Intrinsic value of Enbridge Inc. - ENB

Previous Close

$49.62

  Intrinsic Value

$418.81

stock screener

  Rating & Target

str. buy

+744%

Previous close

$49.62

 
Intrinsic value

$418.81

 
Up/down potential

+744%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ENB stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 81.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.27
  40.00
  36.50
  33.35
  30.52
  27.96
  25.67
  23.60
  21.74
  20.07
  18.56
  17.20
  15.98
  14.89
  13.90
  13.01
  12.21
  11.49
  10.84
  10.25
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
Revenue, $m
  34,560
  48,384
  66,044
  88,070
  114,944
  147,087
  184,840
  228,463
  278,132
  333,943
  395,921
  464,035
  538,203
  618,315
  704,239
  795,839
  892,980
  995,544
  1,103,431
  1,216,569
  1,334,917
  1,458,466
  1,587,244
  1,721,313
  1,860,775
  2,005,763
  2,156,449
  2,313,037
  2,475,764
  2,644,902
  2,820,749
Variable operating expenses, $m
 
  9,141
  12,475
  16,633
  21,706
  27,774
  34,901
  43,136
  52,512
  63,048
  74,748
  87,598
  101,599
  116,722
  132,942
  150,234
  168,572
  187,933
  208,299
  229,657
  251,998
  275,321
  299,631
  324,940
  351,266
  378,637
  407,082
  436,642
  467,361
  499,289
  532,485
Fixed operating expenses, $m
 
  26,840
  27,511
  28,198
  28,903
  29,626
  30,367
  31,126
  31,904
  32,701
  33,519
  34,357
  35,216
  36,096
  36,999
  37,924
  38,872
  39,844
  40,840
  41,861
  42,907
  43,980
  45,079
  46,206
  47,361
  48,546
  49,759
  51,003
  52,278
  53,585
  54,925
Total operating expenses, $m
  31,979
  35,981
  39,986
  44,831
  50,609
  57,400
  65,268
  74,262
  84,416
  95,749
  108,267
  121,955
  136,815
  152,818
  169,941
  188,158
  207,444
  227,777
  249,139
  271,518
  294,905
  319,301
  344,710
  371,146
  398,627
  427,183
  456,841
  487,645
  519,639
  552,874
  587,410
Operating income, $m
  2,581
  12,403
  26,058
  43,238
  64,335
  89,687
  119,573
  154,201
  193,716
  238,193
  287,655
  342,080
  401,388
  465,496
  534,298
  607,681
  685,537
  767,767
  854,292
  945,052
  1,040,012
  1,139,165
  1,242,534
  1,350,167
  1,462,147
  1,578,581
  1,699,608
  1,825,392
  1,956,126
  2,092,027
  2,233,339
EBITDA, $m
  4,821
  15,546
  30,346
  48,953
  71,791
  99,226
  131,558
  169,014
  211,747
  259,841
  313,318
  372,149
  436,264
  505,563
  579,933
  659,251
  743,402
  832,278
  925,794
  1,023,885
  1,126,514
  1,233,674
  1,345,387
  1,461,708
  1,582,725
  1,708,554
  1,839,345
  1,975,276
  2,116,555
  2,263,417
  2,416,124
Interest expense (income), $m
  1,820
  1,696
  2,769
  4,139
  5,848
  7,932
  10,425
  13,354
  16,737
  20,590
  24,919
  29,727
  35,010
  40,763
  46,977
  53,642
  60,747
  68,282
  76,237
  84,606
  93,381
  102,561
  112,144
  122,133
  132,533
  143,350
  154,596
  166,285
  178,431
  191,053
  204,172
Earnings before tax, $m
  2,451
  10,707
  23,289
  39,099
  58,487
  81,755
  109,147
  140,848
  176,979
  217,604
  262,736
  312,353
  366,378
  424,734
  487,321
  554,039
  624,790
  699,486
  778,055
  860,446
  946,630
  1,036,604
  1,130,389
  1,228,034
  1,329,614
  1,435,231
  1,545,011
  1,659,107
  1,777,695
  1,900,974
  2,029,167
Tax expense, $m
  142
  2,891
  6,288
  10,557
  15,792
  22,074
  29,470
  38,029
  47,784
  58,753
  70,939
  84,335
  98,922
  114,678
  131,577
  149,591
  168,693
  188,861
  210,075
  232,320
  255,590
  279,883
  305,205
  331,569
  358,996
  387,512
  417,153
  447,959
  479,978
  513,263
  547,875
Net income, $m
  2,069
  7,816
  17,001
  28,542
  42,696
  59,681
  79,677
  102,819
  129,194
  158,851
  191,797
  228,018
  267,456
  310,056
  355,745
  404,449
  456,097
  510,624
  567,980
  628,126
  691,040
  756,721
  825,184
  896,465
  970,618
  1,047,718
  1,127,858
  1,211,148
  1,297,717
  1,387,711
  1,481,292

