Intrinsic value of Buckeye Partners - BPL

Previous Close

$55.68

  Intrinsic Value

$6.04

stock screener

  Rating & Target

str. sell

-89%

  Value-price divergence*

-61%

Previous close

$55.68

 
Intrinsic value

$6.04

 
Up/down potential

-89%

 
Rating

str. sell

 
Value-price divergence*

-61%

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

We calculate the intrinsic value of BPL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 7.9

 

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, %
  -5.94
  24.10
  22.19
  20.47
  18.92
  17.53
  16.28
  15.15
  14.14
  13.22
  12.40
  11.66
  10.99
  10.39
  9.85
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
Revenue, $m
  3,248
  4,031
  4,925
  5,933
  7,056
  8,293
  9,643
  11,104
  12,674
  14,350
  16,129
  18,010
  19,990
  22,067
  24,242
  26,514
  28,882
  31,348
  33,914
  36,582
  39,355
  42,237
  45,231
  48,344
  51,579
  54,944
  58,445
  62,088
  65,882
  69,835
  73,955
Variable operating expenses, $m
 
  3,301
  4,011
  4,812
  5,704
  6,686
  7,758
  8,918
  10,164
  11,495
  12,908
  14,301
  15,873
  17,523
  19,250
  21,053
  22,934
  24,892
  26,930
  29,048
  31,250
  33,538
  35,916
  38,388
  40,957
  43,629
  46,408
  49,302
  52,314
  55,453
  58,724
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,515
  3,301
  4,011
  4,812
  5,704
  6,686
  7,758
  8,918
  10,164
  11,495
  12,908
  14,301
  15,873
  17,523
  19,250
  21,053
  22,934
  24,892
  26,930
  29,048
  31,250
  33,538
  35,916
  38,388
  40,957
  43,629
  46,408
  49,302
  52,314
  55,453
  58,724
Operating income, $m
  733
  730
  914
  1,121
  1,353
  1,607
  1,885
  2,186
  2,510
  2,855
  3,221
  3,709
  4,117
  4,545
  4,992
  5,460
  5,948
  6,456
  6,984
  7,534
  8,105
  8,698
  9,315
  9,956
  10,622
  11,315
  12,036
  12,787
  13,568
  14,382
  15,230
EBITDA, $m
  988
  1,111
  1,358
  1,636
  1,946
  2,287
  2,659
  3,062
  3,495
  3,957
  4,447
  4,966
  5,512
  6,085
  6,685
  7,311
  7,964
  8,644
  9,352
  10,087
  10,852
  11,646
  12,472
  13,330
  14,223
  15,150
  16,116
  17,120
  18,166
  19,256
  20,392
Interest expense (income), $m
  175
  181
  233
  292
  359
  433
  515
  605
  702
  806
  917
  1,034
  1,159
  1,290
  1,428
  1,572
  1,722
  1,879
  2,043
  2,213
  2,389
  2,573
  2,764
  2,962
  3,168
  3,383
  3,606
  3,838
  4,079
  4,330
  4,592
Earnings before tax, $m
  550
  548
  681
  829
  994
  1,174
  1,370
  1,582
  1,808
  2,049
  2,305
  2,675
  2,958
  3,254
  3,565
  3,888
  4,226
  4,577
  4,942
  5,321
  5,716
  6,125
  6,551
  6,994
  7,454
  7,933
  8,431
  8,949
  9,489
  10,052
  10,638
Tax expense, $m
  1
  148
  184
  224
  268
  317
  370
  427
  488
  553
  622
  722
  799
  879
  962
  1,050
  1,141
  1,236
  1,334
  1,437
  1,543
  1,654
  1,769
  1,888
  2,013
  2,142
  2,276
  2,416
  2,562
  2,714
  2,872
Net income, $m
  536
  400
  497
  605
  725
  857
  1,000
  1,155
  1,320
  1,496
  1,682
  1,952
  2,159
  2,376
  2,602
  2,839
  3,085
  3,341
  3,607
  3,885
  4,172
  4,471
  4,782
  5,105
  5,441
  5,791
  6,154
  6,533
  6,927
  7,338
  7,766

