We average our valuation methodologies to derive a $163 target price. (1) Our NAV value is a multiple of 1.85x of rate base for utilities. These values are partially offset by the company's net debt. (2) Our DDM values the company’s forecasted cash flows discounted by a WACC/CAPM based discount rate. We calculate a hypothetical dividend, based on regulated capital growth, authorized returns and cost of equity to arrive at our DDM valuation. (3) Our P/E analysis indicates multiples of 18.5x and 18.5x for the company's distribution and transmission businesses. For our EV/EBITDA analysis, we use multiples of 12.5x for the company's distribution and transmission businesses.

The key risks to our investment thesis on ATO are (1) Capital Investment Recovery – ATO, relying on future rates, spends capital to maintain and expand pipeline and utility systems. A politicized commission could delay or put at risk this recovery; (2) Customer Growth – An unexpected increase or decrease in population could affect earnings substantially, either favorably or unfavorably; (3) Capital Markets – ATO is a relatively small utility in terms of market cap and trading volumes, impacting ATO's ability to access capital markets while this type of liquidity may make it difficult for institutional investors to trade in and out of the stock; (4) Derivatives Markets – Volatile markets and dislocated hedges might cause losses on earnings or make ATO occur liability. If the impact on the company from any of the following factors proves to be greater or less than we anticipate, the company could fail to achieve or exceed our target price.