Intrinsic value of Brookfield Infrastructure Partners - BIP

Previous Close

$43.88

  Intrinsic Value

$100.25

stock screener

  Rating & Target

str. buy

+128%

Previous close

$43.88

 
Intrinsic value

$100.25

 
Up/down potential

+128%

 
Rating

str. buy

We calculate the intrinsic value of BIP 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 16.2

 

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, %
  14.02
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  2,115
  3,384
  5,228
  7,819
  11,345
  16,006
  22,004
  29,536
  38,783
  49,904
  63,033
  78,273
  95,696
  115,346
  137,239
  161,369
  187,711
  216,227
  246,872
  279,596
  314,348
  351,085
  389,768
  430,367
  472,865
  517,253
  563,539
  611,742
  661,894
  714,041
  768,241
Variable operating expenses, $m
 
  2,352
  3,607
  5,369
  7,768
  10,938
  15,019
  20,143
  26,433
  33,998
  42,930
  53,246
  65,099
  78,466
  93,359
  109,774
  127,693
  147,092
  167,938
  190,199
  213,840
  238,831
  265,146
  292,764
  321,673
  351,869
  383,356
  416,147
  450,263
  485,737
  522,607
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
  1,676
  2,352
  3,607
  5,369
  7,768
  10,938
  15,019
  20,143
  26,433
  33,998
  42,930
  53,246
  65,099
  78,466
  93,359
  109,774
  127,693
  147,092
  167,938
  190,199
  213,840
  238,831
  265,146
  292,764
  321,673
  351,869
  383,356
  416,147
  450,263
  485,737
  522,607
Operating income, $m
  439
  1,032
  1,621
  2,450
  3,577
  5,067
  6,985
  9,394
  12,350
  15,906
  20,104
  25,027
  30,598
  36,880
  43,880
  51,595
  60,018
  69,136
  78,934
  89,397
  100,508
  112,254
  124,623
  137,604
  151,191
  165,384
  180,183
  195,595
  211,631
  228,304
  245,634
EBITDA, $m
  886
  1,779
  2,749
  4,110
  5,964
  8,415
  11,568
  15,528
  20,389
  26,235
  33,138
  41,149
  50,309
  60,639
  72,149
  84,834
  98,682
  113,674
  129,784
  146,987
  165,257
  184,570
  204,906
  226,250
  248,591
  271,927
  296,260
  321,601
  347,967
  375,381
  403,874
Interest expense (income), $m
  366
  366
  815
  1,461
  2,369
  3,605
  5,238
  7,340
  9,980
  13,220
  17,118
  21,719
  27,059
  33,165
  40,052
  47,724
  56,180
  65,412
  75,405
  86,144
  97,612
  109,791
  122,666
  136,222
  150,450
  165,343
  180,899
  197,119
  214,012
  231,587
  249,862
Earnings before tax, $m
  543
  666
  807
  989
  1,208
  1,463
  1,747
  2,053
  2,370
  2,686
  2,986
  3,308
  3,538
  3,715
  3,829
  3,871
  3,838
  3,724
  3,529
  3,252
  2,896
  2,463
  1,957
  1,382
  742
  41
  -715
  -1,524
  -2,381
  -3,283
  -4,229
Tax expense, $m
  15
  180
  218
  267
  326
  395
  472
  554
  640
  725
  806
  893
  955
  1,003
  1,034
  1,045
  1,036
  1,005
  953
  878
  782
  665
  528
  373
  200
  11
  0
  0
  0
  0
  0
Net income, $m
  373
  486
  589
  722
  882
  1,068
  1,275
  1,499
  1,730
  1,961
  2,180
  2,415
  2,583
  2,712
  2,795
  2,826
  2,801
  2,718
  2,576
  2,374
  2,114
  1,798
  1,429
  1,009
  541
  30
  -715
  -1,524
  -2,381
  -3,283
  -4,229

