Intrinsic value of CPFL Energia S.A. - CPL

Previous Close

$15.59

  Intrinsic Value

$67.82

stock screener

  Rating & Target

str. buy

+335%

Previous close

$15.59

 
Intrinsic value

$67.82

 
Up/down potential

+335%

 
Rating

str. buy

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

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 7.9

 

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, %
  37.60
  34.34
  31.41
  28.77
  26.39
  24.25
  22.32
  20.59
  19.03
  17.63
  16.37
  15.23
  14.21
  13.29
  12.46
  11.71
  11.04
  10.44
  9.89
  9.40
  8.96
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
Revenue, $m
  11,115
  14,932
  19,622
  25,266
  31,934
  39,678
  48,536
  58,531
  69,671
  81,954
  95,367
  109,892
  125,504
  142,179
  159,892
  178,618
  198,339
  219,039
  240,709
  263,345
  286,949
  311,533
  337,111
  363,706
  391,349
  420,076
  449,928
  480,953
  513,207
  546,747
Variable operating expenses, $m
  9,528
  12,690
  16,575
  21,251
  26,774
  33,189
  40,527
  48,807
  58,036
  68,211
  79,003
  91,035
  103,969
  117,783
  132,456
  147,969
  164,306
  181,455
  199,406
  218,158
  237,712
  258,077
  279,266
  301,298
  324,198
  347,995
  372,725
  398,427
  425,146
  452,931
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
  9,528
  12,690
  16,575
  21,251
  26,774
  33,189
  40,527
  48,807
  58,036
  68,211
  79,003
  91,035
  103,969
  117,783
  132,456
  147,969
  164,306
  181,455
  199,406
  218,158
  237,712
  258,077
  279,266
  301,298
  324,198
  347,995
  372,725
  398,427
  425,146
  452,931
Operating income, $m
  1,587
  2,242
  3,047
  4,016
  5,160
  6,488
  8,008
  9,723
  11,635
  13,743
  16,364
  18,856
  21,535
  24,396
  27,436
  30,649
  34,033
  37,585
  41,303
  45,187
  49,237
  53,456
  57,844
  62,408
  67,151
  72,080
  77,203
  82,526
  88,061
  93,816
EBITDA, $m
  2,376
  3,192
  4,194
  5,400
  6,825
  8,481
  10,374
  12,510
  14,891
  17,517
  20,383
  23,488
  26,825
  30,389
  34,175
  38,177
  42,392
  46,817
  51,448
  56,287
  61,332
  66,586
  72,053
  77,738
  83,646
  89,786
  96,166
  102,798
  109,691
  116,860
Interest expense (income), $m
  497
  676
  1,083
  1,595
  2,224
  2,981
  3,876
  4,914
  6,102
  7,443
  8,937
  10,585
  12,384
  14,332
  16,426
  18,662
  21,038
  23,550
  26,195
  28,971
  31,878
  34,914
  38,080
  41,377
  44,808
  48,375
  52,082
  55,935
  59,939
  64,100
  68,426
Earnings before tax, $m
  911
  1,159
  1,452
  1,791
  2,178
  2,613
  3,094
  3,621
  4,192
  4,805
  5,779
  6,473
  7,203
  7,971
  8,773
  9,611
  10,483
  11,390
  12,332
  13,309
  14,324
  15,376
  16,468
  17,600
  18,777
  19,998
  21,267
  22,587
  23,960
  25,389
Tax expense, $m
  246
  313
  392
  484
  588
  705
  835
  978
  1,132
  1,297
  1,560
  1,748
  1,945
  2,152
  2,369
  2,595
  2,830
  3,075
  3,330
  3,594
  3,867
  4,151
  4,446
  4,752
  5,070
  5,399
  5,742
  6,099
  6,469
  6,855
Net income, $m
  665
  846
  1,060
  1,308
  1,590
  1,907
  2,259
  2,643
  3,060
  3,508
  4,219
  4,725
  5,258
  5,819
  6,404
  7,016
  7,653
  8,315
  9,002
  9,716
  10,456
  11,224
  12,021
  12,848
  13,707
  14,599
  15,525
  16,489
  17,491
  18,534

