Intrinsic value of TransCanada Corporation - TRP

Previous Close

$62.48

  Intrinsic Value

$2.96

stock screener

  Rating & Target

str. sell

-95%

  Value-price divergence*

0%

Previous close

$62.48

 
Intrinsic value

$2.96

 
Up/down potential

-95%

 
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 TRP 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 54.4

 

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, %
  10.66
  16.90
  15.71
  14.64
  13.68
  12.81
  12.03
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.21
  6.98
  6.79
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
Revenue, $m
  12,505
  14,618
  16,915
  19,391
  22,043
  24,866
  27,857
  31,011
  34,327
  37,801
  41,434
  45,225
  49,175
  53,287
  57,563
  62,008
  66,628
  71,428
  76,417
  81,603
  86,995
  92,604
  98,439
  104,515
  110,843
  117,437
  124,313
  131,484
  138,968
  146,782
  154,944
Variable operating expenses, $m
 
  14,660
  16,744
  18,991
  21,397
  23,959
  26,672
  29,535
  32,543
  35,696
  38,992
  41,036
  44,621
  48,351
  52,232
  56,265
  60,457
  64,813
  69,340
  74,045
  78,938
  84,027
  89,322
  94,835
  100,577
  106,560
  112,799
  119,306
  126,097
  133,187
  140,593
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
  9,988
  14,660
  16,744
  18,991
  21,397
  23,959
  26,672
  29,535
  32,543
  35,696
  38,992
  41,036
  44,621
  48,351
  52,232
  56,265
  60,457
  64,813
  69,340
  74,045
  78,938
  84,027
  89,322
  94,835
  100,577
  106,560
  112,799
  119,306
  126,097
  133,187
  140,593
Operating income, $m
  2,517
  -42
  171
  400
  646
  907
  1,184
  1,476
  1,784
  2,105
  2,442
  4,189
  4,555
  4,935
  5,331
  5,743
  6,171
  6,616
  7,078
  7,558
  8,057
  8,577
  9,117
  9,680
  10,266
  10,877
  11,514
  12,178
  12,871
  13,595
  14,351
EBITDA, $m
  4,456
  3,386
  3,918
  4,492
  5,106
  5,760
  6,453
  7,184
  7,952
  8,757
  9,598
  10,477
  11,392
  12,344
  13,335
  14,364
  15,435
  16,547
  17,702
  18,904
  20,153
  21,452
  22,804
  24,211
  25,677
  27,205
  28,797
  30,459
  32,192
  34,002
  35,893
Interest expense (income), $m
  1,721
  1,885
  2,333
  2,827
  3,360
  3,931
  4,539
  5,183
  5,862
  6,576
  7,324
  8,106
  8,923
  9,773
  10,658
  11,579
  12,536
  13,531
  14,564
  15,638
  16,755
  17,916
  19,123
  20,380
  21,688
  23,050
  24,470
  25,950
  27,494
  29,105
  30,788
Earnings before tax, $m
  837
  -1,927
  -2,162
  -2,427
  -2,715
  -3,024
  -3,355
  -3,707
  -4,079
  -4,471
  -4,882
  -3,918
  -4,368
  -4,838
  -5,327
  -5,836
  -6,365
  -6,915
  -7,486
  -8,080
  -8,697
  -9,339
  -10,006
  -10,699
  -11,421
  -12,173
  -12,956
  -13,772
  -14,623
  -15,510
  -16,437
Tax expense, $m
  352
  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
Net income, $m
  233
  -1,927
  -2,162
  -2,427
  -2,715
  -3,024
  -3,355
  -3,707
  -4,079
  -4,471
  -4,882
  -3,918
  -4,368
  -4,838
  -5,327
  -5,836
  -6,365
  -6,915
  -7,486
  -8,080
  -8,697
  -9,339
  -10,006
  -10,699
  -11,421
  -12,173
  -12,956
  -13,772
  -14,623
  -15,510
  -16,437

