Intrinsic value of New Jersey Resources - NJR

Previous Close

$46.65

  Intrinsic Value

$3.39

stock screener

  Rating & Target

str. sell

-93%

Previous close

$46.65

 
Intrinsic value

$3.39

 
Up/down potential

-93%

 
Rating

str. sell

We calculate the intrinsic value of NJR 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 4.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  18.80
  17.42
  16.18
  15.06
  14.05
  13.15
  12.33
  11.60
  10.94
  10.35
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  2,695
  3,165
  3,677
  4,230
  4,825
  5,459
  6,133
  6,844
  7,593
  8,378
  9,200
  10,059
  10,954
  11,886
  12,855
  13,863
  14,911
  16,000
  17,131
  18,307
  19,529
  20,801
  22,123
  23,500
  24,934
  26,428
  27,985
  29,608
  31,303
  33,071
Variable operating expenses, $m
  2,454
  2,881
  3,347
  3,850
  4,391
  4,968
  5,580
  6,227
  6,907
  7,622
  8,365
  9,145
  9,959
  10,806
  11,688
  12,604
  13,557
  14,547
  15,575
  16,644
  17,756
  18,912
  20,114
  21,366
  22,670
  24,028
  25,443
  26,920
  28,460
  30,068
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
  2,454
  2,881
  3,347
  3,850
  4,391
  4,968
  5,580
  6,227
  6,907
  7,622
  8,365
  9,145
  9,959
  10,806
  11,688
  12,604
  13,557
  14,547
  15,575
  16,644
  17,756
  18,912
  20,114
  21,366
  22,670
  24,028
  25,443
  26,920
  28,460
  30,068
Operating income, $m
  241
  283
  330
  380
  434
  492
  553
  617
  685
  757
  835
  913
  995
  1,079
  1,167
  1,259
  1,354
  1,453
  1,556
  1,662
  1,773
  1,889
  2,009
  2,134
  2,264
  2,400
  2,541
  2,689
  2,843
  3,003
EBITDA, $m
  344
  404
  470
  541
  617
  698
  784
  875
  970
  1,071
  1,176
  1,286
  1,400
  1,519
  1,643
  1,772
  1,906
  2,045
  2,190
  2,340
  2,496
  2,659
  2,828
  3,004
  3,187
  3,378
  3,577
  3,784
  4,001
  4,227
Interest expense (income), $m
  44
  77
  104
  134
  167
  202
  241
  281
  324
  370
  418
  468
  521
  576
  633
  692
  754
  819
  886
  956
  1,028
  1,103
  1,182
  1,263
  1,348
  1,436
  1,527
  1,623
  1,723
  1,827
  1,935
Earnings before tax, $m
  164
  179
  195
  213
  232
  251
  272
  293
  316
  339
  368
  393
  419
  447
  475
  504
  535
  567
  600
  634
  670
  707
  746
  786
  829
  872
  918
  966
  1,016
  1,068
Tax expense, $m
  44
  48
  53
  58
  63
  68
  73
  79
  85
  92
  99
  106
  113
  121
  128
  136
  144
  153
  162
  171
  181
  191
  201
  212
  224
  236
  248
  261
  274
  288
Net income, $m
  119
  131
  143
  155
  169
  183
  198
  214
  230
  248
  268
  287
  306
  326
  347
  368
  391
  414
  438
  463
  489
  516
  545
  574
  605
  637
  670
  705
  742
  780