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
  17,153
  23,044
  30,281
  38,991
  49,281
  61,231
  74,901
  90,325
  107,517
  126,472
  147,171
  169,586
  193,679
  219,412
  246,746
  275,645
  306,079
  338,024
  371,465
  406,396
  442,823
  480,760
  520,232
  561,275
  603,934
  648,265
  694,333
  742,212
  791,985
  843,746
Adjusted assets (=assets-cash), $m
  17,153
  23,044
  30,281
  38,991
  49,281
  61,231
  74,901
  90,325
  107,517
  126,472
  147,171
  169,586
  193,679
  219,412
  246,746
  275,645
  306,079
  338,024
  371,465
  406,396
  442,823
  480,760
  520,232
  561,275
  603,934
  648,265
  694,333
  742,212
  791,985
  843,746
Revenue / Adjusted assets
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
  0.648
Average production assets, $m
  6,325
  8,496
  11,165
  14,377
  18,170
  22,577
  27,617
  33,304
  39,643
  46,632
  54,264
  62,528
  71,412
  80,900
  90,978
  101,634
  112,855
  124,633
  136,963
  149,843
  163,274
  177,262
  191,816
  206,949
  222,678
  239,023
  256,009
  273,662
  292,015
  311,099
Working capital, $m
  100
  134
  177
  227
  287
  357
  437
  527
  627
  738
  858
  989
  1,130
  1,280
  1,439
  1,608
  1,785
  1,971
  2,166
  2,370
  2,583
  2,804
  3,034
  3,273
  3,522
  3,781
  4,049
  4,329
  4,619
  4,921
Total debt, $m
  9,761
  14,373
  20,039
  26,860
  34,916
  44,274
  54,977
  67,054
  80,515
  95,357
  111,565
  129,115
  147,980
  168,129
  189,532
  212,160
  235,989
  261,002
  287,186
  314,538
  343,060
  372,765
  403,671
  435,808
  469,210
  503,921
  539,992
  577,481
  616,454
  656,982
Total liabilities, $m
  13,431
  18,043
  23,710
  30,530
  38,587
  47,944
  58,647
  70,724
  84,186
  99,027
  115,235
  132,786
  151,651
  171,800
  193,202
  215,830
  239,660
  264,673
  290,857
  318,208
  346,731
  376,435
  407,342
  439,478
  472,880
  507,592
  543,663
  581,152
  620,125
  660,653
Total equity, $m
  3,722
  5,000
  6,571
  8,461
  10,694
  13,287
  16,254
  19,601
  23,331
  27,444
  31,936
  36,800
  42,028
  47,612
  53,544
  59,815
  66,419
  73,351
  80,608
  88,188
  96,093
  104,325
  112,890
  121,797
  131,054
  140,674
  150,670
  161,060
  171,861
  183,093
Total liabilities and equity, $m
  17,153
  23,043
  30,281
  38,991
  49,281
  61,231
  74,901
  90,325
  107,517
  126,471
  147,171
  169,586
  193,679
  219,412
  246,746
  275,645
  306,079
  338,024
  371,465
  406,396
  442,824
  480,760
  520,232
  561,275
  603,934
  648,266
  694,333
  742,212
  791,986
  843,746
Debt-to-equity ratio
  2.620
  2.870
  3.050
  3.170
  3.270
  3.330
  3.380
  3.420
  3.450
  3.470
  3.490
  3.510
  3.520
  3.530
  3.540
  3.550
  3.550
  3.560
  3.560
  3.570
  3.570
  3.570
  3.580
  3.580
  3.580
  3.580
  3.580
  3.590
  3.590
  3.590
Adjusted equity ratio
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  665
  846
  1,060
  1,308
  1,590
  1,907
  2,259
  2,643
  3,060
  3,508
  4,219
  4,725
  5,258
  5,819
  6,404
  7,016
  7,653
  8,315
  9,002
  9,716
  10,456
  11,224
  12,021
  12,848
  13,707
  14,599
  15,525
  16,489
  17,491
  18,534
Depreciation, amort., depletion, $m
  788
  949
  1,147
  1,385
  1,666
  1,992
  2,365
  2,787
  3,256
  3,774
  4,020
  4,632
  5,290
  5,993
  6,739
  7,528
  8,360
  9,232
  10,145
  11,099
  12,094
  13,131
  14,209
  15,330
  16,495
  17,705
  18,964
  20,271
  21,631
  23,044
Funds from operations, $m
  1,454
  1,795
  2,207
  2,692
  3,256
  3,899
  4,624
  5,430
  6,316
  7,282
  8,238
  9,357
  10,548
  11,811
  13,144
  14,544
  16,012
  17,547
  19,148
  20,815
  22,551
  24,355
  26,230
  28,178
  30,202
  32,304
  34,489
  36,760
  39,122
  41,579
Change in working capital, $m
  27
  34
  42
  51
  60
  70
  80
  90
  100
  111
  121
  131
  141
  150
  159
  169
  177
  186
  195
  204
  212
  221
  230
  239
  249
  259
  269
  279
  290
  302
Cash from operations, $m
  1,426
  1,761
  2,164
  2,642
  3,196
  3,830
  4,544
  5,340
  6,216
  7,171
  8,118
  9,226
  10,408
  11,661
  12,984
  14,376
  15,835
  17,360
  18,953
  20,612
  22,338
  24,134
  26,000
  27,939
  29,953
  32,045
  34,220
  36,481
  38,831
  41,277
Maintenance CAPEX, $m
  -340
  -468
  -629
  -827
  -1,065
  -1,346
  -1,672
  -2,046
  -2,467
  -2,936
  -3,454
  -4,020
  -4,632
  -5,290
  -5,993
  -6,739
  -7,528
  -8,360
  -9,232
  -10,145
  -11,099
  -12,094
  -13,131
  -14,209
  -15,330
  -16,495
  -17,705
  -18,964
  -20,271
  -21,631
New CAPEX, $m
  -1,728
  -2,172
