Intrinsic value of Pembina Pipeline Corporation - PPL

Previous Close

$42.12

  Intrinsic Value

$5.17

stock screener

  Rating & Target

str. sell

-88%

  Value-price divergence*

0%

Previous close

$42.12

 
Intrinsic value

$5.17

 
Up/down potential

-88%

 
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 PPL 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 16.9

 

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, %
  -7.98
  13.50
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.96
  7.67
  7.40
  7.16
  6.94
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
Revenue, $m
  4,265
  4,841
  5,453
  6,101
  6,784
  7,502
  8,254
  9,039
  9,859
  10,712
  11,601
  12,524
  13,485
  14,483
  15,520
  16,597
  17,718
  18,883
  20,095
  21,356
  22,669
  24,036
  25,462
  26,948
  28,498
  30,116
  31,806
  33,571
  35,415
  37,344
  39,360
Variable operating expenses, $m
 
  4,124
  4,646
  5,198
  5,780
  6,392
  7,032
  7,701
  8,399
  9,127
  9,884
  10,671
  11,489
  12,339
  13,223
  14,141
  15,096
  16,088
  17,121
  18,195
  19,314
  20,479
  21,693
  22,960
  24,281
  25,659
  27,099
  28,602
  30,174
  31,817
  33,535
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
  3,458
  4,124
  4,646
  5,198
  5,780
  6,392
  7,032
  7,701
  8,399
  9,127
  9,884
  10,671
  11,489
  12,339
  13,223
  14,141
  15,096
  16,088
  17,121
  18,195
  19,314
  20,479
  21,693
  22,960
  24,281
  25,659
  27,099
  28,602
  30,174
  31,817
  33,535
Operating income, $m
  807
  716
  807
  903
  1,004
  1,110
  1,222
  1,338
  1,459
  1,585
  1,717
  1,854
  1,996
  2,143
  2,297
  2,456
  2,622
  2,795
  2,974
  3,161
  3,355
  3,557
  3,768
  3,988
  4,218
  4,457
  4,707
  4,969
  5,241
  5,527
  5,825
EBITDA, $m
  1,100
  1,213
  1,366
  1,529
  1,700
  1,879
  2,068
  2,265
  2,470
  2,684
  2,906
  3,138
  3,378
  3,628
  3,888
  4,158
  4,439
  4,731
  5,034
  5,350
  5,679
  6,022
  6,379
  6,751
  7,140
  7,545
  7,968
  8,411
  8,873
  9,356
  9,861
Interest expense (income), $m
  163
  182
  222
  264
  309
  356
  406
  458
  512
  569
  628
  689
  753
  820
  889
  960
  1,035
  1,112
  1,193
  1,277
  1,364
  1,455
  1,549
  1,648
  1,751
  1,858
  1,970
  2,087
  2,209
  2,336
  2,470
Earnings before tax, $m
  655
  534
  585
  639
  695
  754
  816
  880
  947
  1,017
  1,089
  1,164
  1,243
  1,324
  1,408
  1,496
  1,587
  1,682
  1,781
  1,884
  1,991
  2,103
  2,219
  2,340
  2,467
  2,599
  2,737
  2,882
  3,033
  3,190
  3,356
Tax expense, $m
  189
  144
  158
  173
  188
  204
  220
  238
  256
  274
  294
  314
  335
  357
  380
  404
  429
  454
  481
  509
  538
  568
  599
  632
  666
  702
  739
  778
  819
  861
  906
Net income, $m
  466
  390
  427
  466
  507
  551
  595
  642
  691
  742
  795
  850
  907
  966
  1,028
  1,092
  1,159
  1,228
  1,300
  1,375
  1,453
  1,535
  1,620
  1,708
  1,801
  1,897
  1,998
  2,104
  2,214
  2,329
  2,450

