Intrinsic value of American Midstream Partners - AMID

Previous Close

$14.05

  Intrinsic Value

$5.37

stock screener

  Rating & Target

str. sell

-62%

  Value-price divergence*

-59%

Previous close

$14.05

 
Intrinsic value

$5.37

 
Up/down potential

-62%

 
Rating

str. sell

 
Value-price divergence*

-59%

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

We calculate the intrinsic value of AMID 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 0.4

 

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, %
  -1.27
  39.90
  36.41
  33.27
  30.44
  27.90
  25.61
  23.55
  21.69
  20.02
  18.52
  17.17
  15.95
  14.86
  13.87
  12.98
  12.19
  11.47
  10.82
  10.24
  9.71
  9.24
  8.82
  8.44
  8.09
  7.78
  7.51
  7.25
  7.03
  6.83
  6.64
Revenue, $m
  233
  326
  445
  593
  773
  989
  1,242
  1,534
  1,867
  2,241
  2,656
  3,112
  3,608
  4,144
  4,719
  5,332
  5,982
  6,668
  7,389
  8,146
  8,937
  9,763
  10,624
  11,520
  12,452
  13,422
  14,429
  15,476
  16,564
  17,695
  18,870
Variable operating expenses, $m
 
  482
  650
  859
  1,114
  1,418
  1,776
  2,189
  2,659
  3,187
  3,773
  4,395
  5,096
  5,854
  6,666
  7,531
  8,449
  9,418
  10,437
  11,505
  12,623
  13,789
  15,005
  16,271
  17,588
  18,957
  20,380
  21,859
  23,395
  24,992
  26,653
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
  256
  482
  650
  859
  1,114
  1,418
  1,776
  2,189
  2,659
  3,187
  3,773
  4,395
  5,096
  5,854
  6,666
  7,531
  8,449
  9,418
  10,437
  11,505
  12,623
  13,789
  15,005
  16,271
  17,588
  18,957
  20,380
  21,859
  23,395
  24,992
  26,653
Operating income, $m
  -23
  -156
  -205
  -266
  -341
  -430
  -534
  -655
  -792
  -946
  -1,117
  -1,283
  -1,488
  -1,709
  -1,946
  -2,199
  -2,467
  -2,750
  -3,048
  -3,360
  -3,686
  -4,027
  -4,382
  -4,751
  -5,136
  -5,536
  -5,951
  -6,383
  -6,832
  -7,298
  -7,783
EBITDA, $m
  23
  -76
  -104
  -139
  -181
  -232
  -291
  -360
  -438
  -526
  -623
  -730
  -847
  -972
  -1,107
  -1,251
  -1,403
  -1,564
  -1,734
  -1,911
  -2,097
  -2,290
  -2,492
  -2,703
  -2,921
  -3,149
  -3,385
  -3,631
  -3,886
  -4,151
  -4,427
Interest expense (income), $m
  17
  43
  64
  89
  122
  161
  208
  263
  326
  399
  480
  570
  669
  777
  894
  1,019
  1,152
  1,293
  1,442
  1,599
  1,764
  1,936
  2,115
  2,303
  2,498
  2,700
  2,911
  3,130
  3,358
  3,594
  3,840
Earnings before tax, $m
  1
  -200
  -269
  -356
  -462
  -590
  -742
  -917
  -1,118
  -1,345
  -1,597
  -1,854
  -2,158
  -2,487
  -2,840
  -3,218
  -3,619
  -4,043
  -4,490
  -4,959
  -5,450
  -5,962
  -6,497
  -7,054
  -7,633
  -8,236
  -8,862
  -9,513
  -10,189
  -10,892
  -11,623
Tax expense, $m
  2
  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
  -3
  -200
  -269
  -356
  -462
  -590
  -742
  -917
  -1,118
  -1,345
  -1,597
  -1,854
  -2,158
  -2,487
  -2,840
  -3,218
  -3,619
  -4,043
  -4,490
  -4,959
  -5,450
  -5,962
  -6,497
  -7,054
  -7,633
  -8,236
  -8,862
  -9,513
  -10,189
  -10,892
  -11,623

