Intrinsic value of Chesapeake Utilities Corporation - CPK

Previous Close

$92.85

  Intrinsic Value

$7.44

stock screener

  Rating & Target

str. sell

-92%

Previous close

$92.85

 
Intrinsic value

$7.44

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of CPK 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 1.5

 

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, %
  11.50
  10.85
  10.27
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.20
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
Revenue, $m
  799
  886
  977
  1,072
  1,172
  1,275
  1,383
  1,495
  1,612
  1,733
  1,859
  1,990
  2,126
  2,267
  2,414
  2,567
  2,727
  2,892
  3,065
  3,245
  3,433
  3,629
  3,834
  4,048
  4,271
  4,505
  4,749
  5,004
  5,272
  5,551
Variable operating expenses, $m
  686
  760
  838
  920
  1,004
  1,093
  1,185
  1,281
  1,381
  1,484
  1,588
  1,700
  1,817
  1,937
  2,063
  2,194
  2,330
  2,472
  2,619
  2,773
  2,934
  3,102
  3,276
  3,459
  3,650
  3,850
  4,058
  4,276
  4,505
  4,744
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
  686
  760
  838
  920
  1,004
  1,093
  1,185
  1,281
  1,381
  1,484
  1,588
  1,700
  1,817
  1,937
  2,063
  2,194
  2,330
  2,472
  2,619
  2,773
  2,934
  3,102
  3,276
  3,459
  3,650
  3,850
  4,058
  4,276
  4,505
  4,744
Operating income, $m
  113
  126
  139
  153
  167
  182
  198
  214
  231
  249
  270
  289
  309
  330
  351
  373
  397
  421
  446
  472
  499
  528
  558
  589
  621
  655
  691
  728
  767
  808
EBITDA, $m
  171
  189
  209
  229
  250
  272
  295
  319
  344
  370
  397
  425
  454
  484
  516
  548
  582
  618
  655
  693
  733
  775
  819
  864
  912
  962
  1,014
  1,069
  1,126
  1,185
Interest expense (income), $m
  10
  34
  41
  49
  57
  65
  74
  83
  93
  103
  113
  124
  135
  146
  158
  171
  184
  198
  212
  226
  242
  258
  274
  292
  310
  329
  349
  369
  391
  414
  437
Earnings before tax, $m
  79
  85
  90
  96
  102
  108
  115
  122
  129
  136
  147
  155
  163
  171
  180
  189
  199
  209
  219
  230
  242
  254
  266
  279
  293
  307
  322
  337
  353
  370
Tax expense, $m
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  91
  95
  100
Net income, $m
  58
  62
  66
  70
  75
  79
  84
  89
  94
  99
  107
  113
  119
  125
  132
  138
  145
  153
  160
  168
  176
  185
  194
  204
  214
  224
  235
  246
  258
  270