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,117
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  85,832
  117,153
  159,913
  213,244
  278,316
  356,143
  447,554
  553,179
  673,442
  808,578
  958,647
  1,123,571
  1,303,155
  1,497,130
  1,705,179
  1,926,970
  2,162,179
  2,410,518
  2,671,746
  2,945,689
  3,232,245
  3,531,395
  3,843,205
  4,167,829
  4,505,508
  4,856,569
  5,221,426
  5,600,573
  5,994,587
  6,404,120
  6,829,901
Adjusted assets (=assets-cash), $m
  83,715
  117,153
  159,913
  213,244
  278,316
  356,143
  447,554
  553,179
  673,442
  808,578
  958,647
  1,123,571
  1,303,155
  1,497,130
  1,705,179
  1,926,970
  2,162,179
  2,410,518
  2,671,746
  2,945,689
  3,232,245
  3,531,395
  3,843,205
  4,167,829
  4,505,508
  4,856,569
  5,221,426
  5,600,573
  5,994,587
  6,404,120
  6,829,901
Revenue / Adjusted assets
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
Average production assets, $m
  33,603
  47,029
  64,195
  85,604
  111,726
  142,968
  179,664
  222,066
  270,344
  324,592
  384,836
  451,042
  523,133
  601,002
  684,520
  773,555
  867,977
  967,669
  1,072,535
  1,182,505
  1,297,539
  1,417,629
  1,542,801
  1,673,117
  1,808,673
  1,949,602
  2,096,068
  2,248,272
  2,406,443
  2,570,844
  2,741,768
Working capital, $m
  -4,556
  -2,226
  -3,038
  -4,051
  -5,287
  -6,766
  -8,503
  -10,509
  -12,794
  -15,361
  -18,212
  -21,346
  -24,757
  -28,442
  -32,395
  -36,609
  -41,077
  -45,795
  -50,758
  -55,962
  -61,406
  -67,089
  -73,013
  -79,180
  -85,596
  -92,265
  -99,197
  -106,400
  -113,885
  -121,665
  -129,754
Total debt, $m
  41,568
  64,401
  96,257
  135,989
  184,467
  242,448
  310,550
  389,240
  478,837
  579,512
  691,314
  814,182
  947,972
  1,092,484
  1,247,481
  1,412,714
  1,587,946
  1,772,958
  1,967,573
  2,171,660
  2,385,144
  2,608,011
  2,840,310
  3,082,155
  3,333,725
  3,595,266
  3,867,084
  4,149,549
  4,443,089
  4,748,192
  5,065,398
Total liabilities, $m
  64,446
  87,279
  119,135
  158,867
  207,345
  265,326
  333,428
  412,118
  501,715
  602,390
  714,192
  837,060
  970,850
  1,115,362
  1,270,359
  1,435,592
  1,610,824
  1,795,836
  1,990,451
  2,194,538
  2,408,022
  2,630,889
  2,863,188
  3,105,033
  3,356,603
  3,618,144
  3,889,962
  4,172,427
  4,465,967
  4,771,070
  5,088,276
Total equity, $m
  21,386
  29,874
  40,778
  54,377
  70,971
  90,816
  114,126
  141,061
  171,728
  206,187
  244,455
  286,510
  332,305
  381,768
  434,821
  491,377
  551,356
  614,682
  681,295
  751,151
  824,222
  900,506
  980,017
  1,062,796
  1,148,904
  1,238,425
  1,331,464
  1,428,146
  1,528,620
  1,633,051
  1,741,625
Total liabilities and equity, $m
  85,832
  117,153
  159,913
  213,244
  278,316
  356,142
  447,554
  553,179
  673,443
  808,577
  958,647
  1,123,570
  1,303,155
  1,497,130
  1,705,180
  1,926,969
  2,162,180
  2,410,518
  2,671,746
  2,945,689
  3,232,244
  3,531,395
  3,843,205
  4,167,829
  4,505,507
  4,856,569
  5,221,426
  5,600,573
  5,994,587
  6,404,121
  6,829,901
Debt-to-equity ratio
  1.944
  2.160
  2.360
  2.500
  2.600
  2.670
  2.720
  2.760
  2.790
  2.810
  2.830
  2.840
  2.850
  2.860
  2.870
  2.880
  2.880
  2.880
  2.890
  2.890
  2.890
  2.900
  2.900
  2.900
  2.900
  2.900
  2.900
  2.910
  2.910
  2.910
  2.910
Adjusted equity ratio
  0.242
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,069
  7,816
  17,001
  28,542
  42,696
  59,681
  79,677
  102,819
  129,194
  158,851
  191,797
  228,018
  267,456
  310,056
  355,745
  404,449
  456,097
  510,624
  567,980
  628,126
  691,040
  756,721
  825,184
  896,465
  970,618
  1,047,718
  1,127,858
  1,211,148
  1,297,717
  1,387,711
  1,481,292
Depreciation, amort., depletion, $m
  2,240
  3,143
  4,287
  5,715
  7,456
  9,539
  11,985
  14,812
  18,031
  21,647
  25,664
  30,069
  34,876
  40,067
  45,635
  51,570
  57,865
  64,511
  71,502
  78,834
  86,503
  94,509
  102,853
  111,541
  120,578
  129,973
  139,738
  149,885
  160,430
  171,390
  182,785
Funds from operations, $m
  4,849
  10,959
  21,288
