Intrinsic value of Fortis - FTS

Previous Close

$35.19

  Intrinsic Value

$42.31

stock screener

  Rating & Target

buy

+20%

Previous close

$35.19

 
Intrinsic value

$42.31

 
Up/down potential

+20%

 
Rating

buy

We calculate the intrinsic value of FTS 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 14.8

 

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, %
  28.20
  25.88
  23.79
  21.91
  20.22
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
Revenue, $m
  8,360
  10,523
  13,027
  15,881
  19,093
  22,663
  26,590
  30,871
  35,497
  40,463
  45,759
  51,378
  57,314
  63,559
  70,110
  76,965
  84,122
  91,583
  99,351
  107,432
  115,834
  124,566
  133,640
  143,070
  152,871
  163,061
  173,658
  184,684
  196,161
  208,112
Variable operating expenses, $m
  3,054
  3,585
  4,200
  4,902
  5,691
  6,568
  7,533
  8,585
  9,721
  10,941
  11,243
  12,624
  14,082
  15,617
  17,226
  18,911
  20,669
  22,502
  24,411
  26,397
  28,461
  30,607
  32,836
  35,153
  37,561
  40,065
  42,669
  45,378
  48,198
  51,134
Fixed operating expenses, $m
  2,038
  2,083
  2,129
  2,175
  2,223
  2,272
  2,322
  2,373
  2,425
  2,479
  2,533
  2,589
  2,646
  2,704
  2,764
  2,824
  2,887
  2,950
  3,015
  3,081
  3,149
  3,218
  3,289
  3,362
  3,436
  3,511
  3,588
  3,667
  3,748
  3,830
Total operating expenses, $m
  5,092
  5,668
  6,329
  7,077
  7,914
  8,840
  9,855
  10,958
  12,146
  13,420
  13,776
  15,213
  16,728
  18,321
  19,990
  21,735
  23,556
  25,452
  27,426
  29,478
  31,610
  33,825
  36,125
  38,515
  40,997
  43,576
  46,257
  49,045
  51,946
  54,964
Operating income, $m
  3,268
  4,855
  6,698
  8,804
  11,179
  13,823
  16,735
  19,913
  23,350
  27,042
  31,982
  36,165
  40,585
  45,238
  50,120
  55,230
  60,566
  66,130
  71,925
  77,954
  84,224
  90,741
  97,515
  104,556
  111,875
  119,485
  127,401
  135,639
  144,215
  153,148
EBITDA, $m
  5,445
  7,337
  9,532
  12,041
  14,867
  18,014
  21,480
  25,260
  29,349
  33,740
  38,427
  43,401
  48,657
  54,189
  59,994
  66,069
  72,413
  79,028
  85,917
  93,084
  100,537
  108,284
  116,336
  124,705
  133,404
  142,449
  151,858
  161,649
  171,841
  182,457
Interest expense (income), $m
  0
  936
  1,324
  1,784
  2,317
  2,925
  3,609
  4,369
  5,205
  6,116
  7,101
  8,158
  9,286
  10,482
  11,746
  13,075
  14,470
  15,929
  17,453
  19,042
  20,695
  22,416
  24,205
  26,064
  27,995
  30,003
  32,090
  34,259
  36,515
  38,862
  41,306
Earnings before tax, $m
  2,332
  3,532
  4,914
  6,487
  8,254
  10,214
  12,367
  14,708
  17,234
  19,941
  23,824
  26,880
  30,103
  33,492
  37,045
  40,760
  44,637
  48,677
  52,883
  57,259
  61,808
  66,537
  71,451
  76,560
  81,872
  87,395
  93,142
  99,124
  105,352
  111,842
Tax expense, $m
  630
  954
  1,327
  1,752
  2,229
  2,758
  3,339
  3,971
  4,653
  5,384
  6,433
  7,257
  8,128
  9,043
  10,002
  11,005
  12,052
  13,143
  14,279
  15,460
  16,688
  17,965
  19,292
  20,671
  22,105
  23,597
  25,148
  26,763
  28,445
  30,197
Net income, $m
  1,702
  2,578
  3,587
  4,736
  6,025
  7,456
  9,028
  10,737
  12,581
  14,557
  17,392
  19,622
  21,975
  24,449
  27,043
  29,755
  32,585
  35,534
  38,605
  41,799
  45,120
  48,572
  52,160
  55,889
  59,766
  63,799
  67,994
  72,360
  76,907
  81,644