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
  1,890
  2,095
  2,310
  2,535
  2,770
  3,015
  3,270
  3,535
  3,810
  4,097
  4,395
  4,704
  5,025
  5,360
  5,707
  6,069
  6,446
  6,838
  7,247
  7,672
  8,117
  8,580
  9,064
  9,570
  10,098
  10,650
  11,227
  11,831
  12,463
  13,124
Adjusted assets (=assets-cash), $m
  1,890
  2,095
  2,310
  2,535
  2,770
  3,015
  3,270
  3,535
  3,810
  4,097
  4,395
  4,704
  5,025
  5,360
  5,707
  6,069
  6,446
  6,838
  7,247
  7,672
  8,117
  8,580
  9,064
  9,570
  10,098
  10,650
  11,227
  11,831
  12,463
  13,124
Revenue / Adjusted assets
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
Average production assets, $m
  1,415
  1,569
  1,730
  1,898
  2,074
  2,257
  2,448
  2,646
  2,853
  3,067
  3,290
  3,522
  3,763
  4,013
  4,273
  4,544
  4,826
  5,120
  5,426
  5,744
  6,077
  6,424
  6,786
  7,165
  7,560
  7,974
  8,406
  8,858
  9,331
  9,826
Working capital, $m
  -55
  -61
  -67
  -74
  -81
  -88
  -95
  -103
  -111
  -120
  -128
  -137
  -147
  -156
  -167
  -177
  -188
  -200
  -212
  -224
  -237
  -250
  -265
  -279
  -295
  -311
  -328
  -345
  -364
  -383
Total debt, $m
  759
  901
  1,050
  1,207
  1,369
  1,539
  1,716
  1,900
  2,092
  2,290
  2,497
  2,712
  2,935
  3,167
  3,408
  3,659
  3,921
  4,193
  4,476
  4,772
  5,080
  5,402
  5,738
  6,089
  6,455
  6,838
  7,239
  7,658
  8,096
  8,555
Total liabilities, $m
  1,312
  1,454
  1,603
  1,759
  1,922
  2,092
  2,269
  2,453
  2,644
  2,843
  3,050
  3,265
  3,488
  3,720
  3,961
  4,212
  4,473
  4,746
  5,029
  5,325
  5,633
  5,955
  6,291
  6,641
  7,008
  7,391
  7,792
  8,211
  8,649
  9,108
Total equity, $m
  578
  641
  707
  776
  848
  923
  1,000
  1,082
  1,166
  1,254
  1,345
  1,439
  1,538
  1,640
  1,746
  1,857
  1,972
  2,092
  2,217
  2,348
  2,484
  2,626
  2,774
  2,928
  3,090
  3,259
  3,435
  3,620
  3,814
  4,016
Total liabilities and equity, $m
  1,890
  2,095
  2,310
  2,535
  2,770
  3,015
  3,269
  3,535
  3,810
  4,097
  4,395
  4,704
  5,026
  5,360
  5,707
  6,069
  6,445
  6,838
  7,246
  7,673
  8,117
  8,581
  9,065
  9,569
  10,098
  10,650
  11,227
  11,831
  12,463
  13,124
Debt-to-equity ratio
  1.310
  1.410
  1.490
  1.560
  1.620
  1.670
  1.720
  1.760
  1.790
  1.830
  1.860
  1.880
  1.910
  1.930
  1.950
  1.970
  1.990
  2.000
  2.020
  2.030
  2.050
  2.060
  2.070
  2.080
  2.090
  2.100
  2.110
  2.120
  2.120
  2.130
Adjusted equity ratio
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  58
  62
  66
  70
  75
  79
  84
  89
  94
  99
  107
  113
  119
  125
  132
  138
  145
  153
  160
  168
  176
  185
  194
  204
  214
  224
  235
  246
  258
  270
Depreciation, amort., depletion, $m
  58
  64
  70
  76
  83
  90
  97
  105
  113
  121
  127
  135
  145
  154
  164
  175
  186
  197
  209
  221
  234
  247
  261
  276
  291
  307
  323
  341
  359
  378
Funds from operations, $m
  116
  125
  136
  146
  157
  169
  181
  194
  207
  220
  234
  248
  264
  279
  296
  313
  331
  350
  369
  389
  410
  432
  455
  479
  504
  531
  558
  587
  617
  648
Change in working capital, $m
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
Cash from operations, $m
  121
  131
  142
  153
  164
  176
  189
  202
  215
  229
  242
  257
  273
  289
  306
  324
  342
  361
  381
  402
  423
  446
  469
  494
  520
  547
  575
  604
  635
  668
Maintenance CAPEX, $m
  -49
  -54
  -60
  -67
  -73
  -80
  -87
  -94
  -102
  -110
  -118
  -127
  -135
  -145
  -154
  -164
  -175
  -186
  -197
  -209
  -221
  -234
  -247
  -261
  -276
  -291
  -307
  -323
  -341
  -359
New CAPEX, $m
  -146
  -154
  -161
  -168
  -176
  -183
  -191
  -199
  -206
  -214
  -223
  -232
  -241
  -250
  -260
  -271
  -282
  -294
  -306
  -319
  -333
  -347
  -362
  -378
  -395
  -413
  -432
  -452
  -473
  -495
Cash from investing activities, $m
  -195
  -208
  -221
  -235
  -249
  -263
  -278
  -293
  -308
  -324
  -341
  -359
  -376
  -395
  -414
  -435
  -457
  -480
  -503
  -528
  -554
  -581
  -609
  -639
  -671
  -704
  -739
  -775
  -814
  -854
Free cash flow, $m
  -73
  -77
  -79
  -82
  -85
  -87
  -89
  -91
  -93
  -95
  -99
  -101
  -103
  -106
  -109
  -112
  -115
  -118
  -122
  -126
  -130
  -135
  -140
  -145
  -151
  -157
  -164
  -171
  -178
  -186
Issuance/(repayment) of debt, $m
  136
  142
  149
  156
  163
  170
  177
  184
  191
  199
  207
  215
  223
  232
  241
  251
  261
  272
  284
  296
  308
  322
  336
  351
  367
  383
  401
  419
  438
  459
Issuance/(repurchase) of shares, $m
  2
  1
  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  
  138
  143
  149
  156
  163
  170
  177
  184
  191
  199
  207
  215
  223
  232
  241
  251
  261
  272
  284
  296
  308
  322
  336
  351
  367
  383
  401
  419
  438
  459
Total cash flow (excl. dividends), $m
  65
  67
  70
  74
  78
  83
  88
  93
  98
  103
  108
  114
  120
  126
  133
  139
  147
  154
  162
  170
  178
  187
  196
  205
  215
  226
  237
  248
  260
  273
Retained Cash Flow (-), $m
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -98
  -102
  -106
  -111
  -115
  -120
  -125
  -130
  -136
  -142
  -148
  -155
  -162
  -169
  -177
  -185
  -193
  -202
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
  5
  4
  4
  5
  7
  8
  10
  12
  14
  16
  17
  19
  21
  24
  26
  29
  31
  34
  37
  39
  42
  45
  48
  51
  54
  57
  60
  63
  67
  70
Discount rate, %
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
  5
  3
  3
  4
  4
  5
  5
  5
  5
  5
  5
  4
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.9
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8

