Intrinsic value of NextEra Energy - NEE

Previous Close

$152.54

  Intrinsic Value

$186.58

stock screener

  Rating & Target

buy

+22%

  Value-price divergence*

+137%

Previous close

$152.54

 
Intrinsic value

$186.58

 
Up/down potential

+22%

 
Rating

buy

 
Value-price divergence*

+137%

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

We calculate the intrinsic value of NEE 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 2016), $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 72.0

 

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, %
  -7.61
  15.40
  14.36
  13.42
  12.58
  11.82
  11.14
  10.53
  9.97
  9.48
  9.03
  8.63
  8.26
  7.94
  7.64
  7.38
  7.14
  6.93
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
  5.92
  5.83
  5.75
  5.67
  5.60
  5.54
  5.49
Revenue, $m
  15,696
  18,643
  21,320
  24,182
  27,224
  30,443
  33,835
  37,397
  41,127
  45,024
  49,090
  53,324
  57,731
  62,313
  67,076
  72,026
  77,169
  82,515
  88,072
  93,850
  99,861
  106,117
  112,630
  119,415
  126,487
  133,861
  141,553
  149,582
  157,966
  166,724
  175,877
Variable operating expenses, $m
 
  13,703
  15,670
  17,774
  20,010
  22,376
  24,869
  27,487
  30,228
  33,093
  36,081
  39,193
  42,432
  45,800
  49,301
  52,939
  56,719
  60,649
  64,733
  68,980
  73,398
  77,996
  82,783
  87,770
  92,968
  98,388
  104,042
  109,943
  116,105
  122,542
  129,269
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
  11,547
  13,703
  15,670
  17,774
  20,010
  22,376
  24,869
  27,487
  30,228
  33,093
  36,081
  39,193
  42,432
  45,800
  49,301
  52,939
  56,719
  60,649
  64,733
  68,980
  73,398
  77,996
  82,783
  87,770
  92,968
  98,388
  104,042
  109,943
  116,105
  122,542
  129,269
Operating income, $m
  4,608
  4,940
  5,650
  6,408
  7,214
  8,067
  8,966
  9,910
  10,899
  11,931
  13,009
  14,131
  15,299
  16,513
  17,775
  19,087
  20,450
  21,866
  23,339
  24,870
  26,463
  28,121
  29,847
  31,645
  33,519
  35,473
  37,512
  39,639
  41,861
  44,182
  46,607
EBITDA, $m
  7,985
  6,260
  7,159
  8,120
  9,142
  10,223
  11,362
  12,558
  13,810
  15,119
  16,484
  17,906
  19,386
  20,925
  22,524
  24,186
  25,913
  27,709
  29,575
  31,515
  33,533
  35,634
  37,821
  40,100
  42,474
  44,950
  47,534
  50,230
  53,045
  55,986
  59,059
Interest expense (income), $m
  1,193
  1,152
  1,543
  1,959
  2,404
  2,878
  3,378
  3,906
  4,460
  5,041
  5,647
  6,279
  6,938
  7,624
  8,336
  9,077
  9,847
  10,648
  11,479
  12,344
  13,243
  14,178
  15,151
  16,164
  17,220
  18,320
  19,467
  20,664
  21,913
  23,217
  24,580
Earnings before tax, $m
  4,388
  3,788
  4,107
  4,449
  4,810
  5,190
  5,588
  6,004
  6,438
  6,891
  7,362
  7,852
  8,361
  8,889
  9,439
  10,009
  10,602
  11,219
  11,860
  12,527
  13,220
  13,943
  14,696
  15,481
  16,299
  17,153
  18,044
  18,975
  19,948
  20,965
  22,028
Tax expense, $m
  1,383
  1,023
  1,109
  1,201
  1,299
  1,401
  1,509
  1,621
  1,738
  1,861
  1,988
  2,120
  2,257
  2,400
  2,548
  2,703
  2,863
  3,029
  3,202
  3,382
  3,570
  3,765
  3,968
  4,180
  4,401
  4,631
  4,872
  5,123
  5,386
  5,660
  5,947
Net income, $m
  2,912
  2,765
  2,998
  3,248
  3,511
  3,789
  4,079
  4,383
  4,700
  5,030
  5,374
  5,732
  6,103
  6,489
  6,890
  7,307
  7,740
  8,190
  8,658
  9,144
  9,651
  10,178
  10,728
  11,301
  11,898
  12,522
  13,172
  13,852
  14,562
  15,304
  16,080