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  2,349
  3,293
  4,491
  5,986
  7,808
  9,986
  12,543
  15,497
  18,859
  22,635
  26,827
  31,433
  36,447
  41,862
  47,668
  53,858
  60,421
  67,349
  74,637
  82,278
  90,271
  98,615
  107,311
  116,365
  125,783
  135,573
  145,749
  156,323
  167,311
  178,733
  190,607
Adjusted assets (=assets-cash), $m
  2,343
  3,293
  4,491
  5,986
  7,808
  9,986
  12,543
  15,497
  18,859
  22,635
  26,827
  31,433
  36,447
  41,862
  47,668
  53,858
  60,421
  67,349
  74,637
  82,278
  90,271
  98,615
  107,311
  116,365
  125,783
  135,573
  145,749
  156,323
  167,311
  178,733
  190,607
Revenue / Adjusted assets
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
  0.099
Average production assets, $m
  1,069
  1,496
  2,040
  2,719
  3,546
  4,536
  5,697
  7,039
  8,566
  10,281
  12,185
  14,277
  16,555
  19,014
  21,652
  24,463
  27,444
  30,591
  33,901
  37,372
  41,002
  44,792
  48,742
  52,854
  57,132
  61,579
  66,201
  71,004
  75,995
  81,183
  86,576
Working capital, $m
  -16
  -24
  -32
  -43
  -56
  -72
  -91
  -112
  -136
  -164
  -194
  -227
  -263
  -303
  -345
  -389
  -437
  -487
  -539
  -595
  -652
  -713
  -776
  -841
  -909
  -980
  -1,053
  -1,130
  -1,209
  -1,292
  -1,378
Total debt, $m
  1,241
  1,819
  2,556
  3,475
  4,596
  5,935
  7,508
  9,325
  11,392
  13,714
  16,293
  19,125
  22,209
  25,539
  29,110
  32,917
  36,953
  41,214
  45,695
  50,395
  55,311
  60,442
  65,790
  71,358
  77,150
  83,172
  89,429
  95,932
  102,690
  109,715
  117,018
Total liabilities, $m
  1,447
  2,025
  2,762
  3,681
  4,802
  6,141
  7,714
  9,531
  11,598
  13,920
  16,499
  19,331
  22,415
  25,745
  29,316
  33,123
  37,159
  41,420
  45,901
  50,601
  55,517
  60,648
  65,996
  71,564
  77,356
  83,378
  89,635
  96,138
  102,896
  109,921
  117,224
Total equity, $m
  902
  1,268
  1,729
  2,304
  3,006
  3,845
  4,829
  5,966
  7,261
  8,714
  10,328
  12,102
  14,032
  16,117
  18,352
  20,735
  23,262
  25,929
  28,735
  31,677
  34,754
  37,967
  41,315
  44,800
  48,426
  52,196
  56,113
  60,184
  64,415
  68,812
  73,384
Total liabilities and equity, $m
  2,349
  3,293
  4,491
  5,985
  7,808
  9,986
  12,543
  15,497
  18,859
  22,634
  26,827
  31,433
  36,447
  41,862
  47,668
  53,858
  60,421
  67,349
  74,636
  82,278
  90,271
  98,615
  107,311
  116,364
  125,782
  135,574
  145,748
  156,322
  167,311
  178,733
  190,608
Debt-to-equity ratio
  1.376
  1.430
  1.480
  1.510
  1.530
  1.540
  1.550
  1.560
  1.570
  1.570
  1.580
  1.580
  1.580
  1.580
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
Adjusted equity ratio
  0.382
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3
  -200
  -269
  -356
  -462
  -590
  -742
  -917
  -1,118
  -1,345
  -1,597
  -1,854
  -2,158
  -2,487
  -2,840
  -3,218
  -3,619
  -4,043
  -4,490
  -4,959
  -5,450
  -5,962
  -6,497
  -7,054
  -7,633
  -8,236
  -8,862
  -9,513
  -10,189
  -10,892
  -11,623
Depreciation, amort., depletion, $m
  46
  80
  101
  127
  159
  198
  243
  295
  354
  420
  494
  553
  642
  737
  839
  948
  1,064
  1,186
  1,314
  1,449
  1,589
  1,736
  1,889
  2,049
  2,214
  2,387
  2,566
  2,752
  2,946
  3,147
  3,356
Funds from operations, $m
  46
  -120
  -168
  -228
  -303
  -393
  -499
  -623
  -764