Chesapeake Utilities Corporation (Chesapeake) is an energy company. The Company operates through two segments: Regulated Energy and Unregulated Energy. The Company provides natural gas distribution and transmission; natural gas supply, gathering, processing and marketing; electric distribution and generation; propane distribution; propane and crude oil wholesale marketing; steam generation, and other energy-related services. The Regulated Energy segment includes the Company's natural gas distribution, natural gas transmission and electric distribution operations. The Unregulated Energy segment includes its propane distribution, propane and crude oil wholesale marketing, natural gas marketing and unregulated natural gas supply, gathering and processing, electricity and steam generation and other unregulated energy-related services to customers.

FINANCIAL RATIOS  of  Chesapeake Utilities Corporation (CPK)

Valuation Ratios
P/E Ratio 33.6
Price to Sales 3
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 14.7
Price to Free Cash Flow -22.6
Growth Rates
Sales Growth Rate 8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.2%
Cap. Spend. - 3 Yr. Gr. Rate 11.9%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 30.7%
Total Debt to Equity 80.5%
Interest Coverage 8
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity 11.2%
Return On Equity - 3 Yr. Avg. 12%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 23%
EBITDA Margin - 3 Yr. Avg. 21.9%
Operating Margin 16.8%
Oper. Margin - 3 Yr. Avg. 15.4%
Pre-Tax Margin 14.6%
Pre-Tax Margin - 3 Yr. Avg. 13.8%
Net Profit Margin 9%
Net Profit Margin - 3 Yr. Avg. 8.4%
Effective Tax Rate 38.4%
Eff/ Tax Rate - 3 Yr. Avg. 39.4%
Payout Ratio 37.8%

CPK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPK stock intrinsic value calculation we used $717 million for the last fiscal year's total revenue generated by Chesapeake Utilities Corporation. The default revenue input number comes from 0001 income statement of Chesapeake Utilities 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 CPK stock valuation model: a) initial revenue growth rate of 11.5% 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 7.6%, whose default value for CPK is calculated based on our internal credit rating of Chesapeake Utilities 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 Chesapeake Utilities 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 CPK stock the variable cost ratio is equal to 85.9%.

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 CPK 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 Chesapeake Utilities Corporation.

Corporate tax rate of 27% is the nominal tax rate for Chesapeake Utilities 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 CPK 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 CPK are equal to 177%.

Life of production assets of 26 years is the average useful life of capital assets used in Chesapeake Utilities 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 CPK is equal to -6.9%. 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 - $518.439 million for Chesapeake Utilities 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 16.349 million for Chesapeake Utilities 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 Chesapeake Utilities Corporation at the current share price and the inputted number of shares is $1.5 billion.

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