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  837
  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
  21,275
  32,854
  50,760
  75,912
  110,144
  155,397
  213,635
  286,761
  376,535
  484,509
  611,975
  759,934
  929,092
  1,119,868
  1,332,422
  1,566,691
  1,822,438
  2,099,296
  2,396,818
  2,714,521
  3,051,927
  3,408,597
  3,784,158
  4,178,325
  4,590,918
  5,021,875
  5,471,254
  5,939,243
  6,426,156
  6,932,435
  7,458,647
Adjusted assets (=assets-cash), $m
  20,438
  32,854
  50,760
  75,912
  110,144
  155,397
  213,635
  286,761
  376,535
  484,509
  611,975
  759,934
  929,092
  1,119,868
  1,332,422
  1,566,691
  1,822,438
  2,099,296
  2,396,818
  2,714,521
  3,051,927
  3,408,597
  3,784,158
  4,178,325
  4,590,918
  5,021,875
  5,471,254
  5,939,243
  6,426,156
  6,932,435
  7,458,647
Revenue / Adjusted assets
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
Average production assets, $m
  12,025
  19,238
  29,723
  44,450
  64,495
  90,994
  125,095
  167,914
  220,482
  283,707
  358,345
  444,983
  544,034
  655,744
  780,206
  917,384
  1,067,138
  1,229,253
  1,403,469
  1,589,501
  1,787,071
  1,995,921
  2,215,833
  2,446,639
  2,688,235
  2,940,584
  3,203,720
  3,477,754
  3,762,868
  4,059,322
  4,367,448
Working capital, $m
  117
  -233
  -361
  -540
  -783
  -1,104
  -1,518
  -2,038
  -2,676
  -3,443
  -4,349
  -5,401
  -6,603
  -7,959
  -9,470
  -11,134
  -12,952
  -14,920
  -17,034
  -19,292
  -21,690
  -24,225
  -26,894
  -29,695
  -32,628
  -35,690
  -38,884
  -42,210
  -45,671
  -49,269
  -53,009
Total debt, $m
  8,367
  17,337
  31,089
  50,405
  76,696
  111,450
  156,177
  212,337
  281,284
  364,208
  462,102
  575,734
  705,647
  852,164
  1,015,405
  1,195,324
  1,391,738
  1,604,364
  1,832,861
  2,076,857
  2,335,985
  2,609,908
  2,898,338
  3,201,058
  3,517,930
  3,848,905
  4,194,028
  4,553,444
  4,927,393
  5,316,215
  5,720,346
Total liabilities, $m
  16,262
  25,232
  38,984
  58,300
  84,591
  119,345
  164,072
  220,232
  289,179
  372,103
  469,997
  583,629
  713,542
  860,059
  1,023,300
  1,203,219
  1,399,633
  1,612,259
  1,840,756
  2,084,752
  2,343,880
  2,617,803
  2,906,233
  3,208,953
  3,525,825
  3,856,800
  4,201,923
  4,561,339
  4,935,288
  5,324,110
  5,728,241
Total equity, $m
  5,013
  7,622
  11,776
  17,611
  25,553
  36,052
  49,563
  66,529
  87,356
  112,406
  141,978
  176,305
  215,549
  259,809
  309,122
  363,472
  422,806
  487,037
  556,062
  629,769
  708,047
  790,795
  877,925
  969,371
  1,065,093
  1,165,075
  1,269,331
  1,377,904
  1,490,868
  1,608,325
  1,730,406
Total liabilities and equity, $m
  21,275
  32,854
  50,760
  75,911
  110,144
  155,397
  213,635
  286,761
  376,535
  484,509
  611,975
  759,934
  929,091
  1,119,868
  1,332,422
  1,566,691
  1,822,439
  2,099,296
  2,396,818
  2,714,521
  3,051,927
  3,408,598
  3,784,158
  4,178,324
  4,590,918
  5,021,875
  5,471,254
  5,939,243
  6,426,156
  6,932,435
  7,458,647
Debt-to-equity ratio
  1.669
  2.270
  2.640
  2.860
  3.000
  3.090
  3.150
  3.190
  3.220
  3.240
  3.250
  3.270
  3.270
  3.280
  3.280
  3.290
  3.290
  3.290
  3.300
  3.300
  3.300
  3.300
  3.300
  3.300
  3.300
  3.300
  3.300
  3.300
  3.310
  3.310
  3.310
Adjusted equity ratio
  0.204
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  373
  486
  589
  722
  882
  1,068
  1,275
  1,499
  1,730
  1,961
  2,180
  2,415
  2,583
  2,712
  2,795
  2,826
  2,801
  2,718
  2,576
  2,374
  2,114
  1,798
  1,429
  1,009
  541
  30
  -715
  -1,524
  -2,381
  -3,283
  -4,229
Depreciation, amort., depletion, $m
  447
  747
  1,127
  1,661
  2,387
  3,347
  4,583
  6,134
  8,039
  10,329
  13,034
  16,123
  19,711
  23,759
  28,268
  33,239
  38,664
  44,538
  50,850
  57,591
  64,749
  72,316
  80,284
  88,646
  97,400
  106,543
  116,077
  126,006
  136,336
  147,077
  158,241
Funds from operations, $m