  -924
  -1,103
  -1,300
  -1,516
  -1,750
  -2,001
  -2,270
  -2,555
  -2,858
  -3,176
  -3,510
  -3,860
  -4,226
  -4,608
  -5,005
  -5,419
  -5,849
  -6,296
  -6,761
  -7,244
  -7,745
  -8,267
Change in working capital, $m
  1
  -7
  -9
  -11
  -13
  -16
  -18
  -21
  -24
  -27
  -30
  -33
  -36
  -39
  -42
  -45
  -47
  -50
  -53
  -55
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -76
  -79
  -83
  -86
Cash from operations, $m
  45
  -113
  -159
  -218
  -290
  -377
  -481
  -601
  -740
  -897
  -1,073
  -1,267
  -1,480
  -1,710
  -1,959
  -2,225
  -2,508
  -2,808
  -3,123
  -3,455
  -3,803
  -4,166
  -4,545
  -4,940
  -5,351
  -5,778
  -6,223
  -6,684
  -7,164
  -7,663
  -8,181
Maintenance CAPEX, $m
  0
  -41
  -58
  -79
  -105
  -137
  -176
  -221
  -273
  -332
  -398
  -472
  -553
  -642
  -737
  -839
  -948
  -1,064
  -1,186
  -1,314
  -1,449
  -1,589
  -1,736
  -1,889
  -2,049
  -2,214
  -2,387
  -2,566
  -2,752
  -2,946
  -3,147
New CAPEX, $m
  -123
  -427
  -545
  -679
  -828
  -989
  -1,162
  -1,342
  -1,527
  -1,715
  -1,904
  -2,092
  -2,277
  -2,459
  -2,637
  -2,811
  -2,981
  -3,147
  -3,310
  -3,471
  -3,630
  -3,790
  -3,950
  -4,112
  -4,278
  -4,447
  -4,622
  -4,803
  -4,991
  -5,188
  -5,394
Cash from investing activities, $m
  -551
  -468
  -603
  -758
  -933
  -1,126
  -1,338
  -1,563
  -1,800
  -2,047
  -2,302
  -2,564
  -2,830
  -3,101
  -3,374
  -3,650
  -3,929
  -4,211
  -4,496
  -4,785
  -5,079
  -5,379
  -5,686
  -6,001
  -6,327
  -6,661
  -7,009
  -7,369
  -7,743
  -8,134
  -8,541
Free cash flow, $m
  -506
  -581
  -762
  -975
  -1,223
  -1,504
  -1,818
  -2,164
  -2,540
  -2,944
  -3,375
  -3,831
  -4,311
  -4,812
  -5,334
  -5,875
  -6,437
  -7,018
  -7,619
  -8,240
  -8,882
  -9,545
  -10,231
  -10,941
  -11,677
  -12,440
  -13,231
  -14,053
  -14,907
  -15,796
  -16,722
Issuance/(repayment) of debt, $m
  537
  583
  737
  919
  1,121
  1,340
  1,573
  1,816
  2,067
  2,322
  2,578
  2,833
  3,084
  3,330
  3,571
  3,806
  4,036
  4,261
  4,482
  4,700
  4,916
  5,131
  5,348
  5,568
  5,792
  6,021
  6,258
  6,503
  6,758
  7,024
  7,303
Issuance/(repurchase) of shares, $m
  37
  566
  730
  931
  1,164
  1,429
  1,726
  2,054
  2,412
  2,799
  3,211
  3,627
  4,088
  4,571
  5,076
  5,601
  6,146
  6,711
  7,296
  7,901
  8,527
  9,175
  9,845
  10,540
  11,259
  12,005
  12,780
  13,584
  14,420
  15,289
  16,195
Cash from financing (excl. dividends), $m  
  573
  1,149
  1,467
  1,850
  2,285
  2,769
  3,299
  3,870
  4,479
  5,121
  5,789
  6,460
  7,172
  7,901
  8,647
  9,407
  10,182
  10,972
  11,778
  12,601
  13,443
  14,306
  15,193
  16,108
  17,051
  18,026
  19,038
  20,087
  21,178
  22,313
  23,498
Total cash flow (excl. dividends), $m
  67
  568
  706
  874
  1,062
  1,265
  1,481
  1,707
  1,940
  2,177
  2,414
  2,628
  2,861
  3,090
  3,313
  3,532
  3,745
  3,954
  4,158
  4,360
  4,561
  4,761
  4,962
  5,166
  5,374
  5,587
  5,806
  6,034
  6,270
  6,517
  6,776
Retained Cash Flow (-), $m
  -615
  -566
  -730
  -931
  -1,164
  -1,429
  -1,726
  -2,054
  -2,412
  -2,799
  -3,211
  -3,627
  -4,088
  -4,571
  -5,076
  -5,601
  -6,146
  -6,711
  -7,296
  -7,901
  -8,527
  -9,175
  -9,845
  -10,540
  -11,259
  -12,005
  -12,780
  -13,584
  -14,420
  -15,289
  -16,195
Prev. year cash balance distribution, $m
 
