Intrinsic value of Keyera Corp. - KEY

Previous Close

$39.78

  Intrinsic Value

$2.41

stock screener

  Rating & Target

str. sell

-94%

  Value-price divergence*

-67%

Previous close

$39.78

 
Intrinsic value

$2.41

 
Up/down potential

-94%

 
Rating

str. sell

 
Value-price divergence*

-67%

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

We calculate the intrinsic value of KEY 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 7.4

 

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, %
  -0.48
  40.40
  36.86
  33.67
  30.81
  28.23
  25.90
  23.81
  21.93
  20.24
  18.71
  17.34
  16.11
  15.00
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
Revenue, $m
  2,509
  3,523
  4,821
  6,445
  8,430
  10,809
  13,609
  16,850
  20,546
  24,704
  29,327
  34,413
  39,957
  45,949
  52,381
  59,242
  66,523
  74,212
  82,304
  90,793
  99,674
  108,947
  118,615
  128,681
  139,152
  150,039
  161,354
  173,112
  185,331
  198,031
  211,235
Variable operating expenses, $m
 
  3,098
  4,238
  5,663
  7,406
  9,494
  11,952
  14,797
  18,041
  21,691
  25,750
  30,209
  35,076
  40,336
  45,983
  52,006
  58,397
  65,147
  72,251
  79,702
  87,499
  95,639
  104,126
  112,962
  122,154
  131,711
  141,644
  151,966
  162,692
  173,841
  185,432
Fixed operating expenses, $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
Total operating expenses, $m
  2,202
  3,098
  4,238
  5,663
  7,406
  9,494
  11,952
  14,797
  18,041
  21,691
  25,750
  30,209
  35,076
  40,336
  45,983
  52,006
  58,397
  65,147
  72,251
  79,702
  87,499
  95,639
  104,126
  112,962
  122,154
  131,711
  141,644
  151,966
  162,692
  173,841
  185,432
Operating income, $m
  307
  425
  584
  782
  1,024
  1,315
  1,657
  2,053
  2,504
  3,012
  3,577
  4,204
  4,881
  5,613
  6,399
  7,237
  8,126
  9,065
  10,054
  11,091
  12,175
  13,308
  14,489
  15,719
  16,998
  18,328
  19,710
  21,146
  22,639
  24,190
  25,803
EBITDA, $m
  479
  669
  915
  1,223
  1,600
  2,052
  2,584
  3,199
  3,901
  4,690
  5,568
  6,533
  7,586
  8,723
  9,944
  11,247
  12,629
  14,089
  15,625
  17,237
  18,923
  20,683
  22,519
  24,430
  26,418
  28,485
  30,633
  32,865
  35,185
  37,596
  40,102
Interest expense (income), $m
  84
  86
  148
  228
  329
  451
  598
  771
  971
  1,199
  1,455
  1,741
  2,055
  2,397
  2,767
  3,163
  3,587
  4,036
  4,511
  5,010
  5,534
  6,082
  6,654
  7,251
  7,872
  8,518
  9,190
  9,888
  10,614
  11,368
  12,152
Earnings before tax, $m
  307
  339
  435
  553
  696
  864
  1,059
  1,282
  1,534
  1,813
  2,122
  2,463
  2,826
  3,216
  3,632
  4,073
  4,539
  5,029
  5,543
  6,080
  6,641
  7,226
  7,835
  8,468
  9,126
  9,809
  10,520
  11,258
  12,025
  12,822
  13,651
Tax expense, $m
  90
  92
  118
  149
  188
  233
  286
  346
  414
  490
  573
  665
  763
  868
  981
  1,100
  1,226
  1,358
  1,497
  1,642
  1,793
  1,951
  2,115
  2,286
  2,464
  2,649
  2,840
  3,040
  3,247
  3,462
  3,686
Net income, $m
  217
  248
  318
  404
  508
  631
  773
  936
  1,120
  1,324
  1,549
  1,798
  2,063
  2,348
  2,651
  2,973
  3,313
  3,671
  4,046
  4,439
  4,848
  5,275
  5,719
  6,181
  6,662
  7,161
  7,679
  8,218
  8,778
  9,360
  9,965

