Intrinsic value of CPFL Energia ADR - CPL

Previous Close

$12.75

  Intrinsic Value

$124.86

stock screener

  Rating & Target

str. buy

+879%

Previous close

$12.75

 
Intrinsic value

$124.86

 
Up/down potential

+879%

 
Rating

str. buy

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

We calculate the intrinsic value of CPL 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -7.22
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  6,043
  9,669
  14,938
  22,340
  32,415
  45,732
  62,871
  84,392
  110,812
  142,588
  180,100
  223,643
  273,425
  329,569
  392,122
  461,066
  536,330
  617,807
  705,366
  798,864
  898,160
  1,003,125
  1,113,650
  1,229,650
  1,351,074
  1,477,901
  1,610,150
  1,747,876
  1,891,171
  2,040,165
  2,195,025
Variable operating expenses, $m
 
  8,325
  12,862
  19,234
  27,908
  39,374
  54,130
  72,659
  95,405
  122,763
  155,060
  192,549
  235,410
  283,748
  337,604
  396,962
  461,763
  531,912
  607,297
  687,795
  773,286
  863,658
  958,816
  1,058,688
  1,163,230
  1,272,424
  1,386,286
  1,504,863
  1,628,235
  1,756,514
  1,889,844
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
  5,147
  8,325
  12,862
  19,234
  27,908
  39,374
  54,130
  72,659
  95,405
  122,763
  155,060
  192,549
  235,410
  283,748
  337,604
  396,962
  461,763
  531,912
  607,297
  687,795
  773,286
  863,658
  958,816
  1,058,688
  1,163,230
  1,272,424
  1,386,286
  1,504,863
  1,628,235
  1,756,514
  1,889,844
Operating income, $m
  896
  1,344
  2,077
  3,106
  4,506
  6,358
  8,741
  11,733
  15,406
  19,824
  25,040
  31,094
  38,015
  45,821
  54,518
  64,103
  74,568
  85,896
  98,069
  111,068
  124,874
  139,468
  154,834
  170,962
  187,844
  205,477
  223,864
  243,013
  262,935
  283,650
  305,181
EBITDA, $m
  1,304
  1,995
  3,083
  4,611
  6,690
  9,438
  12,976
  17,417
  22,870
  29,428
  37,170
  46,156
  56,431
  68,018
  80,928
  95,157
  110,690
  127,506
  145,576
  164,873
  185,366
  207,029
  229,840
  253,780
  278,840
  305,015
  332,309
  360,734
  390,308
  421,058
  453,018
Interest expense (income), $m
  497
  425
  836
  1,433
  2,271
  3,412
  4,920
  6,861
  9,298
  12,290
  15,889
  20,137
  25,069
  30,707
  37,065
  44,150
  51,958
  60,481
  69,709
  79,625
  90,214
  101,459
  113,347
  125,864
  139,002
  152,753
  167,117
  182,094
  197,692
  213,920
  230,794
Earnings before tax, $m
  436
  919
  1,241
  1,673
  2,236
  2,946
  3,821
  4,872
  6,108
  7,534
  9,150
  10,956
  12,946
  15,114
  17,453
  19,954
  22,610
  25,414
  28,360
  31,443
  34,660
  38,008
  41,487
  45,098
  48,842
  52,724
  56,748
  60,919
  65,243
  69,730
  74,387
Tax expense, $m
  158
  248
  335
  452
  604
  795
  1,032
  1,315
  1,649
  2,034
  2,471
  2,958
  3,495
  4,081
  4,712
  5,388
  6,105
  6,862
  7,657
  8,490
  9,358
  10,262
  11,202
  12,176
  13,187
  14,236
  15,322
  16,448
  17,616
  18,827
  20,084
Net income, $m
  285
  671
  906
  1,221
  1,632
  2,151
  2,789
  3,557
  4,459
  5,500
  6,680
  7,998
  9,451
  11,033
  12,740
  14,566
  16,505
  18,552
  20,703
  22,954
  25,302
  27,746
  30,286
  32,921
  35,655
  38,489
  41,426
  44,471
  47,628
  50,903
  54,302

