Intrinsic value of Spark Energy, Inc. - SPKE

Previous Close

$10.64

  Intrinsic Value

$248.53

stock screener

  Rating & Target

str. buy

+999%

Previous close

$10.64

 
Intrinsic value

$248.53

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of SPKE 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 0.4

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,026
  1,050
  1,077
  1,107
  1,141
  1,177
  1,217
  1,261
  1,308
  1,358
  1,412
  1,469
  1,530
  1,595
  1,663
  1,736
  1,813
  1,895
  1,981
  2,072
  2,168
  2,270
  2,376
  2,489
  2,607
  2,732
  2,864
  3,002
  3,147
  3,300
Variable operating expenses, $m
  101
  103
  105
  108
  111
  114
  117
  121
  125
  129
  117
  122
  127
  132
  138
  144
  150
  157
  164
  172
  180
  188
  197
  206
  216
  226
  237
  249
  261
  273
Fixed operating expenses, $m
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  83
  84
  86
  88
  90
  92
  94
  96
  98
  100
  103
  105
  107
  110
  112
  114
  117
  120
  122
  125
Total operating expenses, $m
  167
  171
  174
  179
  183
  188
  193
  198
  204
  210
  200
  206
  213
  220
  228
  236
  244
  253
  262
  272
  283
  293
  304
  316
  328
  340
  354
  369
  383
  398
Operating income, $m
  858
  879
  902
  928
  957
  990
  1,025
  1,063
  1,104
  1,148
  1,212
  1,263
  1,317
  1,374
  1,436
  1,500
  1,569
  1,642
  1,719
  1,800
  1,886
  1,977
  2,072
  2,173
  2,280
  2,392
  2,509
  2,634
  2,764
  2,902
EBITDA, $m
  893
  914
  938
  964
  994
  1,027
  1,063
  1,102
  1,144
  1,189
  1,237
  1,289
  1,344
  1,403
  1,466
  1,532
  1,602
  1,676
  1,755
  1,838
  1,925
  2,018
  2,115
  2,218
  2,326
  2,441
  2,561
  2,688
  2,821
  2,961
Interest expense (income), $m
  2
  9
  10
  10
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  42
  45
  48
  51
  54
  57
  61
  65
  69
Earnings before tax, $m
  849
  869
  891
  917
  945
  977
  1,011
  1,048
  1,088
  1,131
  1,193
  1,242
  1,295
  1,351
  1,410
  1,473
  1,540
  1,610
  1,685
  1,764
  1,847
  1,935
  2,028
  2,126
  2,229
  2,338
  2,452
  2,572
  2,699
  2,833
Tax expense, $m
  229
  235
  241
  248
  255
  264
  273
  283
  294
  305
  322
  335
  350
  365
  381
  398
  416
  435
  455
  476
  499
  522
  548
  574
  602
  631
  662
  695
  729
  765
Net income, $m
  620
  634
  651
  669
  690
  713
  738
  765
  794
  825
  871
  907
  945
  986
  1,029
  1,075
  1,124
  1,175
  1,230
  1,288
  1,348
  1,413
  1,480
  1,552
  1,627
  1,706
  1,790
  1,878
  1,970
  2,068

