Intrinsic value of Capstone Turbine - CPST

Previous Close

$0.80

  Intrinsic Value

$0.10

stock screener

  Rating & Target

str. sell

-88%

Previous close

$0.80

 
Intrinsic value

$0.10

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of CPST 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 0.1

 

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, %
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
Revenue, $m
  91
  100
  109
  119
  128
  139
  149
  161
  172
  184
  197
  210
  223
  237
  252
  267
  283
  299
  317
  335
  354
  373
  394
  415
  438
  461
  486
  511
  538
  567
Variable operating expenses, $m
  120
  131
  143
  156
  169
  182
  196
  211
  226
  242
  258
  275
  293
  311
  330
  350
  371
  393
  416
  439
  464
  490
  517
  545
  574
  605
  638
  671
  707
  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
  120
  131
  143
  156
  169
  182
  196
  211
  226
  242
  258
  275
  293
  311
  330
  350
  371
  393
  416
  439
  464
  490
  517
  545
  574
  605
  638
  671
  707
  744
Operating income, $m
  -29
  -31
  -34
  -37
  -40
  -43
  -47
  -50
  -54
  -58
  -61
  -66
  -70
  -74
  -79
  -83
  -88
  -94
  -99
  -105
  -110
  -117
  -123
  -130
  -137
  -144
  -152
  -160
  -168
  -177
EBITDA, $m
  -28
  -31
  -33
  -36
  -39
  -42
  -46
  -49
  -53
  -56
  -60
  -64
  -68
  -73
  -77
  -82
  -87
  -92
  -97
  -102
  -108
  -114
  -120
  -127
  -134
  -141
  -149
  -156
  -165
  -173
Interest expense (income), $m
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
Earnings before tax, $m
  -29
  -32
  -35
  -38
  -42
  -45
  -49
  -52
  -56
  -60
  -64
  -69
  -73
  -78
  -83
  -88
  -93
  -99
  -105
  -111
  -117
  -123
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -188
Tax expense, $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
Net income, $m
  -29
  -32
  -35
  -38
  -42
  -45
  -49
  -52
  -56
  -60
  -64
  -69
  -73
  -78
  -83
  -88
  -93
  -99
  -105
  -111
  -117
  -123
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -188

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
  64
  70
  77
  83
  90
  98
  105
  113
  121
  130
  138
  147
  157
  167
  177
  188
  199
  211
  223
  235
  249
  262
  277
  292
  308
  324
  342
  360
  379
  398
Adjusted assets (=assets-cash), $m
  64
  70
  77
  83
  90
  98
  105
  113
  121
  130
  138
  147
  157
  167
  177
  188
  199
  211
  223
  235
  249
  262
  277
  292
  308
  324
  342
  360
  379
  398
Revenue / Adjusted assets
  1.422
  1.429
  1.416
  1.434
  1.422
  1.418
  1.419
  1.425
  1.421
  1.415
  1.428
  1.429
  1.420
  1.419
  1.424
  1.420
  1.422
  1.417
  1.422
  1.426
  1.422
  1.424
  1.422
  1.421
  1.422
  1.423
  1.421
  1.419
  1.420
  1.425
Average production assets, $m
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
Working capital, $m
  12
  13
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  33
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  65
  68
  72
  75
Total debt, $m
  12
  16
  19
  23
  27
  31
  35
  39
  44
  49
  54
  59
  64
  69
  75
  81
  87
  94
  101
  108
  115
  123
  131
  139
  148
  158
  167
  177
  188
  199
Total liabilities, $m
  36
  39
  43
  47
  51
  55
  59
  63
  68
  72
  77
  82
  88
  93
  99
  105
  111
  118
  125
  132
  139
  147
  155
  163
  172
  181
  191
  201
  212
  223
Total equity, $m
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  74
  78
  83
  88
  93
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
Total liabilities and equity, $m
  64
  70
  77
  84
  91
  98
  105
  113
  121
  129
  138
  147
  157
  167
  177
  188
  199
  211
  223
  236
  249
  263
  277
  292
  308
  324
  342
  360
  379
  399
Debt-to-equity ratio
  0.430
  0.500
  0.570
  0.620
  0.670
  0.720
  0.750
  0.790
  0.820
  0.850
  0.880
  0.900
  0.920
  0.940
  0.960
  0.980
  1.000
  1.010
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.130
Adjusted equity ratio
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -29
  -32
  -35
  -38
  -42
  -45
  -49
  -52
  -56
  -60
  -64
  -69
  -73
  -78
  -83
  -88
  -93
  -99
  -105
  -111
  -117
  -123
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -188
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
Funds from operations, $m
  -28
  -31
  -34
  -37
  -41
  -44
  -48
  -51
  -55
  -59
  -63
  -67
  -72
  -76
  -81
  -86
  -91
  -97
  -102
  -108
  -115
  -121
  -128
  -135
  -142
  -150
  -158
  -166
  -175
  -184
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
Cash from operations, $m
  -30
  -32
  -35
  -39
  -42
  -45
  -49
  -53
  -57
  -61
  -65
  -69
  -74
  -78
  -83
  -88
  -93
  -99
  -105
  -111
  -117
  -124
  -130
  -138
  -145
  -153
  -161
  -170
  -179
  -188
Maintenance CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
Free cash flow, $m
  -30
  -33
  -36
  -40
  -43
  -47
  -50
  -54
  -58
  -62
  -66
  -71
  -75
  -80
  -85
  -90
  -96
  -101
  -107
  -113
  -120
  -127
  -134
  -141
  -149
  -157
  -165
  -174
  -183
  -193
Issuance/(repayment) of debt, $m
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
Issuance/(repurchase) of shares, $m
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  68
  73
  77
  82
  87
  93
  98
  104
  110
  116
  123
  130
  137
  144
  152
  160
  169
  178
  187
  197
Cash from financing (excl. dividends), $m  
  35
  38
  42
  45
  49
  52
  56
  60
  65
  69
  73
  78
  82
  88
  93
  99
  104
  111
  117
  123
  130
  138
  145
  152
  161
  169
  179
  188
  198
  208
Total cash flow (excl. dividends), $m
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
Retained Cash Flow (-), $m
  -32
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -73
  -77
  -82
  -87
  -93
  -98
  -104
  -110
  -116
  -123
  -130
  -137
  -144
  -152
  -160
  -169
  -178
  -187
  -197
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
  -27
  -30
  -33
  -36
  -39
  -43
  -46
  -50
  -53
  -57
  -61
  -66
  -70
  -75
  -79
  -84
  -89
  -95
  -100
  -106
  -112
  -119
  -126
  -132
  -140
  -147
  -155
  -164
  -172
  -182
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -26
  -27
  -29
  -30
  -30
  -31
  -31
  -31
  -31
  -30
  -29
  -28
  -27
  -25
  -23
  -21
  -19
  -17
  -15
  -14
  -12
  -10
  -8
  -7
  -5
  -4
  -3
  -3
  -2
  -1
Current shareholders' claim on cash, %
  61.9
  38.3
  23.8
  14.8
  9.2
  5.7
  3.6
  2.2
  1.4
  0.9
  0.5
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
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Capstone Turbine Corporation (Capstone) develops, manufactures, markets and services microturbine technology solutions for use in stationary distributed power generation applications, including cogeneration (combined heat and power), integrated combined heat and power (ICHP), and combined cooling, heat and power (CCHP), renewable energy, natural resources and critical power supply. The Company's microturbines are used as battery charging generators for hybrid electric vehicle applications. Capstone offers micro turbines for commercial, industrial and utility users with product offerings ranging from 30 kilowatts (kW) to 1 megawatt in electric power output. The Company sells complete microturbine units, subassemblies, components and various accessories. It also remanufactures micro turbine engines and provides after-market parts and services. Its products include C30, C65, TA100, C200, C600, C800, C1000 and waste heat recovery generator. It also offers C65 and C200 ICHP systems.