  798
  1,233
  1,716
  2,382
  3,269
  4,415
  5,858
  7,633
  9,769
  12,290
  15,213
  18,537
  22,294
  26,471
  31,063
  36,065
  41,466
  47,257
  53,426
  59,965
  66,863
  74,114
  81,712
  89,655
  97,941
  106,573
  115,362
  124,482
  133,955
  143,793
  154,012
Change in working capital, $m
  45
  -88
  -127
  -179
  -243
  -322
  -414
  -520
  -638
  -767
  -906
  -1,052
  -1,202
  -1,356
  -1,511
  -1,665
  -1,818
  -1,968
  -2,114
  -2,258
  -2,398
  -2,535
  -2,669
  -2,801
  -2,932
  -3,063
  -3,194
  -3,326
  -3,460
  -3,598
  -3,740
Cash from operations, $m
  753
  1,321
  1,843
  2,561
  3,512
  4,736
  6,272
  8,153
  10,407
  13,057
  16,119
  19,589
  23,496
  27,827
  32,574
  37,730
  43,283
  49,224
  55,541
  62,223
  69,261
  76,649
  84,381
  92,456
  100,874
  109,636
  118,555
  127,808
  137,415
  147,392
  157,752
Maintenance CAPEX, $m
  0
  -436
  -697
  -1,077
  -1,611
  -2,337
  -3,297
  -4,532
  -6,084
  -7,988
  -10,279
  -12,984
  -16,123
  -19,711
  -23,759
  -28,268
  -33,239
  -38,664
  -44,538
  -50,850
  -57,591
  -64,749
  -72,316
  -80,284
  -88,646
  -97,400
  -106,543
  -116,077
  -126,006
  -136,336
  -147,077
New CAPEX, $m
  -690
  -7,214
  -10,485
  -14,728
  -20,045
  -26,498
  -34,102
  -42,819
  -52,568
  -63,225
  -74,638
  -86,638
  -99,051
  -111,710
  -124,462
  -137,178
  -149,754
  -162,115
  -174,215
  -186,033
  -197,570
  -208,850
  -219,911
  -230,806
  -241,596
  -252,349
  -263,136
  -274,033
  -285,114
  -296,454
  -308,126
Cash from investing activities, $m
  -1,058
  -7,650
  -11,182
  -15,805
  -21,656
  -28,835
  -37,399
  -47,351
  -58,652
  -71,213
  -84,917
  -99,622
  -115,174
  -131,421
  -148,221
  -165,446
  -182,993
  -200,779
  -218,753
  -236,883
  -255,161
  -273,599
  -292,227
  -311,090
  -330,242
  -349,749
  -369,679
  -390,110
  -411,120
  -432,790
  -455,203
Free cash flow, $m
  -305
  -6,329
  -9,339
  -13,243
  -18,143
  -24,099
  -31,126
  -39,199
  -48,245
  -58,156
  -68,798
  -80,033
  -91,678
  -103,595
  -115,647
  -127,716
  -139,709
  -151,556
  -163,213
  -174,660
  -185,900
  -196,950
  -207,846
  -218,634
  -229,369
  -240,113
  -251,124
  -262,302
  -273,705
  -285,398
  -297,451
Issuance/(repayment) of debt, $m
  770
  9,544
  13,752
  19,316
  26,290
  34,754
  44,727
  56,161
  68,947
  82,924
  97,893
  113,633
  129,913
  146,516
  163,241
  179,919
  196,414
  212,627
  228,497
  243,996
  259,128
  273,923
  288,431
  302,720
  316,872
  330,975
  345,123
  359,416
  373,949
  388,822
  404,130
Issuance/(repurchase) of shares, $m
  180
  2,386
  3,565
  5,113
  7,060
  9,431
  12,236
  15,466
  19,097
  23,089
  27,392
  31,912
  36,662
  41,548
  46,518
  51,524
  56,532
  61,513
  66,449
  71,333
  76,164
  80,949
  85,701
  90,438
  95,180
  99,952
  104,971
  110,097
  115,345
  120,740
  126,310
Cash from financing (excl. dividends), $m  
  1,443
  11,930
  17,317
  24,429
  33,350
  44,185
  56,963
  71,627
  88,044
  106,013
  125,285
  145,545
  166,575
  188,064
  209,759
  231,443
  252,946
  274,140
  294,946
  315,329
  335,292
  354,872
  374,132
  393,158
  412,052
  430,927
  450,094
  469,513
  489,294
  509,562
  530,440
Total cash flow (excl. dividends), $m
  1,131
  5,602
  7,978
  11,187
  15,207
  20,087
  25,836
  32,428
  39,799
  47,858
  56,488
  65,511
  74,898
  84,470
  94,112
  103,727
  113,236
  122,584
  131,733
  140,669
  149,393
  157,922
  166,286
  174,524
  182,683
  190,814
  198,971
  207,210
  215,589
  224,164
  232,989
Retained Cash Flow (-), $m
  -963
  -2,872
  -4,154
  -5,835
  -7,942
  -10,499
  -13,511
  -16,965
  -20,828
  -25,050
  -29,572
  -34,326
  -39,245
  -44,260
  -49,312
  -54,351
  -59,333
  -64,231
  -69,025
  -73,707
  -78,278
  -82,747
  -87,130
  -91,447
  -95,722
  -99,982
  -104,971
  -110,097
  -115,345
  -120,740
  -126,310
Prev. year cash balance distribution, $m
 