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
  499
  510
  523
  538
  554
  572
  592
  613
  635
  660
  686
  714
  743
  775
  808
  844
  881
  921
  963
  1,007
  1,054
  1,103
  1,155
  1,209
  1,267
  1,328
  1,391
  1,459
  1,529
  1,603
Adjusted assets (=assets-cash), $m
  499
  510
  523
  538
  554
  572
  592
  613
  635
  660
  686
  714
  743
  775
  808
  844
  881
  921
  963
  1,007
  1,054
  1,103
  1,155
  1,209
  1,267
  1,328
  1,391
  1,459
  1,529
  1,603
Revenue / Adjusted assets
  2.056
  2.059
  2.059
  2.058
  2.060
  2.058
  2.056
  2.057
  2.060
  2.058
  2.058
  2.057
  2.059
  2.058
  2.058
  2.057
  2.058
  2.058
  2.057
  2.058
  2.057
  2.058
  2.057
  2.059
  2.058
  2.057
  2.059
  2.058
  2.058
  2.059
Average production assets, $m
  92
  94
  97
  100
  103
  106
  110
  113
  118
  122
  127
  132
  138
  144
  150
  156
  163
  171
  178
  187
  195
  204
  214
  224
  235
  246
  258
  270
  283
  297
Working capital, $m
  101
  103
  106
  108
  112
  115
  119
  124
  128
  133
  138
  144
  150
  156
  163
  170
  178
  186
  194
  203
  212
  222
  233
  244
  256
  268
  281
  294
  308
  323
Total debt, $m
  152
  163
  174
  188
  202
  218
  236
  255
  275
  297
  321
  346
  373
  401
  431
  463
  497
  532
  570
  610
  652
  696
  743
  792
  844
  898
  956
  1,016
  1,080
  1,147
Total liabilities, $m
  449
  459
  471
  484
  499
  515
  532
  551
  572
  594
  617
  642
  669
  697
  727
  759
  793
  829
  866
  906
  948
  993
  1,039
  1,088
  1,140
  1,195
  1,252
  1,313
  1,376
  1,443
Total equity, $m
  50
  51
  52
  54
  55
  57
  59
  61
  64
  66
  69
  71
  74
  77
  81
  84
  88
  92
  96
  101
  105
  110
  115
  121
  127
  133
  139
  146
  153
  160
Total liabilities and equity, $m
  499
  510
  523
  538
  554
  572
  591
  612
  636
  660
  686
  713
  743
  774
  808
  843
  881
  921
  962
  1,007
  1,053
  1,103
  1,154
  1,209
  1,267
  1,328
  1,391
  1,459
  1,529
  1,603
Debt-to-equity ratio
  3.050
  3.190
  3.330
  3.490
  3.650
  3.820
  3.990
  4.160
  4.330
  4.510
  4.680
  4.850
  5.010
  5.170
  5.330
  5.490
  5.640
  5.780
  5.920
  6.060
  6.190
  6.310
  6.430
  6.550
  6.660
  6.770
  6.870
  6.970
  7.060
  7.150
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  620
  634
  651
  669
  690
  713
  738
  765
  794
  825
  871
  907
  945
  986
  1,029
  1,075
  1,124
  1,175
  1,230
  1,288
  1,348
  1,413
  1,480
  1,552
  1,627
  1,706
  1,790
  1,878
  1,970
  2,068
Depreciation, amort., depletion, $m
  35
  35
  36
  36
  37
  37
  38
  39
  40
  41
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
Funds from operations, $m
  655
  669
  686
  706
  727
  750
  776
  804
  834
  866
  896
  933
  973
  1,015
  1,059
  1,106
  1,157
  1,210
  1,266
  1,325
  1,387
  1,453
  1,523
  1,597
  1,674
  1,756
  1,841
  1,932
  2,027
  2,127
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
Cash from operations, $m
  653
  667
  684
  703
  724
  747
  772
  800
  829
  861
  891
  928
  967
  1,008
  1,052
  1,099
  1,149
  1,202
  1,257
  1,316
  1,378
  1,444
  1,513
  1,586
  1,662
  1,743
  1,829
  1,918
  2,013
  2,112
Maintenance CAPEX, $m
  -18
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
New CAPEX, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
Cash from investing activities, $m
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -29
  -30
  -31
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -71
Free cash flow, $m
  633
  647
  662
  681
  701
  723
  747
  774
  802
  833
  862
  897
  935
  975
  1,018
  1,063
  1,111
  1,162
  1,215
  1,272
  1,332
  1,395
  1,462
  1,533
  1,607
  1,685
  1,768
  1,854
  1,946
  2,042
Issuance/(repayment) of debt, $m
  6
  10
  12
  13
  15
  16
  18
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  57
  60
  64
  67
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  6
  10
  12
  13
  15
  16
  18
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  57
  60
  64
  67
Total cash flow (excl. dividends), $m
  639
  657
  674
  694
  715
  739
  765
  793
  823
  855
  885
  922
  961
  1,003
  1,048
  1,095
  1,145
  1,197
  1,253
  1,312
  1,374
  1,440
  1,509
  1,582
  1,659
  1,740
  1,825
  1,915
  2,009
  2,109
Retained Cash Flow (-), $m
  -4
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
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
  634
  656
  673
  692
  714
  737
  763
  791
  821
  853
  883
  919
  958
  1,000
  1,044
  1,091
  1,141
  1,193
  1,249
  1,307
  1,369
  1,435
  1,504
  1,576
  1,653
  1,734
  1,819
  1,908
  2,002
  2,101
Discount rate, %
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
  607
  598
  582
  565
  547
  527
  506
  484
  460
  434
  405
  378
  349
  320
  290
  261
  232
  204
  177
  152
  128
  107
  87
  71
  56
  43
  33
  25
  18
  13
Current shareholders' claim on cash, %
  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