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
  48,044
  60,478
  74,867
  91,272
  109,729
  130,248
  152,819
  177,417
  204,007
  232,543
  262,982
  295,277
  329,388
  365,282
  402,933
  442,327
  483,459
  526,338
  570,982
  617,426
  665,712
  715,897
  768,048
  822,243
  878,571
  937,133
  998,037
  1,061,403
  1,127,360
  1,196,047
Adjusted assets (=assets-cash), $m
  48,044
  60,478
  74,867
  91,272
  109,729
  130,248
  152,819
  177,417
  204,007
  232,543
  262,982
  295,277
  329,388
  365,282
  402,933
  442,327
  483,459
  526,338
  570,982
  617,426
  665,712
  715,897
  768,048
  822,243
  878,571
  937,133
  998,037
  1,061,403
  1,127,360
  1,196,047
Revenue / Adjusted assets
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
Average production assets, $m
  35,320
  44,460
  55,038
  67,099
  80,667
  95,752
  112,345
  130,428
  149,975
  170,954
  193,331
  217,073
  242,150
  268,537
  296,217
  325,177
  355,415
  386,937
  419,758
  453,901
  489,398
  526,292
  564,630
  604,472
  645,882
  688,933
  733,707
  780,290
  828,779
  879,274
Working capital, $m
  -669
  -842
  -1,042
  -1,271
  -1,527
  -1,813
  -2,127
  -2,470
  -2,840
  -3,237
  -3,661
  -4,110
  -4,585
  -5,085
  -5,609
  -6,157
  -6,730
  -7,327
  -7,948
  -8,595
  -9,267
  -9,965
  -10,691
  -11,446
  -12,230
  -13,045
  -13,893
  -14,775
  -15,693
  -16,649
Total debt, $m
  24,511
  33,041
  42,912
  54,166
  66,827
  80,903
  96,387
  113,261
  131,502
  151,078
  171,959
  194,113
  217,513
  242,137
  267,965
  294,989
  323,206
  352,621
  383,247
  415,107
  448,232
  482,659
  518,434
  555,612
  594,253
  634,426
  676,206
  719,675
  764,922
  812,042
Total liabilities, $m
  32,958
  41,488
  51,359
  62,613
  75,274
  89,350
  104,834
  121,708
  139,949
  159,525
  180,405
  202,560
  225,960
  250,584
  276,412
  303,436
  331,653
  361,068
  391,694
  423,554
  456,679
  491,105
  526,881
  564,059
  602,700
  642,873
  684,653
  728,122
  773,369
  820,489
Total equity, $m
  15,086
  18,990
  23,508
  28,660
  34,455
  40,898
  47,985
  55,709
  64,058
  73,019
  82,576
  92,717
  103,428
  114,699
  126,521
  138,891
  151,806
  165,270
  179,288
  193,872
  209,034
  224,792
  241,167
  258,184
  275,871
  294,260
  313,384
  333,280
  353,991
  375,559
Total liabilities and equity, $m
  48,044
  60,478
  74,867
  91,273
  109,729
  130,248
  152,819
  177,417
  204,007
  232,544
  262,981
  295,277
  329,388
  365,283
  402,933
  442,327
  483,459
  526,338
  570,982
  617,426
  665,713
  715,897
  768,048
  822,243
  878,571
  937,133
  998,037
  1,061,402
  1,127,360
  1,196,048
Debt-to-equity ratio
  1.620
  1.740
  1.830
  1.890
  1.940
  1.980
  2.010
  2.030
  2.050
  2.070
  2.080
  2.090
  2.100
  2.110
  2.120
  2.120
  2.130
  2.130
  2.140
  2.140
  2.140
  2.150
  2.150
  2.150
  2.150
  2.160
  2.160
  2.160
  2.160
  2.160
Adjusted equity ratio
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,702
  2,578
  3,587
  4,736
  6,025
  7,456
  9,028
  10,737
  12,581
  14,557
  17,392
  19,622
  21,975
  24,449
  27,043
  29,755
  32,585
  35,534
  38,605
  41,799
  45,120
  48,572
  52,160
  55,889
  59,766
  63,799
  67,994
  72,360
  76,907
  81,644
Depreciation, amort., depletion, $m
  2,177
  2,482
  2,834
  3,236
  3,689
  4,191
  4,744
  5,347
  5,999
  6,698
  6,444
  7,236
  8,072
  8,951
  9,874
  10,839
  11,847
  12,898
  13,992
  15,130
  16,313
  17,543
  18,821
  20,149
  21,529
  22,964
  24,457
  26,010
  27,626
  29,309
Funds from operations, $m
  3,879
  5,060
  6,421
  7,972
  9,714
  11,648
  13,772
  16,084
  18,580
  21,255
  23,836
  26,858
  30,047
  33,401
  36,917
  40,594
  44,432
  48,432
  52,597
  56,929
  61,433
  66,115
  70,981
  76,038
  81,296
  86,763
