Intrinsic value of FirstEnergy - FE

Previous Close

$36.38

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$36.38

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of FE 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 2017), $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 16.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  14,297
  14,626
  15,002
  15,424
  15,892
  16,405
  16,963
  17,568
  18,220
  18,919
  19,667
  20,465
  21,315
  22,218
  23,177
  24,192
  25,268
  26,405
  27,606
  28,874
  30,213
  31,624
  33,112
  34,679
  36,330
  38,069
  39,898
  41,824
  43,849
  45,980
Variable operating expenses, $m
  21,378
  21,856
  22,404
  23,018
  23,699
  24,446
  25,259
  26,140
  27,088
  28,106
  28,634
  29,796
  31,033
  32,348
  33,743
  35,222
  36,788
  38,443
  40,192
  42,039
  43,987
  46,042
  48,208
  50,491
  52,894
  55,425
  58,089
  60,892
  63,841
  66,943
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
  21,378
  21,856
  22,404
  23,018
  23,699
  24,446
  25,259
  26,140
  27,088
  28,106
  28,634
  29,796
  31,033
  32,348
  33,743
  35,222
  36,788
  38,443
  40,192
  42,039
  43,987
  46,042
  48,208
  50,491
  52,894
  55,425
  58,089
  60,892
  63,841
  66,943
Operating income, $m
  -7,080
  -7,230
  -7,402
  -7,594
  -7,807
  -8,041
  -8,296
  -8,572
  -8,869
  -9,187
  -8,967
  -9,331
  -9,718
  -10,130
  -10,567
  -11,030
  -11,520
  -12,038
  -12,586
  -13,164
  -13,775
  -14,418
  -15,096
  -15,811
  -16,564
  -17,356
  -18,190
  -19,068
  -19,992
  -20,963
EBITDA, $m
  -2,974
  -3,043
  -3,121
  -3,209
  -3,306
  -3,413
  -3,529
  -3,655
  -3,790
  -3,936
  -4,091
  -4,257
  -4,434
  -4,622
  -4,821
  -5,033
  -5,256
  -5,493
  -5,743
  -6,006
  -6,285
  -6,578
  -6,888
  -7,214
  -7,557
  -7,919
  -8,300
  -8,700
  -9,122
  -9,565
Interest expense (income), $m
  1,050
  1,215
  1,238
  1,286
  1,341
  1,403
  1,471
  1,546
  1,628
  1,717
  1,812
  1,914
  2,024
  2,141
  2,265
  2,397
  2,538
  2,686
  2,844
  3,010
  3,186
  3,372
  3,568
  3,774
  3,992
  4,221
  4,463
  4,718
  4,985
  5,267
  5,564
Earnings before tax, $m
  -8,295
  -8,468
  -8,688
  -8,935
  -9,210
  -9,512
  -9,842
  -10,200
  -10,585
  -10,999
  -10,881
  -11,354
  -11,859
  -12,395
  -12,964
  -13,567
  -14,206
  -14,882
  -15,596
  -16,350
  -17,146
  -17,986
  -18,871
  -19,803
  -20,785
  -21,819
  -22,908
  -24,054
  -25,259
  -26,527
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
  -8,295
  -8,468
  -8,688
  -8,935
  -9,210
  -9,512
  -9,842
  -10,200
  -10,585
  -10,999
  -10,881
  -11,354
  -11,859
  -12,395
  -12,964
  -13,567
  -14,206
  -14,882
  -15,596
  -16,350
  -17,146
  -17,986
  -18,871
  -19,803
  -20,785
  -21,819
  -22,908
  -24,054
  -25,259
  -26,527

