Intrinsic value of Enbridge Inc. - ENB

Previous Close

$44.01

  Intrinsic Value

$47.00

stock screener

  Rating & Target

hold

+7%

Previous close

$44.01

 
Intrinsic value

$47.00

 
Up/down potential

+7%

 
Rating

hold

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 72.8

 

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
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
Revenue, $m
  34,560
  37,567
  40,696
  43,950
  47,333
  50,849
  54,503
  58,299
  62,246
  66,350
  70,618
  75,060
  79,685
  84,502
  89,522
  94,756
  100,215
  105,913
  111,862
  118,077
  124,571
  131,360
  138,459
  145,887
  153,660
  161,796
  170,316
  179,239
  188,586
  198,381
  208,645
Variable operating expenses, $m
 
  7,099
  7,690
  8,305
  8,943
  9,607
  10,296
  11,013
  11,758
  12,533
  13,339
  14,169
  15,042
  15,952
  16,899
  17,887
  18,918
  19,994
  21,117
  22,290
  23,516
  24,797
  26,138
  27,540
  29,007
  30,543
  32,151
  33,836
  35,600
  37,449
  39,387
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
  33,939
  35,201
  36,503
  37,846
  39,233
  40,663
  42,139
  43,662
  45,234
  46,858
  48,526
  50,258
  52,048
  53,898
  55,811
  57,790
  59,838
  61,957
  64,151
  66,423
  68,777
  71,217
  73,746
  76,368
  79,089
  81,910
  84,839
  87,878
  91,034
  94,312
Operating income, $m
  2,581
  3,628
  5,495
  7,448
  9,487
  11,616
  13,840
  16,160
  18,584
  21,115
  23,761
  26,534
  29,427
  32,454
  35,624
  38,945
  42,425
  46,076
  49,906
  53,926
  58,148
  62,582
  67,242
  72,141
  77,291
  82,708
  88,405
  94,400
  100,708
  107,346
  114,334
EBITDA, $m
  4,821
  3,951
  5,845
  7,825
  9,892
  12,051
  14,305
  16,658
  19,115
  21,681
  24,362
  27,164
  30,096
  33,164
  36,376
  39,740
  43,267
  46,966
  50,846
  54,918
  59,194
  63,686
  68,405
  73,366
  78,582
  84,067
  89,836
  95,905
  102,292
  109,013
  116,086
Interest expense (income), $m
  1,820
  1,736
  1,975
  2,223
  2,482
  2,750
  3,029
  3,319
  3,621
  3,934
  4,260
  4,598
  4,951
  5,318
  5,700
  6,099
  6,514
  6,947
  7,400
  7,872
  8,365
  8,881
  9,419
  9,983
  10,572
  11,189
  11,835
  12,511
  13,220
  13,962
  14,739
Earnings before tax, $m
  2,451
  1,892
  3,520
  5,224
  7,005
  8,866
  10,810
  12,841
  14,963
  17,182
  19,501
  21,936
  24,476
  27,136
  29,923
  32,846
  35,911
  39,128
  42,506
  46,054
  49,783
  53,702
  57,823
  62,158
  66,719
  71,518
  76,570
  81,888
  87,488
  93,385
  99,595
Tax expense, $m
  142
  511
  950
  1,411
  1,891
  2,394
  2,919
  3,467
  4,040
  4,639
  5,265
  5,923
  6,608
  7,327
  8,079
  8,868
  9,696
  10,565
  11,477
  12,435
  13,441
  14,499
  15,612
  16,783
  18,014
  19,310
  20,674
  22,110
  23,622
  25,214
  26,891
Net income, $m
  2,069
  1,381
  2,570
  3,814
  5,114
  6,472
  7,892
  9,374
  10,923
  12,543
  14,236
  16,013
  17,867
  19,809
  21,844
  23,977
  26,215
  28,564
  31,030
  33,620
  36,341
  39,202
  42,211
  45,375
  48,705
  52,208
  55,896
  59,779
  63,866
  68,171
  72,704