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
  4,663
  5,475
  6,361
  7,319
  8,347
  9,445
  10,610
  11,841
  13,136
  14,495
  15,918
  17,403
  18,951
  20,563
  22,241
  23,985
  25,797
  27,681
  29,638
  31,673
  33,788
  35,987
  38,276
  40,658
  43,138
  45,722
  48,416
  51,226
  54,157
  57,217
Adjusted assets (=assets-cash), $m
  4,663
  5,475
  6,361
  7,319
  8,347
  9,445
  10,610
  11,841
  13,136
  14,495
  15,918
  17,403
  18,951
  20,563
  22,241
  23,985
  25,797
  27,681
  29,638
  31,673
  33,788
  35,987
  38,276
  40,658
  43,138
  45,722
  48,416
  51,226
  54,157
  57,217
Revenue / Adjusted assets
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
Average production assets, $m
  2,992
  3,513
  4,081
  4,696
  5,356
  6,060
  6,807
  7,597
  8,428
  9,300
  10,212
  11,165
  12,159
  13,193
  14,269
  15,388
  16,551
  17,760
  19,015
  20,321
  21,678
  23,089
  24,557
  26,085
  27,677
  29,335
  31,063
  32,865
  34,746
  36,709
Working capital, $m
  245
  288
  335
  385
  439
  497
  558
  623
  691
  762
  837
  915
  997
  1,082
  1,170
  1,262
  1,357
  1,456
  1,559
  1,666
  1,777
  1,893
  2,013
  2,139
  2,269
  2,405
  2,547
  2,694
  2,849
  3,009
Total debt, $m
  1,931
  2,487
  3,094
  3,750
  4,455
  5,206
  6,004
  6,847
  7,735
  8,666
  9,640
  10,657
  11,718
  12,823
  13,972
  15,166
  16,408
  17,698
  19,039
  20,432
  21,881
  23,388
  24,956
  26,587
  28,286
  30,056
  31,902
  33,826
  35,834
  37,930
Total liabilities, $m
  3,194
  3,750
  4,357
  5,013
  5,718
  6,470
  7,268
  8,111
  8,998
  9,929
  10,904
  11,921
  12,982
  14,086
  15,235
  16,430
  17,671
  18,961
  20,302
  21,696
  23,145
  24,651
  26,219
  27,851
  29,550
  31,320
  33,165
  35,090
  37,097
  39,193
Total equity, $m
  1,469
  1,725
  2,004
  2,305
  2,629
  2,975
  3,342
  3,730
  4,138
  4,566
  5,014
  5,482
  5,970
  6,477
  7,006
  7,555
  8,126
  8,719
  9,336
  9,977
  10,643
  11,336
  12,057
  12,807
  13,589
  14,403
  15,251
  16,136
  17,059
  18,023
Total liabilities and equity, $m
  4,663
  5,475
  6,361
  7,318
  8,347
  9,445
  10,610
  11,841
  13,136
  14,495
  15,918
  17,403
  18,952
  20,563
  22,241
  23,985
  25,797
  27,680
  29,638
  31,673
  33,788
  35,987
  38,276
  40,658
  43,139
  45,723
  48,416
  51,226
  54,156
  57,216
Debt-to-equity ratio
  1.310
  1.440
  1.540
  1.630
  1.690
  1.750
  1.800
  1.840
  1.870
  1.900
  1.920
  1.940
  1.960
  1.980
  1.990
  2.010
  2.020
  2.030
  2.040
  2.050
  2.060
  2.060
  2.070
  2.080
  2.080
  2.090
  2.090
  2.100
  2.100
  2.100
Adjusted equity ratio
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  119
  131
  143
  155
  169
  183
  198
  214
  230
  248
  268
  287
  306
  326
  347
  368
  391
  414
  438
  463
  489
  516
  545
  574
  605
  637
  670
  705
  742
  780
Depreciation, amort., depletion, $m
  104
  121
  140
  161
  183
  206
  231
  257
  285
  314
  340
  372
  405
  440
  476
  513
  552
  592
  634
  677
  723
  770
  819
  870
  923
  978
  1,035
  1,096
  1,158
  1,224
Funds from operations, $m
  223
  252
  283
  316
  352
  389
  429
  471
  515
  562
  609
  659
  711
  766
  822
  881
  942
  1,006
  1,072
  1,140
  1,212
  1,286