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,292
  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
  89,993
  102,433
  117,143
  132,868
  149,585
  167,271
  185,907
  205,477
  225,972
  247,387
  269,724
  292,991
  317,203
  342,380
  368,550
  395,746
  424,008
  453,379
  483,912
  515,661
  548,689
  583,061
  618,849
  656,129
  694,983
  735,498
  777,764
  821,879
  867,943
  916,064
  966,355
Adjusted assets (=assets-cash), $m
  88,701
  102,433
  117,143
  132,868
  149,585
  167,271
  185,907
  205,477
  225,972
  247,387
  269,724
  292,991
  317,203
  342,380
  368,550
  395,746
  424,008
  453,379
  483,912
  515,661
  548,689
  583,061
  618,849
  656,129
  694,983
  735,498
  777,764
  821,879
  867,943
  916,064
  966,355
Revenue / Adjusted assets
  0.177
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
Average production assets, $m
  5,727
  6,600
  7,547
  8,560
  9,637
  10,777
  11,978
  13,238
  14,559
  15,939
  17,378
  18,877
  20,437
  22,059
  23,745
  25,497
  27,318
  29,210
  31,177
  33,223
  35,351
  37,565
  39,871
  42,273
  44,776
  47,387
  50,110
  52,952
  55,920
  59,020
  62,260
Working capital, $m
  -3,510
  -2,051
  -2,345
  -2,660
  -2,995
  -3,349
  -3,722
  -4,114
  -4,524
  -4,953
  -5,400
  -5,866
  -6,350
  -6,854
  -7,378
  -7,923
  -8,489
  -9,077
  -9,688
  -10,324
  -10,985
  -11,673
  -12,389
  -13,136
  -13,914
  -14,725
  -15,571
  -16,454
  -17,376
  -18,340
  -19,346
Total debt, $m
  30,840
  39,555
  50,234
  61,650
  73,787
  86,627
  100,156
  114,364
  129,244
  144,791
  161,008
  177,900
  195,477
  213,756
  232,756
  252,500
  273,018
  294,341
  316,508
  339,558
  363,536
  388,490
  414,472
  441,538
  469,746
  499,159
  529,845
  561,872
  595,314
  630,250
  666,761
Total liabilities, $m
  65,652
  74,367
  85,046
  96,462
  108,599
  121,439
  134,968
  149,176
  164,056
  179,603
  195,820
  212,712
  230,289
  248,568
  267,568
  287,312
  307,830
  329,153
  351,320
  374,370
  398,348
  423,302
  449,284
  476,350
  504,558
  533,971
  564,657
  596,684
  630,126
  665,062
  701,573
Total equity, $m
  24,341
  28,067
  32,097
  36,406
  40,986
  45,832
  50,938
  56,301
  61,916
  67,784
  73,904
  80,280
  86,914
  93,812
  100,983
  108,434
  116,178
  124,226
  132,592
  141,291
  150,341
  159,759
  169,565
  179,779
  190,425
  201,526
  213,107
  225,195
  237,816
  251,002
  264,781
Total liabilities and equity, $m
  89,993
  102,434
  117,143
  132,868
  149,585
  167,271
  185,906
  205,477
  225,972
  247,387
  269,724
  292,992
  317,203
  342,380
  368,551
  395,746
  424,008
  453,379
  483,912
  515,661
  548,689
  583,061
  618,849
  656,129
  694,983
  735,497
  777,764
  821,879
  867,942
  916,064
  966,354
Debt-to-equity ratio
  1.267
  1.410
  1.570
  1.690
  1.800
  1.890
  1.970
  2.030
  2.090
  2.140
  2.180
  2.220
  2.250
  2.280
  2.300
  2.330
  2.350
  2.370
  2.390
  2.400
  2.420
  2.430
  2.440
  2.460
  2.470
  2.480
  2.490
  2.500
  2.500
  2.510
  2.520
Adjusted equity ratio
  0.265
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,912
  2,765
  2,998
  3,248
  3,511
  3,789
  4,079
  4,383
  4,700
  5,030
  5,374
  5,732
  6,103
  6,489
  6,890
  7,307
  7,740
  8,190
  8,658
  9,144
  9,651
  10,178
  10,728
  11,301
  11,898
  12,522
  13,172
  13,852
  14,562
  15,304
  16,080
Depreciation, amort., depletion, $m
  3,377
  1,320
  1,509
  1,712
  1,927
  2,155
  2,396
  2,648
  2,912
  3,188
  3,476
  3,775
  4,087
  4,412
  4,749
  5,099
  5,464
  5,842
  6,235
  6,645
  7,070