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  35
  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
  15,017
  16,985
  19,134
  21,408
  23,805
  26,323
  28,960
  31,716
  34,591
  37,587
  40,704
  43,945
  47,315
  50,816
  54,455
  58,237
  62,168
  66,255
  70,507
  74,932
  79,539
  84,338
  89,339
  94,554
  99,994
  105,672
  111,600
  117,793
  124,265
  131,031
  138,107
Adjusted assets (=assets-cash), $m
  14,982
  16,985
  19,134
  21,408
  23,805
  26,323
  28,960
  31,716
  34,591
  37,587
  40,704
  43,945
  47,315
  50,816
  54,455
  58,237
  62,168
  66,255
  70,507
  74,932
  79,539
  84,338
  89,339
  94,554
  99,994
  105,672
  111,600
  117,793
  124,265
  131,031
  138,107
Revenue / Adjusted assets
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
Average production assets, $m
  13,121
  14,890
  16,774
  18,767
  20,869
  23,076
  25,388
  27,804
  30,325
  32,951
  35,683
  38,525
  41,479
  44,549
  47,738
  51,054
  54,500
  58,083
  61,811
  65,690
  69,729
  73,936
  78,320
  82,892
  87,661
  92,638
  97,835
  103,264
  108,938
  114,870
  121,073
Working capital, $m
  -109
  -155
  -175
  -195
  -217
  -240
  -264
  -289
  -315
  -343
  -371
  -401
  -432
  -463
  -497
  -531
  -567
  -604
  -643
  -683
  -725
  -769
  -815
  -862
  -912
  -964
  -1,018
  -1,074
  -1,133
  -1,195
  -1,260
Total debt, $m
  4,151
  5,039
  6,002
  7,021
  8,095
  9,223
  10,404
  11,639
  12,927
  14,269
  15,665
  17,117
  18,627
  20,196
  21,826
  23,520
  25,281
  27,112
  29,017
  31,000
  33,063
  35,213
  37,454
  39,790
  42,227
  44,771
  47,427
  50,201
  53,101
  56,132
  59,302
Total liabilities, $m
  6,721
  7,609
  8,572
  9,591
  10,665
  11,793
  12,974
  14,209
  15,497
  16,839
  18,235
  19,687
  21,197
  22,766
  24,396
  26,090
  27,851
  29,682
  31,587
  33,570
  35,633
  37,783
  40,024
  42,360
  44,797
  47,341
  49,997
  52,771
  55,671
  58,702
  61,872
Total equity, $m
  8,296
  9,376
  10,562
  11,817
  13,140
  14,530
  15,986
  17,507
  19,094
  20,748
  22,468
  24,258
  26,118
  28,051
  30,059
  32,147
  34,317
  36,573
  38,920
  41,362
  43,906
  46,555
  49,315
  52,194
  55,197
  58,331
  61,603
  65,022
  68,594
  72,329
  76,235
Total liabilities and equity, $m
  15,017
  16,985
  19,134
  21,408
  23,805
  26,323
  28,960
  31,716
  34,591
  37,587
  40,703
  43,945
  47,315
  50,817
  54,455
  58,237
  62,168
  66,255
  70,507
  74,932
  79,539
  84,338
  89,339
  94,554
  99,994
  105,672
  111,600
  117,793
  124,265
  131,031
  138,107
Debt-to-equity ratio
  0.500
  0.540
  0.570
  0.590
  0.620
  0.630
  0.650
  0.660
  0.680
  0.690
  0.700
  0.710
  0.710
  0.720
  0.730
  0.730
  0.740
  0.740
  0.750
  0.750
  0.750
  0.760
  0.760
  0.760
  0.770
  0.770
  0.770
  0.770
  0.770
  0.780
  0.780
Adjusted equity ratio
  0.551
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  466
  390
  427
  466
  507
  551
  595
  642
  691
  742
  795
  850
  907
  966
  1,028
  1,092
  1,159
  1,228
  1,300
  1,375
  1,453
  1,535
  1,620
  1,708
  1,801
  1,897
  1,998
  2,104
  2,214
  2,329
  2,450
Depreciation, amort., depletion, $m
  293
  496
  559
  626
  696
  769
  846
  927
  1,011
  1,098
  1,189
  1,284
  1,383
  1,485
  1,591
  1,702
  1,817
  1,936
  2,060
  2,190
  2,324
