Intrinsic value of Crestwood Equity Partners - CEQP

Previous Close

$23.90

  Intrinsic Value

$7.73

stock screener

  Rating & Target

str. sell

-68%

  Value-price divergence*

+11%

Previous close

$23.90

 
Intrinsic value

$7.73

 
Up/down potential

-68%

 
Rating

str. sell

 
Value-price divergence*

+11%

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

We calculate the intrinsic value of CEQP 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 1.7

 

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, %
  -4.25
  41.20
  37.58
  34.32
  31.39
  28.75
  26.38
  24.24
  22.31
  20.58
  19.02
  17.62
  16.36
  15.22
  14.20
  13.28
  12.45
  11.71
  11.04
  10.43
  9.89
  9.40
  8.96
  8.56
  8.21
  7.89
  7.60
  7.34
  7.11
  6.89
  6.71
Revenue, $m
  2,521
  3,560
  4,897
  6,578
  8,643
  11,128
  14,063
  17,472
  21,371
  25,769
  30,672
  36,077
  41,979
  48,370
  55,239
  62,576
  70,369
  78,607
  87,283
  96,390
  105,923
  115,881
  126,265
  137,079
  148,331
  160,031
  172,191
  184,828
  197,960
  211,609
  225,797
Variable operating expenses, $m
 
  6,477
  8,904
  11,954
  15,699
  20,207
  25,532
  31,716
  38,789
  46,768
  55,662
  65,447
  76,155
  87,748
  100,210
  113,519
  127,656
  142,602
  158,341
  174,861
  192,155
  210,220
  229,058
  248,676
  269,089
  290,313
  312,373
  335,298
  359,121
  383,881
  409,620
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
  2,588
  6,477
  8,904
  11,954
  15,699
  20,207
  25,532
  31,716
  38,789
  46,768
  55,662
  65,447
  76,155
  87,748
  100,210
  113,519
  127,656
  142,602
  158,341
  174,861
  192,155
  210,220
  229,058
  248,676
  269,089
  290,313
  312,373
  335,298
  359,121
  383,881
  409,620
Operating income, $m
  -67
  -2,918
  -4,007
  -5,375
  -7,056
  -9,079
  -11,469
  -14,244
  -17,418
  -20,999
  -24,990
  -29,370
  -34,175
  -39,378
  -44,971
  -50,943
  -57,287
  -63,995
  -71,058
  -78,472
  -86,232
  -94,339
  -102,793
  -111,597
  -120,757
  -130,282
  -140,182
  -150,470
  -161,161
  -172,272
  -183,823
EBITDA, $m
  163
  -2,625
  -3,612
  -4,852
  -6,375
  -8,208
  -10,372
  -12,886
  -15,762
  -19,006
  -22,622
  -26,609
  -30,962
  -35,675
  -40,742
  -46,153
  -51,900
  -57,977
  -64,376
  -71,093
  -78,124
  -85,468
  -93,127
  -101,103
  -109,402
  -118,031
  -127,000
  -136,321
  -146,006
  -156,073
  -166,537
Interest expense (income), $m
  122
  93
  146
  213
  299
  404
  530
  679
  852
  1,050
  1,273
  1,522
  1,797
  2,096
  2,421
  2,770
  3,142
  3,538
  3,956
  4,397
  4,859
  5,344
  5,849
  6,376
  6,926
  7,497
  8,091
  8,709
  9,350
  10,017
  10,710
Earnings before tax, $m
  -192
  -3,011
  -4,152
  -5,589
  -7,355
  -9,483
  -11,999
  -14,923
  -18,270
  -22,049
  -26,263
  -30,893
  -35,972
  -41,475
  -47,392
  -53,713
  -60,430
  -67,533
  -75,014
  -82,869
  -91,092
  -99,683
  -108,642
  -117,974
  -127,683
  -137,779
  -148,273
  -159,178
  -170,511
  -182,289
  -194,533
Tax expense, $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
  0
Net income, $m
  -216
  -3,011
  -4,152
  -5,589
  -7,355
  -9,483
  -11,999
  -14,923
  -18,270
  -22,049
  -26,263
  -30,893
  -35,972
  -41,475
  -47,392
  -53,713
  -60,430
  -67,533
  -75,014
  -82,869
  -91,092
  -99,683
  -108,642
  -117,974
  -127,683
  -137,779
  -148,273
  -159,178
  -170,511
  -182,289
  -194,533

