Intrinsic value of Enbridge Inc. - ENB

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$52.48

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$52.48

 
Intrinsic value

$208.56

 
Up/down potential

+297%

 
Rating

str. buy

 
Value-price divergence* premium content

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*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 85.2

 

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
  26.70
  24.53
  22.58
  20.82
  19.24
  17.81
  16.53
  15.38
  14.34
  13.41
  12.57
  11.81
  11.13
  10.52
  9.96
  9.47
  9.02
  8.62
  8.26
  7.93
  7.64
  7.37
  7.14
  6.92
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
Revenue, $m
  34,560
  43,788
  54,529
  66,840
  80,755
  96,290
  113,443
  132,198
  152,528
  174,403
  197,785
  222,639
  248,932
  276,635
  305,726
  336,189
  368,019
  401,218
  435,799
  471,783
  509,202
  548,096
  588,514
  630,516
  674,169
  719,546
  766,733
  815,820
  866,905
  920,096
  975,505
Variable operating expenses, $m
 
  8,274
  10,301
  12,625
  15,252
  18,185
  21,423
  24,963
  28,801
  32,931
  37,345
  42,029
  46,992
  52,222
  57,713
  63,464
  69,473
  75,740
  82,268
  89,061
  96,124
  103,466
  111,096
  119,025
  127,266
  135,832
  144,740
  154,006
  163,649
  173,690
  184,150
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
  35,114
  37,812
  40,823
  44,155
  47,811
  51,790
  56,089
  60,705
  65,632
  70,864
  76,386
  82,208
  88,318
  94,712
  101,388
  108,345
  115,584
  123,108
  130,922
  139,031
  147,446
  156,175
  165,231
  174,627
  184,378
  194,499
  205,009
  215,927
  227,275
  239,075
Operating income, $m
  2,581
  8,674
  16,717
  26,016
  36,599
  48,479
  61,653
  76,109
  91,823
  108,771
  126,921
  146,254
  166,724
  188,317
  211,014
  234,802
  259,675
  285,635
  312,692
  340,862
  370,170
  400,649
  432,339
  465,285
  499,541
  535,169
  572,234
  610,811
  650,978
  692,820
  736,430
EBITDA, $m
  4,821
  11,519
  20,258
  30,355
  41,840
  54,727
  69,012
  84,683
  101,715
  120,080
  139,746
  160,681
  182,855
  206,243
  230,825
  256,587
  283,522
  311,634
  340,931
  371,433
  403,167
  436,166
  470,474
  506,142
  543,228
  581,796
  621,919
  663,676
  707,153
  752,442
  799,642
Interest expense (income), $m
  1,820
  1,696
  2,413
  3,246
  4,201
  5,280
  6,485
  7,816
  9,270
  10,847
  12,544
  14,358
  16,286
  18,325
  20,474
  22,730
  25,093
  27,562
  30,137
  32,820
  35,611
  38,513
  41,530
  44,665
  47,923
  51,309
  54,829
  58,489
  62,297
  66,259
  70,385
Earnings before tax, $m
  2,451
  6,978
  14,304
  22,770
  32,399
  43,199
  55,168
  68,293
  82,553
  97,923
  114,377
  131,896
  150,439
  169,992
  190,540
  212,071
  234,581
  258,073
  282,554
  308,042
  334,560
  362,136
  390,808
  420,619
  451,618
  483,860
  517,405
  552,322
  588,681
  626,561
  666,045
Tax expense, $m
  142
  1,884
  3,862
  6,148
  8,748
  11,664
  14,895
  18,439
  22,289
  26,439
  30,882
  35,612
  40,618
  45,898
  51,446
  57,259
  63,337
  69,680
  76,290
  83,171
  90,331
  97,777
  105,518
  113,567
  121,937
  130,642
  139,699
  149,127
  158,944
  169,171
  179,832
Net income, $m
  2,069
  5,094
  10,442
  16,622
  23,651
  31,535
  40,273
  49,854
  60,264
  71,484
  83,495
  96,284
  109,820
  124,094
  139,094
  154,812
  171,244
  188,393
  206,265
  224,871
  244,228
  264,359
  285,290
  307,052
  329,681
  353,218
  377,706
  403,195
  429,737
  457,389
  486,213

