Discounted Cash Flow Calculation for TSX:ACI using 2 Stage Free Cash Flow to Equity Model
The calculations below outline how an intrinsic value for
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.
TSX:ACI DCF 1st Stage: Next 10 year cash flow forecast
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
AltaGas Canada's share price is below the future cash flow value, and at a moderate discount (> 20%).
AltaGas Canada's share price is below the future cash flow value, and at a substantial discount (> 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
AltaGas Canada's earnings available for a low price, and how does
this compare to other companies in the same industry?
AltaGas Canada's earnings are expected to decrease over the next 1-3 years, this is not considered high growth.
AltaGas Canada's revenue is expected to grow by 3% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
AltaGas Canada's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
2/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
Mr. Jared Blake Green, CA, serves as the President and Chief Executive Officer of AltaGas Canada Inc. and has been its Director since October 2017. Mr. Green has been Corporate Secretary and Vice President of Altagas Utility Group Inc. since January 1, 2009 and also has been its Controller since June 2, 2008. Mr. Green serves as President, Chief Executive Officer and Non-Independent Director at AltaGas Canada Inc. Mr. Green served as the Director of Strategic Development of Altagas Utility Group Inc. Mr. Green is a Chartered Accountant with nine years of progressive experience in corporate reporting, accounting and risk management at public and private companies listed on both the Toronto and New York stock exchanges. He is a member of Institute of Chartered Accountants of Alberta. Mr. Green holds a Bachelor of Arts in Economics from the University of Calgary, a Bachelor of Commerce (Distinction) in Accounting from the University of Saskatchewan.
Insufficient data for Jared to compare compensation growth.
Jared's remuneration is lower than average for companies of similar size in Canada.
Management Team Tenure
Average tenure of the
management team in years:
The tenure for the AltaGas Canada management team is about average.
CFO, Executive VP & Corporate Secretary
Executive VP of Utility Operations & President of PNG
President of Heritage Gas Limited
President of AUI
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The average tenure for the AltaGas Canada board of directors is less than 3 years, this suggests a new board.
Should You Worry About AltaGas Canada Inc.’s (TSE:ACI) ROCE?
Specifically, we're going to calculate its Return On Capital Employed (ROCE), in the hopes of getting some insight into the business. … Understanding Return On Capital Employed (ROCE). … ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business.
AltaGas Canada Inc., a natural gas distribution utility company, provides rate-regulated utility services in northern British Columbia. The company also holds interest in the Bear Mountain Wind Park, a 102 MW generating wind facility consisting of 34 turbines, a substation, and transmission and collector lines. As of June 30, 2018, it served approximately 130,000 residential, rural, commercial, and industrial customers. The company was formerly known as AltaGas Utility Holdings (Pacific) Inc. and changed its name to AltaGas Canada Inc. in September 2018. The company was incorporated in 2011 and is headquartered in Calgary, Canada. AltaGas Canada Inc. is a subsidiary of AltaGas Ltd.
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