  92,451
  98,370
  104,533
  110,954
Change in working capital, $m
  -147
  -173
  -200
  -228
  -257
  -286
  -314
  -342
  -370
  -397
  -424
  -450
  -475
  -500
  -524
  -548
  -573
  -597
  -621
  -646
  -672
  -699
  -726
  -754
  -784
  -815
  -848
  -882
  -918
  -956
Cash from operations, $m
  4,027
  5,233
  6,622
  8,200
  9,971
  11,933
  14,086
  16,426
  18,950
  21,652
  24,260
  27,307
  30,522
  33,900
  37,441
  41,142
  45,004
  49,029
  53,218
  57,575
  62,105
  66,813
  71,706
  76,792
  82,080
  87,578
  93,298
  99,252
  105,451
  111,910
Maintenance CAPEX, $m
  -918
  -1,177
  -1,482
  -1,835
  -2,237
  -2,689
  -3,192
  -3,745
  -4,348
  -4,999
  -5,698
  -6,444
  -7,236
  -8,072
  -8,951
  -9,874
  -10,839
  -11,847
  -12,898
  -13,992
  -15,130
  -16,313
  -17,543
  -18,821
  -20,149
  -21,529
  -22,964
  -24,457
  -26,010
  -27,626
New CAPEX, $m
  -7,766
  -9,141
  -10,578
  -12,060
  -13,568
  -15,084
  -16,593
  -18,084
  -19,547
  -20,979
  -22,377
  -23,742
  -25,077
  -26,387
  -27,679
  -28,960
  -30,238
  -31,522
  -32,821
  -34,143
  -35,498
  -36,893
  -38,339
  -39,841
  -41,410
  -43,051
  -44,774
  -46,584
  -48,489
  -50,495
Cash from investing activities, $m
  -8,684
  -10,318
  -12,060
  -13,895
  -15,805
  -17,773
  -19,785
  -21,829
  -23,895
  -25,978
  -28,075
  -30,186
  -32,313
  -34,459
  -36,630
  -38,834
  -41,077
  -43,369
  -45,719
  -48,135
  -50,628
  -53,206
  -55,882
  -58,662
  -61,559
  -64,580
  -67,738
  -71,041
  -74,499
  -78,121
Free cash flow, $m
  -4,658
  -5,085
  -5,438
  -5,695
  -5,834
  -5,840
  -5,699
  -5,402
  -4,945
  -4,326
  -3,816
  -2,879
  -1,791
  -559
  810
  2,308
  3,927
  5,660
  7,500
  9,441
  11,478
  13,607
  15,825
  18,130
  20,521
  22,997
  25,560
  28,212
  30,953
  33,788
Issuance/(repayment) of debt, $m
  7,177
  8,530
  9,871
  11,254
  12,661
  14,076
  15,484
  16,875
  18,240
  19,576
  20,881
  22,155
  23,400
  24,623
  25,829
  27,024
  28,217
  29,415
  30,626
  31,860
  33,124
  34,427
  35,775
  37,178
  38,641
  40,173
  41,780
  43,469
  45,247
  47,119
Issuance/(repurchase) of shares, $m
  1,598
  1,326
  931
  416
  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  
  8,775
  9,856
  10,802
  11,670
  12,661
  14,076
  15,484
  16,875
  18,240
  19,576
  20,881
  22,155
  23,400
  24,623
  25,829
  27,024
  28,217
  29,415
  30,626
  31,860
  33,124
  34,427
  35,775
  37,178
  38,641
  40,173
  41,780
  43,469
  45,247
  47,119
Total cash flow (excl. dividends), $m
  4,117
  4,770
  5,363
  5,975
  6,827
  8,236
  9,785
  11,473
  13,295
  15,251
  17,065
  19,276
  21,610
  24,064
  26,639
  29,332
  32,144
  35,074
  38,126
  41,301
  44,602
  48,034
  51,600
  55,308
  59,162
  63,171
  67,341
  71,681
  76,200
  80,908
Retained Cash Flow (-), $m
  -3,300
  -3,904
  -4,518
  -5,151
  -5,795
  -6,443
  -7,087
  -7,724
  -8,349
  -8,961
  -9,558
  -10,141
  -10,711
  -11,271
  -11,822
  -12,370
  -12,915
  -13,464
  -14,019
  -14,583
  -15,162
  -15,758
  -16,375
  -17,017
  -17,687
  -18,388
  -19,124
  -19,897
  -20,711
  -21,568
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
  817
  866
  845
  824
  1,032
  1,793
  2,698
  3,749
  4,946
  6,290
  7,508
  9,135
  10,899
  12,794
  14,816
  16,962
  19,228
  21,611
  24,108
  26,718
  29,440
  32,275
  35,225
  38,290
  41,475
  44,782
  48,217
  51,784
  55,489
  59,340
Discount rate, %
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
  749
  722
  635
  552
  611
  927
  1,206
  1,430
  1,589
  1,679
  1,641
  1,610
  1,523
  1,394
  1,235
  1,061
  884
  714
  560
  426
  314
  224
  155
  103
  67
  41
  25
  14
  8
  4
Current shareholders' claim on cash, %
  90.3
  84.4
  81.2
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1