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
  106,023
  132,031
  161,839
  195,533
  233,148
  274,680
  320,091
  369,318
  422,283
  478,898
  539,078
  602,741
  669,819
  740,256
  814,017
  891,087
  971,472
  1,055,203
  1,142,332
  1,232,934
  1,327,108
  1,424,974
  1,526,674
  1,632,370
  1,742,243
  1,856,497
  1,975,351
  2,099,044
  2,227,834
  2,361,997
Adjusted assets (=assets-cash), $m
  83,715
  106,023
  132,031
  161,839
  195,533
  233,148
  274,680
  320,091
  369,318
  422,283
  478,898
  539,078
  602,741
  669,819
  740,256
  814,017
  891,087
  971,472
  1,055,203
  1,142,332
  1,232,934
  1,327,108
  1,424,974
  1,526,674
  1,632,370
  1,742,243
  1,856,497
  1,975,351
  2,099,044
  2,227,834
  2,361,997
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
  42,561
  53,002
  64,968
  78,494
  93,594
  110,267
  128,496
  148,258
  169,519
  192,247
  216,405
  241,962
  268,889
  297,165
  326,776
  357,714
  389,984
  423,596
  458,573
  494,944
  532,749
  572,036
  612,862
  655,292
  699,399
  745,265
  792,977
  842,632
  894,333
  948,191
Working capital, $m
  -4,556
  -2,014
  -2,508
  -3,075
  -3,715
  -4,429
  -5,218
  -6,081
  -7,016
  -8,023
  -9,098
  -10,241
  -11,451
  -12,725
  -14,063
  -15,465
  -16,929
  -18,456
  -20,047
  -21,702
  -23,423
  -25,212
  -27,072
  -29,004
  -31,012
  -33,099
  -35,270
  -37,528
  -39,878
  -42,324
  -44,873
Total debt, $m
  41,568
  56,109
  75,485
  97,692
  122,794
  150,817
  181,759
  215,590
  252,264
  291,723
  333,901
  378,735
  426,164
  476,137
  528,613
  583,565
  640,982
  700,869
  763,248
  828,159
  895,658
  965,818
  1,038,728
  1,114,494
  1,193,237
  1,275,093
  1,360,212
  1,448,758
  1,540,910
  1,636,859
  1,736,810
Total liabilities, $m
  64,446
  78,987
  98,363
  120,570
  145,672
  173,695
  204,637
  238,468
  275,142
  314,601
  356,779
  401,613
  449,042
  499,015
  551,491
  606,443
  663,860
  723,747
  786,126
  851,037
  918,536
  988,696
  1,061,606
  1,137,372
  1,216,115
  1,297,971
  1,383,090
  1,471,636
  1,563,788
  1,659,737
  1,759,688
Total equity, $m
  21,386
  27,036
  33,668
  41,269
  49,861
  59,453
  70,043
  81,623
  94,176
  107,682
  122,119
  137,465
  153,699
  170,804
  188,765
  207,574
  227,227
  247,725
  269,077
  291,295
  314,398
  338,413
  363,368
  389,302
  416,254
  444,272
  473,407
  503,714
  535,256
  568,098
  602,309
Total liabilities and equity, $m
  85,832
  106,023
  132,031
  161,839
  195,533
  233,148
  274,680
  320,091
  369,318
  422,283
  478,898
  539,078
  602,741
  669,819
  740,256
  814,017
  891,087
  971,472
  1,055,203
  1,142,332
  1,232,934
  1,327,109
  1,424,974
  1,526,674
  1,632,369
  1,742,243
  1,856,497
  1,975,350
  2,099,044
  2,227,835
  2,361,997
Debt-to-equity ratio
  1.944
  2.080
  2.240
  2.370
  2.460
  2.540
  2.590
  2.640
  2.680
  2.710
  2.730
  2.760
  2.770
  2.790
  2.800
  2.810
  2.820
  2.830
  2.840
  2.840
  2.850
  2.850
  2.860
  2.860
  2.870
  2.870
  2.870
  2.880
  2.880
  2.880
  2.880
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
  5,094
  10,442
  16,622
  23,651
  31,535
  40,273
  49,854
  60,264
  71,484
  83,495
  96,284
  109,820
  124,094
  139,094
  154,812
  171,244
  188,393
  206,265
  224,871
  244,228
  264,359
  285,290
  307,052
  329,681
  353,218
  377,706
  403,195
  429,737
  457,389
  486,213
Depreciation, amort., depletion, $m
  2,240
  2,845
  3,541
  4,339
  5,241
  6,247
  7,359
  8,574
  9,892
  11,309
  12,824
  14,427
  16,131
  17,926
  19,811
  21,785
  23,848
  25,999
  28,240
  30,572
  32,996
  35,517
  38,136
  40,857
  43,686
  46,627
  49,684
  52,865
  56,175
  59,622
