipeline-Texas Division, and nonregulated segment, which includes its nonregulated natural gas management, nonregulated natural gas transmission, storage and other services. Its nonregulated businesses provide natural gas management, transportation and storage services to local gas distribution companies, including certain of its natural gas distribution divisions and industrial customers in the Midwest and Southeast. It also manages its natural gas pipeline and storage assets, including its intrastate natural gas pipeline systems in Texas.

FINANCIAL RATIOS  of  Atmos Energy Corporation (ATO)

Valuation Ratios
P/E Ratio 28.1
Price to Sales 4
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow -41.3
Growth Rates
Sales Growth Rate 12.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.6%
Cap. Spend. - 3 Yr. Gr. Rate 6.4%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 78.7%
Total Debt to Equity 90.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 5.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.5%
Return On Equity 10.8%
Return On Equity - 3 Yr. Avg. 10.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 39.2%
EBITDA Margin - 3 Yr. Avg. 37%
Operating Margin 26.4%
Oper. Margin - 3 Yr. Avg. 24.7%
Pre-Tax Margin 21.9%
Pre-Tax Margin - 3 Yr. Avg. 20.3%
Net Profit Margin 14.3%
Net Profit Margin - 3 Yr. Avg. 13.1%
Effective Tax Rate 36.6%
Eff/ Tax Rate - 3 Yr. Avg. 37%
Payout Ratio 48.5%

ATO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATO stock intrinsic value calculation we used $3116 million for the last fiscal year's total revenue generated by Atmos Energy Corporation. The default revenue input number comes from 0001 income statement of Atmos Energy Corporation. 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 ATO stock valuation model: a) initial revenue growth rate of 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 6.3%, whose default value for ATO is calculated based on our internal credit rating of Atmos Energy Corporation, 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 Atmos Energy Corporation.
    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 ATO stock the variable cost ratio is equal to 73.7%.

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 ATO 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 Atmos Energy Corporation.

Corporate tax rate of 27% is the nominal tax rate for Atmos Energy Corporation. 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 ATO 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 ATO are equal to 326.7%.

Life of production assets of 29.2 years is the average useful life of capital assets used in Atmos Energy Corporation 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 ATO is equal to -9.6%. 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 - $4769.951 million for Atmos Energy Corporation - 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 116.934 million for Atmos Energy Corporation 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 Atmos Energy Corporation at the current share price and the inputted number of shares is $12.3 billion.

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