  7,513
  7,974
  8,455
  8,955
  9,477
  10,022
  10,590
  11,184
  11,804
  12,452
Funds from operations, $m
  6,113
  4,085
  4,508
  4,960
  5,439
  5,944
  6,475
  7,031
  7,612
  8,218
  8,850
  9,507
  10,191
  10,901
  11,639
  12,406
  13,203
  14,032
  14,893
  15,789
  16,721
  17,692
  18,702
  19,756
  20,854
  21,999
  23,194
  24,442
  25,746
  27,108
  28,532
Change in working capital, $m
  -223
  -274
  -294
  -315
  -335
  -354
  -373
  -392
  -410
  -429
  -447
  -466
  -485
  -504
  -524
  -544
  -566
  -588
  -611
  -636
  -661
  -688
  -716
  -746
  -778
  -811
  -846
  -883
  -922
  -963
  -1,007
Cash from operations, $m
  6,336
  4,359
  4,802
  5,275
  5,774
  6,298
  6,848
  7,422
  8,022
  8,647
  9,297
  9,973
  10,675
  11,405
  12,163
  12,951
  13,769
  14,620
  15,504
  16,425
  17,382
  18,380
  19,419
  20,502
  21,631
  22,810
  24,040
  25,326
  26,668
  28,072
  29,539
Maintenance CAPEX, $m
  0
  -1,145
  -1,320
  -1,509
  -1,712
  -1,927
  -2,155
  -2,396
  -2,648
  -2,912
  -3,188
  -3,476
  -3,775
  -4,087
  -4,412
  -4,749
  -5,099
  -5,464
  -5,842
  -6,235
  -6,645
  -7,070
  -7,513
  -7,974
  -8,455
  -8,955
  -9,477
  -10,022
  -10,590
  -11,184
  -11,804
New CAPEX, $m
  -4,240
  -873
  -948
  -1,013
  -1,077
  -1,139
  -1,201
  -1,261
  -1,320
  -1,380
  -1,439
  -1,499
  -1,560
  -1,622
  -1,686
  -1,752
  -1,821
  -1,892
  -1,967
  -2,046
  -2,128
  -2,215
  -2,306
  -2,402
  -2,503
  -2,610
  -2,723
  -2,842
  -2,968
  -3,100
  -3,240
Cash from investing activities, $m
  -8,110
  -2,018
  -2,268
  -2,522
  -2,789
  -3,066
  -3,356
  -3,657
  -3,968
  -4,292
  -4,627
  -4,975
  -5,335
  -5,709
  -6,098
  -6,501
  -6,920
  -7,356
  -7,809
  -8,281
  -8,773
  -9,285
  -9,819
  -10,376
  -10,958
  -11,565
  -12,200
  -12,864
  -13,558
  -14,284
  -15,044
Free cash flow, $m
  -1,774
  2,340
  2,535
  2,752
  2,984
  3,231
  3,492
  3,766
  4,054
  4,355
  4,670
  4,998
  5,340
  5,696
  6,065
  6,450
  6,849
  7,264
  7,695
  8,144
  8,610
  9,095
  9,600
  10,126
  10,674
  11,245
  11,840
  12,461
  13,110
  13,787
  14,495
Issuance/(repayment) of debt, $m
  2,079
  10,007
  10,679
  11,417
  12,136
  12,840
  13,530
  14,208
  14,879
  15,547
  16,217
  16,892
  17,578
  18,279
  18,999
  19,744
  20,518
  21,324
  22,167
  23,050
  23,978
  24,954
  25,982
  27,066
  28,208
  29,414
  30,685
  32,027
  33,443
  34,936
  36,511
Issuance/(repurchase) of shares, $m
  537
  961
  1,032
  1,061
  1,069
  1,057
  1,027
  979
  916
  837
  746
  643
  531
  409
  280
  145
  4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  4,107
  10,968
  11,711
  12,478
  13,205
  13,897
  14,557
  15,187
  15,795
  16,384
  16,963
  17,535
  18,109
  18,688
  19,279
  19,889
  20,522
  21,324
  22,167
  23,050
  23,978
  24,954
  25,982
  27,066
  28,208
  29,414
  30,685
  32,027
  33,443
  34,936
  36,511
Total cash flow (excl. dividends), $m
  2,333
  13,308
  14,246
  15,230
  16,190
  17,129
  18,048
  18,953
  19,849
  20,740
  21,633
  22,534
  23,449
  24,384
  25,345
  26,339
  27,370
  28,588
  29,862
  31,194
  32,588
  34,049
  35,582
  37,191
  38,882
  40,658
  42,525
  44,488
  46,553
  48,723
  51,006
Retained Cash Flow (-), $m
  -1,767
  -3,726
  -4,030
  -4,309
  -4,580
  -4,846
  -5,106
  -5,362
  -5,616
  -5,868
  -6,120
  -6,375
  -6,634
  -6,899
  -7,171
  -7,452
  -7,744
  -8,048
  -8,366
  -8,699
  -9,050
  -9,418
  -9,806
  -10,215
  -10,646
  -11,101
  -11,581
  -12,087
  -12,622
  -13,185
  -13,780
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
 