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,953
  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
  13,333
  18,209
  28,132
  42,072
  61,044
  86,125
  118,402
  158,930
  208,685
  268,526
  339,171
  421,173
  514,924
  620,657
  738,459
  868,297
  1,010,038
  1,163,479
  1,328,373
  1,504,451
  1,691,450
  1,889,125
  2,097,269
  2,315,726
  2,544,395
  2,783,241
  3,032,298
  3,291,668
  3,561,527
  3,842,119
  4,133,757
Adjusted assets (=assets-cash), $m
  11,380
  18,209
  28,132
  42,072
  61,044
  86,125
  118,402
  158,930
  208,685
  268,526
  339,171
  421,173
  514,924
  620,657
  738,459
  868,297
  1,010,038
  1,163,479
  1,328,373
  1,504,451
  1,691,450
  1,889,125
  2,097,269
  2,315,726
  2,544,395
  2,783,241
  3,032,298
  3,291,668
  3,561,527
  3,842,119
  4,133,757
Revenue / Adjusted assets
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
Average production assets, $m
  6,144
  9,833
  15,192
  22,720
  32,966
  46,510
  63,940
  85,826
  112,695
  145,012
  183,161
  227,445
  278,073
  335,172
  398,788
  468,904
  545,448
  628,310
  717,357
  812,444
  913,428
  1,020,178
  1,132,582
  1,250,554
  1,374,042
  1,503,025
  1,637,523
  1,777,590
  1,923,321
  2,074,848
  2,232,341
Working capital, $m
  747
  -48
  -75
  -112
  -162
  -229
  -314
  -422
  -554
  -713
  -900
  -1,118
  -1,367
  -1,648
  -1,961
  -2,305
  -2,682
  -3,089
  -3,527
  -3,994
  -4,491
  -5,016
  -5,568
  -6,148
  -6,755
  -7,390
  -8,051
  -8,739
  -9,456
  -10,201
  -10,975
Total debt, $m
  7,162
  11,772
  20,177
  31,984
  48,054
  69,297
  96,635
  130,962
  173,105
  223,791
  283,627
  353,083
  432,490
  522,046
  621,824
  731,797
  851,851
  981,816
  1,121,481
  1,270,619
  1,429,007
  1,596,437
  1,772,736
  1,957,769
  2,151,451
  2,353,754
  2,564,705
  2,784,392
  3,012,962
  3,250,623
  3,497,641
Total liabilities, $m
  10,813
  15,423
  23,828
  35,635
  51,705
  72,948
  100,286
  134,613
  176,756
  227,442
  287,278
  356,734
  436,141
  525,697
  625,475
  735,448
  855,502
  985,467
  1,125,132
  1,274,270
  1,432,658
  1,600,088
  1,776,387
  1,961,420
  2,155,102
  2,357,405
  2,568,356
  2,788,043
  3,016,613
  3,254,274
  3,501,292
Total equity, $m
  2,520
  2,786
  4,304
  6,437
  9,340
  13,177
  18,115
  24,316
  31,929
  41,085
  51,893
  64,439
  78,783
  94,961
  112,984
  132,849
  154,536
  178,012
  203,241
  230,181
  258,792
  289,036
  320,882
  354,306
  389,292
  425,836
  463,942
  503,625
  544,914
  587,844
  632,465
Total liabilities and equity, $m
  13,333
  18,209
  28,132
  42,072
  61,045
  86,125
  118,401
  158,929
  208,685
  268,527
  339,171
  421,173
  514,924
  620,658
  738,459
  868,297
  1,010,038
  1,163,479
  1,328,373
  1,504,451
  1,691,450
  1,889,124
  2,097,269
  2,315,726
  2,544,394
  2,783,241
  3,032,298
  3,291,668
  3,561,527
  3,842,118
  4,133,757
Debt-to-equity ratio
  2.842
  4.230
  4.690
  4.970
  5.150
  5.260
  5.330
  5.390
  5.420
  5.450
  5.470
  5.480
  5.490
  5.500
  5.500
  5.510
  5.510
  5.520
  5.520
  5.520
  5.520
  5.520
  5.520
  5.530
  5.530
  5.530
  5.530
  5.530
  5.530
  5.530
  5.530
Adjusted equity ratio
  0.050
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  285
  671
  906
  1,221
  1,632
  2,151
  2,789
  3,557
  4,459
  5,500
  6,680
  7,998
  9,451
  11,033
  12,740
  14,566
  16,505
  18,552
  20,703
  22,954
  25,302
  27,746
  30,286
  32,921
  35,655
  38,489
  41,426
  44,471
  47,628
  50,903
  54,302
Depreciation, amort., depletion, $m
  408
  651
  1,006
  1,505
  2,183
  3,080
  4,235
  5,684
  7,463
  9,604
  12,130
  15,063
  18,415
  22,197
  26,410
  31,053
  36,122
  41,610
  47,507
  53,804
  60,492
  67,561
  75,005
  82,818
  90,996
  99,538
  108,445