  2,465
  2,611
  2,763
  2,922
  3,088
  3,261
  3,442
  3,631
  3,829
  4,036
Funds from operations, $m
  949
  886
  986
  1,092
  1,203
  1,320
  1,442
  1,569
  1,702
  1,840
  1,984
  2,134
  2,290
  2,451
  2,619
  2,794
  2,975
  3,164
  3,361
  3,565
  3,778
  3,999
  4,230
  4,471
  4,723
  4,985
  5,259
  5,546
  5,845
  6,158
  6,485
Change in working capital, $m
  -128
  -18
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -62
  -65
Cash from operations, $m
  1,077
  905
  1,006
  1,113
  1,225
  1,343
  1,466
  1,594
  1,728
  1,868
  2,013
  2,164
  2,320
  2,483
  2,653
  2,828
  3,011
  3,201
  3,399
  3,605
  3,820
  4,043
  4,276
  4,519
  4,773
  5,037
  5,314
  5,602
  5,904
  6,220
  6,550
Maintenance CAPEX, $m
  0
  -437
  -496
  -559
  -626
  -696
  -769
  -846
  -927
  -1,011
  -1,098
  -1,189
  -1,284
  -1,383
  -1,485
  -1,591
  -1,702
  -1,817
  -1,936
  -2,060
  -2,190
  -2,324
  -2,465
  -2,611
  -2,763
  -2,922
  -3,088
  -3,261
  -3,442
  -3,631
  -3,829
New CAPEX, $m
  -1,745
  -1,770
  -1,884
  -1,994
  -2,101
  -2,207
  -2,312
  -2,416
  -2,521
  -2,626
  -2,733
  -2,842
  -2,954
  -3,070
  -3,190
  -3,315
  -3,446
  -3,583
  -3,728
  -3,879
  -4,039
  -4,207
  -4,384
  -4,572
  -4,769
  -4,977
  -5,197
  -5,429
  -5,674
  -5,932
  -6,203
Cash from investing activities, $m
  -2,286
  -2,207
  -2,380
  -2,553
  -2,727
  -2,903
  -3,081
  -3,262
  -3,448
  -3,637
  -3,831
  -4,031
  -4,238
  -4,453
  -4,675
  -4,906
  -5,148
  -5,400
  -5,664
  -5,939
  -6,229
  -6,531
  -6,849
  -7,183
  -7,532
  -7,899
  -8,285
  -8,690
  -9,116
  -9,563
  -10,032
Free cash flow, $m
  -1,209
  -1,302
  -1,374
  -1,440
  -1,502
  -1,560
  -1,615
  -1,668
  -1,719
  -1,769
  -1,818
  -1,867
  -1,918
  -1,969
  -2,022
  -2,078
  -2,137
  -2,199
  -2,264
  -2,334
  -2,409
  -2,488
  -2,573
  -2,663
  -2,760
  -2,862
  -2,972
  -3,088
  -3,212
  -3,343
  -3,483
Issuance/(repayment) of debt, $m
  817
  894
  963
  1,019
  1,074
  1,128
  1,182
  1,235
  1,288
  1,342
  1,396
  1,452
  1,510
  1,569
  1,630
  1,694
  1,761
  1,831
  1,905
  1,982
  2,064
  2,150
  2,241
  2,336
  2,437
  2,544
  2,656
  2,774
  2,899
  3,031
  3,170
Issuance/(repurchase) of shares, $m
  781
  719
  759
  789
  816
  839
  860
  879
  896
  911
  926
  939
  953
  966
  981
  995
  1,011
  1,028
  1,047
  1,067
  1,090
  1,114
  1,141
  1,170
  1,202
  1,237
  1,274
  1,315
  1,359
  1,406
  1,456
Cash from financing (excl. dividends), $m  
  1,567
  1,613
  1,722
  1,808
  1,890
  1,967
  2,042
  2,114
  2,184
  2,253
  2,322
  2,391
  2,463
  2,535
  2,611
  2,689
  2,772
  2,859
  2,952
  3,049
  3,154
  3,264
  3,382
  3,506
  3,639
  3,781
  3,930
  4,089
  4,258
  4,437
  4,626
Total cash flow (excl. dividends), $m
  358
  311
  347
  368
  388
  407
  426
  446
  465
  484
  504
  524
  545
  566
  588
  611
  636
  661
  687
  715
  745
  776
  809
  843
  880
  918
  959
  1,001
  1,046
  1,094
  1,144
Retained Cash Flow (-), $m
  -872
  -1,109
  -1,186
  -1,255
  -1,323
  -1,390
  -1,456
  -1,521
  -1,587
  -1,653
  -1,721
  -1,789
  -1,860
  -1,933
  -2,009
  -2,087
  -2,170
  -2,256
  -2,347
  -2,443
  -2,543
  -2,649
  -2,761
  -2,879
  -3,003
  -3,134
  -3,272
  -3,418
  -3,572
  -3,735
  -3,906
Prev. year cash balance distribution, $m
 