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  16
  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
  4,957
  6,934
  9,490
  12,686
  16,594
  21,278
  26,790
  33,169
  40,444
  48,629
  57,730
  67,742
  78,655
  90,451
  103,113
  116,619
  130,950
  146,087
  162,016
  178,726
  196,208
  214,463
  233,494
  253,308
  273,921
  295,352
  317,625
  340,771
  364,825
  389,825
  415,816
Adjusted assets (=assets-cash), $m
  4,941
  6,934
  9,490
  12,686
  16,594
  21,278
  26,790
  33,169
  40,444
  48,629
  57,730
  67,742
  78,655
  90,451
  103,113
  116,619
  130,950
  146,087
  162,016
  178,726
  196,208
  214,463
  233,494
  253,308
  273,921
  295,352
  317,625
  340,771
  364,825
  389,825
  415,816
Revenue / Adjusted assets
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
Average production assets, $m
  3,906
  5,485
  7,506
  10,034
  13,125
  16,830
  21,190
  26,235
  31,989
  38,464
  45,662
  53,581
  62,212
  71,543
  81,558
  92,241
  103,576
  115,549
  128,148
  141,364
  155,192
  169,631
  184,683
  200,356
  216,659
  233,610
  251,228
  269,535
  288,560
  308,334
  328,892
Working capital, $m
  46
  127
  174
  232
  303
  389
  490
  607
  740
  889
  1,056
  1,239
  1,438
  1,654
  1,886
  2,133
  2,395
  2,672
  2,963
  3,269
  3,588
  3,922
  4,270
  4,632
  5,009
  5,401
  5,809
  6,232
  6,672
  7,129
  7,604
Total debt, $m
  1,732
  2,965
  4,567
  6,571
  9,022
  11,958
  15,414
  19,414
  23,975
  29,107
  34,814
  41,091
  47,934
  55,330
  63,269
  71,737
  80,723
  90,214
  100,201
  110,678
  121,640
  133,086
  145,018
  157,441
  170,365
  183,803
  197,768
  212,281
  227,362
  243,037
  259,334
Total liabilities, $m
  3,115
  4,348
  5,950
  7,954
  10,405
  13,341
  16,797
  20,797
  25,358
  30,490
  36,197
  42,474
  49,317
  56,713
  64,652
  73,120
  82,106
  91,597
  101,584
  112,061
  123,023
  134,469
  146,401
  158,824
  171,748
  185,186
  199,151
  213,664
  228,745
  244,420
  260,717
Total equity, $m
  1,842
  2,587
  3,540
  4,732
  6,190
  7,937
  9,993
  12,372
  15,086
  18,139
  21,533
  25,268
  29,338
  33,738
  38,461
  43,499
  48,844
  54,491
  60,432
  66,665
  73,186
  79,995
  87,093
  94,484
  102,173
  110,166
  118,474
  127,108
  136,080
  145,405
  155,099
Total liabilities and equity, $m
  4,957
  6,935
  9,490
  12,686
  16,595
  21,278
  26,790
  33,169
  40,444
  48,629
  57,730
  67,742
  78,655
  90,451
  103,113
  116,619
  130,950
  146,088
  162,016
  178,726
  196,209
  214,464
  233,494
  253,308
  273,921
  295,352
  317,625
  340,772
  364,825
  389,825
  415,816
Debt-to-equity ratio
  0.940
  1.150
  1.290
  1.390
  1.460
  1.510
  1.540
  1.570
  1.590
  1.600
  1.620
  1.630
  1.630
  1.640
  1.650
  1.650
  1.650
  1.660
  1.660
  1.660
  1.660
  1.660
  1.670
  1.670
  1.670
  1.670
  1.670
  1.670
  1.670
  1.670
  1.670
Adjusted equity ratio
  0.370
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373
  0.373