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,494
  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
  85,209
  90,961
  98,538
  106,418
  114,609
  123,122
  131,968
  141,161
  150,717
  160,653
  170,989
  181,744
  192,942
  204,605
  216,760
  229,433
  242,652
  256,448
  270,853
  285,900
  301,624
  318,062
  335,253
  353,237
  372,057
  391,758
  412,386
  433,992
  456,625
  480,340
  505,195
Adjusted assets (=assets-cash), $m
  83,715
  90,961
  98,538
  106,418
  114,609
  123,122
  131,968
  141,161
  150,717
  160,653
  170,989
  181,744
  192,942
  204,605
  216,760
  229,433
  242,652
  256,448
  270,853
  285,900
  301,624
  318,062
  335,253
  353,237
  372,057
  391,758
  412,386
  433,992
  456,625
  480,340
  505,195
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
  1,461
  1,578
  1,709
  1,846
  1,988
  2,136
  2,289
  2,449
  2,614
  2,787
  2,966
  3,153
  3,347
  3,549
  3,760
  3,980
  4,209
  4,448
  4,698
  4,959
  5,232
  5,517
  5,815
  6,127
  6,454
  6,795
  7,153
  7,528
  7,921
  8,332
  8,763
Working capital, $m
  -4,556
  -1,728
  -1,872
  -2,022
  -2,177
  -2,339
  -2,507
  -2,682
  -2,863
  -3,052
  -3,248
  -3,453
  -3,666
  -3,887
  -4,118
  -4,359
  -4,610
  -4,872
  -5,146
  -5,432
  -5,730
  -6,043
  -6,369
  -6,711
  -7,068
  -7,443
  -7,835
  -8,245
  -8,675
  -9,126
  -9,598
Total debt, $m
  40,945
  44,888
  50,533
  56,403
  62,506
  68,848
  75,438
  82,287
  89,406
  96,809
  104,509
  112,522
  120,864
  129,553
  138,608
  148,049
  157,898
  168,176
  178,908
  190,117
  201,832
  214,078
  226,885
  240,283
  254,304
  268,982
  284,350
  300,446
  317,308
  334,976
  353,492
Total liabilities, $m
  63,823
  67,766
  73,411
  79,281
  85,384
  91,726
  98,316
  105,165
  112,284
  119,687
  127,387
  135,400
  143,742
  152,431
  161,486
  170,927
  180,776
  191,054
  201,786
  212,995
  224,710
  236,956
  249,763
  263,161
  277,182
  291,860
  307,228
  323,324
  340,186
  357,854
  376,370
Total equity, $m
  21,386
  23,195
  25,127
  27,137
  29,225
  31,396
  33,652
  35,996
  38,433
  40,967
  43,602
  46,345
  49,200
  52,174
  55,274
  58,505
  61,876
  65,394
  69,068
  72,904
  76,914
  81,106
  85,489
  90,075
  94,875
  99,898
  105,159
  110,668
  116,439
  122,487
  128,825
Total liabilities and equity, $m
  85,209
  90,961
  98,538
  106,418
  114,609
  123,122
  131,968
  141,161
  150,717
  160,654
  170,989
  181,745
  192,942
  204,605
  216,760
  229,432
  242,652
  256,448
  270,854
  285,899
  301,624
  318,062
  335,252
  353,236
  372,057
  391,758
  412,387
  433,992
  456,625
  480,341
  505,195
Debt-to-equity ratio
  1.915
  1.940
  2.010
  2.080
  2.140
  2.190
  2.240
  2.290
  2.330
  2.360
  2.400
  2.430
  2.460
  2.480
  2.510
  2.530
  2.550
  2.570
  2.590
  2.610
  2.620
  2.640
  2.650
  2.670
  2.680
  2.690
  2.700
  2.710
  2.730
  2.730
  2.740
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
  1,381
  2,570
  3,814
  5,114
  6,472
  7,892
  9,374
  10,923
  12,543
  14,236
  16,013
  17,867
  19,809
  21,844
  23,977
  26,215
  28,564
  31,030
  33,620
  36,341
  39,202
  42,211
  45,375
  48,705
  52,208
  55,896
  59,779
  63,866
  68,171
  72,704
Depreciation, amort., depletion, $m
  2,240
  323
  350
  377
  405
  435
  466
  498
  531
  565
  601
  631
  669
  710
  752
  796
  842
  890
  940
  992
  1,046
  1,103
  1,163
  1,225
  1,291
  1,359
  1,431
  1,506
  1,584
  1,666
  1,753
Funds from operations, $m
  4,849
  1,704
  2,919
  4,191
  5,519
  6,907
  8,357
  9,872
  11,454
  13,108
  14,837
  16,643
  18,537
  20,519
  22,596
  24,773
  27,057
  29,453
  31,969
  34,611
  37,388
  40,306
  43,374
  46,601
  49,995
  53,567
  57,327
  61,284
  65,450
  69,837
  74,457
Change in working capital, $m
  -362
  -138
  -144
  -150
  -156
  -162
  -168
  -175
  -182
  -189
  -196
  -204
  -213
  -222
  -231
  -241
  -251
  -262
  -274
  -286
  -299
  -312
  -327
  -342
  -358
  -374
  -392
  -410
  -430
  -451
  -472
Cash from operations, $m