  63,213
Funds from operations, $m
  4,849
  7,939
  13,983
  20,961
  28,892
  37,783
  47,632
  58,428
  70,155
  82,793
  96,320
  110,711
  125,951
  142,020
  158,905
  176,597
  195,092
  214,392
  234,504
  255,442
  277,225
  299,876
  323,426
  347,910
  373,367
  399,844
  427,390
  456,060
  485,913
  517,012
  549,425
Change in working capital, $m
  -362
  -424
  -494
  -566
  -640
  -715
  -789
  -863
  -935
  -1,006
  -1,076
  -1,143
  -1,209
  -1,274
  -1,338
  -1,401
  -1,464
  -1,527
  -1,591
  -1,655
  -1,721
  -1,789
  -1,859
  -1,932
  -2,008
  -2,087
  -2,171
  -2,258
  -2,350
  -2,447
  -2,549
Cash from operations, $m
  5,211
  40,618
  14,477
  21,527
  29,532
  38,497
  48,421
  59,291
  71,090
  83,799
  97,395
  111,854
  127,161
  143,295
  160,243
  177,998
  196,556
  215,919
  236,095
  257,098
  278,946
  301,665
  325,285
  349,842
  375,375
  401,932
  429,561
  458,318
  488,262
  519,458
  551,974
Maintenance CAPEX, $m
  0
  -2,240
  -2,837
  -3,533
  -4,331
  -5,233
  -6,240
  -7,351
  -8,566
  -9,884
  -11,301
  -12,816
  -14,427
  -16,131
  -17,926
  -19,811
  -21,785
  -23,848
  -25,999
  -28,240
  -30,572
  -32,996
  -35,517
  -38,136
  -40,857
  -43,686
  -46,627
  -49,684
  -52,865
  -56,175
  -59,622
New CAPEX, $m
  -5,255
  -8,959
  -10,440
  -11,966
  -13,526
  -15,100
  -16,673
  -18,230
  -19,761
  -21,262
  -22,728
  -24,158
  -25,557
  -26,927
  -28,276
  -29,610
  -30,939
  -32,270
  -33,613
  -34,977
  -36,371
  -37,805
  -39,287
  -40,826
  -42,430
  -44,107
  -45,865
  -47,712
  -49,655
  -51,701
  -53,858
Cash from investing activities, $m
  -5,192
  -11,199
  -13,277
  -15,499
  -17,857
  -20,333
  -22,913
  -25,581
  -28,327
  -31,146
  -34,029
  -36,974
  -39,984
  -43,058
  -46,202
  -49,421
  -52,724
  -56,118
  -59,612
  -63,217
  -66,943
  -70,801
  -74,804
  -78,962
  -83,287
  -87,793
  -92,492
  -97,396
  -102,520
  -107,876
  -113,480
Free cash flow, $m
  19
  29,419
  1,199
  6,028
  11,675
  18,164
  25,509
  33,710
  42,763
  52,654
  63,366
  74,880
  87,177
  100,237
  114,041
  128,577
  143,833
  159,802
  176,484
  193,881
  212,003
  230,864
  250,482
  270,880
  292,088
  314,138
  337,069
  360,921
  385,742
  411,582
  438,494
Issuance/(repayment) of debt, $m
  -149
  16,658
  19,376
  22,207
  25,102
  28,023
  30,941
  33,831
  36,674
  39,458
  42,179
  44,834
  47,429
  49,973
  52,476
  54,952
  57,417
  59,887
  62,379
  64,911
  67,499
  70,160
  72,910
  75,766
  78,743
  81,856
  85,119
  88,546
  92,152
  95,949
  99,951
Issuance/(repurchase) of shares, $m
  2,997
  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 from financing (excl. dividends), $m  
  2,545
  16,658
  19,376
  22,207
  25,102
  28,023
  30,941
  33,831
  36,674
  39,458
  42,179
  44,834
  47,429
  49,973
  52,476
  54,952
  57,417
  59,887
  62,379
  64,911
  67,499
  70,160
  72,910
  75,766
  78,743
  81,856
  85,119
  88,546
  92,152
  95,949
  99,951
Total cash flow (excl. dividends), $m
  2,545
  46,077
  20,575
  28,235
  36,777
  46,188
  56,450
  67,541
  79,437
  92,112
  105,545
  119,714
  134,606
  150,209
  166,517
  183,529
  201,250
  219,689
  238,863
  258,792
  279,502
  301,024
  323,392
  346,646
  370,831
  395,994
  422,188
  449,468
  477,894
  507,531
  538,445
Retained Cash Flow (-), $m
  -2,488
  -5,650
  -6,632
  -7,601
  -8,592
  -9,592
  -10,591
  -11,580
  -12,553
  -13,506
  -14,437
  -15,346
  -16,234
  -17,105
  -17,961
  -18,809
  -19,653
  -20,498
  -21,351
  -22,218
  -23,104
  -24,014
  -24,956
  -25,933
  -26,952
  -28,018
  -29,135
  -30,308
  -31,542
  -32,842
  -34,211
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
 