  9,582
  10,215
  10,921
  11,610
  12,283
  12,942
  13,591
  14,233
  14,872
  15,513
  16,158
  16,814
  17,485
  18,174
  18,887
  19,627
  20,540
  21,496
  22,494
  23,538
  24,631
  25,776
  26,976
  28,236
  29,557
  30,944
  32,401
  33,931
  35,538
  37,226
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
 
  8,864
  8,677
  8,449
  8,112
  7,680
  7,172
  6,607
  6,002
  5,377
  4,749
  4,134
  3,544
  2,992
  2,484
  2,029
  1,627
  1,290
  1,003
  763
  568
  413
  293
  203
  136
  89
  57
  35
  21
  12
  7
Current shareholders' claim on cash, %
  100
  98.7
  97.5
  96.4
  95.4
  94.6
  93.9
  93.3
  92.8
  92.4
  92.0
  91.8
  91.5
  91.4
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3

NextEra Energy, Inc. (NEE) is a holding company. The Company is an electric power companies in North America and, through its subsidiary NextEra Energy Resources, LLC (NEER) and its affiliated entities, is the generator of renewable energy from the wind and sun. NEE also owns and/or operates generation, transmission and distribution facilities to support its services to retail and wholesale customers, and has investments in gas infrastructure assets. Its segments include FPL and NEER. Florida Power & Light Company (FPL) is a rate-regulated electric utility engaged primarily in the generation, transmission, distribution and sale of electric energy in Florida. NEER is a diversified clean energy company with a business strategy that emphasizes the development, acquisition and operation of long-term contracted assets with a focus on renewable projects. NEER owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets.

