Centrica Share Discussion Threads

[maywillow] 13/10/2019 14:06

Columbus Day is a U.S. holiday that commemorates the landing of Christopher Columbus in the Americas in 1492, and Columbus Day 2019 is on Monday, October 14, 2019. It was unofficially celebrated in a number of cities and states as early as the 18th century, but did not become a federal holiday until 1937. For many, the holiday is a way of both honoring Columbus’ achievements and celebrating Italian-American heritage. But throughout its history, Columbus Day and the man who inspired it have generated controversy, and many alternatives to the holiday have proposed since the 1970s including Indigenous Peoples' Day.

[discodave4] 13/10/2019 13:46

Good work sicko stalker Nodik

[nortic 007] 13/10/2019 13:05

Another one of your pathetic efforts Dave.Meant to say, stalker will thumbs down you for talking to me, you are best to filter me or just ignore.This board and premium down tickers are sad losers who prefer only ramping posts and false info.Grow up please Dave

[nortic 007] 13/10/2019 12:57

I'll await

[nortic 007] 13/10/2019 12:56

My apologies for Dave but he just can't help himself. He tried the same stunt the other day with a poster but eventually fell out with them as well !!!I'll swing your apology Dave .)

[nortic 007] 13/10/2019 12:52

David stop playing silly little games you child. You'll notice my upticks now start behaving!!!

[discodave4] 13/10/2019 12:35

Ps thanks and all the best.

[maywillow] 13/10/2019 12:16

Piched from the other thread






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LSE:CNA

An Intrinsic Calculation For Centrica plc (LON:CNA) Suggests It’s 50% Undervalued
Simply Wall St June 28, 2019

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Today we’ll do a simple run through of a valuation method used to estimate the attractiveness of Centrica plc (LON:CNA) as an investment opportunity by taking the foreast future cash flows of the company and discounting them back to today’s value. I will use the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple!

Remember though, that there are many ways to estimate a company’s value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.

View our latest analysis for Centrica
Is Centrica fairly valued?

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. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. 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. 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. We do this to reflect that growth tends to slow more in the early years than it does in later years.

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) estimate
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Levered FCF (£, Millions) £650.82 £739.78 £912.81 £1.06k £812.00 £663.23 £580.62 £532.13 £502.98 £485.54
Growth Rate Estimate Source Analyst x6 Analyst x9 Analyst x8 Analyst x2 Analyst x1 Est @ -18.32% Est @ -12.46% Est @ -8.35% Est @ -5.48% Est @ -3.47%
Present Value (£, Millions) Discounted @ 6.55% £610.82 £651.66 £754.67 £824.06 £591.36 £453.34 £372.48 £320.40 £284.24 £257.52

Present Value of 10-year Cash Flow (PVCF)= £5.12b

“Est” = FCF growth rate estimated by Simply Wall St

After calculating the present value of future cash flows in the intial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 10-year government bond rate of 1.2%. We discount the terminal cash flows to today’s value at a cost of equity of 6.5%.

Terminal Value (TV) = FCF2029 × (1 + g) ÷ (r – g) = UK£486m × (1 + 1.2%) ÷ (6.5% – 1.2%) = UK£9.2b

Present Value of Terminal Value (PVTV) = TV / (1 + r)10 = £UK£9.2b ÷ ( 1 + 6.5%)10 = £4.90b

The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is £10.02b. In the final step we divide the equity value by the number of shares outstanding. This results in an intrinsic value estimate of £1.72. Relative to the current share price of £0.86, the company appears quite undervalued at a 50% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula – garbage in, garbage out.
LSE:CNA Intrinsic value, June 28th 2019
LSE:CNA Intrinsic value, June 28th 2019
The assumptions

The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. If you don’t agree with these result, have a go at the calculation yourself and play with the assumptions. 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. Given that we are looking at Centrica 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. In this calculation we’ve used 6.5%, which is based on a levered beta of 0.800. Beta is a measure of a stock’s volatility, compared to the market as a whole. 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.
Next Steps:

Although the valuation of a company is important, it shouldn’t be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to “what assumptions need to be true for this stock to be under/overvalued?” If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price to differ from the intrinsic value? For Centrica, I’ve compiled three relevant aspects you should further examine:

Financial Health: Does CNA have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Future Earnings: How does CNA’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.
Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of CNA? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the LON every day. If you want to find the calculation for other stocks just search here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at [e-mail]. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

[hifc231] 13/10/2019 12:13

G'day Dave, i make my own mind up about people, never follow a crowd. Ive never had anything offensive from you. All i see is you posting information about centrica (positive and negative) as i try and do. Centrica had an intrinic value of £1.71 back in June so would have thought if anyone was brave enough to take this on would have to offer around that figure>...........Source:

[discodave4] 13/10/2019 11:45

Forgot to say, Ofgem and CMA would not authorise any such acquisition by Shell for obvious reasons IMO.

[discodave4] 13/10/2019 11:40

Apologies, thought you meant per share.Shell have a green agenda, PR and political box ticking plus good business obviously, they want small 100% renewable energy suppliers.Look at those they have bought (First Utility 825k customers and Green Star 200k customers), peanuts not £billions and 100% renewable energy suppliers (they also were the wholesale elec/gas suppliers for First Utility so a natural fit).To put into context, Ovo buying retail from SSE cost £500m for 3.5 million customers, so that makes CNA home energy (H1 11.9 million customers) worth about £1.7 billion........no chance IMO.

[hifc231] 13/10/2019 02:17

G'day Dave, you miss read my comment. It was £10 quid total for the company, NOT per share, i was taking the Micky aka sarcasm......lol also agreed, i think Centrica is to big for Shells tastes looks like they are targeting smaller prey.

[discodave4] 12/10/2019 22:47

Can you expand on that please......where was it mentioned?.

[diku] 12/10/2019 19:30

Hello full time day/night ticker stalker...don't forget to pay your sub money to ADVFN...they will give you a medal soon...

[bisiboy] 12/10/2019 19:17

it was mentioned that the market underestimates the value of the servicing business
which is bigger than homeserve on its own.

[discodave4] 12/10/2019 19:12

Good work saddo stalker

[diku] 12/10/2019 19:06

Some of us have already suggested and know it..so not a new point there...when is your next juicy divi?...

[nortic 007] 12/10/2019 17:45

I make a valid point though Dave ?

[discodave4] 12/10/2019 17:14

Good work psycho stalker

[nortic 007] 12/10/2019 17:07

All be it unlikely at the moment but it could have some legs in the future.

[nortic 007] 12/10/2019 17:05

No offence like .)

[nortic 007] 12/10/2019 17:05

Plus Shell have already dipped their toes in with a smaller acquisition.

[nortic 007] 12/10/2019 17:03

The debt wouldn't be an issue....