Intrinsic value of National Grid Transco, PLC - NGG

Previous Close

$54.04

  Intrinsic Value

$10.06

stock screener

  Rating & Target

str. sell

-81%

Previous close

$54.04

 
Intrinsic value

$10.06

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of NGG 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 36.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.70
  11.03
  10.43
  9.88
  9.40
  8.96
  8.56
  8.20
  7.88
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
Revenue, $m
  23,422
  26,006
  28,717
  31,556
  34,521
  37,613
  40,833
  44,183
  47,666
  51,287
  55,049
  58,959
  63,023
  67,247
  71,640
  76,211
  80,967
  85,920
  91,081
  96,459
  102,068
  107,919
  114,027
  120,406
  127,069
  134,034
  141,316
  148,932
  156,901
  165,242
Variable operating expenses, $m
  18,330
  20,254
  22,274
  24,388
  26,596
  28,899
  31,297
  33,792
  36,387
  39,084
  41,001
  43,913
  46,940
  50,086
  53,358
  56,762
  60,305
  63,994
  67,838
  71,843
  76,021
  80,379
  84,929
  89,679
  94,643
  99,830
  105,254
  110,926
  116,862
  123,073
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
  18,330
  20,254
  22,274
  24,388
  26,596
  28,899
  31,297
  33,792
  36,387
  39,084
  41,001
  43,913
  46,940
  50,086
  53,358
  56,762
  60,305
  63,994
  67,838
  71,843
  76,021
  80,379
  84,929
  89,679
  94,643
  99,830
  105,254
  110,926
  116,862
  123,073
Operating income, $m
  5,092
  5,752
  6,444
  7,168
  7,925
  8,714
  9,535
  10,390
  11,279
  12,203
  14,048
  15,046
  16,083
  17,161
  18,282
  19,448
  20,662
  21,926
  23,243
  24,615
  26,047
  27,540
  29,099
  30,726
  32,427
  34,204
  36,063
  38,006
  40,040
  42,168
EBITDA, $m
  8,190
  9,093
  10,042
  11,034
  12,071
  13,152
  14,278
  15,449
  16,667
  17,933
  19,249
  20,616
  22,037
  23,514
  25,051
  26,649
  28,312
  30,044
  31,848
  33,729
  35,690
  37,736
  39,872
  42,102
  44,432
  46,868
  49,414
  52,077
  54,864
  57,780
Interest expense (income), $m
  1,020
  2,005
  2,356
  2,726
  3,115
  3,522
  3,948
  4,391
  4,853
  5,334
  5,833
  6,353
  6,892
  7,453
  8,036
  8,642
  9,272
  9,928
  10,610
  11,320
  12,060
  12,832
  13,636
  14,476
  15,352
  16,267
  17,223
  18,222
  19,266
  20,359
  21,502
Earnings before tax, $m
  3,087
  3,396
  3,717
  4,053
  4,402
  4,766
  5,144
  5,537
  5,946
  6,370
  7,696
  8,154
  8,630
  9,125
  9,640
  10,176
  10,735
  11,316
  11,923
  12,555
  13,215
  13,904
  14,623
  15,375
  16,160
  16,982
  17,841
  18,740
  19,681
  20,667
Tax expense, $m
  834
  917
  1,004
  1,094
  1,189
  1,287
  1,389
  1,495
  1,605
  1,720
  2,078
  2,201
  2,330
  2,464
  2,603
  2,748
  2,898
  3,055
  3,219
  3,390
  3,568
  3,754
  3,948
  4,151
  4,363
  4,585
  4,817
  5,060
  5,314
  5,580
Net income, $m
  2,254
  2,479
  2,714
  2,959
  3,214
  3,479
  3,755
  4,042
  4,340
  4,650
  5,618
  5,952
  6,300
  6,661
  7,037
  7,429
  7,836
  8,261
  8,704
  9,165
  9,647
  10,150
  10,675
  11,223
  11,797
  12,397
  13,024
  13,680
  14,367
  15,087