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,016
  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
  88,051
  101,516
  117,464
  134,660
  153,075
  172,680
  193,448
  215,355
  238,380
  262,510
  287,738
  314,064
  341,495
  370,047
  399,743
  430,612
  462,693
  496,031
  530,677
  566,689
  604,133
  643,080
  683,608
  725,799
  769,744
  815,538
  863,282
  913,083
  965,056
  1,019,319
  1,075,998
Adjusted assets (=assets-cash), $m
  87,035
  101,516
  117,464
  134,660
  153,075
  172,680
  193,448
  215,355
  238,380
  262,510
  287,738
  314,064
  341,495
  370,047
  399,743
  430,612
  462,693
  496,031
  530,677
  566,689
  604,133
  643,080
  683,608
  725,799
  769,744
  815,538
  863,282
  913,083
  965,056
  1,019,319
  1,075,998
Revenue / Adjusted assets
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
Average production assets, $m
  52,160
  60,973
  70,552
  80,880
  91,941
  103,716
  116,190
  129,347
  143,177
  157,670
  172,822
  188,634
  205,110
  222,259
  240,095
  258,636
  277,905
  297,928
  318,737
  340,367
  362,857
  386,249
  410,591
  435,932
  462,327
  489,832
  518,508
  548,420
  579,636
  612,227
  646,270
Working capital, $m
  404
  2,339
  2,706
  3,103
  3,527
  3,979
  4,457
  4,962
  5,492
  6,048
  6,629
  7,236
  7,868
  8,526
  9,210
  9,921
  10,660
  11,429
  12,227
  13,057
  13,919
  14,817
  15,750
  16,722
  17,735
  18,790
  19,890
  21,037
  22,235
  23,485
  24,791
Total debt, $m
  44,855
  54,254
  65,753
  78,151
  91,428
  105,563
  120,537
  136,332
  152,933
  170,331
  188,520
  207,501
  227,279
  247,865
  269,276
  291,533
  314,663
  338,699
  363,679
  389,644
  416,641
  444,722
  473,942
  504,362
  536,046
  569,064
  603,487
  639,394
  676,866
  715,990
  756,856
Total liabilities, $m
  63,794
  73,193
  84,692
  97,090
  110,367
  124,502
  139,476
  155,271
  171,872
  189,270
  207,459
  226,440
  246,218
  266,804
  288,215
  310,472
  333,602
  357,638
  382,618
  408,583
  435,580
  463,661
  492,881
  523,301
  554,985
  588,003
  622,426
  658,333
  695,805
  734,929
  775,795
Total equity, $m
  24,257
  28,323
  32,773
  37,570
  42,708
  48,178
  53,972
  60,084
  66,508
  73,240
  80,279
  87,624
  95,277
  103,243
  111,528
  120,141
  129,091
  138,393
  148,059
  158,106
  168,553
  179,419
  190,727
  202,498
  214,759
  227,535
  240,856
  254,750
  269,251
  284,390
  300,203
Total liabilities and equity, $m
  88,051
  101,516
  117,465
  134,660
  153,075
  172,680
  193,448
  215,355
  238,380
  262,510
  287,738
  314,064
  341,495
  370,047
  399,743
  430,613
  462,693
  496,031
  530,677
  566,689
  604,133
  643,080
  683,608
  725,799
  769,744
  815,538
  863,282
  913,083
  965,056
  1,019,319
  1,075,998
Debt-to-equity ratio
  1.849
  1.920
  2.010
  2.080
  2.140
  2.190
  2.230
  2.270
  2.300
  2.330
  2.350
  2.370
  2.390
  2.400
  2.410
  2.430
  2.440
  2.450
  2.460
  2.460
  2.470
  2.480
  2.480
  2.490
  2.500
  2.500
  2.510
  2.510
  2.510
  2.520
  2.520
Adjusted equity ratio
  0.276
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  233
  -1,927
  -2,162
  -2,427
  -2,715
  -3,024
  -3,355
  -3,707
  -4,079
  -4,471
  -4,882
  -3,918
  -4,368
  -4,838
  -5,327
  -5,836
  -6,365
  -6,915
  -7,486
  -8,080
  -8,697
  -9,339
  -10,006
  -10,699
  -11,421
  -12,173
  -12,956
  -13,772
  -14,623
  -15,510
  -16,437
Depreciation, amort., depletion, $m
  1,939
  3,428
  3,748
  4,092
  4,460
  4,853
  5,269
  5,707
  6,168
  6,651
  7,157
  6,288
  6,837
  7,409
  8,003
  8,621
  9,263
  9,931
  10,625
  11,346
  12,095
  12,875
  13,686
  14,531
  15,411
  16,328
  17,284
  18,281
  19,321
  20,408
  21,542
