Intrinsic value of Companhia Energetica de Minas Gerais-Cem - CIG

Previous Close

$2.04

  Intrinsic Value

$9.41

stock screener

  Rating & Target

str. buy

+361%

Previous close

$2.04

 
Intrinsic value

$9.41

 
Up/down potential

+361%

 
Rating

str. buy

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

We calculate the intrinsic value of CIG 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 2.5

 

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, %
  -14.16
  9.40
  8.96
  8.56
  8.21
  7.89
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
Revenue, $m
  5,935
  6,493
  7,075
  7,681
  8,311
  8,966
  9,648
  10,356
  11,091
  11,856
  12,651
  13,478
  14,338
  15,233
  16,165
  17,135
  18,147
  19,203
  20,304
  21,453
  22,653
  23,907
  25,218
  26,588
  28,021
  29,520
  31,090
  32,732
  34,453
  36,255
  38,143
Variable operating expenses, $m
 
  1,019
  1,111
  1,206
  1,305
  1,408
  1,515
  1,626
  1,741
  1,861
  1,986
  2,116
  2,251
  2,392
  2,538
  2,690
  2,849
  3,015
  3,188
  3,368
  3,557
  3,753
  3,959
  4,174
  4,399
  4,635
  4,881
  5,139
  5,409
  5,692
  5,988
Fixed operating expenses, $m
 
  4,562
  4,676
  4,793
  4,913
  5,036
  5,162
  5,291
  5,423
  5,559
  5,698
  5,840
  5,986
  6,136
  6,289
  6,446
  6,608
  6,773
  6,942
  7,116
  7,293
  7,476
  7,663
  7,854
  8,051
  8,252
  8,458
  8,670
  8,886
  9,109
  9,336
Total operating expenses, $m
  5,365
  5,581
  5,787
  5,999
  6,218
  6,444
  6,677
  6,917
  7,164
  7,420
  7,684
  7,956
  8,237
  8,528
  8,827
  9,136
  9,457
  9,788
  10,130
  10,484
  10,850
  11,229
  11,622
  12,028
  12,450
  12,887
  13,339
  13,809
  14,295
  14,801
  15,324
Operating income, $m
  571
  911
  1,288
  1,681
  2,093
  2,523
  2,971
  3,439
  3,927
  4,436
  4,967
  5,521
  6,100
  6,705
  7,338
  7,999
  8,691
  9,415
  10,174
  10,969
  11,803
  12,678
  13,596
  14,559
  15,571
  16,634
  17,750
  18,924
  20,157
  21,454
  22,818
EBITDA, $m
  835
  1,199
  1,601
  2,022
  2,461
  2,920
  3,399
  3,898
  4,419
  4,962
  5,528
  6,119
  6,736
  7,381
  8,054
  8,759
  9,495
  10,267
  11,074
  11,921
  12,808
  13,738
  14,714
  15,738
  16,813
  17,942
  19,129
  20,375
  21,685
  23,062
  24,509
Interest expense (income), $m
  749
  631
  756
  886
  1,020
  1,160
  1,306
  1,458
  1,615
  1,778
  1,948
  2,125
  2,309
  2,500
  2,699
  2,906
  3,122
  3,347
  3,582
  3,826
  4,082
  4,349
  4,627
  4,919
  5,223
  5,542
  5,875
  6,224
  6,589
  6,972
  7,372
Earnings before tax, $m
  116
  280
  531
  796
  1,073
  1,362
  1,665
  1,981
  2,312
  2,657
  3,019
  3,396
  3,791
  4,205
  4,639
  5,093
  5,569
  6,068
  6,593
  7,143
  7,721
  8,329
  8,968
  9,641
  10,348
  11,092
  11,875
  12,700
  13,568
  14,483
  15,446
Tax expense, $m
  10
  76
  143
  215
  290
  368
  450
  535
  624
  718
  815
  917
  1,024
  1,135
  1,252
  1,375
  1,504
  1,638
  1,780
  1,929
  2,085
  2,249
  2,421
  2,603
  2,794
  2,995
  3,206
  3,429
  3,663
  3,910
  4,170
Net income, $m
  106
  204
  388
  581
  783
  995
  1,215
  1,446
  1,688
  1,940
  2,204
  2,479
  2,768
  3,070
  3,386
  3,718
  4,065
  4,430
  4,813
  5,214
  5,637
  6,080
  6,547
  7,038
  7,554
  8,097
  8,669
  9,271
  9,905
  10,572
  11,275