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
  91,494
  101,585
  112,178
  123,266
  134,848
  146,925
  159,503
  172,589
  186,196
  200,339
  215,036
  230,309
  246,183
  262,685
  279,845
  297,698
  316,279
  335,627
  355,783
  376,793
  398,701
  421,559
  445,419
  470,335
  496,365
  523,571
  552,016
  581,767
  612,896
  645,475
Adjusted assets (=assets-cash), $m
  91,494
  101,585
  112,178
  123,266
  134,848
  146,925
  159,503
  172,589
  186,196
  200,339
  215,036
  230,309
  246,183
  262,685
  279,845
  297,698
  316,279
  335,627
  355,783
  376,793
  398,701
  421,559
  445,419
  470,335
  496,365
  523,571
  552,016
  581,767
  612,896
  645,475
Revenue / Adjusted assets
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
  0.256
Average production assets, $m
  63,732
  70,762
  78,140
  85,864
  93,932
  102,344
  111,106
  120,221
  129,700
  139,552
  149,789
  160,428
  171,485
  182,980
  194,934
  207,369
  220,312
  233,790
  247,830
  262,465
  277,726
  293,648
  310,268
  327,624
  345,756
  364,707
  384,521
  405,245
  426,928
  449,622
Working capital, $m
  -913
  -1,014
  -1,120
  -1,231
  -1,346
  -1,467
  -1,592
  -1,723
  -1,859
  -2,000
  -2,147
  -2,299
  -2,458
  -2,623
  -2,794
  -2,972
  -3,158
  -3,351
  -3,552
  -3,762
  -3,981
  -4,209
  -4,447
  -4,696
  -4,956
  -5,227
  -5,511
  -5,808
  -6,119
  -6,444
Total debt, $m
  43,624
  50,487
  57,689
  65,229
  73,105
  81,318
  89,870
  98,769
  108,022
  117,639
  127,633
  138,019
  148,813
  160,034
  171,703
  183,843
  196,478
  209,635
  223,341
  237,628
  252,526
  268,069
  284,293
  301,236
  318,937
  337,437
  356,779
  377,010
  398,178
  420,331
Total liabilities, $m
  62,216
  69,078
  76,281
  83,821
  91,696
  99,909
  108,462
  117,361
  126,613
  136,231
  146,225
  156,610
  167,404
  178,626
  190,295
  202,435
  215,070
  228,226
  241,933
  256,219
  271,117
  286,660
  302,885
  319,828
  337,528
  356,028
  375,371
  395,602
  416,769
  438,923
Total equity, $m
  29,278
  32,507
  35,897
  39,445
  43,151
  47,016
  51,041
  55,229
  59,583
  64,109
  68,812
  73,699
  78,779
  84,059
  89,551
  95,263
  101,209
  107,401
  113,851
  120,574
  127,584
  134,899
  142,534
  150,507
  158,837
  167,543
  176,645
  186,166
  196,127
  206,552
Total liabilities and equity, $m
  91,494
  101,585
  112,178
  123,266
  134,847
  146,925
  159,503
  172,590
  186,196
  200,340
  215,037
  230,309
  246,183
  262,685
  279,846
  297,698
  316,279
  335,627
  355,784
  376,793
  398,701
  421,559
  445,419
  470,335
  496,365
  523,571
  552,016
  581,768
  612,896
  645,475
Debt-to-equity ratio
  1.490
  1.550
  1.610
  1.650
  1.690
  1.730
  1.760
  1.790
  1.810
  1.840
  1.850
  1.870
  1.890
  1.900
  1.920
  1.930
  1.940
  1.950
  1.960
  1.970
  1.980
  1.990
  1.990
  2.000
  2.010
  2.010
  2.020
  2.030
  2.030
  2.030
Adjusted equity ratio
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,254
  2,479
  2,714
  2,959
  3,214
  3,479
  3,755
  4,042
  4,340
  4,650
  5,618
  5,952
  6,300
  6,661
  7,037
  7,429
  7,836
  8,261
  8,704
  9,165
  9,647
  10,150
  10,675
  11,223
  11,797
  12,397
  13,024
  13,680
  14,367
  15,087
Depreciation, amort., depletion, $m
  3,098
  3,342
  3,598
  3,866
  4,146
  4,438
  4,743
  5,059
  5,388
  5,730
  5,201
  5,570
  5,954
  6,353
  6,769
  7,200
  7,650
  8,118
  8,605
  9,113
  9,643
  10,196
  10,773
  11,376
  12,005
  12,663
  13,351
  14,071
  14,824
  15,612
Funds from operations, $m
  5,351
  5,821
  6,312
  6,825
  7,360
  7,918
  8,498
  9,101
  9,729
  10,380
  10,819
  11,523
  12,254
  13,015
  13,806
  14,629
  15,486
  16,379
  17,309
  18,279
  19,290
  20,346
  21,448
  22,599
  23,802
  25,060
  26,375
  27,751
  29,191
  30,698