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  217
  248
  318
  404
  508
  631
  773
  936
  1,120
  1,324
  1,549
  1,798
  2,063
  2,348
  2,651
  2,973
  3,313
  3,671
  4,046
  4,439
  4,848
  5,275
  5,719
  6,181
  6,662
  7,161
  7,679
  8,218
  8,778
  9,360
  9,965
Depreciation, amort., depletion, $m
  172
  244
  332
  442
  576
  737
  927
  1,146
  1,396
  1,678
  1,991
  2,330
  2,705
  3,111
  3,546
  4,010
  4,503
  5,024
  5,572
  6,146
  6,747
  7,375
  8,030
  8,711
  9,420
  10,157
  10,923
  11,719
  12,546
  13,406
  14,300
Funds from operations, $m
  284
  491
  650
  846
  1,084
  1,368
  1,700
  2,082
  2,516
  3,002
  3,539
  4,128
  4,768
  5,458
  6,197
  6,984
  7,817
  8,695
  9,618
  10,585
  11,596
  12,650
  13,749
  14,893
  16,082
  17,318
  18,602
  19,937
  21,324
  22,766
  24,265
Change in working capital, $m
  -129
  36
  47
  58
  71
  86
  101
  117
  133
  150
  166
  183
  200
  216
  232
  247
  262
  277
  291
  306
  320
  334
  348
  362
  377
  392
  407
  423
  440
  457
  475
Cash from operations, $m
  413
  455
  603
  787
  1,013
  1,282
  1,599
  1,965
  2,383
  2,852
  3,373
  3,944
  4,568
  5,243
  5,966
  6,737
  7,555
  8,418
  9,327
  10,279
  11,276
  12,317
  13,401
  14,530
  15,705
  16,926
  18,195
  19,514
  20,884
  22,309
  23,790
Maintenance CAPEX, $m
  0
  -170
  -238
  -326
  -436
  -571
  -732
  -921
  -1,141
  -1,391
  -1,672
  -1,985
  -2,330
  -2,705
  -3,111
  -3,546
  -4,010
  -4,503
  -5,024
  -5,572
  -6,146
  -6,747
  -7,375
  -8,030
  -8,711
  -9,420
  -10,157
  -10,923
  -11,719
  -12,546
  -13,406
New CAPEX, $m
  -567
  -1,579
  -2,022
  -2,528
  -3,091
  -3,705
  -4,360
  -5,046
  -5,754
  -6,474
  -7,198
  -7,919
  -8,631
  -9,331
  -10,015
  -10,683
  -11,335
  -11,973
  -12,599
  -13,216
  -13,828
  -14,439
  -15,052
  -15,672
  -16,304
  -16,951
  -17,617
  -18,308
  -19,025
  -19,774
  -20,558
Cash from investing activities, $m
  -761
  -1,749
  -2,260
  -2,854
  -3,527
  -4,276
  -5,092
  -5,967
  -6,895
  -7,865
  -8,870
  -9,904
  -10,961
  -12,036
  -13,126
  -14,229
  -15,345
  -16,476
  -17,623
  -18,788
  -19,974
  -21,186
  -22,427
  -23,702
  -25,015
  -26,371
  -27,774
  -29,231
  -30,744
  -32,320
  -33,964
Free cash flow, $m
  -348
  -1,294
  -1,657
  -2,067
  -2,515
  -2,993
  -3,492
  -4,002
  -4,512
  -5,013
  -5,498
  -5,960
  -6,392
  -6,793
  -7,160
  -7,492
  -7,791
  -8,058
  -8,296
  -8,509
  -8,698
  -8,870
  -9,026
  -9,172
  -9,310
  -9,445
  -9,579
  -9,717
  -9,860
  -10,012
  -10,174
Issuance/(repayment) of debt, $m
  127
  1,249
  1,603
  2,004
  2,450
  2,937
  3,456
  4,000
  4,561
  5,132
  5,706
  6,278
  6,842
  7,396
  7,939
  8,468
  8,985
  9,491
  9,987
  10,477
  10,962
  11,446
  11,932
  12,424
  12,924
  13,437
  13,966
  14,513
  15,081
  15,675
  16,296
Issuance/(repurchase) of shares, $m
  515
  497
  636
  788
  950
  1,116
  1,283
  1,444
  1,594
  1,729
  1,846
  1,937
  2,007
  2,052
  2,071
  2,064
  2,032
  1,975
  1,895
  1,794
  1,673
  1,534
  1,379
  1,209
  1,027
  833
  629
  415
  194
  0
  0
Cash from financing (excl. dividends), $m  
  625
  1,746
  2,239
  2,792
  3,400
  4,053
  4,739
  5,444
  6,155
  6,861
  7,552
  8,215
  8,849
  9,448
  10,010
  10,532
  11,017
  11,466
  11,882
  12,271
  12,635
  12,980
  13,311
  13,633
  13,951
  14,270
  14,595
  14,928
  15,275
  15,675
  16,296
Total cash flow (excl. dividends), $m
  277
  452
  581
  725
  885
  1,060
  1,246
  1,442
  1,643
  1,848
  2,054
  2,254
  2,457
  2,656
  2,851
  3,041
  3,227
  3,408
  3,586
  3,762
  3,936
  4,110
  4,285
  4,461
  4,641
  4,825
  5,015
  5,211
  5,416
  5,664
  6,122
Retained Cash Flow (-), $m
  -444
  -745
  -953
  -1,192
  -1,458
  -1,747
  -2,056
  -2,380
  -2,713
  -3,053
  -3,395
  -3,735
  -4,070
  -4,400
  -4,723
  -5,038
  -5,345
  -5,646
  -5,941
  -6,233
  -6,521
  -6,809
  -7,098
  -7,391
  -7,689
  -7,994
  -8,308
  -8,633
  -8,972
  -9,325
  -9,695
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
 