  117,721
  127,372
  137,407
  147,837
Funds from operations, $m
  1,344
  1,322
  1,912
  2,726
  3,815
  5,231
  7,024
  9,241
  11,922
  15,103
  18,810
  23,061
  27,866
  33,230
  39,150
  45,620
  52,628
  60,162
  68,210
  76,758
  85,794
  95,307
  105,291
  115,740
  126,651
  138,027
  149,871
  162,192
  175,000
  188,310
  202,140
Change in working capital, $m
  -121
  -18
  -26
  -37
  -50
  -67
  -86
  -108
  -132
  -159
  -188
  -218
  -249
  -281
  -313
  -345
  -376
  -407
  -438
  -467
  -496
  -525
  -553
  -580
  -607
  -634
  -661
  -689
  -716
  -745
  -774
Cash from operations, $m
  1,465
  1,340
  1,939
  2,763
  3,866
  5,298
  7,110
  9,348
  12,054
  15,262
  18,997
  23,278
  28,115
  33,511
  39,463
  45,964
  53,004
  60,570
  68,648
  77,225
  86,290
  95,832
  105,844
  116,320
  127,258
  138,661
  150,532
  162,880
  175,716
  189,055
  202,914
Maintenance CAPEX, $m
  0
  -407
  -651
  -1,006
  -1,505
  -2,183
  -3,080
  -4,234
  -5,684
  -7,463
  -9,603
  -12,130
  -15,063
  -18,415
  -22,197
  -26,410
  -31,053
  -36,122
  -41,610
  -47,507
  -53,804
  -60,492
  -67,561
  -75,005
  -82,818
  -90,996
  -99,538
  -108,445
  -117,721
  -127,372
  -137,407
New CAPEX, $m
  -708
  -3,690
  -5,359
  -7,528
  -10,246
  -13,544
  -17,430
  -21,886
  -26,869
  -32,316
  -38,150
  -44,283
  -50,628
  -57,098
  -63,616
  -70,116
  -76,544
  -82,862
  -89,047
  -95,087
  -100,984
  -106,750
  -112,404
  -117,972
  -123,487
  -128,983
  -134,497
  -140,067
  -145,731
  -151,527
  -157,493
Cash from investing activities, $m
  -1,206
  -4,097
  -6,010
  -8,534
  -11,751
  -15,727
  -20,510
  -26,120
  -32,553
  -39,779
  -47,753
  -56,413
  -65,691
  -75,513
  -85,813
  -96,526
  -107,597
  -118,984
  -130,657
  -142,594
  -154,788
  -167,242
  -179,965
  -192,977
  -206,305
  -219,979
  -234,035
  -248,512
  -263,452
  -278,899
  -294,900
Free cash flow, $m
  259
  -2,756
  -4,072
  -5,771
  -7,884
  -10,430
  -13,401
  -16,772
  -20,499
  -24,517
  -28,756
  -33,135
  -37,576
  -42,003
  -46,350
  -50,561
  -54,593
  -58,415
  -62,009
  -65,369
  -68,498
  -71,410
  -74,122
  -76,658
  -79,047
  -81,319
  -83,503
  -85,632
  -87,736
  -89,844
  -91,986
Issuance/(repayment) of debt, $m
  -77
  5,785
  8,405
  11,807
  16,070
  21,243
  27,339
  34,327
  42,143
  50,686
  59,836
  69,456
  79,407
  89,556
  99,779
  109,973
  120,055
  129,965
  139,665
  149,138
  158,388
  167,431
  176,298
  185,033
  193,683
  202,303
  210,951
  219,687
  228,570
  237,661
  247,018
Issuance/(repurchase) of shares, $m
  0
  373
  612
  911
  1,271
  1,687
  2,149
  2,644
  3,154
  3,656
  4,129
  4,548
  4,893
  5,144
  5,283
  5,299
  5,181
  4,924
  4,526
  3,986
  3,309
  2,498
  1,561
  502
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -33
  6,158
  9,017
  12,718
  17,341
  22,930
  29,488
  36,971
  45,297
  54,342
  63,965
  74,004
  84,300
  94,700
  105,062
  115,272
  125,236
  134,889
  144,191
  153,124
  161,697
  169,929
  177,859
  185,535
  193,683
  202,303
  210,951
  219,687
  228,570
  237,661
  247,018
Total cash flow (excl. dividends), $m
  225
  3,402
  4,946
  6,948
  9,456
  12,500
  16,087
  20,199
  24,798
  29,825
  35,209
  40,869
  46,725
  52,696
  58,712
  64,710
  70,642
  76,474
  82,181
  87,756
  93,198
  98,519
  103,737
  108,877
  114,635
  120,984
  127,448
  134,055
  140,835
  147,817
  155,032
Retained Cash Flow (-), $m
  -94
  -1,044
  -1,518
  -2,133
  -2,903
  -3,837
  -4,938
  -6,201
  -7,613
  -9,156
  -10,809
  -12,546
  -14,344
  -16,177
  -18,024
  -19,865
  -21,686
  -23,476
  -25,229
  -26,940
  -28,611
  -30,244
  -31,846
  -33,424
  -34,986
  -36,543
  -38,106
  -39,684
  -41,288
  -42,931
  -44,621
Prev. year cash balance distribution, $m
 