  1,363
  1,444
  1,527
  1,615
  1,706
  1,801
  1,900
  2,003
Change in working capital, $m
  39
  43
  47
  50
  54
  58
  61
  65
  68
  71
  75
  78
  81
  85
  88
  92
  95
  99
  103
  107
  111
  116
  120
  125
  130
  136
  142
  148
  154
  161
Cash from operations, $m
  184
  209
  236
  266
  298
  332
  368
  407
  447
  490
  534
  581
  630
  681
  734
  789
  847
  907
  969
  1,033
  1,101
  1,170
  1,243
  1,318
  1,397
  1,479
  1,564
  1,653
  1,746
  1,842
Maintenance CAPEX, $m
  -84
  -100
  -117
  -136
  -157
  -179
  -202
  -227
  -253
  -281
  -310
  -340
  -372
  -405
  -440
  -476
  -513
  -552
  -592
  -634
  -677
  -723
  -770
  -819
  -870
  -923
  -978
  -1,035
  -1,096
  -1,158
New CAPEX, $m
  -473
  -521
  -568
  -615
  -660
  -704
  -747
  -790
  -831
  -872
  -912
  -953
  -993
  -1,034
  -1,076
  -1,119
  -1,163
  -1,208
  -1,256
  -1,305
  -1,357
  -1,411
  -1,468
  -1,528
  -1,591
  -1,658
  -1,728
  -1,802
  -1,881
  -1,963
Cash from investing activities, $m
  -557
  -621
  -685
  -751
  -817
  -883
  -949
  -1,017
  -1,084
  -1,153
  -1,222
  -1,293
  -1,365
  -1,439
  -1,516
  -1,595
  -1,676
  -1,760
  -1,848
  -1,939
  -2,034
  -2,134
  -2,238
  -2,347
  -2,461
  -2,581
  -2,706
  -2,837
  -2,977
  -3,121
Free cash flow, $m
  -372
  -412
  -449
  -485
  -519
  -551
  -581
  -610
  -637
  -663
  -689
  -712
  -736
  -759
  -782
  -805
  -829
  -853
  -879
  -906
  -934
  -963
  -995
  -1,028
  -1,064
  -1,102
  -1,142
  -1,185
  -1,230
  -1,279
Issuance/(repayment) of debt, $m
  502
  556
  607
  656
  705
  752
  798
  843
  887
  931
  974
  1,017
  1,061
  1,104
  1,149
  1,195
  1,242
  1,290
  1,341
  1,394
  1,449
  1,507
  1,568
  1,632
  1,699
  1,770
  1,845
  1,924
  2,008
  2,096
Issuance/(repurchase) of shares, $m
  113
  125
  136
  146
  155
  162
  169
  174
  178
  181
  180
  181
  182
  182
  182
  181
  180
  179
  179
  178
  177
  177
  176
  176
  176
  177
  178
  180
  182
  184
Cash from financing (excl. dividends), $m  
  615
  681
  743
  802
  860
  914
  967
  1,017
  1,065
  1,112
  1,154
  1,198
  1,243
  1,286
  1,331
  1,376
  1,422
  1,469
  1,520
  1,572
  1,626
  1,684
  1,744
  1,808
  1,875
  1,947
  2,023
  2,104
  2,190
  2,280
Total cash flow (excl. dividends), $m
  243
  270
  294
  318
  341
  363
  385
  407
  428
  449
  465
  486
  507
  528
  549
  571
  593
  616
  640
  666
  692
  720
  749
  779
  812
  846
  881
  919
  959
  1,001
Retained Cash Flow (-), $m
  -232
  -256
  -279
  -302
  -324
  -346
  -367
  -388
  -408
  -428
  -448
  -468
  -488
  -508
  -528
  -549
  -571
  -593
  -617
  -641
  -666
  -693
  -721
  -750
  -781
  -814
  -849
  -885
  -923
  -964
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
  11
  14
  15
  16
  17
  18
  18
  19
  20
  21
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
Discount rate, %
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
  10
  12
  12
  11
  10
  10
  9
  8
  7
  6
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  97.3
  94.9
  92.7
  90.7
  88.9
  87.3
  85.8
  84.5
  83.3
  82.3
  81.3
  80.4
  79.6
  78.9
  78.2
  77.6
  77.1
  76.6
  76.1
  75.7
  75.3
  74.9
  74.6
  74.2
  73.9
  73.6
  73.4
  73.1
  72.9
  72.6