Spark Energy, Inc. is an independent retail energy services company. The Company provides residential and commercial customers across the United States with an alternative choice for their natural gas and electricity. The Company operates through two segments: Retail Natural Gas Segment and Retail Electricity Segment. The Retail Natural Gas segment consists of natural gas sales to, and natural gas transportation and distribution for, residential and commercial customers. It purchases natural gas supply through physical and financial transactions with market counterparts and supplies natural gas to residential and commercial consumers pursuant to fixed-price and variable-price. The Retail Electricity segment consists of electricity sales and transmission to residential and commercial customers. The Company has approximately 774,000 renewable energy credits (RCEs). As of July 5, 2017, the Company operates in 94 utility service territories across 19 states and the District of Columbia.

FINANCIAL RATIOS  of  Spark Energy, Inc. (SPKE)

Valuation Ratios
P/E Ratio 17.6
Price to Sales 0.5
Price to Book 8.2
Price to Tangible Book
Price to Cash Flow 3.6
Price to Free Cash Flow 3.7
Growth Rates
Sales Growth Rate 52.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 0
Current Ratio 0.3
LT Debt to Equity 16.7%
Total Debt to Equity 260%
Interest Coverage 39
Management Effectiveness
Return On Assets 5.9%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 16.7%
Ret/ On T. Cap. - 3 Yr. Avg. 8.2%
Return On Equity 68.3%
Return On Equity - 3 Yr. Avg. 36.1%
Asset Turnover 2
Profitability Ratios
Gross Margin 36.9%
Gross Margin - 3 Yr. Avg. 29.8%
EBITDA Margin 23.2%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin 15.4%
Oper. Margin - 3 Yr. Avg. 7.5%
Pre-Tax Margin 13.9%
Pre-Tax Margin - 3 Yr. Avg. 6.7%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 1.2%
Effective Tax Rate 13.2%
Eff/ Tax Rate - 3 Yr. Avg. 13.4%
Payout Ratio 57.1%

SPKE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPKE stock intrinsic value calculation we used $1006 million for the last fiscal year's total revenue generated by Spark Energy, Inc.. The default revenue input number comes from 0001 income statement of Spark Energy, Inc.. 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 SPKE stock valuation model: a) initial revenue growth rate of 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 4.5%, whose default value for SPKE is calculated based on our internal credit rating of Spark Energy, Inc., 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 Spark Energy, Inc..
    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 SPKE stock the variable cost ratio is equal to 9.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $65 million in the base year in the intrinsic value calculation for SPKE 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 6.4% for Spark Energy, Inc..

Corporate tax rate of 27% is the nominal tax rate for Spark Energy, Inc.. 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 SPKE 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 SPKE are equal to 9%.

Life of production assets of 3.4 years is the average useful life of capital assets used in Spark Energy, Inc. 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 SPKE is equal to 9.8%. 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 - $45.806 million for Spark Energy, Inc. - 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 34.942 million for Spark Energy, Inc. 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 Spark Energy, Inc. at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
JE Just Energy Gr 1.71 7.76  str.buy
FE FirstEnergy Co 44.68 35.51  hold
NI NiSource, Inc 29.42 10.34  str.sell
BKH Black Hills Co 77.17 34.19  str.sell
CPK Chesapeake Uti 95.21 15.81  str.sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.