  -292
  -373
  -467
  -572
  -687
  -810
  -938
  -1,070
  -1,205
  -1,340
  -1,480
  -1,613
  -1,744
  -1,872
  -1,997
  -2,119
  -2,238
  -2,355
  -2,471
  -2,585
  -2,699
  -2,814
  -2,930
  -3,048
  -3,169
  -3,293
  -3,422
  -3,556
  -3,662
  -3,572
Discount rate, %
 
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
 
  -274
  -324
  -375
  -421
  -459
  -488
  -505
  -510
  -503
  -485
  -459
  -423
  -382
  -338
  -293
  -248
  -206
  -168
  -133
  -104
  -79
  -59
  -43
  -30
  -21
  -14
  -9
  -6
  -4
  -2
Current shareholders' claim on cash, %
  100
  93.7
  88.3
  83.6
  79.6
  76.2
  73.2
  70.7
  68.5
  66.6
  64.9
  63.5
  62.3
  61.2
  60.3
  59.5
  58.8
  58.2
  57.7
  57.3
  56.9
  56.6
  56.4
  56.2
  56.0
  55.9
  55.8
  55.8
  55.8
  55.8
  55.8

Keyera Corp. operates as an energy midstream company in Canada and the United States. It owns and operates 15 raw gas gathering pipelines and processing plants with approximately 5,000 kilometers to collect and process raw natural gas, remove waste products, and separate the economic components. The company is also involved in the processing, fractionation, storage, transportation, and terminalling of natural gas liquids (NGLs), such as ethane, propane, butane, and condensate, as well as crude oil to customers through a network of facilities, including underground NGL storage caverns, ground storage tanks, NGL fractionation facilities, pipeline terminals, rail and truck terminals, NGL and crude oil pipelines, and AEF facilities; and produces iso-octane. In addition, it engages in marketing NGLs, crude oil, iso-octane, and sulphur, as well as propane, butane, and condensate, as well as the crude oil midstream activities. The company was formerly known as Keyera Facilities Income Fund and changed its name to Keyera Corp. in January 2011. Keyera Corp. is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Keyera Corp. (KEY)

Valuation Ratios
P/E Ratio 34
Price to Sales 2.9
Price to Book 4
Price to Tangible Book
Price to Cash Flow 17.9
Price to Free Cash Flow -48
Growth Rates
Sales Growth Rate -0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.7%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 90.8%
Total Debt to Equity 94%
Interest Coverage 5
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 6.7%
Return On Total Capital 6.6%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 13.4%
Return On Equity - 3 Yr. Avg. 16.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 25.7%
Gross Margin - 3 Yr. Avg. 24.6%
EBITDA Margin 22.4%
EBITDA Margin - 3 Yr. Avg. 19.5%
Operating Margin 12.2%
Oper. Margin - 3 Yr. Avg. 11.1%
Pre-Tax Margin 12.2%
Pre-Tax Margin - 3 Yr. Avg. 11.1%
Net Profit Margin 8.6%
Net Profit Margin - 3 Yr. Avg. 7.7%
Effective Tax Rate 29.3%
Eff/ Tax Rate - 3 Yr. Avg. 30.5%
Payout Ratio 126.3%

KEY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KEY stock intrinsic value calculation we used $2509 million for the last fiscal year's total revenue generated by Keyera Corp.. The default revenue input number comes from 2016 income statement of Keyera Corp.. 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 KEY stock valuation model: a) initial revenue growth rate of 40.4% 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 6.9%, whose default value for KEY is calculated based on our internal credit rating of Keyera Corp., 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 Keyera Corp..
    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 KEY stock the variable cost ratio is equal to 88%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for KEY 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 5% for Keyera Corp..

Corporate tax rate of 27% is the nominal tax rate for Keyera Corp.. 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 KEY 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 KEY are equal to 155.7%.

Life of production assets of 23 years is the average useful life of capital assets used in Keyera Corp. 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 KEY is equal to 3.6%. 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 - $1842 million for Keyera Corp. - 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 185.331 million for Keyera Corp. 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 Keyera Corp. at the current share price and the inputted number of shares is $7.4 billion.

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Stock chart of KEY Financial statements of KEY
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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