  34,257
  50,152
  69,220
  91,663
  117,631
  147,225
  180,498
  217,461
  258,087
  302,332
  350,122
  401,379
  456,019
  513,962
  575,136
  639,482
  706,959
  777,543
  851,230
  928,037
  1,008,006
  1,091,196
  1,177,692
  1,267,596
  1,361,033
  1,458,147
  1,559,101
  1,664,077
Change in working capital, $m
  -362
  -636
  -812
  -1,013
  -1,236
  -1,479
  -1,737
  -2,007
  -2,285
  -2,567
  -2,851
  -3,133
  -3,412
  -3,685
  -3,953
  -4,214
  -4,469
  -4,718
  -4,963
  -5,204
  -5,444
  -5,683
  -5,924
  -6,167
  -6,415
  -6,669
  -6,932
  -7,203
  -7,485
  -7,780
  -8,089
Cash from operations, $m
  5,211
  11,595
  22,101
  35,270
  51,388
  70,699
  93,400
  119,638
  149,510
  183,065
  220,312
  261,221
  305,744
  353,808
  405,332
  460,233
  518,430
  579,854
  644,445
  712,164
  782,987
  856,913
  933,961
  1,014,173
  1,097,612
  1,184,361
  1,274,528
  1,368,236
  1,465,632
  1,566,881
  1,672,166
Maintenance CAPEX, $m
  0
  -2,240
  -3,135
  -4,280
  -5,707
  -7,448
  -9,531
  -11,978
  -14,804
  -18,023
  -21,639
  -25,656
  -30,069
  -34,876
  -40,067
  -45,635
  -51,570
  -57,865
  -64,511
  -71,502
  -78,834
  -86,503
  -94,509
  -102,853
  -111,541
  -120,578
  -129,973
  -139,738
  -149,885
  -160,430
  -171,390
New CAPEX, $m
  -5,255
  -13,427
  -17,166
  -21,409
  -26,122
  -31,242
  -36,696
  -42,402
  -48,278
  -54,248
  -60,243
  -66,206
  -72,092
  -77,869
  -83,518
  -89,035
  -94,422
  -99,692
  -104,866
  -109,970
  -115,034
  -120,090
  -125,172
  -130,316
  -135,556
  -140,929
  -146,467
  -152,203
  -158,171
  -164,401
  -170,924
Cash from investing activities, $m
  -5,192
  -15,667
  -20,301
  -25,689
  -31,829
  -38,690
  -46,227
  -54,380
  -63,082
  -72,271
  -81,882
  -91,862
  -102,161
  -112,745
  -123,585
  -134,670
  -145,992
  -157,557
  -169,377
  -181,472
  -193,868
  -206,593
  -219,681
  -233,169
  -247,097
  -261,507
  -276,440
  -291,941
  -308,056
  -324,831
  -342,314
Free cash flow, $m
  19
  -4,072
  1,800
  9,582
  19,559
  32,008
  47,172
  65,259
  86,427
  110,794
  138,429
  169,359
  203,582
  241,063
  281,747
  325,563
  372,438
  422,296
  475,068
  530,691
  589,119
  650,321
  714,281
  781,004
  850,514
  922,855
  998,087
  1,076,295
  1,157,576
  1,242,050
  1,329,852
Issuance/(repayment) of debt, $m
  -149
  24,950
  31,857
  39,732
  48,478
  57,981
  68,102
  78,690
  89,596
  100,676
  111,802
  122,868
  133,790
  144,511
  154,997
  165,234
  175,231
  185,012
  194,615
  204,087
  213,484
  222,867
  232,299
  241,845
  251,571
  261,541
  271,818
  282,465
  293,540
  305,102
  317,207
Issuance/(repurchase) of shares, $m
  2,997
  672
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2,545
  25,622
  31,857
  39,732
  48,478
  57,981
  68,102
  78,690
  89,596
  100,676
  111,802
  122,868
  133,790
  144,511
  154,997
  165,234
  175,231
  185,012
  194,615
  204,087
  213,484
  222,867
  232,299
  241,845
  251,571
  261,541
  271,818
  282,465
  293,540
  305,102
  317,207
Total cash flow (excl. dividends), $m
  2,545
  21,550
  33,657
  49,313
  68,037
  89,989
  115,274
  143,949
  176,024
  211,470
  250,231
  292,227
  337,373
  385,575
  436,743
  490,797
  547,669
  607,309
  669,683
  734,778
  802,603
  873,187
  946,579
  1,022,849
  1,102,085
  1,184,395
  1,269,906
  1,358,760
  1,451,116
  1,547,152
  1,647,059
Retained Cash Flow (-), $m
  -2,488
  -8,488
  -10,904
  -13,599
  -16,593
  -19,846
  -23,310
  -26,934
  -30,667
  -34,460
  -38,268
  -42,055
  -45,794
  -49,464
  -53,053
  -56,557
  -59,978
  -63,326
  -66,613
  -69,855
  -73,072
  -76,283
  -79,512
  -82,779
  -86,108
  -89,521
  -93,038
  -96,683
  -100,474
  -104,431
  -108,574
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  13,062
  22,753
  35,714
  51,444
  70,143
  91,964
  117,015
  145,356
  177,010
  211,963
  250,171
  291,579
  336,111
  383,691
  434,241
  487,691
  543,982
  603,069
  664,923
  729,532
  796,904
  867,068
  940,070
  1,015,977
  1,094,875
  1,176,867
  1,262,077
  1,350,643
  1,442,721
  1,538,485
Discount rate, %
 