Funds from operations, $m
  5,317
  1,501
  1,585
  1,665
  1,746
  1,829
  1,914
  2,001
  2,090
  2,181
  2,274
  2,370
  2,469
  2,571
  2,676
  2,786
  2,899
  3,016
  3,138
  3,265
  3,398
  3,536
  3,681
  3,832
  3,990
  4,155
  4,328
  4,509
  4,698
  4,897
  5,106
Change in working capital, $m
  248
  338
  367
  396
  424
  452
  478
  505
  530
  556
  581
  607
  632
  658
  684
  711
  739
  768
  798
  830
  863
  897
  934
  972
  1,012
  1,055
  1,100
  1,147
  1,197
  1,250
  1,306
Cash from operations, $m
  5,069
  1,163
  1,218
  1,268
  1,322
  1,377
  1,435
  1,496
  1,559
  1,625
  1,693
  1,764
  1,837
  1,913
  1,992
  2,074
  2,159
  2,248
  2,340
  2,436
  2,535
  2,639
  2,747
  2,860
  2,977
  3,100
  3,228
  3,361
  3,501
  3,647
  3,800
Maintenance CAPEX, $m
  0
  -1,739
  -2,032
  -2,352
  -2,696
  -3,065
  -3,457
  -3,873
  -4,312
  -4,773
  -5,256
  -5,761
  -6,288
  -6,837
  -7,409
  -8,003
  -8,621
  -9,263
  -9,931
  -10,625
  -11,346
  -12,095
  -12,875
  -13,686
  -14,531
  -15,411
  -16,328
  -17,284
  -18,281
  -19,321
  -20,408
New CAPEX, $m
  -5,302
  -8,813
  -9,579
  -10,328
  -11,060
  -11,775
  -12,474
  -13,157
  -13,829
  -14,493
  -15,153
  -15,812
  -16,476
  -17,149
  -17,836
  -18,541
  -19,269
  -20,023
  -20,809
  -21,630
  -22,490
  -23,393
  -24,342
  -25,341
  -26,394
  -27,505
  -28,676
  -29,912
  -31,216
  -32,592
  -34,043
Cash from investing activities, $m
  -18,783
  -10,552
  -11,611
  -12,680
  -13,756
  -14,840
  -15,931
  -17,030
  -18,141
  -19,266
  -20,409
  -21,573
  -22,764
  -23,986
  -25,245
  -26,544
  -27,890
  -29,286
  -30,740
  -32,255
  -33,836
  -35,488
  -37,217
  -39,027
  -40,925
  -42,916
  -45,004
  -47,196
  -49,497
  -51,913
  -54,451
Free cash flow, $m
  -13,714
  -9,389
  -10,393
  -11,411
  -12,435
  -13,463
  -14,496
  -15,534
  -16,582
  -17,641
  -18,715
  -19,809
  -20,927
  -22,073
  -23,252
  -24,470
  -25,730
  -27,039
  -28,400
  -29,819
  -31,300
  -32,849
  -34,470
  -36,168
  -37,948
  -39,816
  -41,776
  -43,834
  -45,996
  -48,266
  -50,651
Issuance/(repayment) of debt, $m
  6,400
  10,415
  11,499
  12,398
  13,277
  14,135
  14,974
  15,794
  16,601
  17,398
  18,189
  18,981
  19,778
  20,586
  21,411
  22,257
  23,130
  24,036
  24,980
  25,965
  26,997
  28,081
  29,220
  30,420
  31,684
  33,017
  34,423
  35,907
  37,472
  39,124
  40,866
Issuance/(repurchase) of shares, $m
  9,207
  5,993
  6,612
  7,225
  7,852
  8,494
  9,149
  9,819
  10,503
  11,203
  11,921
  11,263
  12,021
  12,804
  13,612
  14,448
  15,315
  16,216
  17,152
  18,128
  19,144
  20,205
  21,313
  22,471
  23,682
  24,949
  26,277
  27,667
  29,123
  30,650
  32,250
Cash from financing (excl. dividends), $m  
  15,543
  16,408
  18,111
  19,623
  21,129
  22,629
  24,123
  25,613
  27,104
  28,601
  30,110
  30,244
  31,799
  33,390
  35,023
  36,705
  38,445
  40,252
  42,132
  44,093
  46,141
  48,286
  50,533
  52,891
  55,366
  57,966
  60,700
  63,574
  66,595
  69,774
  73,116
Total cash flow (excl. dividends), $m
  1,702
  7,020
  7,717
  8,211
  8,695
  9,166
  9,627
  10,079
  10,522
  10,960
  11,395
  10,434
  10,873
  11,317
  11,770
  12,235
  12,716
  13,214
  13,732
  14,274
  14,841
  15,437
  16,063
  16,723
  17,418
  18,151
  18,924
  19,739
  20,600
  21,508
  22,465
Retained Cash Flow (-), $m
  -7,819
  -5,993
  -6,612
  -7,225
  -7,852
  -8,494
  -9,149
  -9,819
  -10,503
  -11,203
  -11,921
  -11,263
  -12,021
  -12,804
  -13,612
  -14,448
  -15,315
  -16,216
  -17,152
  -18,128
  -19,144
  -20,205
  -21,313
  -22,471
  -23,682
  -24,949
  -26,277
  -27,667
  -29,123
  -30,650
  -32,250
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
 