FINANCIAL RATIOS  of  Capstone Turbine (CPST)

Valuation Ratios
P/E Ratio -1.3
Price to Sales 0.4
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow -1.6
Price to Free Cash Flow -1.6
Growth Rates
Sales Growth Rate -9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 57.1%
Interest Coverage 0
Management Effectiveness
Return On Assets -42.1%
Ret/ On Assets - 3 Yr. Avg. -39.5%
Return On Total Capital -70.6%
Ret/ On T. Cap. - 3 Yr. Avg. -65.8%
Return On Equity -104.3%
Return On Equity - 3 Yr. Avg. -93.5%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 2.6%
Gross Margin - 3 Yr. Avg. 11.2%
EBITDA Margin -28.6%
EBITDA Margin - 3 Yr. Avg. -26.9%
Operating Margin -29.9%
Oper. Margin - 3 Yr. Avg. -28.7%
Pre-Tax Margin -31.2%
Pre-Tax Margin - 3 Yr. Avg. -29.2%
Net Profit Margin -31.2%
Net Profit Margin - 3 Yr. Avg. -29.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -1.1%
Payout Ratio 0%

CPST stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPST stock intrinsic value calculation we used $82.837 million for the last fiscal year's total revenue generated by Capstone Turbine. The default revenue input number comes from 0001 income statement of Capstone Turbine. 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 CPST stock valuation model: a) initial revenue growth rate of 10.1% 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 4.3%, whose default value for CPST is calculated based on our internal credit rating of Capstone Turbine, 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 Capstone Turbine.
    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 CPST stock the variable cost ratio is equal to 131.3%.

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 CPST 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 5.9% for Capstone Turbine.

Corporate tax rate of 27% is the nominal tax rate for Capstone Turbine. 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 CPST 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 CPST are equal to 3.3%.

Life of production assets of 2.6 years is the average useful life of capital assets used in Capstone Turbine 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 CPST is equal to 13.3%. 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 - $25.759 million for Capstone Turbine - 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 64.194 million for Capstone Turbine 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 Capstone Turbine at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Capstone Turbine: Fiscal 2Q Earnings Snapshot   [07:41PM  Associated Press]
▶ New Strong Sell Stocks for October 4th   [Oct-04-18 09:00AM  Zacks]
▶ Who Owns Capstone Turbine Corporation (NASDAQ:CPST)?   [Oct-01-18 08:50AM  Simply Wall St.]
▶ New Strong Sell Stocks for September 19th   [Sep-19-18 07:12AM  Zacks]
▶ U.S. Microturbine CHP Market Share Grows to a Record 25%   [Aug-29-18 08:30AM  GlobeNewswire]
▶ New Strong Sell Stocks for August 14th   [Aug-14-18 09:00AM  Zacks]
▶ Capstone Turbine: Fiscal 1Q Earnings Snapshot   [Aug-07-18 05:40PM  Associated Press]
▶ Penny Stocks to Watch for August 2018   [Jul-31-18 01:37PM  Investopedia]
▶ 4 Top-Ranked Nasdaq Stocks That Have Doubled This Year   [Jun-14-18 01:15PM  InvestorPlace]
▶ Capstone Turbine's Earnings Preview   [07:41AM  Benzinga]

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