New Jersey Resources Corporation is an energy services holding company. The Company's business is the distribution of natural gas through a regulated utility, which provides other retail and wholesale energy services to customers and investing in clean energy projects and midstream assets. It operates in four business segments: Natural Gas Distribution, Clean Energy Ventures, Energy Services and Midstream. The Natural Gas Distribution segment consists of regulated natural gas services, off-system sales, capacity and storage management operations. The Energy Services segment consists of unregulated wholesale energy operations. The Clean Energy Ventures segment consists of capital investments in clean energy projects. The Midstream segment consists of investments in the midstream natural gas market, such as natural gas transportation and storage facilities. The Home Services and Other operations consist of heating, cooling and water appliance sales and installations, among others.

FINANCIAL RATIOS  of  New Jersey Resources (NJR)

Valuation Ratios
P/E Ratio 30.6
Price to Sales 1.8
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 16.3
Price to Free Cash Flow -84.1
Growth Rates
Sales Growth Rate 20.6%
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 2.2%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 80.6%
Total Debt to Equity 115.4%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.8%
Return On Equity 11%
Return On Equity - 3 Yr. Avg. 13.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 12.1%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 8.5%
Pre-Tax Margin 6%
Pre-Tax Margin - 3 Yr. Avg. 7.4%
Net Profit Margin 5.8%
Net Profit Margin - 3 Yr. Avg. 6.5%
Effective Tax Rate 13.9%
Eff/ Tax Rate - 3 Yr. Avg. 18.8%
Payout Ratio 66.7%

NJR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NJR stock intrinsic value calculation we used $2268.617 million for the last fiscal year's total revenue generated by New Jersey Resources. The default revenue input number comes from 0001 income statement of New Jersey Resources. 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 NJR stock valuation model: a) initial revenue growth rate of 18.8% 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 8.2%, whose default value for NJR is calculated based on our internal credit rating of New Jersey Resources, 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 New Jersey Resources.
    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 NJR stock the variable cost ratio is equal to 91.1%.

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 NJR 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 New Jersey Resources.

Corporate tax rate of 27% is the nominal tax rate for New Jersey Resources. 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 NJR 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 NJR are equal to 111%.

Life of production assets of 30.9 years is the average useful life of capital assets used in New Jersey Resources 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 NJR is equal to 9.1%. 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 - $1236.643 million for New Jersey Resources - 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 88.277 million for New Jersey Resources 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 New Jersey Resources at the current share price and the inputted number of shares is $4.1 billion.

RELATED COMPANIES Price Int.Val. Rating
SJI South Jersey I 36.00 11.46  str.sell
CPK Chesapeake Uti 89.05 7.01  str.sell
NI NiSource 25.55 13.67  sell
CNP CenterPoint En 28.03 17.11  sell
SR Spire 74.55 38.33  sell

COMPANY NEWS

▶ New Jersey Resources: Fiscal 3Q Earnings Snapshot   [Aug-07-18 08:15AM  Associated Press]
▶ New Jersey Resources beats 1Q profit forecasts   [Feb-08-18 07:25AM  Associated Press]
▶ 5 Stocks That Look Good Short   [Jan-13-18 12:00PM  TheStreet.com]
▶ New Jersey Resources reports 4Q loss   [07:15AM  Associated Press]
▶ New Jersey Resources Announces Promotions   [02:08PM  Business Wire]
▶ Stocks With Rising Relative Strength: New Jersey Resources   [Oct-30-17 03:00AM  Investor's Business Daily]
▶ Stocks With Rising Relative Strength: Spire   [Oct-05-17 03:00AM  Investor's Business Daily]

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