![]() ![]() If you want to find the calculation for other stocks just search here. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Risks: For example, we've discovered 3 warning signs for Xcel Energy (1 is potentially serious!) that you should be aware of before investing here.įuture Earnings: How does XEL's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. What is the reason for the share price sitting below the intrinsic value? For Xcel Energy, there are three fundamental factors you should assess: Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. DCF models are not the be-all and end-all of investment valuation. Valuation is only one side of the coin in terms of building your investment thesis, and it ideally won't be the sole piece of analysis you scrutinize for a company. Paying a dividend but company has no free cash flows.Īnnual earnings are forecast to grow slower than the American market. Good value based on P/E ratio and estimated fair value.ĭebt is not well covered by operating cash flow. Interest payments on debt are not well covered.ĭividend is low compared to the top 25% of dividend payers in the Electric Utilities market.Īnnual earnings are forecast to grow for the next 3 years. SWOT Analysis for Xcel EnergyĮarnings growth over the past year exceeded the industry. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Beta is a measure of a stock's volatility, compared to the market as a whole. In this calculation we've used 6.9%, which is based on a levered beta of 0.800. Given that we are looking at Xcel Energy as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 10-year free cash flow (FCF) forecast We do this to reflect that growth tends to slow more in the early years than it does in later years. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. To begin with, we have to get estimates of the next ten years of cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. View our latest analysis for Xcel Energy Is Xcel Energy Fairly Valued? For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. It may sound complicated, but actually it is quite simple!Ĭompanies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. ![]() ( NASDAQ:XEL) by taking the expected future cash flows and discounting them to their present value. ![]() In this article we are going to estimate the intrinsic value of Xcel Energy Inc. Xcel Energy's US$63.55 share price signals that it might be 33% undervaluedĪnalyst price target for XEL is US$72.00 which is 24% below our fair value estimate Xcel Energy's estimated fair value is US$94.50 based on 2 Stage Free Cash Flow to Equity ![]()
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