Fortis Inc. operates as an electric and gas utility company in Canada, the United States, and the Caribbean. It generates, transmits, and distributes electricity to approximately 420,000 retail customers in a territory comprising approximately 2,991 square kilometers located in southeastern Arizona, including the greater Tucson metropolitan area in Pima county, as well as parts of Cochise county; and 95,000 retail customers in Arizona’s Mohave and Santa Cruz counties with an aggregate capacity of 2,994 megawatts (MW) comprising 54 MW of solar capacity. The company also sells wholesale electricity to other entities in the western United States; owns gas-fired and hydroelectric generating capacity totaling 64 MW; and distributes natural gas to approximately 994,000 customers in approximately 135 communities in British Columbia, Canada. In addition, it owns and operates the electricity distribution system that serves approximately 549,000 customers in southern and central Alberta; owns 4 hydroelectric generating facilities with a combined capacity of 225 MW; and provides operation, maintenance, and management services to hydroelectric generating facilities. Further, the company distributes electricity in the island portion of Newfoundland and Labrador serving approximately 264,000 customers with an installed generating capacity of 139 MW; and on Prince Edward Island serving approximately 79,000 customers through generating facilities with a combined capacity of 145 MW. Additionally, it provides integrated electric utility service to approximately 65,000 customers in Fort Erie, Cornwall, Gananoque, Port Colborne, and the District of Algoma in Ontario; approximately 43,200 customers on Grand Cayman, Cayman Islands; and approximately 15,000 customers on certain islands in Turks and Caicos, as well as holds long-term contracted generation assets in British Columbia and Belize, and Aitken Creek. Fortis Inc. was founded in 1977 and is headquartered in St. John's, Canada.

