Calpine Corp. – Value Analysis (NYSE:CPN) : December 27, 2016

Capitalcube gives Calpine Corp. a score of 25.

Our analysis is based on comparing Calpine Corp. with the following peers – Sempra Energy, Ormat Technologies, Inc., CenterPoint Energy, Inc., ALLETE, Inc., SCANA Corporation, Dominion Resources, Inc., Ameren Corporation, CMS Energy Corporation, OGE Energy Corp. and Entergy Corporation (SRE-US, ORA-US, CNP-US, ALE-US, SCG-US, D-US, AEE-US, CMS-US, OGE-US and ETR-US).

Investment Outlook

Calpine Corp. has a fundamental score of 25 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • Calpine Corporation trades at a lower Price/Book multiple (1.28) than its peer median (1.93).
  • The market expects faster earnings growth from CPN-US than from its peers and also a turnaround in its current ROE.
  • CPN-US has relatively low net profit margins while its asset efficiency is relatively high.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • CPN-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • Compared with the peers chosen, CPN-US has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • CPN-US seems too levered to raise additional debt.

Access our research and ratings on Calpine Corp.

Leverage & Liquidity

CPN-US would seem to have a hard time raising additional debt.

  • With debt at a relatively high 80.43% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 41.73%), and relatively tight interest coverage level of 0.62x, CPN-US would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 10 peers for the company have an outstanding debt balance.

CPN-US has maintained its Limited Flexibility profile from the recent year-end.

  • CPN-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 2.30x in 2014.
  • Compared to 2015, interest coverage has remained relatively stable for both the company (0.62x) and the peer median (2.98x).
  • CPN-US‘s debt-EV has declined 3.01 percentage points from last year’s high but remains above its five-year average debt-EV of 68.03.
  • The decrease in its debt-EV to 80.43% from 83.44% (in 2015) was also accompanied by a decrease in its peer median during this period to 41.73% from 42.29%.
  • Relative to peers, debt-EV fell 2.45 percentage points.

Access the detailed analysis for Calpine Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Sempra Energy 38.99 0.43 2.42 14.88
Ormat Technologies, Inc. 25.71 1.53 3.19 25.74
CenterPoint Energy, Inc. 49.24 1.05 1.99 24.78
ALLETE, Inc. 35.27 0.85 3.31 23.08
SCANA Corporation 41.73 0.78 3.25 16.03
Dominion Resources, Inc. 42.21 0.42 2.98 13.66
Ameren Corporation 38.81 0.7 3.64 25.67
CMS Energy Corporation 46.52 1.06 2.98 15.26
OGE Energy Corp. 31.05 0.69 3.11 26.05
Entergy Corporation 54.33 1.18 2.28 21.28
Calpine Corporation 80.43 1.61 0.62 8.88
Peer Median 41.73 0.85 2.98 21.28
Best In Class 25.71 1.61 3.64 26.05

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Company Profile

Calpine Corp. is a power producer company, which develops, constructs, owns and operates a modern and flexible fleet of low-carbon, natural gas-fired and renewable geothermal power plants. The company sells wholesale power, steam, regulatory capacity, renewable energy credits and ancillary services, including utilities, independent electric system operators, industrial and agricultural companies, retail power providers, municipalities, power marketers and others. Its portfolio is primarily comprised of two types of power generation technologies: natural gas-fired combustion turbines, which are primarily efficient combined-cycle plants, and renewable geothermal conventional steam turbines. The company generates power in a reliable and environmentally responsible manner for the customers and communities it serves. It operates through four segments: West (including geothermal), Texas, North (including Canada) and Southeast. Calpine was founded by Peter Cartwright in June 1984 and is headquartered in Houston, TX.


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