Change in working capital, $m
  -96
  -101
  -106
  -111
  -116
  -121
  -126
  -131
  -136
  -141
  -147
  -152
  -158
  -165
  -171
  -178
  -186
  -193
  -201
  -210
  -219
  -228
  -238
  -249
  -260
  -272
  -284
  -297
  -311
  -325
Cash from operations, $m
  5,447
  5,922
  6,417
  6,935
  7,476
  8,038
  8,623
  9,232
  9,864
  10,522
  10,966
  11,675
  12,413
  13,179
  13,977
  14,807
  15,672
  16,572
  17,510
  18,488
  19,509
  20,574
  21,686
  22,848
  24,062
  25,332
  26,659
  28,048
  29,502
  31,024
Maintenance CAPEX, $m
  -1,981
  -2,213
  -2,457
  -2,713
  -2,981
  -3,262
  -3,554
  -3,858
  -4,174
  -4,503
  -4,846
  -5,201
  -5,570
  -5,954
  -6,353
  -6,769
  -7,200
  -7,650
  -8,118
  -8,605
  -9,113
  -9,643
  -10,196
  -10,773
  -11,376
  -12,005
  -12,663
  -13,351
  -14,071
  -14,824
New CAPEX, $m
  -6,679
  -7,030
  -7,378
  -7,724
  -8,068
  -8,413
  -8,761
  -9,116
  -9,478
  -9,852
  -10,238
  -10,639
  -11,057
  -11,495
  -11,954
  -12,436
  -12,943
  -13,477
  -14,041
  -14,635
  -15,261
  -15,922
  -16,620
  -17,356
  -18,132
  -18,951
  -19,814
  -20,724
  -21,683
  -22,694
Cash from investing activities, $m
  -8,660
  -9,243
  -9,835
  -10,437
  -11,049
  -11,675
  -12,315
  -12,974
  -13,652
  -14,355
  -15,084
  -15,840
  -16,627
  -17,449
  -18,307
  -19,205
  -20,143
  -21,127
  -22,159
  -23,240
  -24,374
  -25,565
  -26,816
  -28,129
  -29,508
  -30,956
  -32,477
  -34,075
  -35,754
  -37,518
Free cash flow, $m
  -3,213
  -3,321
  -3,418
  -3,501
  -3,573
  -3,636
  -3,692
  -3,742
  -3,788
  -3,834
  -4,118
  -4,165
  -4,215
  -4,270
  -4,330
  -4,397
  -4,472
  -4,555
  -4,648
  -4,751
  -4,866
  -4,992
  -5,130
  -5,281
  -5,446
  -5,625
  -5,818
  -6,027
  -6,252
  -6,494
Issuance/(repayment) of debt, $m
  6,490
  6,862
  7,203
  7,540
  7,876
  8,213
  8,553
  8,899
  9,253
  9,617
  9,994
  10,386
  10,794
  11,221
  11,669
  12,140
  12,635
  13,157
  13,706
  14,286
  14,898
  15,543
  16,224
  16,943
  17,701
  18,500
  19,343
  20,231
  21,167
  22,154
Issuance/(repurchase) of shares, $m
  759
  750
  676
  590
  492
  386
  270
  145
  14
  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  
  7,249
  7,612
  7,879
  8,130
  8,368
  8,599
  8,823
  9,044
  9,267
  9,617
  9,994
  10,386
  10,794
  11,221
  11,669
  12,140
  12,635
  13,157
  13,706
  14,286
  14,898
  15,543
  16,224
  16,943
  17,701
  18,500
  19,343
  20,231
  21,167
  22,154
Total cash flow (excl. dividends), $m
  4,037
  4,292
  4,461
  4,628
  4,795
  4,962
  5,131
  5,303
  5,478
  5,784
  5,876
  6,221
  6,579
  6,952
  7,339
  7,743
  8,163
  8,601
  9,058
  9,535
  10,032
  10,552
  11,095
  11,662
  12,255
  12,875
  13,524
  14,204
  14,915
  15,660
Retained Cash Flow (-), $m
  -3,013
  -3,229
  -3,390
  -3,548
  -3,706
  -3,865
  -4,025
  -4,188
  -4,354
  -4,526
  -4,703
  -4,887
  -5,080
  -5,281
  -5,491
  -5,713
  -5,946
  -6,191
  -6,450
  -6,723
  -7,011
  -7,315
  -7,635
  -7,973
  -8,330
  -8,706
  -9,102
  -9,520
  -9,961
  -10,425
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
  1,024
  1,062
  1,071
  1,080
  1,088
  1,097
  1,106
  1,115
  1,124
  1,258
  1,173
  1,334
  1,500
  1,671
  1,848
  2,030
  2,217
  2,410
  2,608
  2,812
  3,021
  3,237
  3,460
  3,689
  3,925
  4,169
  4,422
  4,683
  4,954
  5,235
Discount rate, %
  9.70
  10.19
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.38
  29.79
  31.28
  32.85
  34.49
  36.21
  38.03
  39.93
PV of cash for distribution, $m
  933
  875
  790
  705
  623
  545
  470
  401
  337
  310
  234
  211
  186
  159
  133
  107
  85
  65
  48
  35
  25
  17
  11
  7
  4
  3
  1
  1
  0
  0
Current shareholders' claim on cash, %
  98.0
  96.2
  94.8
  93.7
  92.9
  92.3
  91.9
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7

