Intrinsic value of Gibson Energy Inc. - GEI

Previous Close

$17.59

  Intrinsic Value

$8.07

stock screener

  Rating & Target

str. sell

-54%

  Value-price divergence*

0%

Previous close

$17.59

 
Intrinsic value

$8.07

 
Up/down potential

-54%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of GEI 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 2.5

 

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, %
  -15.00
  35.20
  32.18
  29.46
  27.02
  24.81
  22.83
  21.05
  19.44
  18.00
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
Revenue, $m
  4,594
  6,211
  8,210
  10,629
  13,500
  16,850
  20,697
  25,054
  29,925
  35,312
  41,209
  47,609
  54,502
  61,875
  69,719
  78,021
  86,774
  95,969
  105,600
  115,667
  126,169
  137,110
  148,496
  160,338
  172,646
  185,437
  198,729
  212,544
  226,903
  241,835
  257,366
Variable operating expenses, $m
 
  5,773
  7,616
  9,846
  12,494
  15,583
  19,131
  23,148
  27,640
  32,607
  38,045
  43,901
  50,257
  57,056
  64,289
  71,945
  80,016
  88,494
  97,376
  106,659
  116,343
  126,432
  136,931
  147,850
  159,200
  170,995
  183,252
  195,990
  209,232
  223,000
  237,322
Fixed operating expenses, $m
 
  508
  521
  534
  547
  561
  575
  590
  604
  619
  635
  651
  667
  684
  701
  718
  736
  755
  774
  793
  813
  833
  854
  875
  897
  920
  943
  966
  990
  1,015
  1,040
Total operating expenses, $m
  4,766
  6,281
  8,137
  10,380
  13,041
  16,144
  19,706
  23,738
  28,244
  33,226
  38,680
  44,552
  50,924
  57,740
  64,990
  72,663
  80,752
  89,249
  98,150
  107,452
  117,156
  127,265
  137,785
  148,725
  160,097
  171,915
  184,195
  196,956
  210,222
  224,015
  238,362
Operating income, $m
  -172
  -70
  73
  248
  459
  706
  991
  1,316
  1,681
  2,085
  2,529
  3,057
  3,578
  4,135
  4,729
  5,358
  6,022
  6,720
  7,451
  8,216
  9,014
  9,845
  10,711
  11,612
  12,549
  13,523
  14,535
  15,587
  16,682
  17,820
  19,004
EBITDA, $m
  72
  228
  453
  726
  1,054
  1,437
  1,880
  2,382
  2,945
  3,569
  4,253
  4,996
  5,797
  6,655
  7,568
  8,535
  9,555
  10,628
  11,751
  12,926
  14,151
  15,429
  16,758
  18,141
  19,579
  21,074
  22,628
  24,242
  25,921
  27,668
  29,484
Interest expense (income), $m
  90
  91
  143
  207
  285
  377
  485
  609
  749
  905
  1,079
  1,268
  1,474
  1,695
  1,932
  2,185
  2,452
  2,733
  3,028
  3,338
  3,662
  3,999
  4,351
  4,717
  5,098
  5,493
  5,905
  6,332
  6,776
  7,238
  7,718
Earnings before tax, $m
  -235
  -161
  -70
  41
  173
  328
  506
  708
  932
  1,180
  1,451
  1,789
  2,104
  2,440
  2,797
  3,174
  3,570
  3,987
  4,422
  4,877
  5,352
  5,846
  6,360
  6,895
  7,451
  8,029
  8,630
  9,255
  9,906
  10,582
  11,286
Tax expense, $m
  -57
  0
  0
  11
  47
  89
  137
  191
  252
  319
  392
  483
  568
  659
  755
  857
  964
  1,076
  1,194
  1,317
  1,445
  1,578
  1,717
  1,862
  2,012
  2,168
  2,330
  2,499
  2,674
  2,857
  3,047
Net income, $m
  -160
  -161
  -70
  30
  127
  240
  370
  516
  680
  861
  1,059
  1,306
  1,536
  1,781
  2,041
  2,317
  2,606
  2,910
  3,228
  3,560
  3,907
  4,268
  4,643
  5,033
  5,439
  5,861
  6,300
  6,756
  7,231
  7,725
  8,239

