Intrinsic value of SJW Group - SJW

Previous Close

$52.85

  Intrinsic Value

$56.14

stock screener

  Rating & Target

hold

+6%

Previous close

$52.85

 
Intrinsic value

$56.14

 
Up/down potential

+6%

 
Rating

hold

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

We calculate the intrinsic value of SJW 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  11.48
  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
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
Revenue, $m
  333
  379
  421
  465
  510
  558
  607
  659
  713
  769
  827
  887
  950
  1,015
  1,083
  1,153
  1,227
  1,303
  1,382
  1,465
  1,551
  1,641
  1,735
  1,833
  1,936
  2,043
  2,155
  2,272
  2,394
  2,522
  2,656
Variable operating expenses, $m
 
  239
  265
  292
  321
  351
  382
  414
  448
  483
  520
  558
  597
  638
  681
  725
  771
  819
  869
  922
  976
  1,032
  1,092
  1,153
  1,218
  1,285
  1,355
  1,429
  1,506
  1,586
  1,670
Fixed operating expenses, $m
 
  35
  36
  37
  38
  38
  39
  40
  41
  42
  44
  45
  46
  47
  48
  49
  50
  52
  53
  54
  56
  57
  59
  60
  61
  63
  65
  66
  68
  70
  71
Total operating expenses, $m
  247
  274
  301
  329
  359
  389
  421
  454
  489
  525
  564
  603
  643
  685
  729
  774
  821
  871
  922
  976
  1,032
  1,089
  1,151
  1,213
  1,279
  1,348
  1,420
  1,495
  1,574
  1,656
  1,741
Operating income, $m
  93
  106
  120
  136
  152
  168
  186
  204
  223
  243
  263
  284
  307
  330
  354
  379
  405
  432
  460
  489
  520
  552
  585
  620
  657
  695
  735
  777
  820
  866
  914
EBITDA, $m
  139
  136
  154
  172
  192
  212
  234
  256
  279
  303
  328
  354
  381
  409
  439
  469
  501
  534
  568
  604
  642
  681
  722
  764
  809
  855
  904
  955
  1,008
  1,064
  1,123
Interest expense (income), $m
  24
  25
  31
  38
  45
  53
  61
  69
  78
  87
  96
  106
  116
  126
  137
  149
  160
  173
  185
  199
  212
  227
  242
  257
  274
  291
  309
  327
  347
  367
  389
Earnings before tax, $m
  86
  81
  89
  98
  106
  115
  125
  135
  145
  156
  167
  179
  191
  203
  216
  230
  244
  259
  275
  291
  308
  325
  344
  363
  383
  404
  426
  449
  473
  499
  525
Tax expense, $m
  33
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  52
  55
  58
  62
  66
  70
  74
  78
  83
  88
  93
  98
  103
  109
  115
  121
  128
  135
  142
Net income, $m
  53
  59
  65
  71
  78
  84
  91
  98
  106
  114
  122
  130
  139
  148
  158
  168
  178
  189
  200
  212
  225
  237
  251
  265
  280
  295
  311
  328
  346
  364
  384