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
  43,064
  44,055
  45,187
  46,458
  47,867
  49,412
  51,095
  52,916
  54,879
  56,985
  59,238
  61,642
  64,202
  66,923
  69,809
  72,869
  76,107
  79,532
  83,150
  86,971
  91,002
  95,253
  99,735
  104,456
  109,429
  114,665
  120,176
  125,975
  132,076
  138,493
Adjusted assets (=assets-cash), $m
  43,064
  44,055
  45,187
  46,458
  47,867
  49,412
  51,095
  52,916
  54,879
  56,985
  59,238
  61,642
  64,202
  66,923
  69,809
  72,869
  76,107
  79,532
  83,150
  86,971
  91,002
  95,253
  99,735
  104,456
  109,429
  114,665
  120,176
  125,975
  132,076
  138,493
Revenue / Adjusted assets
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
Average production assets, $m
  35,443
  36,258
  37,190
  38,236
  39,396
  40,667
  42,052
  43,552
  45,167
  46,900
  48,755
  50,733
  52,840
  55,079
  57,455
  59,973
  62,638
  65,457
  68,435
  71,579
  74,897
  78,396
  82,084
  85,970
  90,063
  94,372
  98,908
  103,681
  108,702
  113,984
Working capital, $m
  -572
  -585
  -600
  -617
  -636
  -656
  -679
  -703
  -729
  -757
  -787
  -819
  -853
  -889
  -927
  -968
  -1,011
  -1,056
  -1,104
  -1,155
  -1,209
  -1,265
  -1,324
  -1,387
  -1,453
  -1,523
  -1,596
  -1,673
  -1,754
  -1,839
Total debt, $m
  22,923
  23,814
  24,833
  25,977
  27,245
  28,636
  30,150
  31,790
  33,556
  35,451
  37,479
  39,643
  41,947
  44,395
  46,994
  49,747
  52,661
  55,743
  59,000
  62,439
  66,067
  69,893
  73,926
  78,176
  82,651
  87,363
  92,323
  97,542
  103,033
  108,809
Total liabilities, $m
  38,758
  39,649
  40,668
  41,812
  43,080
  44,471
  45,985
  47,625
  49,391
  51,286
  53,314
  55,478
  57,782
  60,230
  62,829
  65,582
  68,496
  71,578
  74,835
  78,274
  81,902
  85,728
  89,761
  94,011
  98,486
  103,198
  108,158
  113,377
  118,868
  124,644
Total equity, $m
  4,306
  4,405
  4,519
  4,646
  4,787
  4,941
  5,109
  5,292
  5,488
  5,698
  5,924
  6,164
  6,420
  6,692
  6,981
  7,287
  7,611
  7,953
  8,315
  8,697
  9,100
  9,525
  9,973
  10,446
  10,943
  11,466
  12,018
  12,597
  13,208
  13,849
Total liabilities and equity, $m
  43,064
  44,054
  45,187
  46,458
  47,867
  49,412
  51,094
  52,917
  54,879
  56,984
  59,238
  61,642
  64,202
  66,922
  69,810
  72,869
  76,107
  79,531
  83,150
  86,971
  91,002
  95,253
  99,734
  104,457
  109,429
  114,664
  120,176
  125,974
  132,076
  138,493
Debt-to-equity ratio
  5.320
  5.410
  5.500
  5.590
  5.690
  5.800
  5.900
  6.010
  6.110
  6.220
  6.330
  6.430
  6.530
  6.630
  6.730
  6.830
  6.920
  7.010
  7.100
  7.180
  7.260
  7.340
  7.410
  7.480
  7.550
  7.620
  7.680
  7.740
  7.800
  7.860
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -8,295
  -8,468
  -8,688
  -8,935
  -9,210
  -9,512
  -9,842
  -10,200
  -10,585
  -10,999
  -10,881
  -11,354
  -11,859
  -12,395
  -12,964
  -13,567
  -14,206
  -14,882
  -15,596
  -16,350
  -17,146
  -17,986
  -18,871
  -19,803
  -20,785
  -21,819
  -22,908
  -24,054
  -25,259
  -26,527
Depreciation, amort., depletion, $m
  4,106
  4,188
  4,281
  4,385
  4,501
  4,629
  4,767
  4,917
  5,078
  5,252
  4,875
  5,073
  5,284
  5,508
  5,746
  5,997
  6,264
  6,546
  6,843
  7,158
  7,490
  7,840
  8,208
  8,597
  9,006
  9,437
  9,891
  10,368
  10,870
  11,398
Funds from operations, $m
  -4,189
  -4,280
  -4,407
  -4,550
  -4,709
  -4,884
  -5,075
  -5,283
  -5,507
  -5,748
  -6,006
  -6,281
  -6,575
  -6,887
  -7,219
  -7,570
  -7,942
  -8,336
  -8,753
  -9,192
  -9,657
  -10,146
  -10,662
  -11,206
  -11,779
  -12,382
  -13,017
  -13,686
  -14,389
  -15,128
Change in working capital, $m
  -11
  -13
  -15
  -17
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -51
  -54
  -56
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
Cash from operations, $m
  -4,178
  -4,267
  -4,392
  -4,533
  -4,690
  -4,863
  -5,053