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  751
  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
  13,291
  13,727
  14,957
  16,238
  17,571
  18,956
  20,397
  21,894
  23,449
  25,066
  26,746
  28,494
  30,312
  32,204
  34,175
  36,227
  38,367
  40,598
  42,926
  45,356
  47,893
  50,544
  53,314
  56,211
  59,241
  62,411
  65,728
  69,202
  72,839
  76,648
  80,640
Adjusted assets (=assets-cash), $m
  12,540
  13,727
  14,957
  16,238
  17,571
  18,956
  20,397
  21,894
  23,449
  25,066
  26,746
  28,494
  30,312
  32,204
  34,175
  36,227
  38,367
  40,598
  42,926
  45,356
  47,893
  50,544
  53,314
  56,211
  59,241
  62,411
  65,728
  69,202
  72,839
  76,648
  80,640
Revenue / Adjusted assets
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
  0.473
Average production assets, $m
  4,555
  4,980
  5,426
  5,891
  6,374
  6,877
  7,400
  7,943
  8,507
  9,094
  9,703
  10,337
  10,997
  11,683
  12,398
  13,143
  13,919
  14,729
  15,573
  16,455
  17,375
  18,337
  19,342
  20,393
  21,492
  22,642
  23,846
  25,106
  26,425
  27,807
  29,255
Working capital, $m
  -999
  -240
  -262
  -284
  -308
  -332
  -357
  -383
  -410
  -439
  -468
  -499
  -530
  -564
  -598
  -634
  -671
  -711
  -751
  -794
  -838
  -885
  -933
  -984
  -1,037
  -1,092
  -1,150
  -1,211
  -1,275
  -1,341
  -1,411
Total debt, $m
  4,799
  4,848
  5,677
  6,540
  7,439
  8,373
  9,343
  10,352
  11,401
  12,490
  13,623
  14,801
  16,026
  17,302
  18,630
  20,013
  21,455
  22,959
  24,528
  26,166
  27,876
  29,662
  31,530
  33,482
  35,524
  37,661
  39,897
  42,238
  44,689
  47,257
  49,947
Total liabilities, $m
  9,202
  9,252
  10,081
  10,944
  11,843
  12,777
  13,747
  14,756
  15,805
  16,894
  18,027
  19,205
  20,430
  21,706
  23,034
  24,417
  25,859
  27,363
  28,932
  30,570
  32,280
  34,066
  35,934
  37,886
  39,928
  42,065
  44,301
  46,642
  49,093
  51,661
  54,351
Total equity, $m
  4,088
  4,475
  4,876
  5,294
  5,728
  6,180
  6,649
  7,137
  7,644
  8,171
  8,719
  9,289
  9,882
  10,499
  11,141
  11,810
  12,508
  13,235
  13,994
  14,786
  15,613
  16,477
  17,380
  18,325
  19,312
  20,346
  21,427
  22,560
  23,745
  24,987
  26,289
Total liabilities and equity, $m
  13,290
  13,727
  14,957
  16,238
  17,571
  18,957
  20,396
  21,893
  23,449
  25,065
  26,746
  28,494
  30,312
  32,205
  34,175
  36,227
  38,367
  40,598
  42,926
  45,356
  47,893
  50,543
  53,314
  56,211
  59,240
  62,411
  65,728
  69,202
  72,838
  76,648
  80,640
Debt-to-equity ratio
  1.174
  1.080
  1.160
  1.240
  1.300
  1.350
  1.410
  1.450
  1.490
  1.530
  1.560
  1.590
  1.620
  1.650
  1.670
  1.690
  1.720
  1.730
  1.750
  1.770
  1.790
  1.800
  1.810
  1.830
  1.840
  1.850
  1.860
  1.870
  1.880
  1.890
  1.900
Adjusted equity ratio
  0.266
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  106
  204
  388
  581
  783
  995
  1,215
  1,446
  1,688
  1,940
  2,204
  2,479
  2,768
  3,070
  3,386
  3,718
  4,065
  4,430
  4,813
  5,214
  5,637
  6,080
  6,547
  7,038
  7,554
  8,097
  8,669
  9,271
  9,905
  10,572
  11,275