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  640
  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
  9,421
  10,894
  13,311
  16,036
  19,071
  22,414
  26,063
  30,012
  34,254
  38,783
  43,592
  48,675
  54,026
  59,642
  65,520
  71,658
  78,059
  84,725
  91,660
  98,871
  106,365
  114,153
  122,247
  130,659
  139,403
  148,497
  157,958
  167,806
  178,060
  188,742
  199,878
Adjusted assets (=assets-cash), $m
  8,781
  10,894
  13,311
  16,036
  19,071
  22,414
  26,063
  30,012
  34,254
  38,783
  43,592
  48,675
  54,026
  59,642
  65,520
  71,658
  78,059
  84,725
  91,660
  98,871
  106,365
  114,153
  122,247
  130,659
  139,403
  148,497
  157,958
  167,806
  178,060
  188,742
  199,878
Revenue / Adjusted assets
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
Average production assets, $m
  6,800
  8,440
  10,313
  12,425
  14,776
  17,366
  20,193
  23,253
  26,539
  30,048
  33,774
  37,712
  41,858
  46,209
  50,763
  55,519
  60,479
  65,643
  71,016
  76,603
  82,410
  88,444
  94,714
  101,232
  108,007
  115,053
  122,383
  130,012
  137,957
  146,234
  154,861
Working capital, $m
  919
  347
  424
  510
  607
  713
  829
  955
  1,090
  1,234
  1,387
  1,549
  1,719
  1,898
  2,085
  2,280
  2,484
  2,696
  2,917
  3,146
  3,385
  3,632
  3,890
  4,158
  4,436
  4,725
  5,026
  5,340
  5,666
  6,006
  6,360
Total debt, $m
  4,218
  5,419
  6,796
  8,350
  10,079
  11,985
  14,065
  16,316
  18,734
  21,315
  24,057
  26,954
  30,004
  33,205
  36,555
  40,054
  43,703
  47,502
  51,455
  55,565
  59,837
  64,276
  68,890
  73,684
  78,669
  83,852
  89,245
  94,858
  100,703
  106,792
  113,139
Total liabilities, $m
  5,009
  6,210
  7,587
  9,141
  10,870
  12,776
  14,856
  17,107
  19,525
  22,106
  24,848
  27,745
  30,795
  33,996
  37,346
  40,845
  44,494
  48,293
  52,246
  56,356
  60,628
  65,067
  69,681
  74,475
  79,460
  84,643
  90,036
  95,649
  101,494
  107,583
  113,930
Total equity, $m
  4,412
  4,684
  5,724
  6,896
  8,201
  9,638
  11,207
  12,905
  14,729
  16,677
  18,745
  20,930
  23,231
  25,646
  28,173
  30,813
  33,566
  36,432
  39,414
  42,514
  45,737
  49,086
  52,566
  56,183
  59,943
  63,854
  67,922
  72,156
  76,566
  81,159
  85,947
Total liabilities and equity, $m
  9,421
  10,894
  13,311
  16,037
  19,071
  22,414
  26,063
  30,012
  34,254
  38,783
  43,593
  48,675
  54,026
  59,642
  65,519
  71,658
  78,060
  84,725
  91,660
  98,870
  106,365
  114,153
  122,247
  130,658
  139,403
  148,497
  157,958
  167,805
  178,060
  188,742
  199,877
Debt-to-equity ratio
  0.956
  1.160
  1.190
  1.210
  1.230
  1.240
  1.260
  1.260
  1.270
  1.280
  1.280
  1.290
  1.290
  1.290
  1.300
  1.300
  1.300
  1.300
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.310
  1.320
  1.320
  1.320
Adjusted equity ratio
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  536
  400
  497
  605
  725
  857
  1,000
  1,155
  1,320
  1,496
  1,682
  1,952
  2,159
  2,376
  2,602
  2,839
  3,085
  3,341
  3,607
  3,885
  4,172
  4,471
  4,782
  5,105
  5,441
  5,791
  6,154
  6,533
  6,927
  7,338
  7,766
Depreciation, amort., depletion, $m
  255
  382
  444
  515
  593
  679
  774
  876
  985
  1,102
  1,226
  1,257
  1,395
  1,540
  1,692
  1,851
  2,016
  2,188
  2,367
  2,553
  2,747