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  62
  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
  3,261
  4,325
  5,717
  7,402
  9,401
  11,734
  14,413
  17,447
  20,839
  24,591
  28,697
  33,154
  37,954
  43,089
  48,551
  54,333
  60,427
  66,830
  73,538
  80,548
  87,862
  95,481
  103,410
  111,656
  120,227
  129,135
  138,391
  148,011
  158,011
  168,409
  179,225
Adjusted assets (=assets-cash), $m
  3,199
  4,325
  5,717
  7,402
  9,401
  11,734
  14,413
  17,447
  20,839
  24,591
  28,697
  33,154
  37,954
  43,089
  48,551
  54,333
  60,427
  66,830
  73,538
  80,548
  87,862
  95,481
  103,410
  111,656
  120,227
  129,135
  138,391
  148,011
  158,011
  168,409
  179,225
Revenue / Adjusted assets
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
Average production assets, $m
  1,813
  2,453
  3,243
  4,198
  5,332
  6,656
  8,175
  9,896
  11,821
  13,948
  16,278
  18,806
  21,528
  24,441
  27,539
  30,818
  34,276
  37,908
  41,712
  45,689
  49,837
  54,159
  58,656
  63,333
  68,195
  73,248
  78,498
  83,955
  89,627
  95,525
  101,660
Working capital, $m
  363
  410
  542
  701
  891
  1,112
  1,366
  1,654
  1,975
  2,331
  2,720
  3,142
  3,597
  4,084
  4,601
  5,149
  5,727
  6,334
  6,970
  7,634
  8,327
  9,049
  9,801
  10,582
  11,395
  12,239
  13,116
  14,028
  14,976
  15,961
  16,986
Total debt, $m
  1,359
  2,135
  3,094
  4,255
  5,632
  7,240
  9,086
  11,176
  13,513
  16,098
  18,927
  21,998
  25,305
  28,843
  32,606
  36,590
  40,790
  45,201
  49,823
  54,653
  59,692
  64,941
  70,404
  76,086
  81,991
  88,129
  94,506
  101,135
  108,024
  115,189
  122,641
Total liabilities, $m
  2,204
  2,980
  3,939
  5,100
  6,477
  8,085
  9,931
  12,021
  14,358
  16,943
  19,772
  22,843
  26,150
  29,688
  33,451
  37,435
  41,635
  46,046
  50,668
  55,498
  60,537
  65,786
  71,249
  76,931
  82,836
  88,974
  95,351
  101,980
  108,869
  116,034
  123,486
Total equity, $m
  1,057
  1,345
  1,778
  2,302
  2,924
  3,649
  4,482
  5,426
  6,481
  7,648
  8,925
  10,311
  11,804
  13,401
  15,099
  16,897
  18,793
  20,784
  22,870
  25,050
  27,325
  29,694
  32,160
  34,725
  37,391
  40,161
  43,040
  46,031
  49,141
  52,375
  55,739
Total liabilities and equity, $m
  3,261
  4,325
  5,717
  7,402
  9,401
  11,734
  14,413
  17,447
  20,839
  24,591
  28,697
  33,154
  37,954
  43,089
  48,550
  54,332
  60,428
  66,830
  73,538
  80,548
  87,862
  95,480
  103,409
  111,656
  120,227
  129,135
  138,391
  148,011
  158,010
  168,409
  179,225
Debt-to-equity ratio
  1.286
  1.590
  1.740
  1.850
  1.930
  1.980
  2.030
  2.060
  2.090
  2.100
  2.120
  2.130
  2.140
  2.150
  2.160
  2.170
  2.170
  2.170
  2.180
  2.180
  2.180
  2.190
  2.190
  2.190
  2.190
  2.190
  2.200
  2.200
  2.200
  2.200
  2.200
Adjusted equity ratio
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -160
  -161
  -70
  30
  127
  240
  370
  516
  680
  861
  1,059
  1,306
  1,536
  1,781
  2,041
  2,317
  2,606
  2,910
  3,228
  3,560
  3,907
  4,268
  4,643
  5,033
  5,439
  5,861
  6,300
  6,756
  7,231
  7,725
  8,239
Depreciation, amort., depletion, $m
  244
  298
  380
  478
  595
  732
  888
  1,066
  1,264
  1,483
  1,724
  1,939
  2,219
  2,520
  2,839
  3,177
  3,534
  3,908