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  1,443
  1,601
  1,776
  1,960
  2,152
  2,353
  2,562
  2,780
  3,007
  3,243
  3,488
  3,743
  4,007
  4,282
  4,568
  4,866
  5,175
  5,497
  5,833
  6,182
  6,546
  6,926
  7,322
  7,736
  8,168
  8,620
  9,091
  9,585
  10,101
  10,641
  11,206
Adjusted assets (=assets-cash), $m
  1,437
  1,601
  1,776
  1,960
  2,152
  2,353
  2,562
  2,780
  3,007
  3,243
  3,488
  3,743
  4,007
  4,282
  4,568
  4,866
  5,175
  5,497
  5,833
  6,182
  6,546
  6,926
  7,322
  7,736
  8,168
  8,620
  9,091
  9,585
  10,101
  10,641
  11,206
Revenue / Adjusted assets
  0.232
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
Average production assets, $m
  134
  149
  165
  183
  200
  219
  239
  259
  280
  302
  325
  349
  373
  399
  426
  453
  482
  512
  543
  576
  610
  645
  682
  721
  761
  803
  847
  893
  941
  991
  1,044
Working capital, $m
  36
  49
  54
  60
  66
  72
  78
  85
  92
  99
  107
  114
  123
  131
  140
  149
  158
  168
  178
  189
  200
  212
  224
  237
  250
  264
  278
  293
  309
  325
  343
Total debt, $m
  448
  557
  681
  811
  946
  1,088
  1,236
  1,390
  1,550
  1,717
  1,890
  2,069
  2,256
  2,450
  2,652
  2,862
  3,081
  3,308
  3,545
  3,792
  4,049
  4,317
  4,597
  4,889
  5,194
  5,512
  5,846
  6,194
  6,558
  6,939
  7,338
Total liabilities, $m
  1,022
  1,130
  1,254
  1,384
  1,519
  1,661
  1,809
  1,963
  2,123
  2,290
  2,463
  2,642
  2,829
  3,023
  3,225
  3,435
  3,654
  3,881
  4,118
  4,365
  4,622
  4,890
  5,170
  5,462
  5,767
  6,085
  6,419
  6,767
  7,131
  7,512
  7,911
Total equity, $m
  422
  471
  522
  576
  633
  692
  753
  817
  884
  953
  1,025
  1,100
  1,178
  1,259
  1,343
  1,431
  1,522
  1,616
  1,715
  1,818
  1,925
  2,036
  2,153
  2,274
  2,401
  2,534
  2,673
  2,818
  2,970
  3,128
  3,295
Total liabilities and equity, $m
  1,444
  1,601
  1,776
  1,960
  2,152
  2,353
  2,562
  2,780
  3,007
  3,243
  3,488
  3,742
  4,007
  4,282
  4,568
  4,866
  5,176
  5,497
  5,833
  6,183
  6,547
  6,926
  7,323
  7,736
  8,168
  8,619
  9,092
  9,585
  10,101
  10,640
  11,206
Debt-to-equity ratio
  1.062
  1.180
  1.300
  1.410
  1.500
  1.570
  1.640
  1.700
  1.750
  1.800
  1.840
  1.880
  1.920
  1.950
  1.970
  2.000
  2.020
  2.050
  2.070
  2.090
  2.100
  2.120
  2.140
  2.150
  2.160
  2.180
  2.190
  2.200
  2.210
  2.220
  2.230
Adjusted equity ratio
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  53
  59
  65
  71
  78
  84
  91
  98
  106
  114
  122
  130
  139
  148
  158
  168
  178
  189
  200
  212
  225
  237
  251
  265
  280
  295
  311
  328
  346
  364
  384
Depreciation, amort., depletion, $m
  46
  30
  33
  37
  40
  44
  48
  52
  56
  60
  65
  70
  75
  80
  85
  91
  96
  102
  109
  115
  122
  129
  136
  144
  152
  161
  169
  179
  188
  198
  209
Funds from operations, $m
  136
  89
  98
  108
  118
  128
  139
  150
  162
  174
  187
  200
  214
  228
  243
  259
  275
  292
  309
  327
  346
  366
  387
  409
  432
  455
  480
  506
  534
  562
  592
Change in working capital, $m
  22
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
Cash from operations, $m
  114
  84
  93
  102
  112
  122
  133
  144
  155
  167
  179
  192
  206
  220
  234
  249
  265
  282
  299
  317
  335
  355
  375
  396
  418
  442
  466
  491
  518
  546
  575
Maintenance CAPEX, $m
  0
  -27
  -30
  -33
  -37
  -40
  -44
  -48
  -52
  -56
  -60
  -65
  -70
  -75
  -80
  -85
  -91
  -96
  -102
  -109
  -115
  -122
  -129
  -136
  -144
  -152
  -161
  -169
  -179
  -188
  -198
New CAPEX, $m
  -142
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -53
Cash from investing activities, $m
  -122
  -43
  -46
  -50
  -55
  -59
  -63
  -68
  -73
  -78
  -83
  -89
  -95
  -101
  -107
  -113
  -120
  -126
  -133
  -142
  -149
  -157
  -166
  -175
  -184
  -194
  -205
  -215
  -227
  -238
  -251
Free cash flow, $m
  -8
  42
  47
  52
  57
  63
  69
  76
  82
  89
  96
  104
  111
  120
  128
  137
  146
  155
  165
  175
  186
  197
  209
  221
  234
  247
  261
  276
  291
  307
  324
Issuance/(repayment) of debt, $m
  14
  115
  124
  130
  136
  142
  148
  154
  160
  166
  173
  180
  187
  194
  202
  210
  218
  227
  237
  247
  257
  268
  280
  292
  305
  319
  333
  348
  364
  381
  399
Issuance/(repurchase) of shares, $m
  1
  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 from financing (excl. dividends), $m  
  45
  115
  124
  130
  136
  142
  148
  154
  160
  166
  173
  180
  187
  194
  202
  210
  218
  227
  237
  247
  257
  268
  280
  292
  305
  319
  333
  348
  364
  381
  399
Total cash flow (excl. dividends), $m
  37
  157
  170
  182
  193
  205
  217
  229
  242
  255
  269
  283
  298
  314
  330
  347
  364
  383
  402
  422
  443
  466
  489
  513
  539
  566
  595
  624
  656
  689
  723
Retained Cash Flow (-), $m
  -38
  -49
  -51
  -54
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -127
  -133
  -139
  -145
  -152
  -159
  -166
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
 
  108
  119
  128
  137
  146
  155
  165
  176
  186
  197
  209
  220
  233
  246
  259
  273
  288
  303
  319
  336
  354
  372
  392
  412
  433
  456
  479
  504
  530
  557
Discount rate, %
 