  778
  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
 
  3,136
  3,428
  4,815
  6,553
  8,663
  11,148
  13,998
  17,185
  20,669
  24,400
  28,323
  32,381
  36,519
  40,688
  44,845
  48,956
  52,997
  56,953
  60,816
  64,588
  68,275
  71,891
  75,453
  79,649
  84,441
  89,342
  94,371
  99,546
  104,886
  110,411
Discount rate, %
 
  7.50
  7.88
  8.27
  8.68
  9.12
  9.57
  10.05
  10.55
  11.08
  11.63
  12.22
  12.83
  13.47
  14.14
  14.85
  15.59
  16.37
  17.19
  18.05
  18.95
  19.90
  20.89
  21.94
  23.04
  24.19
  25.40
  26.67
  28.00
  29.40
  30.87
PV of cash for distribution, $m
 
  2,917
  2,946
  3,794
  4,697
  5,600
  6,442
  7,160
  7,702
  8,027
  8,117
  7,971
  7,609
  7,065
  6,386
  5,621
  4,819
  4,026
  3,277
  2,599
  2,008
  1,510
  1,106
  788
  550
  375
  249
  160
  99
  60
  34
Current shareholders' claim on cash, %
  100
  92.4
  85.3
  78.9
  73.3
  68.6
  64.6
  61.1
  58.3
  55.8
  53.7
  52.0
  50.5
  49.3
  48.3
  47.4
  46.7
  46.2
  45.7
  45.4
  45.1
  45.0
  44.9
  44.8
  44.8
  44.8
  44.8
  44.8
  44.8
  44.8
  44.8

CPFL Energia S.A. is a holding company. The Company, through its subsidiaries, distributes, generates, transmits and commercializes electricity in Brazil, as well as provides energy-related services. Its segments include Distribution, Conventional Generation Sources, Renewable Energy Generation, Commercialization and Services. The Company operates its distribution segment through its eight distributors. Its installed capacity in conventional generation is approximately 2,200 megawatt (MW). The Company, through its subsidiary CPFL Geracao, holds equity interests in eight Hydroelectric Power Plants. It operates in the segment of generation of energy of renewable sources, such as wind, biomass thermal plants, SHPPs and solar, through its subsidiary, CPFL Renovaveis. The Company operates in the segment of commercialization (power competitive supply) through its subsidiary, CPFL Brasil. The Company operates in the segment of value-added services providing electricity-related services.

FINANCIAL RATIOS  of  CPFL Energia ADR (CPL)

Valuation Ratios
P/E Ratio 45.5
Price to Sales 2.1
Price to Book 5.2
Price to Tangible Book
Price to Cash Flow 8.9
Price to Free Cash Flow 17.1
Growth Rates
Sales Growth Rate -7.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 57%
Cap. Spend. - 3 Yr. Gr. Rate 5.2%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 237.6%
Total Debt to Equity 284.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 4.9%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 3.3%
Return On Equity 11.5%
Return On Equity - 3 Yr. Avg. 12.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 22.2%
EBITDA Margin - 3 Yr. Avg. 22.1%
Operating Margin 14.8%
Oper. Margin - 3 Yr. Avg. 14.7%
Pre-Tax Margin 7.2%
Pre-Tax Margin - 3 Yr. Avg. 7.7%
Net Profit Margin 4.7%
Net Profit Margin - 3 Yr. Avg. 4.8%
Effective Tax Rate 36.2%
Eff/ Tax Rate - 3 Yr. Avg. 39.1%
Payout Ratio 25.6%