Depreciation, amort., depletion, $m
  264
  288
  314
  341
  368
  398
  428
  459
  492
  526
  561
  598
  636
  675
  717
  760
  805
  851
  900
  951
  1,004
  1,060
  1,118
  1,179
  1,242
  1,309
  1,378
  1,451
  1,527
  1,607
  1,691
Funds from operations, $m
  -504
  492
  702
  921
  1,152
  1,392
  1,643
  1,906
  2,179
  2,466
  2,764
  3,077
  3,403
  3,745
  4,103
  4,477
  4,870
  5,281
  5,713
  6,166
  6,641
  7,140
  7,665
  8,216
  8,796
  9,406
  10,047
  10,722
  11,432
  12,180
  12,967
Change in working capital, $m
  -888
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -64
  -67
  -70
Cash from operations, $m
  384
  513
  723
  944
  1,175
  1,416
  1,668
  1,932
  2,207
  2,494
  2,794
  3,107
  3,435
  3,778
  4,137
  4,513
  4,907
  5,320
  5,753
  6,208
  6,685
  7,187
  7,713
  8,267
  8,849
  9,461
  10,105
  10,783
  11,496
  12,246
  13,036
Maintenance CAPEX, $m
  0
  -263
  -288
  -314
  -341
  -368
  -398
  -428
  -459
  -492
  -526
  -561
  -598
  -636
  -675
  -717
  -760
  -805
  -851
  -900
  -951
  -1,004
  -1,060
  -1,118
  -1,179
  -1,242
  -1,309
  -1,378
  -1,451
  -1,527
  -1,607
New CAPEX, $m
  -361
  -426
  -446
  -465
  -484
  -503
  -523
  -543
  -564
  -586
  -610
  -634
  -660
  -687
  -715
  -745
  -776
  -809
  -845
  -882
  -921
  -962
  -1,005
  -1,051
  -1,099
  -1,150
  -1,204
  -1,260
  -1,320
  -1,382
  -1,448
Cash from investing activities, $m
  -194
  -689
  -734
  -779
  -825
  -871
  -921
  -971
  -1,023
  -1,078
  -1,136
  -1,195
  -1,258
  -1,323
  -1,390
  -1,462
  -1,536
  -1,614
  -1,696
  -1,782
  -1,872
  -1,966
  -2,065
  -2,169
  -2,278
  -2,392
  -2,513
  -2,638
  -2,771
  -2,909
  -3,055
Free cash flow, $m
  190
  -176
  -11
  166
  351
  545
  748
  961
  1,183
  1,416
  1,659
  1,913
  2,178
  2,456
  2,747
  3,052
  3,371
  3,706
  4,058
  4,426
  4,814
  5,221
  5,648
  6,098
  6,571
  7,069
  7,593
  8,144
  8,725
  9,337
  9,981
Issuance/(repayment) of debt, $m
  46
  800
  829
  863
  898
  934
  971
  1,009
  1,048
  1,090
  1,133
  1,178
  1,225
  1,275
  1,328
  1,384
  1,442
  1,504
  1,569
  1,638
  1,710
  1,787
  1,867
  1,952
  2,042
  2,137
  2,236
  2,341
  2,451
  2,568
  2,690
Issuance/(repurchase) of shares, $m
  0
  183
  13
  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  
  46
  983
  842
  863
  898
  934
  971
  1,009
  1,048
  1,090
  1,133
  1,178
  1,225
  1,275
  1,328
  1,384
  1,442
  1,504
  1,569
  1,638
  1,710
  1,787
  1,867
  1,952
  2,042
  2,137
  2,236
  2,341
  2,451
  2,568
  2,690
Total cash flow (excl. dividends), $m
  235
  807
  831
  1,029
  1,249
  1,479
  1,719
  1,970
  2,232
  2,505
  2,791
  3,090
  3,404
  3,731
  4,075
  4,435
  4,813
  5,210
  5,627
  6,064
  6,524
  7,007
  7,516
  8,051
  8,613
  9,206
  9,829
  10,485
  11,177
  11,904
  12,671
Retained Cash Flow (-), $m
  17
  -387
  -401
  -418
  -434
  -452
  -470
  -488
  -507
  -527
  -548
  -570
  -593
  -617
  -642
  -669
  -697
  -727
  -759
  -792
  -827
  -864
  -903
  -944
  -988
  -1,033
  -1,082
  -1,132
  -1,186
  -1,242
  -1,301
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
 