  2,948
  3,157
  3,374
  3,600
  3,835
  4,079
  4,334
  4,599
  4,874
  5,162
Funds from operations, $m
  491
  782
  941
  1,120
  1,318
  1,536
  1,774
  2,030
  2,305
  2,598
  2,909
  3,209
  3,554
  3,916
  4,294
  4,689
  5,101
  5,529
  5,975
  6,438
  6,919
  7,420
  7,939
  8,480
  9,042
  9,626
  10,234
  10,867
  11,526
  12,212
  12,928
Change in working capital, $m
  -227
  67
  77
  87
  97
  106
  116
  126
  135
  144
  153
  162
  170
  179
  187
  195
  204
  212
  221
  229
  238
  248
  258
  268
  278
  289
  301
  313
  326
  340
  354
Cash from operations, $m
  718
  715
  864
  1,033
  1,222
  1,430
  1,658
  1,904
  2,170
  2,454
  2,756
  3,048
  3,384
  3,737
  4,107
  4,494
  4,897
  5,317
  5,754
  6,208
  6,681
  7,172
  7,682
  8,212
  8,763
  9,336
  9,933
  10,553
  11,199
  11,872
  12,574
Maintenance CAPEX, $m
  0
  -227
  -281
  -344
  -414
  -493
  -579
  -673
  -775
  -885
  -1,002
  -1,126
  -1,257
  -1,395
  -1,540
  -1,692
  -1,851
  -2,016
  -2,188
  -2,367
  -2,553
  -2,747
  -2,948
  -3,157
  -3,374
  -3,600
  -3,835
  -4,079
  -4,334
  -4,599
  -4,874
New CAPEX, $m
  -486
  -1,640
  -1,873
  -2,111
  -2,351
  -2,590
  -2,827
  -3,059
  -3,287
  -3,509
  -3,726
  -3,938
  -4,146
  -4,351
  -4,554
  -4,756
  -4,959
  -5,164
  -5,373
  -5,587
  -5,807
  -6,034
  -6,271
  -6,517
  -6,775
  -7,046
  -7,330
  -7,629
  -7,945
  -8,277
  -8,627
Cash from investing activities, $m
  -482
  -1,867
  -2,154
  -2,455
  -2,765
  -3,083
  -3,406
  -3,732
  -4,062
  -4,394
  -4,728
  -5,064
  -5,403
  -5,746
  -6,094
  -6,448
  -6,810
  -7,180
  -7,561
  -7,954
  -8,360
  -8,781
  -9,219
  -9,674
  -10,149
  -10,646
  -11,165
  -11,708
  -12,279
  -12,876
  -13,501
Free cash flow, $m
  236
  -1,152
  -1,290
  -1,422
  -1,544
  -1,653
  -1,748
  -1,828
  -1,892
  -1,940
  -1,972
  -2,016
  -2,019
  -2,009
  -1,987
  -1,955
  -1,913
  -1,863
  -1,807
  -1,745
  -1,679
  -1,609
  -1,537
  -1,462
  -1,386
  -1,310
  -1,233
  -1,156
  -1,079
  -1,003
  -928
Issuance/(repayment) of debt, $m
  375
  1,201
  1,378
  1,553
  1,730
  1,906
  2,080
  2,251
  2,418
  2,582
  2,741
  2,897
  3,050
  3,201
  3,350
  3,499
  3,649
  3,799
  3,953
  4,110
  4,272
  4,439
  4,613
  4,795
  4,985
  5,184
  5,393
  5,613
  5,845
  6,089
  6,347
Issuance/(repurchase) of shares, $m
  689
  512
  542
  566
  580
  581
  569
  543
  504
  452
  386
  233
  142
  39
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,041
  1,713
  1,920
  2,119
  2,310
  2,487
  2,649
  2,794
  2,922
  3,034
  3,127
  3,130
  3,192
  3,240
  3,350
  3,499
  3,649
  3,799
  3,953
  4,110
  4,272
  4,439
  4,613
  4,795
  4,985
  5,184
  5,393
  5,613
  5,845
  6,089
  6,347
Total cash flow (excl. dividends), $m
  1,277
  560
  630
  698
  766
  833
  900
  966
  1,031
  1,093
  1,155
  1,114
  1,173
  1,231
  1,363
  1,545
  1,736
  1,936
  2,146
  2,365
  2,593
  2,830
  3,076
  3,332
  3,598
  3,874
  4,160
  4,457
  4,766
  5,086
  5,419
Retained Cash Flow (-), $m
  -677
  -912
  -1,039
  -1,172
  -1,305
  -1,438
  -1,569
  -1,698
  -1,824
  -1,947
  -2,068
  -2,186
  -2,301
  -2,415
  -2,527
  -2,640
  -2,752
  -2,866
  -2,982
  -3,101
  -3,223
  -3,349
  -3,480
  -3,617
  -3,760
  -3,910
  -4,068
  -4,234
  -4,409
  -4,594
  -4,788
Prev. year cash balance distribution, $m
 