  9.70
  10.19
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.38
  29.79
  31.28
  32.85
  34.49
  36.21
  38.03
  39.93
PV of cash for distribution, $m
 
  11,907
  18,741
  26,331
  33,610
  40,175
  45,655
  49,742
  52,229
  53,029
  52,176
  49,823
  46,218
  41,672
  36,532
  31,138
  25,803
  20,779
  16,256
  12,346
  9,096
  6,497
  4,493
  3,007
  1,944
  1,214
  730
  423
  236
  126
  65
Current shareholders' claim on cash, %
  100
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2

Enbridge Inc. is a Canada-based energy transportation and distribution company. The Company is engaged in delivering energy. It operates through five segments: Liquids Pipelines, Gas Distribution, Gas Pipelines and Processing, Green Power and Transmission, and Energy Services. Liquids Pipelines consists of common carrier and contract crude oil, natural gas liquids (NGL), and refined products pipelines and terminals, including Canadian Mainline, Lakehead Pipeline System, Mid-Continent and Gulf Coast and Regional Oil Sands System. Gas Distribution consists of its natural gas utility operations, the core of which is Enbridge Gas Distribution Inc. Green Power and Transmission consists of its investments in renewable energy assets and transmission facilities. Renewable energy assets consist of wind, solar, geothermal and waste heat recovery facilities in Canada. Energy Services undertake physical commodity marketing activity and logistical services, and oversee refinery supply services.

FINANCIAL RATIOS  of  Enbridge Inc. (ENB)

Valuation Ratios
P/E Ratio 22.6
Price to Sales 1.4
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow -1063.4
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.7%
Cap. Spend. - 3 Yr. Gr. Rate -9.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 170.6%
Total Debt to Equity 194.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. -8.4%
Return On Total Capital 3.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.3%
Return On Equity 10.3%
Return On Equity - 3 Yr. Avg. 7%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 30.5%
Gross Margin - 3 Yr. Avg. 25.8%
EBITDA Margin 18.8%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin 7.5%
Oper. Margin - 3 Yr. Avg. 7.2%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 4.3%
Net Profit Margin 6%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 5.8%
Eff/ Tax Rate - 3 Yr. Avg. 526.5%
Payout Ratio 69.7%

ENB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ENB stock intrinsic value calculation we used $34560 million for the last fiscal year's total revenue generated by Enbridge Inc.. The default revenue input number comes from 2016 income statement of Enbridge Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ENB stock valuation model: a) initial revenue growth rate of 40% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.7%, whose default value for ENB is calculated based on our internal credit rating of Enbridge Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Enbridge Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ENB stock the variable cost ratio is equal to 18.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $26185 million in the base year in the intrinsic value calculation for ENB stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.3% for Enbridge Inc..

Corporate tax rate of 27% is the nominal tax rate for Enbridge Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ENB stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ENB are equal to 97.2%.

Life of production assets of 15 years is the average useful life of capital assets used in Enbridge Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ENB is equal to -4.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $21386 million for Enbridge Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1638.89 million for Enbridge Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Enbridge Inc. at the current share price and the inputted number of shares is $81.3 billion.

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Financial statements of ENB
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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