  420
  430
  611
  815
  1,027
  1,250
  1,482
  1,725
  1,978
  2,243
  2,521
  2,811
  3,115
  3,433
  3,766
  4,116
  4,483
  4,868
  5,272
  5,697
  6,143
  6,613
  7,106
  7,626
  8,172
  8,747
  9,353
  9,991
  10,663
  11,370
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  393
  375
  492
  602
  691
  758
  805
  830
  836
  823
  794
  751
  696
  634
  566
  496
  426
  359
  296
  239
  189
  145
  110
  80
  57
  40
  27
  18
  11
  7
Current shareholders' claim on cash, %
  100
  94.0
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6

Companhia Energetica de Minas Gerais-CEMIG is a holding company that is engaged in the generation, transmission and distribution of electricity. The Company's segments include Generation, Transmission, Distribution, Telecom, Gas and Other. The Company, through its interests in subsidiaries or jointly controlled entities, is engaged in the activities of the construction and operation of systems for sale of electricity, as well as various fields of energy and telecommunications, for the purpose of commercial operation. Its electric power transmission business consists of transporting power from the facilities where it is generated to points of consumption, distribution networks and Free Consumers. Its distribution operation consists of transfers of electricity from distribution substations to final consumers. It is also engaged in businesses, such as telecommunications, energy solutions consulting, and acquisition, transport and distribution of gas and its subproducts and derivatives.

FINANCIAL RATIOS  of  Companhia Energetica de Minas Gerais-Cem (CIG)

Valuation Ratios
P/E Ratio 24.2
Price to Sales 0.4
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 111.6
Growth Rates
Sales Growth Rate -14.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 5.6%
Cap. Spend. - 3 Yr. Gr. Rate 3.2%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 80%
Total Debt to Equity 117.4%
Interest Coverage 1
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 8.8%
Return On Total Capital 1.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 2.6%
Return On Equity - 3 Yr. Avg. 16.4%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 23.1%
Gross Margin - 3 Yr. Avg. 28.5%
EBITDA Margin 19%
EBITDA Margin - 3 Yr. Avg. 25.1%
Operating Margin 9.6%
Oper. Margin - 3 Yr. Avg. 19.9%
Pre-Tax Margin 2%
Pre-Tax Margin - 3 Yr. Avg. 13.4%
Net Profit Margin 1.8%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 8.6%
Eff/ Tax Rate - 3 Yr. Avg. 21.7%
Payout Ratio 200.9%

CIG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CIG stock intrinsic value calculation we used $5935 million for the last fiscal year's total revenue generated by Companhia Energetica de Minas Gerais-Cem. The default revenue input number comes from 2016 income statement of Companhia Energetica de Minas Gerais-Cem. 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 CIG stock valuation model: a) initial revenue growth rate of 9.4% 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 6.8%, whose default value for CIG is calculated based on our internal credit rating of Companhia Energetica de Minas Gerais-Cem, 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 Companhia Energetica de Minas Gerais-Cem.
    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 CIG stock the variable cost ratio is equal to 15.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4451 million in the base year in the intrinsic value calculation for CIG 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 15.6% for Companhia Energetica de Minas Gerais-Cem.

Corporate tax rate of 27% is the nominal tax rate for Companhia Energetica de Minas Gerais-Cem. 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 CIG 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 CIG are equal to 76.7%.

Life of production assets of 17.3 years is the average useful life of capital assets used in Companhia Energetica de Minas Gerais-Cem 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 CIG is equal to -3.7%. 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 - $4088 million for Companhia Energetica de Minas Gerais-Cem - 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 1249.03 million for Companhia Energetica de Minas Gerais-Cem 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 Companhia Energetica de Minas Gerais-Cem at the current share price and the inputted number of shares is $2.5 billion.

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COMPANY NEWS

▶ Cemig Files 2016 20-F Form with the SEC   [May-17-17 02:02PM  PR Newswire]
▶ Shares of CEMIG Slump Following Court Injunction   [Mar-22-17 02:03PM  Motley Fool]
▶ Filing of 2015 20-F Form with the SEC   [Feb-22-17 07:08PM  PR Newswire]
▶ Hedge Funds Are Dumping Deluxe Corporation (DLX)   [Dec-06-16 10:29AM  at Insider Monkey]
Financial statements of CIG
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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