  40,427
  13,943
  20,634
  28,185
  36,596
  45,859
  55,961
  66,884
  78,606
  91,108
  104,368
  118,372
  133,104
  148,556
  164,720
  181,597
  199,191
  217,512
  236,574
  256,399
  277,009
  298,436
  320,713
  343,879
  367,976
  393,053
  419,160
  446,352
  474,689
  504,234
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
 
  36,852
  11,485
  15,213
  18,414
  20,961
  22,767
  23,789
  24,033
  23,549
  22,427
  20,785
  18,763
  16,503
  14,144
  11,812
  9,608
  7,609
  5,863
  4,392
  3,197
  2,258
  1,547
  1,026
  658
  408
  244
  141
  78
  41
  21
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Enbridge Inc. operates as an energy transportation and distribution company in the United States and Canada. Its Liquids Pipelines segment operates common carrier and contract crude oil, natural gas liquids (NGL), and refined products pipelines and terminals. The company’s Gas Distribution segment operates as a natural gas utility that serves residential, commercial, and industrial customers in Central and Eastern Ontario, and Northern New York State, as well as in Quebec and New Brunswick. Its Gas Pipelines, Processing and Energy Services segment has interests in natural gas pipelines, including the Vector Pipeline and transmission and gathering pipelines in the Gulf of Mexico, as well as holds an interest in Aux Sable, a natural gas fractionation and extraction facility. This segment is also involved in the renewable energy projects, such as wind, solar, and geothermal projects with a generating capacity of approximately 2,800 MW. The company’s Sponsored Investments segment is involved in renewable and alternative power generation; crude oil and liquid petroleum transportation and storage; and natural gas and NGL gathering, treating, processing, and transportation. Enbridge Inc. has a strategic partnership with EDF Group for the development, construction, and operation of three French offshore wind farms. The company was formerly known as IPL Energy Inc. and changed its name to Enbridge Inc. in October 1998. Enbridge Inc. was founded in 1949 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Enbridge Inc. (ENB)

Valuation Ratios
P/E Ratio 23.9
Price to Sales 1.4
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow -1124.7
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 26.7% 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 1623.56 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 $85.2 billion.


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Stock chart of ENB Financial statements of ENB
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