  640
  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
 
  288
  -409
  -474
  -539
  -604
  -669
  -732
  -794
  -854
  -913
  -1,071
  -1,128
  -1,184
  -1,164
  -1,095
  -1,017
  -930
  -836
  -736
  -630
  -519
  -404
  -285
  -162
  -36
  92
  223
  356
  492
  631
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  270
  -356
  -381
  -398
  -406
  -406
  -397
  -382
  -361
  -335
  -337
  -301
  -265
  -215
  -165
  -123
  -88
  -62
  -41
  -26
  -16
  -9
  -4
  -2
  0
  0
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  92.9
  87.2
  82.6
  78.9
  75.9
  73.5
  71.5
  70.0
  68.8
  67.9
  67.4
  67.2
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1
  67.1

Buckeye Partners, L.P. owns and operates liquid petroleum products pipeline systems in the United States. The company operates through three segments: Domestic Pipelines & Terminals, Global Marine Terminals, and Merchant Services. The Domestic Pipelines & Terminals segment transports liquid petroleum products, including gasoline, jet fuel, diesel fuel, heating oil, and kerosene; and refined petroleum products, such as propane and butane, refinery feedstock, and blending components, as well as crude oil. This segment owns and operates approximately 6,000 miles of pipeline located primarily in the northeastern and upper midwestern portions of the United States, and services 110 delivery locations; and 117 active terminals that provide bulk storage and throughput services with aggregate storage capacity of 55 million barrels. In addition, this segment provides turn-key operations and maintenance, asset development, and construction services for third-party pipeline and energy assets; operates and/or maintains third-party pipelines; and operates 2 underground propane storage caverns. The Global Marine Terminals segment provides marine accessible bulk storage and blending services, rail and truck rack loading/unloading, and petroleum processing services through 7 liquid petroleum product terminals located in The Bahamas, Puerto Rico, and St. Lucia in the Caribbean; and the New York Harbor and Corpus Christi, Texas in the United States. The Merchant Services segment is involved in the wholesale distribution of refined petroleum products, including gasoline, propane, natural gas liquids, ethanol, and biodiesel, as well as petroleum distillates, such as heating oil, diesel fuel, kerosene, and fuel oil. Buckeye GP LLC serves as the general partner of the company. Buckeye Partners, L.P. was founded in 1886 and is based in Houston, Texas.