  263
  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
 
  2,993
  3,824
  5,351
  7,265
  9,588
  12,325
  15,463
  18,972
  22,808
  26,916
  31,185
  35,653
  40,209
  44,800
  49,376
  53,903
  58,353
  62,708
  66,962
  71,114
  75,175
  79,156
  83,078
  86,961
  90,832
  93,999
  97,113
  100,245
  103,424
  106,680
Discount rate, %
 
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
 
  2,733
  3,162
  3,969
  4,786
  5,552
  6,203
  6,683
  6,953
  6,994
  6,807
  6,406
  5,854
  5,188
  4,460
  3,722
  3,015
  2,370
  1,809
  1,339
  962
  670
  452
  295
  187
  114
  67
  38
  20
  11
  5
Current shareholders' claim on cash, %
  100
  86.5
  75.5
  66.6
  59.2
  53.1
  48.1
  43.8
  40.2
  37.2
  34.6
  32.3
  30.4
  28.6
  27.1
  25.8
  24.6
  23.5
  22.6
  21.7
  20.9
  20.2
  19.6
  19.0
  18.4
  17.9
  17.4
  16.9
  16.5
  16.1
  15.7

Brookfield Infrastructure Partners L.P. owns and operates utilities, transport, energy and communications infrastructure businesses in North and South America, Europe and Asia Pacific. The Company's segments include utilities, transport, energy, communications infrastructure and other. The utilities segment consists of regulated businesses, including regulated distribution (electricity and natural gas connections), electricity transmission and a regulated terminal (coal export terminal). The transport segment consists of open access systems that provide transportation, storage and handling services for freight, bulk commodities and passengers. The Company's energy segment consists of systems that provide transportation, storage and distribution services. The Company's communications infrastructure segment provides services and infrastructure to the media broadcasting and telecommunication sectors.

FINANCIAL RATIOS  of  Brookfield Infrastructure Partners (BIP)

Valuation Ratios
P/E Ratio 30.5
Price to Sales 5.4
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 15.1
Price to Free Cash Flow 180.7
Growth Rates
Sales Growth Rate 14%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 32.7%
Cap. Spend. - 3 Yr. Gr. Rate 10.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 155.5%
Total Debt to Equity 166.9%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 8.2%
Return On Equity - 3 Yr. Avg. 6.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 49.7%
Gross Margin - 3 Yr. Avg. 54.3%
EBITDA Margin 64.1%
EBITDA Margin - 3 Yr. Avg. 58.8%
Operating Margin 20.8%
Oper. Margin - 3 Yr. Avg. 26.9%
Pre-Tax Margin 25.7%
Pre-Tax Margin - 3 Yr. Avg. 21%
Net Profit Margin 17.6%
Net Profit Margin - 3 Yr. Avg. 12.6%
Effective Tax Rate 2.8%
Eff/ Tax Rate - 3 Yr. Avg. 8.9%
Payout Ratio 145.8%

BIP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BIP stock intrinsic value calculation we used $2115 million for the last fiscal year's total revenue generated by Brookfield Infrastructure Partners. The default revenue input number comes from 2016 income statement of Brookfield Infrastructure 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 BIP stock valuation model: a) initial revenue growth rate of 60% 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 9.5%, whose default value for BIP is calculated based on our internal credit rating of Brookfield Infrastructure 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 Brookfield Infrastructure 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 BIP stock the variable cost ratio is equal to 70.4%.

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 BIP 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 4.7% for Brookfield Infrastructure Partners.

Corporate tax rate of 27% is the nominal tax rate for Brookfield Infrastructure 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 BIP 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 BIP are equal to 568.5%.

Life of production assets of 27.6 years is the average useful life of capital assets used in Brookfield Infrastructure 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 BIP is equal to -6.9%. 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 - $5013 million for Brookfield Infrastructure 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 368.107 million for Brookfield Infrastructure 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 Brookfield Infrastructure Partners at the current share price and the inputted number of shares is $16.2 billion.

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Financial statements of BIP
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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