  29
  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
 
  -769
  -839
  -888
  -936
  -983
  -1,029
  -1,076
  -1,122
  -1,169
  -1,217
  -1,265
  -1,315
  -1,367
  -1,420
  -1,476
  -1,534
  -1,595
  -1,660
  -1,727
  -1,798
  -1,873
  -1,952
  -2,035
  -2,123
  -2,216
  -2,314
  -2,417
  -2,526
  -2,641
  -2,762
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  -725
  -741
  -730
  -712
  -687
  -656
  -621
  -581
  -538
  -493
  -446
  -400
  -354
  -309
  -267
  -227
  -191
  -157
  -128
  -102
  -80
  -62
  -47
  -34
  -25
  -18
  -12
  -8
  -5
  -3
Current shareholders' claim on cash, %
  100
  95.9
  92.2
  89.0
  86.1
  83.4
  81.1
  79.0
  77.0
  75.3
  73.6
  72.2
  70.8
  69.5
  68.4
  67.3
  66.3
  65.3
  64.4
  63.5
  62.7
  61.9
  61.2
  60.5
  59.8
  59.2
  58.6
  57.9
  57.4
  56.8
  56.2

Pembina Pipeline Corporation is an energy transportation and service provider. The Company operates through four segments. The Conventional Pipelines segment consists of the tariff-based operations of pipelines and related facilities to deliver crude oil, condensate and natural gas liquids (NGL) in Alberta, British Columbia, Saskatchewan, and North Dakota, United States. The Oil Sands & Heavy Oil segment consists of the Syncrude, Horizon, Nipisi and Mitsue Pipelines, and the Cheecham Lateral. These pipelines and related facilities deliver synthetic crude oil produced from oil sands under long-term cost-of-service arrangements. The Gas Services segment consists of natural gas gathering and processing facilities. The Midstream segment consists of the Company's interests in extraction and fractionation facilities, terminalling and storage hub services under a mixture of short, medium and long-term contractual arrangements.

FINANCIAL RATIOS  of  Pembina Pipeline Corporation (PPL)

Valuation Ratios
P/E Ratio 35.9
Price to Sales 3.9
Price to Book 2
Price to Tangible Book
Price to Cash Flow 15.5
Price to Free Cash Flow -25
Growth Rates
Sales Growth Rate -8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.6%
Cap. Spend. - 3 Yr. Gr. Rate 14.7%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 50%
Total Debt to Equity 50%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 5.9%
Return On Equity - 3 Yr. Avg. 6.2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 23.5%
Gross Margin - 3 Yr. Avg. 18.9%
EBITDA Margin 26%
EBITDA Margin - 3 Yr. Avg. 20.9%
Operating Margin 18.9%
Oper. Margin - 3 Yr. Avg. 15.1%
Pre-Tax Margin 15.4%
Pre-Tax Margin - 3 Yr. Avg. 12.5%
Net Profit Margin 10.9%
Net Profit Margin - 3 Yr. Avg. 8.7%
Effective Tax Rate 28.9%
Eff/ Tax Rate - 3 Yr. Avg. 30.7%
Payout Ratio 75.3%

PPL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PPL stock intrinsic value calculation we used $4265 million for the last fiscal year's total revenue generated by Pembina Pipeline Corporation. The default revenue input number comes from 2016 income statement of Pembina Pipeline Corporation. 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 PPL stock valuation model: a) initial revenue growth rate of 13.5% 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 6.1%, whose default value for PPL is calculated based on our internal credit rating of Pembina Pipeline Corporation, 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 Pembina Pipeline Corporation.
    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 PPL stock the variable cost ratio is equal to 85.2%.

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 PPL 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 Pembina Pipeline Corporation.

Corporate tax rate of 27% is the nominal tax rate for Pembina Pipeline Corporation. 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 PPL 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 PPL are equal to 307.6%.

Life of production assets of 44.8 years is the average useful life of capital assets used in Pembina Pipeline Corporation 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 PPL is equal to -3.2%. 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 - $8296 million for Pembina Pipeline Corporation - 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 401.255 million for Pembina Pipeline Corporation 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 Pembina Pipeline Corporation at the current share price and the inputted number of shares is $16.9 billion.

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Financial statements of PPL
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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