FINANCIAL RATIOS  of  NextEra Energy (NEE)

Valuation Ratios
P/E Ratio 24.5
Price to Sales 4.4
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 11.3
Price to Free Cash Flow 34.1
Growth Rates
Sales Growth Rate -7.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.5%
Cap. Spend. - 3 Yr. Gr. Rate 5.6%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 114.3%
Total Debt to Equity 126.7%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.3%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 12.4%
Return On Equity - 3 Yr. Avg. 12.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 55.5%
EBITDA Margin - 3 Yr. Avg. 49.5%
Operating Margin 28.5%
Oper. Margin - 3 Yr. Avg. 26.9%
Pre-Tax Margin 27.2%
Pre-Tax Margin - 3 Yr. Avg. 23.8%
Net Profit Margin 18%
Net Profit Margin - 3 Yr. Avg. 16.1%
Effective Tax Rate 31.5%
Eff/ Tax Rate - 3 Yr. Avg. 31.5%
Payout Ratio 55.4%

NEE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEE stock intrinsic value calculation we used $16155 million for the last fiscal year's total revenue generated by NextEra Energy. The default revenue input number comes from 2016 income statement of NextEra Energy. 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 NEE stock valuation model: a) initial revenue growth rate of 15.4% 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 8.1%, whose default value for NEE is calculated based on our internal credit rating of NextEra Energy, 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 NextEra Energy.
    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 NEE stock the variable cost ratio is equal to 73.5%.

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 NEE 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 3.9% for NextEra Energy.

Corporate tax rate of 27% is the nominal tax rate for NextEra Energy. 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 NEE 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 NEE are equal to 35.4%.

Life of production assets of 1.8 years is the average useful life of capital assets used in NextEra Energy 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 NEE is equal to -11%. 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 - $24341 million for NextEra Energy - 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 471.686 million for NextEra Energy 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 NextEra Energy at the current share price and the inputted number of shares is $72.0 billion.

RELATED COMPANIES Price Int.Val. Rating
SO Southern 51.27 130.30  str.buy
DUK Duke Energy 87.04 100.46  hold
EE El Paso Electr 57.20 22.71  str.sell
EXC Exelon 39.62 85.57  str.buy
SCG Scana 49.13 102.66  str.buy

COMPANY NEWS

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▶ What You Must Know About NextEra Energy Partners LPs (NEP) ROE   [Oct-06-17 05:59PM  Simply Wall St.]
▶ [$$] Sempra, Oncor Seek Deal Approval from Texas PUC   [Oct-05-17 06:46PM  The Wall Street Journal]
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▶ [$$] Hurricane Irmas Lawsuit Chasers   [12:32AM  The Wall Street Journal]
▶ Coal Industry Continues to Fight Tough Battle   [Oct-04-17 03:27PM  Zacks]
▶ [$$] NextEra's $275 Million Oncor Deal Breakup Fee Erased   [Oct-03-17 05:57PM  The Wall Street Journal]
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▶ [$$] Temporary Truce in Fighting Over NextEra Breakup Fee   [05:01PM  The Wall Street Journal]
▶ XLU: Could Weakness in Utilities Persist?   [09:12AM  Market Realist]
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▶ A Look at Duke Energys Debt Profile   [07:37AM  Market Realist]
▶ [$$] Judge to Reconsider NextEra-Oncor Breakup Fee   [02:20PM  The Wall Street Journal]
▶ Looking at Duke Energys Generation Mix   [07:39AM  Market Realist]
▶ XLU: Where Will Utility Stocks Go this Week?   [01:36PM  Market Realist]
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Financial statements of NEE
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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