  -2,668
  -3,212
  -3,794
  -4,406
  -5,040
  -5,687
  -6,339
  -6,989
  -7,632
  -8,264
  -8,884
  -9,488
  -10,078
  -10,655
  -11,221
  -11,778
  -12,330
  -12,880
  -13,431
  -13,988
  -14,554
  -15,133
  -15,729
  -16,345
  -16,986
  -17,654
  -18,352
  -19,085
Cash from investing activities, $m
  -2,068
  -2,640
  -3,297
  -4,039
  -4,859
  -5,752
  -6,712
  -7,733
  -8,806
  -9,925
  -11,086
  -12,284
  -13,516
  -14,778
  -16,071
  -17,394
  -18,749
  -20,138
  -21,562
  -23,025
  -24,530
  -26,082
  -27,685
  -29,342
  -31,059
  -32,840
  -34,691
  -36,618
  -38,623
  -40,716
Free cash flow, $m
  -642
  -879
  -1,133
  -1,397
  -1,663
  -1,922
  -2,168
  -2,393
  -2,590
  -2,754
  -2,969
  -3,058
  -3,108
  -3,117
  -3,087
  -3,019
  -2,915
  -2,778
  -2,610
  -2,414
  -2,192
  -1,949
  -1,685
  -1,403
  -1,106
  -795
  -471
  -136
  208
  561
Issuance/(repayment) of debt, $m
  3,669
  4,612
  5,667
  6,820
  8,057
  9,357
  10,703
  12,077
  13,461
  14,842
  16,208
  17,551
  18,865
  20,149
  21,403
  22,628
  23,829
  25,013
  26,184
  27,352
  28,522
  29,705
  30,907
  32,136
  33,402
  34,711
  36,071
  37,489
  38,973
  40,528
Issuance/(repurchase) of shares, $m
  350
  432
  511
  583
  643
  686
  708
  704
  670
  605
  273
  139
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  4,019
  5,044
  6,178
  7,403
  8,700
  10,043
  11,411
  12,781
  14,131
  15,447
  16,481
  17,690
  18,865
  20,149
  21,403
  22,628
  23,829
  25,013
  26,184
  27,352
  28,522
  29,705
  30,907
  32,136
  33,402
  34,711
  36,071
  37,489
  38,973
  40,528
Total cash flow (excl. dividends), $m
  3,377
  4,165
  5,044
  6,006
  7,036
  8,121
  9,243
  10,388
  11,542
  12,693
  13,512
  14,631
  15,758
  17,032
  18,316
  19,609
  20,915
  22,235
  23,575
  24,938
  26,330
  27,756
  29,222
  30,733
  32,296
  33,917
  35,600
  37,353
  39,181
  41,090
Retained Cash Flow (-), $m
  -1,016
  -1,278
  -1,570
  -1,890
  -2,233
  -2,593
  -2,966
  -3,347
  -3,731
  -4,113
  -4,492
  -4,864
  -5,228
  -5,584
  -5,931
  -6,271
  -6,604
  -6,932
  -7,257
  -7,580
  -7,905
  -8,232
  -8,565
  -8,906
  -9,257
  -9,620
  -9,997
  -10,390
  -10,801
  -11,232
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
  2,362
  2,887
  3,474
  4,116
  4,804
  5,527
  6,277
  7,041
  7,811
  8,580
  9,020
  9,768
  10,529
  11,448
  12,384
  13,338
  14,311
  15,303
  16,318
  17,358
  18,425
  19,524
  20,657
  21,827
  23,039
  24,297
  25,603
  26,963
  28,380
  29,858
Discount rate, %
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
  2,187
  2,457
  2,696
  2,888
  3,020
  3,085
  3,077
  2,999
  2,858
  2,663
  2,344
  2,096
  1,839
  1,601
  1,365
  1,138
  928
  739
  575
  437
  324
  233
  164
  112
  74
  48
  30
  18
  10
  6
Current shareholders' claim on cash, %
  95.8
  92.1
  89.0
  86.4
  84.2
  82.4
  81.0
  79.8
  78.9
  78.2
  77.9
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8
  77.8

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 S.A. (CPL)

Valuation Ratios
P/E Ratio 55.7
Price to Sales 2.6
Price to Book 6.3
Price to Tangible Book
Price to Cash Flow 10.8
Price to Free Cash Flow 21
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 $8078 million for the last fiscal year's total revenue generated by CPFL Energia S.A.. The default revenue input number comes from 0001 income statement of CPFL Energia S.A.. 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 37.6% 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%, whose default value for CPL is calculated based on our internal credit rating of CPFL Energia S.A., 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 S.A..
    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 86.8%.

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 11.1% for CPFL Energia S.A..

Corporate tax rate of 27% is the nominal tax rate for CPFL Energia S.A.. 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 56.9%.

Life of production assets of 13.5 years is the average useful life of capital assets used in CPFL Energia S.A. 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 0.9%. 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 - $2706.59257022 million for CPFL Energia S.A. - 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 508.940 million for CPFL Energia S.A. 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 S.A. at the current share price and the inputted number of shares is $7.9 billion.

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