FINANCIAL RATIOS  of  Fortis (FTS)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

FTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FTS stock intrinsic value calculation we used $6520.81696779 million for the last fiscal year's total revenue generated by Fortis. The default revenue input number comes from 0001 income statement of Fortis. 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 FTS stock valuation model: a) initial revenue growth rate of 28.2% 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 9.1%, whose default value for FTS is calculated based on our internal credit rating of Fortis, 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 Fortis.
    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 FTS stock the variable cost ratio is equal to 39.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1994 million in the base year in the intrinsic value calculation for FTS 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 Fortis.

Corporate tax rate of 27% is the nominal tax rate for Fortis. 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 FTS 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 FTS are equal to 422.5%.

Life of production assets of 39.3 years is the average useful life of capital assets used in Fortis 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 FTS is equal to -8%. 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 - $11785.5459544 million for Fortis - 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 421.1 million for Fortis 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 Fortis at the current share price and the inputted number of shares is $14.8 billion.

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COMPANY NEWS

▶ Fortis (FTS) Surpasses Q3 Earnings Estimates   [Nov-02-18 07:30AM  Zacks]
▶ Fortis Inc. Releases 2018 Sustainability Report   [Oct-12-18 06:00AM  GlobeNewswire]
▶ Fortis (FTS) Q2 Earnings Match Estimates   [Jul-31-18 08:10AM  Zacks]
▶ Fortis Inc. to Host Earnings Call   [06:30AM  ACCESSWIRE]
▶ Fortis Inc. Announces Third Quarter Dividends - 2018   [Jul-25-18 04:30PM  GlobeNewswire]
▶ Fortis Inc. Reports First Quarter 2018 Earnings   [May-01-18 06:00AM  GlobeNewswire]
▶ Fortis Inc. Announces At-The-Market Equity Program   [Mar-26-18 04:30PM  Marketwired]
▶ Fortis Inc. Announces Executive Appointment   [Feb-26-18 04:30PM  Marketwired]
▶ Fortis Inc. Files 2017 Year-End Disclosure Documents   [Feb-15-18 09:02AM  Marketwired]
▶ Fortis Inc. to Host Earnings Call   [06:40AM  ACCESSWIRE]
▶ Fortis Inc. Announces Second Quarter Dividends - 2018   [Feb-14-18 10:30AM  Marketwired]
▶ ETFs with exposure to Fortis, Inc. : December 21, 2017   [Dec-21-17 11:28AM  Capital Cube]
▶ Fortis, Inc. Value Analysis (NYSE:FTS) : December 1, 2017   [Dec-01-17 10:55AM  Capital Cube]
▶ Fortis Inc. to Host Earnings Call   [06:20AM  ACCESSWIRE]
▶ New Strong Buy Stocks for August 7th   [Aug-07-17 09:34AM  Zacks]
▶ UPDATE/Fortis Statement on Waneta Dam Agreement   [Aug-01-17 10:30PM  Marketwired]
▶ Fortis Statement on Waneta Dam Agreement   [09:05PM  Marketwired]
▶ Fortis posts 2Q profit   [Jul-28-17 08:24PM  Associated Press]
▶ New Strong Sell Stocks for June 7th   [Jun-07-17 07:56AM  Zacks]
▶ Fortis Inc. Announces Commencement of Exchange Offer   [Jun-01-17 06:00AM  Marketwired]
▶ Fortis and Teck Announce Waneta Dam Agreement   [May-12-17 07:00AM  Marketwired]

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