FINANCIAL RATIOS  of  Buckeye Partners (BPL)

Valuation Ratios
P/E Ratio 14.6
Price to Sales 2.4
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 10.9
Price to Free Cash Flow 33.7
Growth Rates
Sales Growth Rate -5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.3%
Cap. Spend. - 3 Yr. Gr. Rate 6.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 95.6%
Total Debt to Equity 95.6%
Interest Coverage 4
Management Effectiveness
Return On Assets 8%
Ret/ On Assets - 3 Yr. Avg. 7%
Return On Total Capital 6.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.5%
Return On Equity 13.2%
Return On Equity - 3 Yr. Avg. 11%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 54.1%
Gross Margin - 3 Yr. Avg. 39.4%
EBITDA Margin 30.2%
EBITDA Margin - 3 Yr. Avg. 21.4%
Operating Margin 22.6%
Oper. Margin - 3 Yr. Avg. 15.8%
Pre-Tax Margin 16.9%
Pre-Tax Margin - 3 Yr. Avg. 11.6%
Net Profit Margin 16.5%
Net Profit Margin - 3 Yr. Avg. 11.1%
Effective Tax Rate 0.2%
Eff/ Tax Rate - 3 Yr. Avg. 0.1%
Payout Ratio 119.8%

BPL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BPL stock intrinsic value calculation we used $3248 million for the last fiscal year's total revenue generated by Buckeye Partners. The default revenue input number comes from 2016 income statement of Buckeye 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 BPL stock valuation model: a) initial revenue growth rate of 24.1% 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 6.8%, whose default value for BPL is calculated based on our internal credit rating of Buckeye 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 Buckeye 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 BPL stock the variable cost ratio is equal to 82.5%.

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 BPL 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 Buckeye Partners.

Corporate tax rate of 27% is the nominal tax rate for Buckeye 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 BPL 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 BPL are equal to 209.4%.

Life of production assets of 30.6 years is the average useful life of capital assets used in Buckeye 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 BPL is equal to 8.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4412 million for Buckeye 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 141.075 million for Buckeye 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 Buckeye Partners at the current share price and the inputted number of shares is $7.9 billion.

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COMPANY NEWS

▶ Buckeye Partners Distribution Coverage Fell in 2Q17   [Aug-10-17 01:34PM  Market Realist]
▶ What Does BPLs Valuation Indicate ahead of 2Q17 Results?   [Jul-31-17 05:35PM  Market Realist]
▶ ETFs with exposure to Buckeye Partners LP : July 24, 2017   [Jul-24-17 02:31PM  Capital Cube]
▶ ETFs with exposure to Buckeye Partners LP : July 14, 2017   [Jul-14-17 01:11PM  Capital Cube]
▶ 3 Growth Stocks for Ambitious Investors   [Jul-07-17 05:03PM  Motley Fool]
▶ Does Buckeye Partners Look Attractive near Its 52-Week Low?   [Jun-23-17 09:08AM  Market Realist]
▶ ETFs with exposure to Buckeye Partners LP : June 22, 2017   [Jun-22-17 03:28PM  Capital Cube]
▶ 3 Stocks to Help You Make Money in Retirement   [Jun-14-17 08:16AM  Motley Fool]
▶ ETFs with exposure to Buckeye Partners LP : June 12, 2017   [Jun-12-17 01:52PM  Capital Cube]
▶ 3 Value Stocks for Successful Investors   [Jun-11-17 10:28AM  Motley Fool]
▶ 3 Large-Cap Stocks for Bright Investors   [Jun-05-17 08:49AM  Motley Fool]
▶ ETFs with exposure to Buckeye Partners LP : June 1, 2017   [Jun-01-17 01:40PM  Capital Cube]
▶ ETFs with exposure to Buckeye Partners LP : May 22, 2017   [May-22-17 01:25PM  Capital Cube]
▶ Buckeye Partners Distribution: What to Expect for 1Q17   [Apr-28-17 04:05PM  Market Realist]
▶ Trump's tax cut proposal shines light on MLPs   [Apr-26-17 02:14PM  Reuters]
▶ 2 Stocks to Buy With Dividends Yielding More Than 5%   [Mar-31-17 01:29PM  Motley Fool]
▶ 2 Stocks That Pay You Big to Own Them   [Feb-25-17 03:15AM  at Motley Fool]
▶ 3 Value Stocks Senior Citizens Could Buy Right Now   [Feb-22-17 10:06AM  at Motley Fool]
▶ Better Buy: Enbridge Inc vs. Buckeye Partners L.P.   [Feb-21-17 02:19PM  at Motley Fool]
Stock chart of BPL Financial statements of BPL
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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