National Grid plc is an electricity and gas utility company focused on transmission and distribution activities in electricity and gas in both the United Kingdom and the United States. The Company's segments include UK Electricity Transmission, which is engaged in high voltage electricity transmission networks in Great Britain; UK Gas Transmission, which is the gas transmission network in Great Britain and United Kingdom liquefied natural gas (LNG) storage activities; UK Gas Distribution, which includes approximately four of the eight regional networks of Great Britain's gas distribution system, and US Regulated, which includes gas distribution networks, electricity distribution networks and high voltage electricity transmission networks in New York, and New England and electricity generation facilities in New York. Its other activities relate to non-regulated businesses and other commercial operations not included within the above segments.

FINANCIAL RATIOS  of  National Grid Transco, PLC (NGG)

Valuation Ratios
P/E Ratio 19.6
Price to Sales 10.2
Price to Book 7.5
Price to Tangible Book
Price to Cash Flow 29.1
Price to Free Cash Flow 88.6
Growth Rates
Sales Growth Rate 13.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15.3%
Cap. Spend. - 3 Yr. Gr. Rate 2.4%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 113.6%
Total Debt to Equity 140.6%
Interest Coverage 4
Management Effectiveness
Return On Assets 13.6%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 17.1%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 46%
Return On Equity - 3 Yr. Avg. 27.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 30%
EBITDA Margin - 3 Yr. Avg. 30.6%
Operating Margin 21.3%
Oper. Margin - 3 Yr. Avg. 22.3%
Pre-Tax Margin 14.5%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 51.8%
Net Profit Margin - 3 Yr. Avg. 28.9%
Effective Tax Rate 17.1%
Eff/ Tax Rate - 3 Yr. Avg. 19.8%
Payout Ratio 18.8%

NGG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NGG stock intrinsic value calculation we used $20969 million for the last fiscal year's total revenue generated by National Grid Transco, PLC. The default revenue input number comes from 0001 income statement of National Grid Transco, PLC. 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 NGG stock valuation model: a) initial revenue growth rate of 11.7% 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 9.7%, whose default value for NGG is calculated based on our internal credit rating of National Grid Transco, PLC, 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 National Grid Transco, PLC.
    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 NGG stock the variable cost ratio is equal to 78.7%.

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 NGG 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 National Grid Transco, PLC.

Corporate tax rate of 27% is the nominal tax rate for National Grid Transco, PLC. 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 NGG 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 NGG are equal to 272.1%.

Life of production assets of 28.8 years is the average useful life of capital assets used in National Grid Transco, PLC 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 NGG is equal to -3.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $26264.9930265 million for National Grid Transco, PLC - 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 682.052 million for National Grid Transco, PLC 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 National Grid Transco, PLC at the current share price and the inputted number of shares is $36.9 billion.

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