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
 
  100
  101
  99
  96
  92
  87
  81
  75
  68
  61
  54
  47
  41
  34
  29
  23
  19
  15
  11
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

SJW Group, formerly SJW Corp., is a holding company. The Company's subsidiaries include San Jose Water Company, SJWTX, Inc. and SJW Land Company. SJWTX, Inc. is doing business as Canyon Lake Water Service Company (CLWSC). It operates through the segments, which include Water Utility Services, Real Estate Services and All Other. Its Water Utility Services segment provides water utility and utility-related services to its customers through its subsidiaries, such as San Jose Water Company, CLWSC and TWA. The Real Estate Services segment includes property management and investment activity conducted by SJW Land Company. The Company's All Other segment includes its other business activities. San Jose Water Company distributes water to customers in accordance with accepted water utility methods. SJW Land Company owns undeveloped land, and owns and operates a portfolio of commercial buildings in the states of California, Texas, Arizona and Tennessee.

FINANCIAL RATIOS  of  SJW Group (SJW)

Valuation Ratios
P/E Ratio 20.4
Price to Sales 3.2
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow -38.6
Growth Rates
Sales Growth Rate 11.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 32.7%
Cap. Spend. - 3 Yr. Gr. Rate 8.6%
Financial Strength
Quick Ratio 0
Current Ratio 1
LT Debt to Equity 102.8%
Total Debt to Equity 106.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 4.8%
Return On Total Capital 6.4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.2%
Return On Equity 13.2%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 45.9%
EBITDA Margin - 3 Yr. Avg. 43.4%
Operating Margin 27.4%
Oper. Margin - 3 Yr. Avg. 27.5%
Pre-Tax Margin 25.3%
Pre-Tax Margin - 3 Yr. Avg. 23.1%
Net Profit Margin 15.6%
Net Profit Margin - 3 Yr. Avg. 14.8%
Effective Tax Rate 38.4%
Eff/ Tax Rate - 3 Yr. Avg. 36.2%
Payout Ratio 32.1%

SJW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SJW stock intrinsic value calculation we used $340 million for the last fiscal year's total revenue generated by SJW Group. The default revenue input number comes from 2016 income statement of SJW Group. 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 SJW stock valuation model: a) initial revenue growth rate of 11.6% 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%, whose default value for SJW is calculated based on our internal credit rating of SJW Group, 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 SJW Group.
    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 SJW stock the variable cost ratio is equal to 62.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $34 million in the base year in the intrinsic value calculation for SJW 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 5.6% for SJW Group.

Corporate tax rate of 27% is the nominal tax rate for SJW Group. 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 SJW 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 SJW are equal to 39.3%.

Life of production assets of 2.9 years is the average useful life of capital assets used in SJW Group 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 SJW is equal to 12.9%. 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 - $422 million for SJW Group - 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 20.68 million for SJW Group 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 SJW Group at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ SJW Group Value Analysis (NYSE:SJW) : December 14, 2017   [Dec-14-17 02:43PM  Capital Cube]
▶ 3 Unknown but Amazing Dividend Stocks   [Nov-17-17 09:19AM  Motley Fool]
▶ What Is SJW Groups (SJW) Share Price Doing?   [Oct-30-17 12:51PM  Simply Wall St.]
▶ SJW posts 3Q profit   [Oct-25-17 06:56PM  Associated Press]
▶ Is It The Right Time To Buy SJW Group (SJW)?   [Sep-20-17 07:39PM  Simply Wall St.]
▶ SJW Group: Leads amongst peers with strong fundamentals   [Jul-31-17 03:23PM  Capital Cube]
▶ SJW posts 2Q profit   [Jul-27-17 03:10PM  Associated Press]
▶ SJW Group Announces 2017 Second Quarter Financial Results   [Jul-26-17 06:00PM  Business Wire]
▶ ETFs with exposure to SJW Group : July 25, 2017   [Jul-25-17 01:13PM  Capital Cube]
▶ ETFs with exposure to SJW Group : July 14, 2017   [Jul-14-17 04:50PM  Capital Cube]
▶ SJW Group Value Analysis (NYSE:SJW) : June 29, 2017   [Jun-29-17 03:53PM  Capital Cube]
▶ ETFs with exposure to SJW Group : May 4, 2017   [May-04-17 04:19PM  Capital Cube]
▶ SJW posts 1Q profit   [Apr-26-17 07:20PM  Associated Press]
▶ The 3 Worst-Performing Dividend Achievers This Year   [Mar-15-17 11:22AM  GuruFocus.com]
▶ SJW posts 4Q profit   [05:02AM  Associated Press]
▶ Is It Time To Consider SJW Group (SJW)?   [Dec-10-16 09:40PM  at Insider Monkey]
Financial statements of SJW
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