  -5,258
  -5,481
  -5,720
  -5,976
  -6,249
  -6,541
  -6,851
  -7,180
  -7,530
  -7,899
  -8,291
  -8,705
  -9,142
  -9,603
  -10,090
  -10,603
  -11,143
  -11,713
  -12,313
  -12,944
  -13,609
  -14,308
  -15,043
Maintenance CAPEX, $m
  -3,475
  -3,544
  -3,626
  -3,719
  -3,824
  -3,940
  -4,067
  -4,205
  -4,355
  -4,517
  -4,690
  -4,875
  -5,073
  -5,284
  -5,508
  -5,746
  -5,997
  -6,264
  -6,546
  -6,843
  -7,158
  -7,490
  -7,840
  -8,208
  -8,597
  -9,006
  -9,437
  -9,891
  -10,368
  -10,870
New CAPEX, $m
  -692
  -815
  -932
  -1,046
  -1,159
  -1,272
  -1,385
  -1,499
  -1,615
  -1,733
  -1,854
  -1,979
  -2,107
  -2,239
  -2,376
  -2,518
  -2,665
  -2,819
  -2,978
  -3,144
  -3,318
  -3,499
  -3,688
  -3,886
  -4,093
  -4,309
  -4,536
  -4,773
  -5,021
  -5,282
Cash from investing activities, $m
  -4,167
  -4,359
  -4,558
  -4,765
  -4,983
  -5,212
  -5,452
  -5,704
  -5,970
  -6,250
  -6,544
  -6,854
  -7,180
  -7,523
  -7,884
  -8,264
  -8,662
  -9,083
  -9,524
  -9,987
  -10,476
  -10,989
  -11,528
  -12,094
  -12,690
  -13,315
  -13,973
  -14,664
  -15,389
  -16,152
Free cash flow, $m
  -8,345
  -8,627
  -8,949
  -9,298
  -9,673
  -10,075
  -10,504
  -10,963
  -11,451
  -11,970
  -12,520
  -13,103
  -13,721
  -14,374
  -15,064
  -15,793
  -16,562
  -17,373
  -18,228
  -19,130
  -20,079
  -21,078
  -22,130
  -23,238
  -24,403
  -25,628
  -26,917
  -28,272
  -29,697
  -31,195
Issuance/(repayment) of debt, $m
  426
  891
  1,019
  1,144
  1,268
  1,391
  1,515
  1,639
  1,766
  1,895
  2,028
  2,164
  2,304
  2,448
  2,598
  2,753
  2,915
  3,082
  3,257
  3,438
  3,628
  3,826
  4,033
  4,249
  4,476
  4,712
  4,960
  5,219
  5,491
  5,775
Issuance/(repurchase) of shares, $m
  8,677
  8,567
  8,801
  9,062
  9,351
  9,667
  10,010
  10,382
  10,781
  11,210
  11,106
  11,595
  12,115
  12,667
  13,253
  13,873
  14,530
  15,225
  15,958
  16,732
  17,549
  18,411
  19,319
  20,275
  21,283
  22,343
  23,459
  24,634
  25,869
  27,169
Cash from financing (excl. dividends), $m  
  9,103
  9,458
  9,820
  10,206
  10,619
  11,058
  11,525
  12,021
  12,547
  13,105
  13,134
  13,759
  14,419
  15,115
  15,851
  16,626
  17,445
  18,307
  19,215
  20,170
  21,177
  22,237
  23,352
  24,524
  25,759
  27,055
  28,419
  29,853
  31,360
  32,944
Total cash flow (excl. dividends), $m
  757
  832
  870
  908
  946
  983
  1,020
  1,058
  1,097
  1,136
  614
  655
  698
  741
  787
  834
  883
  933
  986
  1,041
  1,099
  1,159
  1,221
  1,287
  1,355
  1,427
  1,502
  1,581
  1,663
  1,749
Retained Cash Flow (-), $m
  -8,677
  -8,567
  -8,801
  -9,062
  -9,351
  -9,667
  -10,010
  -10,382
  -10,781
  -11,210
  -11,106
  -11,595
  -12,115
  -12,667
  -13,253
  -13,873
  -14,530
  -15,225
  -15,958
  -16,732
  -17,549
  -18,411
  -19,319
  -20,275
  -21,283
  -22,343
  -23,459
  -24,634
  -25,869
  -27,169
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
  -7,919
  -7,735
  -7,930
  -8,154
  -8,405
  -8,684
  -8,990
  -9,323
  -9,685
  -10,074
  -10,492
  -10,940
  -11,417
  -11,925
  -12,466
  -13,040
  -13,648
  -14,291
  -14,972
  -15,691
  -16,451
  -17,252
  -18,097
  -18,988
  -19,927
  -20,916
  -21,957
  -23,053
  -24,206
  -25,420
Discount rate, %
  11.20
  11.76
  12.35
  12.97
  13.61
  14.29
  15.01
  15.76
  16.55
  17.37
  18.24
  19.16
  20.11
  21.12
  22.18
  23.28
  24.45
  25.67
  26.95
  28.30
  29.72
  31.20
  32.76
  34.40
  36.12
  37.93
  39.82
  41.81
  43.91
  46.10
PV of cash for distribution, $m
  -7,122
  -6,193
  -5,592
  -5,007
  -4,440
  -3,895
  -3,378
  -2,892
  -2,441
  -2,030
  -1,661
  -1,335
  -1,054
  -816
  -618
  -458
  -331
  -234
  -161
  -107
  -70
  -44
  -27
  -16
  -9
  -5
  -3
  -1
  -1
  0
Current shareholders' claim on cash, %
  65.1
  43.9
  29.5
  19.9
  13.3
  8.9
  6.0
  4.0
  2.7
  1.8
  1.2
  0.8
  0.6
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