CPL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPL stock intrinsic value calculation we used $6043 million for the last fiscal year's total revenue generated by CPFL Energia ADR. The default revenue input number comes from 2016 income statement of CPFL Energia ADR. 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 CPL stock valuation model: a) initial revenue growth rate of 60% 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 7.5%, whose default value for CPL is calculated based on our internal credit rating of CPFL Energia ADR, 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 CPFL Energia ADR.
    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 CPL stock the variable cost ratio is equal to 86.1%.

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 CPL 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 7.1% for CPFL Energia ADR.

Corporate tax rate of 27% is the nominal tax rate for CPFL Energia ADR. 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 CPL 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 CPL are equal to 101.7%.

Life of production assets of 15.1 years is the average useful life of capital assets used in CPFL Energia ADR 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 CPL is equal to -0.5%. 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 - $2520 million for CPFL Energia ADR - 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 516.522 million for CPFL Energia ADR 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 CPFL Energia ADR at the current share price and the inputted number of shares is $6.6 billion.

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COMPANY NEWS

▶ ETFs with exposure to CPFL Energia SA : December 11, 2017   [Dec-11-17 01:43PM  Capital Cube]
▶ ETFs with exposure to CPFL Energia SA : November 8, 2017   [Nov-08-17 05:47PM  Capital Cube]
▶ ETFs with exposure to CPFL Energia SA : October 27, 2017   [Oct-27-17 10:50AM  Capital Cube]
▶ ETFs with exposure to CPFL Energia SA : October 10, 2017   [Oct-10-17 11:14AM  Capital Cube]
▶ ETFs with exposure to CPFL Energia SA : August 4, 2017   [Aug-03-17 08:02PM  Capital Cube]
▶ ETFs with exposure to CPFL Energia SA : July 13, 2017   [Jul-13-17 03:47PM  Capital Cube]
▶ ETFs with exposure to CPFL Energia SA : May 19, 2017   [May-19-17 01:46PM  Capital Cube]
▶ ETFs with exposure to CPFL Energia SA : April 12, 2017   [Apr-12-17 01:10PM  Capital Cube]
▶ 4 Stocks With Great 12-Month Performances   [Feb-16-17 02:19PM  GuruFocus.com]
▶ ETFs with exposure to CPFL Energia SA : January 12, 2017   [Jan-12-17 01:56PM  Capital Cube]
▶ ETFs with exposure to CPFL Energia SA : December 14, 2016   [Dec-14-16 12:53PM  Capital Cube]
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▶ [$$] China's State Grid to Acquire Additional Stake in Brazil's CPFL   [Sep-26-16 06:51AM  at The Wall Street Journal]
▶ [$$] Chinas State Grid Pursues Energy Deal in Brazil   [Aug-10-16 12:08AM  at The Wall Street Journal]
▶ Chinas State Grid eyes $13 billion utility deal in Brazil   [Aug-09-16 09:12PM  at MarketWatch]
▶ [$$] China Inc. Pursues Power, Glory With Big Brazil Deal   [08:33PM  at The Wall Street Journal]
▶ China Aims for Gold in Brazil Power Deal   [06:55AM  at MarketWatch]
▶ Welcome China, Latin America Is Waiting   [03:07AM  at Bloomberg]
▶ Chinas State Grid Said in Talks to Buy CPFL Energia Stake   [Jun-22-16 01:35PM  at Bloomberg]
▶ 7 Brazil Stocks To Watch As Impeachment Unfolds   [May-12-16 01:22PM  at Barrons.com]
▶ CPFL ENERGY INC Financials   [01:04PM  EDGAR Online Financials]
▶ 5 Utility Stocks to Trade for Breakout Gains in 2016   [Feb-02-16 07:49AM  at TheStreet]
▶ Embraer Leads Brazilian Stocks Set For 2016 Bounce   [Dec-07  06:08PM  at Investor's Business Daily]
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Financial statements of CPL
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