  5,211
  1,843
  3,063
  4,340
  5,675
  7,069
  8,525
  10,046
  11,635
  13,296
  15,033
  16,848
  18,749
  20,741
  22,827
  25,014
  27,308
  29,715
  32,243
  34,897
  37,686
  40,618
  43,700
  46,942
  50,353
  53,942
  57,719
  61,695
  65,880
  70,288
  74,929
Maintenance CAPEX, $m
  0
  -292
  -316
  -342
  -369
  -398
  -427
  -458
  -490
  -523
  -557
  -593
  -631
  -669
  -710
  -752
  -796
  -842
  -890
  -940
  -992
  -1,046
  -1,103
  -1,163
  -1,225
  -1,291
  -1,359
  -1,431
  -1,506
  -1,584
  -1,666
New CAPEX, $m
  -5,255
  -117
  -131
  -137
  -142
  -148
  -153
  -159
  -166
  -172
  -179
  -187
  -194
  -202
  -211
  -220
  -229
  -239
  -250
  -261
  -273
  -285
  -298
  -312
  -326
  -342
  -358
  -375
  -393
  -411
  -431
Cash from investing activities, $m
  -5,192
  -409
  -447
  -479
  -511
  -546
  -580
  -617
  -656
  -695
  -736
  -780
  -825
  -871
  -921
  -972
  -1,025
  -1,081
  -1,140
  -1,201
  -1,265
  -1,331
  -1,401
  -1,475
  -1,551
  -1,633
  -1,717
  -1,806
  -1,899
  -1,995
  -2,097
Free cash flow, $m
  19
  1,433
  2,616
  3,862
  5,164
  6,524
  7,945
  9,429
  10,980
  12,601
  14,297
  16,068
  17,925
  19,869
  21,906
  24,042
  26,283
  28,634
  31,103
  33,697
  36,422
  39,286
  42,299
  45,467
  48,801
  52,309
  56,002
  59,889
  63,982
  68,292
  72,831
Issuance/(repayment) of debt, $m
  -149
  5,437
  5,645
  5,871
  6,103
  6,342
  6,590
  6,849
  7,119
  7,403
  7,700
  8,013
  8,342
  8,689
  9,055
  9,441
  9,848
  10,278
  10,732
  11,210
  11,714
  12,246
  12,807
  13,398
  14,021
  14,677
  15,368
  16,096
  16,862
  17,668
  18,516
Issuance/(repurchase) of shares, $m
  2,997
  428
  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
  5,865
  5,645
  5,871
  6,103
  6,342
  6,590
  6,849
  7,119
  7,403
  7,700
  8,013
  8,342
  8,689
  9,055
  9,441
  9,848
  10,278
  10,732
  11,210
  11,714
  12,246
  12,807
  13,398
  14,021
  14,677
  15,368
  16,096
  16,862
  17,668
  18,516
Total cash flow (excl. dividends), $m
  2,545
  7,298
  8,261
  9,732
  11,266
  12,866
  14,535
  16,278
  18,099
  20,004
  21,997
  24,081
  26,267
  28,558
  30,961
  33,483
  36,131
  38,913
  41,835
  44,907
  48,136
  51,533
  55,106
  58,866
  62,822
  66,986
  71,370
  75,985
  80,844
  85,960
  91,348
Retained Cash Flow (-), $m
  -2,488
  -1,809
  -1,932
  -2,009
  -2,089
  -2,171
  -2,256
  -2,344
  -2,437
  -2,534
  -2,636
  -2,743
  -2,855
  -2,974
  -3,099
  -3,232
  -3,371
  -3,518
  -3,673
  -3,837
  -4,010
  -4,192
  -4,384
  -4,586
  -4,799
  -5,024
  -5,260
  -5,509
  -5,771
  -6,047
  -6,338
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
 
  5,489
  6,329
  7,723
  9,177
  10,695
  12,279
  13,934
  15,663
  17,470
  19,361
  21,338
  23,411
  25,584
  27,862
  30,252
  32,760
  35,395
  38,162
  41,070
  44,127
  47,341
  50,722
  54,280
  58,023
  61,963
  66,110
  70,476
  75,073
  79,913
  85,010
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
 
  5,004
  5,213
  5,694
  5,996
  6,126
  6,096
  5,923
  5,628
  5,234
  4,766
  4,250
  3,711
  3,172
  2,653
  2,169
  1,733
  1,352
  1,029
  763
  550
  386
  263
  174
  111
  69
  41
  24
  13
  7
  4
Current shareholders' claim on cash, %
  100
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4

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 20.1
Price to Sales 1.2
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow -943.2
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
LT Debt to Equity 170.6%
Total Debt to Equity 191.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.5%
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 8.7% 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 4.4% 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 4.2%.

Life of production assets of 0.7 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 1653.15 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 $72.8 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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