FirstEnergy Corp. is a holding company. The Company is engaged in holding, directly or indirectly, all of the outstanding equity of its principal subsidiaries. Its segments include Regulated Distribution, Regulated Transmission, Competitive Energy Services (CES) and Corporate/Other. As of December 31, 2016, the Regulated Distribution segment distributed electricity through the Company's 10 utility operating companies, serving approximately six million customers, and purchased power for its provider of last resort (POLR), standard offer service (SOS), standard offer service (SSO) and default service requirements in Ohio, Pennsylvania, New Jersey and Maryland. The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAIL). The CES segment primarily supplies electricity to end use customers through retail and wholesale arrangements.

FINANCIAL RATIOS  of  FirstEnergy (FE)

Valuation Ratios
P/E Ratio -2.6
Price to Sales 1.1
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 4.8
Price to Free Cash Flow 52.9
Growth Rates
Sales Growth Rate -3.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 6%
Cap. Spend. - 3 Yr. Gr. Rate 1.2%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 291.5%
Total Debt to Equity 361.4%
Interest Coverage -8
Management Effectiveness
Return On Assets -11.5%
Ret/ On Assets - 3 Yr. Avg. -2.1%
Return On Total Capital -19.6%
Ret/ On T. Cap. - 3 Yr. Avg. -5.7%
Return On Equity -66.2%
Return On Equity - 3 Yr. Avg. -19.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -42.5%
EBITDA Margin - 3 Yr. Avg. -0.7%
Operating Margin -56.7%
Oper. Margin - 3 Yr. Avg. -12.3%
Pre-Tax Margin -63.4%
Pre-Tax Margin - 3 Yr. Avg. -18.8%
Net Profit Margin -42.4%
Net Profit Margin - 3 Yr. Avg. -12.2%
Effective Tax Rate 33.1%
Eff/ Tax Rate - 3 Yr. Avg. 14.6%
Payout Ratio -9.9%

FE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FE stock intrinsic value calculation we used $14017 million for the last fiscal year's total revenue generated by FirstEnergy. The default revenue input number comes from 2017 income statement of FirstEnergy. 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 FE stock valuation model: a) initial revenue growth rate of 2% 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 11.2%, whose default value for FE is calculated based on our internal credit rating of FirstEnergy, 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 FirstEnergy.
    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 FE stock the variable cost ratio is equal to 149.6%.

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 FE 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 FirstEnergy.

Corporate tax rate of 27% is the nominal tax rate for FirstEnergy. 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 FE 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 FE are equal to 247.9%.

Life of production assets of 10 years is the average useful life of capital assets used in FirstEnergy 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 FE is equal to -4%. 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 - $3925 million for FirstEnergy - 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 444 million for FirstEnergy 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 FirstEnergy at the current share price and the inputted number of shares is $16.2 billion.

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COMPANY NEWS

▶ Correction: Earns-FirstEnergy story   [02:07PM  Associated Press]
▶ Energy suppliers, distributors clash over how electricity is billed   [Jul-16-18 03:21PM  American City Business Journals]
▶ [$$] Exelon Makes Bid to Buy FirstEnergy's Retail Power Business   [Jul-10-18 06:02PM  The Wall Street Journal]
▶ [$$] FirstEnergy Solutions Pitches Retail Power Sale   [02:31PM  The Wall Street Journal]
▶ 7 S&P 500 Companies Whose Debt Scares Me   [Jul-06-18 01:30PM  InvestorPlace]
▶ FirstEnergy Corp (NYSE:FE): Time For A Financial Health Check   [Jun-26-18 10:08AM  Simply Wall St.]
▶ [$$] Scurria's Take: FirstEnergy Creditors Point Finger at Parent   [Jun-15-18 04:08PM  The Wall Street Journal]
▶ [$$] FirstEnergy Plants' $100 Million Bonus Plan Draws Union Pushback   [Jun-11-18 04:01PM  The Wall Street Journal]
▶ New swamp: Ex-Perry adviser lobbies for energy firm bailout   [May-29-18 05:39PM  Associated Press]
▶ JCP&L to Host Supplier Diversity Program for Veterans   [May-11-18 09:54AM  PR Newswire]
▶ West Penn Power's 2018 Tree Trimming Program Underway   [May-10-18 02:15PM  PR Newswire]
▶ Rothfus urges Trump to invoke emergency powers to help Beaver Valley plant   [May-03-18 02:23PM  American City Business Journals]
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