  1
  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
 
  3
  -25
  -57
  -102
  -164
  -245
  -347
  -472
  -622
  -797
  -999
  -1,227
  -1,481
  -1,762
  -2,069
  -2,401
  -2,757
  -3,137
  -3,540
  -3,966
  -4,414
  -4,883
  -5,373
  -5,885
  -6,419
  -6,973
  -7,550
  -8,149
  -8,772
  -9,419
Discount rate, %
 
  10.20
  10.71
  11.25
  11.81
  12.40
  13.02
  13.67
  14.35
  15.07
  15.82
  16.61
  17.45
  18.32
  19.23
  20.20
  21.21
  22.27
  23.38
  24.55
  25.77
  27.06
  28.42
  29.84
  31.33
  32.90
  34.54
  36.27
  38.08
  39.99
  41.98
PV of cash for distribution, $m
 
  3
  -20
  -41
  -65
  -92
  -118
  -142
  -162
  -176
  -183
  -184
  -178
  -166
  -150
  -131
  -111
  -90
  -71
  -55
  -40
  -29
  -20
  -13
  -8
  -5
  -3
  -2
  -1
  -1
  0
Current shareholders' claim on cash, %
  100
  52.7
  28.9
  16.3
  9.5
  5.7
  3.4
  2.1
  1.4
  0.9
  0.6
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  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

American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas in the United States. The company’s Gathering and Processing segment provides gathering, compression, treating, processing, fractionating, transportation, and sale of natural gas, natural gas liquids (NGLs), and condensate. Its Transmission segment transports and delivers natural gas from producing wells, receipt points, or pipeline interconnects for shippers and other customers, which include local distribution companies, utilities and industrial, commercial, and power generation customers. The company’s Terminals segment provides above-ground storage services comprising petroleum products, distillates, chemicals, and agricultural products at its marine terminals that support various commercial customers, including commodity brokers, refiners and chemical manufacturers to store a range of products. It owns and operates 12 gathering systems, 5 processing facilities, 3 fractionation facilities, 3 marine terminal sites, 3 interstate pipelines, 5 intrastate pipelines, and 1 crude oil pipeline. The company also owns a 66.7% non-operated in Main Pass Oil Gathering System; a 50% undivided interest in the Burns Point Plant; a 46% non-operated interest in Mesquite; and a 12.9% non-operated indirect interest in Delta House. Its primary assets are located in Alabama, Georgia, Louisiana, Mississippi, North Dakota, Tennessee, Texas, and the Gulf of Mexico, provide infrastructure that links producers of natural gas, NGLs, condensate, and specialty chemicals to various intermediate and end-use markets. The company operates approximately 3,000 miles of pipelines; and 1.8 million barrels of storage capacity at 3 marine terminal sites. American Midstream GP, LLC serves as the general partner of the company. American Midstream Partners, LP was founded in 2009 and is headquartered in Denver, Colorado.