  4,300
  4,710
  5,138
  5,583
  6,047
  6,529
  7,030
  7,551
  8,093
  8,655
  9,240
  9,848
  10,480
Funds from operations, $m
  161
  137
  310
  508
  722
  971
  1,258
  1,582
  1,944
  2,345
  2,782
  3,245
  3,755
  4,301
  4,881
  5,494
  6,140
  6,818
  7,529
  8,271
  9,045
  9,851
  10,690
  11,563
  12,470
  13,413
  14,393
  15,412
  16,471
  17,573
  18,719
Change in working capital, $m
  -47
  107
  132
  160
  190
  221
  254
  288
  322
  356
  389
  422
  455
  487
  518
  548
  578
  607
  636
  664
  693
  722
  751
  782
  812
  844
  877
  912
  948
  985
  1,025
Cash from operations, $m
  208
  30
  178
  348
  532
  750
  1,004
  1,295
  1,623
  1,989
  2,393
  2,822
  3,300
  3,814
  4,363
  4,946
  5,562
  6,211
  6,893
  7,606
  8,352
  9,129
  9,939
  10,781
  11,657
  12,568
  13,515
  14,500
  15,523
  16,587
  17,694
Maintenance CAPEX, $m
  0
  -187
  -253
  -334
  -433
  -550
  -686
  -843
  -1,020
  -1,219
  -1,438
  -1,678
  -1,939
  -2,219
  -2,520
  -2,839
  -3,177
  -3,534
  -3,908
  -4,300
  -4,710
  -5,138
  -5,583
  -6,047
  -6,529
  -7,030
  -7,551
  -8,093
  -8,655
  -9,240
  -9,848
New CAPEX, $m
  -255
  -640
  -789
  -955
  -1,134
  -1,323
  -1,520
  -1,721
  -1,924
  -2,128
  -2,329
  -2,528
  -2,723
  -2,913
  -3,098
  -3,280
  -3,457
  -3,632
  -3,805
  -3,976
  -4,148
  -4,322
  -4,498
  -4,677
  -4,862
  -5,053
  -5,250
  -5,457
  -5,672
  -5,898
  -6,135
Cash from investing activities, $m
  -247
  -827
  -1,042
  -1,289
  -1,567
  -1,873
  -2,206
  -2,564
  -2,944
  -3,347
  -3,767
  -4,206
  -4,662
  -5,132
  -5,618
  -6,119
  -6,634
  -7,166
  -7,713
  -8,276
  -8,858
  -9,460
  -10,081
  -10,724
  -11,391
  -12,083
  -12,801
  -13,550
  -14,327
  -15,138
  -15,983
Free cash flow, $m
  -39
  -797
  -865
  -941
  -1,035
  -1,123
  -1,202
  -1,269
  -1,322
  -1,357
  -1,374
  -1,384
  -1,361
  -1,318
  -1,255
  -1,173
  -1,072
  -954
  -820
  -670
  -507
  -331
  -142
  57
  266
  486
  714
  951
  1,196
  1,450
  1,711
Issuance/(repayment) of debt, $m
  61
  776
  959
  1,161
  1,378
  1,607
  1,846
  2,090
  2,337
  2,585
  2,829
  3,071
  3,307
  3,538
  3,763
  3,984
  4,199
  4,412
  4,621
  4,830
  5,039
  5,250
  5,463
  5,681
  5,906
  6,137
  6,378
  6,628
  6,890
  7,164
  7,452
Issuance/(repurchase) of shares, $m
  231
  511
  503
  494
  495
  486
  464
  427
  375
  305
  218
  80
  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  
  194
  1,287
  1,462
  1,655
  1,873
  2,093
  2,310
  2,517
  2,712
  2,890
  3,047
  3,151
  3,307
  3,538
  3,763
  3,984
  4,199
  4,412
  4,621
  4,830
  5,039
  5,250
  5,463
  5,681
  5,906
  6,137
  6,378
  6,628
  6,890
  7,164
  7,452
Total cash flow (excl. dividends), $m
  153
  491
  597
  713
  838
  970
  1,108
  1,248
  1,390
  1,533
  1,674
  1,767
  1,946
  2,220
  2,508
  2,811
  3,127
  3,458
  3,802
  4,160
  4,532
  4,919
  5,321
  5,738
  6,172
  6,623
  7,091
  7,579
  8,086
  8,614
  9,164
Retained Cash Flow (-), $m
  110
  -511
  -503
  -524
  -622
  -726
  -833
  -944
  -1,055
  -1,167
  -1,277
  -1,386
  -1,493
  -1,597
  -1,699
  -1,798
  -1,896
  -1,991
  -2,086
  -2,180
  -2,274
  -2,370
  -2,466
  -2,564
  -2,666
  -2,770
  -2,879
  -2,992
  -3,110
  -3,234
  -3,364
Prev. year cash balance distribution, $m
 