  1,027
  1,105
  987
  842
  672
  478
  260
  19
  -243
  -526
  -828
  -1,149
  -1,487
  -1,842
  -2,213
  -2,600
  -3,002
  -3,420
  -3,854
  -4,303
  -4,768
  -5,249
  -5,748
  -6,264
  -6,799
  -7,353
  -7,927
  -8,523
  -9,142
  -9,785
Discount rate, %
 
  10.10
  10.61
  11.14
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.05
  20.00
  21.00
  22.05
  23.15
  24.31
  25.52
  26.80
  28.14
  29.55
  31.02
  32.57
  34.20
  35.91
  37.71
  39.59
  41.57
PV of cash for distribution, $m
 
  932
  904
  719
  541
  377
  231
  107
  7
  -70
  -123
  -155
  -170
  -170
  -160
  -144
  -123
  -102
  -81
  -62
  -46
  -33
  -22
  -15
  -10
  -6
  -4
  -2
  -1
  -1
  0
Current shareholders' claim on cash, %
  100
  90.1
  81.6
  74.3
  68.0
  62.4
  57.6
  53.2
  49.4
  45.9
  42.8
  40.3
  38.0
  35.8
  33.9
  32.0
  30.3
  28.7
  27.2
  25.8
  24.5
  23.2
  22.0
  20.9
  19.9
  18.9
  18.0
  17.1
  16.3
  15.5
  14.8

TransCanada Corporation is an energy infrastructure company. The Company is engaged in the development and operation of North American energy infrastructure, including natural gas and liquids pipelines, power generation and natural gas storage facilities. Its segments include Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines and Energy. The Company operates in three businesses: Natural Gas Pipelines, Liquids Pipelines and Energy. The Natural Gas Pipelines and Liquids Pipelines segments principally consist of its respective natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States. The Energy segment includes its power operations and the non-regulated natural gas storage business in Canada. TransCanada PipeLines Limited (TCPL) is its principal operating subsidiary.

FINANCIAL RATIOS  of  TransCanada Corporation (TRP)

Valuation Ratios
P/E Ratio 231.7
Price to Sales 4.3
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 10.6
Price to Free Cash Flow -231.7
Growth Rates
Sales Growth Rate 10.7%
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 3.5%
Financial Strength
Quick Ratio 0
Current Ratio 0.6
LT Debt to Equity 174.1%
Total Debt to Equity 184.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 0.4%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity 1.1%
Return On Equity - 3 Yr. Avg. 1.5%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 52.1%
Gross Margin - 3 Yr. Avg. 52.1%
EBITDA Margin 36%
EBITDA Margin - 3 Yr. Avg. 35.9%
Operating Margin 20.1%
Oper. Margin - 3 Yr. Avg. 16.9%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 8.2%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 42.1%
Eff/ Tax Rate - 3 Yr. Avg. 22.8%
Payout Ratio 659.2%

TRP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRP stock intrinsic value calculation we used $12505 million for the last fiscal year's total revenue generated by TransCanada Corporation. The default revenue input number comes from 2016 income statement of TransCanada 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 TRP stock valuation model: a) initial revenue growth rate of 16.9% 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 10.1%, whose default value for TRP is calculated based on our internal credit rating of TransCanada 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 TransCanada 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 TRP stock the variable cost ratio is equal to 101.9%.

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 TRP 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 TransCanada Corporation.

Corporate tax rate of 27% is the nominal tax rate for TransCanada 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 TRP 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 TRP are equal to 417.1%.

Life of production assets of 31.7 years is the average useful life of capital assets used in TransCanada 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 TRP is equal to 16%. 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 - $24257 million for TransCanada 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 871.045 million for TransCanada 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 TransCanada Corporation at the current share price and the inputted number of shares is $54.4 billion.

RELATED COMPANIES Price Int.Val. Rating
SU Suncor Energy 42.13 6.71  str.sell
CU Canadian Utili 38.10 71.13  str.buy
PPL Pembina Pipeli 42.26 5.17  str.sell
TA TransAlta Corp 7.44 2.70  str.sell
KEY Keyera Corp. 38.58 2.37  str.sell
VSN Veresen Inc. 18.12 5.25  str.sell
IPL Inter Pipeline 23.87 1.90  str.sell
Financial statements of TRP
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.