FINANCIAL RATIOS  of  American Midstream Partners (AMID)

Valuation Ratios
P/E Ratio -243.7
Price to Sales 3.1
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 16.2
Price to Free Cash Flow -9.4
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.2%
Cap. Spend. - 3 Yr. Gr. Rate 35.4%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 137%
Total Debt to Equity 137.6%
Interest Coverage 1
Management Effectiveness
Return On Assets -1.2%
Ret/ On Assets - 3 Yr. Avg. -9.3%
Return On Total Capital -0.2%
Ret/ On T. Cap. - 3 Yr. Avg. -11.2%
Return On Equity -0.5%
Return On Equity - 3 Yr. Avg. -22.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 60.1%
Gross Margin - 3 Yr. Avg. 50.3%
EBITDA Margin 27.5%
EBITDA Margin - 3 Yr. Avg. -8.2%
Operating Margin -9.9%
Oper. Margin - 3 Yr. Avg. -29.9%
Pre-Tax Margin 0.4%
Pre-Tax Margin - 3 Yr. Avg. -28.2%
Net Profit Margin -1.3%
Net Profit Margin - 3 Yr. Avg. -29%
Effective Tax Rate 200%
Eff/ Tax Rate - 3 Yr. Avg. 66.4%
Payout Ratio -2133.3%

AMID stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMID stock intrinsic value calculation we used $233 million for the last fiscal year's total revenue generated by American Midstream Partners. The default revenue input number comes from 2016 income statement of American Midstream Partners. 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 AMID stock valuation model: a) initial revenue growth rate of 39.9% 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 10.2%, whose default value for AMID is calculated based on our internal credit rating of American Midstream Partners, 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 American Midstream Partners.
    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 AMID stock the variable cost ratio is equal to 150.6%.

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 AMID 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 3.5% for American Midstream Partners.

Corporate tax rate of 27% is the nominal tax rate for American Midstream Partners. 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 AMID 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 AMID are equal to 458.8%.

Life of production assets of 25.8 years is the average useful life of capital assets used in American Midstream Partners 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 AMID is equal to -7.3%. 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 - $902 million for American Midstream Partners - 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 31.84 million for American Midstream Partners 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 American Midstream Partners at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Shipping Magnate Bets On Oil's Recovery---Energy Journal   [Jun-27-17 08:13AM  The Wall Street Journal]
▶ American Midstream Reports First Quarter 2017 Results   [May-10-17 06:58AM  Business Wire]
▶ [$$] Deal Close Announcements: March 6-10   [Mar-10-17 04:54PM  at The Wall Street Journal]
▶ Smaller MLPs May Outperform in 2017   [Mar-02-17 10:28AM  at Barrons.com]
▶ What Smart Money Thinks of American Midstream Partners LP (AMID)?   [Dec-20-16 04:59PM  at Insider Monkey]
▶ American Midstream Reports Third Quarter 2016 Results   [Nov-07-16 08:07PM  Business Wire]
▶ 4 stocks to watch   [02:06PM  at MarketWatch]
▶ American Midstream Maintains Quarterly Distribution   [Jul-21-16 04:20PM  Business Wire]
Stock chart of AMID Financial statements of AMID Annual reports of AMID
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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