  62
  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
 
  41
  94
  189
  216
  245
  274
  305
  335
  366
  396
  381
  453
  623
  810
  1,013
  1,232
  1,466
  1,716
  1,980
  2,258
  2,549
  2,855
  3,174
  3,506
  3,853
  4,213
  4,587
  4,976
  5,380
  5,800
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  38
  80
  146
  150
  151
  150
  146
  139
  129
  118
  94
  92
  102
  106
  103
  96
  86
  75
  62
  50
  39
  29
  21
  15
  10
  7
  4
  3
  2
  1
Current shareholders' claim on cash, %
  100
  82.2
  71.0
  63.6
  58.3
  54.5
  51.7
  49.7
  48.3
  47.3
  46.8
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6
  46.6

Gibson Energy Inc. is a Canada-based integrated service provider to the oil and gas industry with operations across producing regions throughout North America. The Company is engaged in the movement, storage, blending, processing, marketing and distribution of crude oil, condensate, natural gas liquids (NGLs), water, oilfield waste and refined products. The Company's segments are Terminals and Pipelines, Environmental Services, Truck Transportation, Propane and NGL Marketing and Distribution, Processing and Wellsite Fluids, and Marketing. The Company transports energy products by utilizing its integrated network of terminals, pipelines, storage tanks, and trucks located throughout western Canada and through its truck transportation and injection station network in the United States. The Company also provides emulsion treating, water disposal and oilfield waste management services. The Company also distributes industrial propane.

FINANCIAL RATIOS  of  Gibson Energy Inc. (GEI)

Valuation Ratios
P/E Ratio -15.6
Price to Sales 0.5
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 12
Price to Free Cash Flow -53
Growth Rates
Sales Growth Rate -15%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -22.7%
Cap. Spend. - 3 Yr. Gr. Rate 1.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.5
LT Debt to Equity 128.6%
Total Debt to Equity 128.6%
Interest Coverage -2
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. -1.5%
Return On Total Capital -6.5%
Ret/ On T. Cap. - 3 Yr. Avg. -4.6%
Return On Equity -14.4%
Return On Equity - 3 Yr. Avg. -9.8%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 0.5%
Gross Margin - 3 Yr. Avg. 1.9%
EBITDA Margin 2.2%
EBITDA Margin - 3 Yr. Avg. 2.5%
Operating Margin -3.7%
Oper. Margin - 3 Yr. Avg. -1.1%
Pre-Tax Margin -5.1%
Pre-Tax Margin - 3 Yr. Avg. -3.1%
Net Profit Margin -3.5%
Net Profit Margin - 3 Yr. Avg. -2.5%
Effective Tax Rate 24.3%
Eff/ Tax Rate - 3 Yr. Avg. 19%
Payout Ratio -110%

GEI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GEI stock intrinsic value calculation we used $4594 million for the last fiscal year's total revenue generated by Gibson Energy Inc.. The default revenue input number comes from 2016 income statement of Gibson Energy 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 GEI stock valuation model: a) initial revenue growth rate of 35.2% 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 8.3%, whose default value for GEI is calculated based on our internal credit rating of Gibson Energy 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 Gibson Energy 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 GEI stock the variable cost ratio is equal to 93.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $496 million in the base year in the intrinsic value calculation for GEI 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 6.7% for Gibson Energy Inc..

Corporate tax rate of 27% is the nominal tax rate for Gibson Energy 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 GEI 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 GEI are equal to 39.5%.

Life of production assets of 9.7 years is the average useful life of capital assets used in Gibson Energy 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 GEI is equal to 6.6%. 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 - $1057 million for Gibson Energy 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 142.526 million for Gibson Energy 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 Gibson Energy Inc. at the current share price and the inputted number of shares is $2.5 billion.

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Financial statements of GEI
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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