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  4,449
  6,278
  8,637
  11,602
  15,244
  19,626
  24,803
  30,815
  37,691
  45,449
  54,095
  63,628
  74,037
  85,309
  97,424
  110,363
  124,107
  138,637
  153,939
  170,000
  186,813
  204,375
  222,689
  241,762
  261,607
  282,241
  303,688
  325,976
  349,136
  373,208
  398,232
Adjusted assets (=assets-cash), $m
  4,447
  6,278
  8,637
  11,602
  15,244
  19,626
  24,803
  30,815
  37,691
  45,449
  54,095
  63,628
  74,037
  85,309
  97,424
  110,363
  124,107
  138,637
  153,939
  170,000
  186,813
  204,375
  222,689
  241,762
  261,607
  282,241
  303,688
  325,976
  349,136
  373,208
  398,232
Revenue / Adjusted assets
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
  0.567
Average production assets, $m
  3,417
  4,823
  6,636
  8,914
  11,711
  15,079
  19,056
  23,674
  28,957
  34,917
  41,560
  48,884
  56,882
  65,541
  74,849
  84,790
  95,349
  106,513
  118,269
  130,608
  143,525
  157,018
  171,089
  185,742
  200,989
  216,842
  233,319
  250,442
  268,236
  286,730
  305,955
Working capital, $m
  36
  50
  69
  92
  121
  156
  197
  245
  299
  361
  429
  505
  588
  677
  773
  876
  985
  1,101
  1,222
  1,349
  1,483
  1,622
  1,768
  1,919
  2,077
  2,240
  2,411
  2,588
  2,771
  2,963
  3,161
Total debt, $m
  1,525
  2,386
  3,500
  4,899
  6,618
  8,687
  11,130
  13,968
  17,213
  20,875
  24,956
  29,455
  34,369
  39,689
  45,407
  51,514
  58,001
  64,860
  72,082
  79,663
  87,599
  95,888
  104,532
  113,535
  122,902
  132,641
  142,764
  153,284
  164,215
  175,577
  187,388
Total liabilities, $m
  2,102
  2,963
  4,077
  5,476
  7,195
  9,264
  11,707
  14,545
  17,790
  21,452
  25,533
  30,032
  34,946
  40,266
  45,984
  52,091
  58,578
  65,437
  72,659
  80,240
  88,176
  96,465
  105,109
  114,112
  123,479
  133,218
  143,341
  153,861
  164,792
  176,154
  187,965
Total equity, $m
  2,347
  3,315
  4,561
  6,126
  8,049
  10,363
  13,096
  16,270
  19,901
  23,997
  28,562
  33,595
  39,092
  45,043
  51,440
  58,272
  65,528
  73,200
  81,280
  89,760
  98,637
  107,910
  117,580
  127,650
  138,129
  149,023
  160,347
  172,115
  184,344
  197,054
  210,266
Total liabilities and equity, $m
  4,449
  6,278
  8,638
  11,602
  15,244
  19,627
  24,803
  30,815
  37,691
  45,449
  54,095
  63,627
  74,038
  85,309
  97,424
  110,363
  124,106
  138,637
  153,939
  170,000
  186,813
  204,375
  222,689
  241,762
  261,608
  282,241
  303,688
  325,976
  349,136
  373,208
  398,231
Debt-to-equity ratio
  0.650
  0.720
  0.770
  0.800
  0.820
  0.840
  0.850
  0.860
  0.860
  0.870
  0.870
  0.880
  0.880
  0.880
  0.880
  0.880
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
Adjusted equity ratio
  0.527
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -216
  -3,011
  -4,152
  -5,589
  -7,355
  -9,483
  -11,999
  -14,923
  -18,270
  -22,049
  -26,263
  -30,893
  -35,972
  -41,475
  -47,392
  -53,713
  -60,430
  -67,533
  -75,014
  -82,869
  -91,092
  -99,683
  -108,642
  -117,974
  -127,683
  -137,779
  -148,273
  -159,178
  -170,511
  -182,289
  -194,533
Depreciation, amort., depletion, $m
  230
  292
  395
  523
  682
  872
  1,096
  1,357
  1,656
  1,993
  2,368
  2,762
  3,214
  3,703
  4,229
  4,790
  5,387
  6,018
  6,682
  7,379
  8,109
  8,871
  9,666
  10,494
  11,355
  12,251
  13,182
  14,149
  15,155
  16,199
  17,286
Funds from operations, $m
  404
  -2,718
  -3,758
  -5,065
  -6,674
  -8,611
  -10,902
  -13,565
  -16,614
  -20,056
  -23,895
  -28,131
  -32,759
  -37,772
  -43,163
  -48,923
  -55,043
  -61,515
  -68,332
  -75,490
  -82,983
  -90,812
  -98,976
  -107,480
  -116,328
  -125,528
  -135,091
  -145,029
  -155,356
  -166,090
  -177,248
Change in working capital, $m
  58
  15
  19
  24
  29
  35
  41
  48
  55
  62
  69
  76
  83
  89
  96
  103
  109
  115
  121
  127
  133
  139
  145
  151
  158
  164
  170
  177
  184
  191
  199
Cash from operations, $m
  346
  -2,733
  -3,776
  -5,089
  -6,703
  -8,646
  -10,943
  -13,613
  -16,669
  -20,118
  -23,964
  -28,207
  -32,841
  -37,861
  -43,259
  -49,025
  -55,152
  -61,630
  -68,454
  -75,617
  -83,117
  -90,951
  -99,121
  -107,631
  -116,485
  -125,692
  -135,262
  -145,206
  -155,540
  -166,281
  -177,446
Maintenance CAPEX, $m
  0
  -193
  -273
  -375
  -504
  -662
  -852
  -1,077
  -1,338
  -1,636
  -1,973
  -2,348
  -2,762
  -3,214
  -3,703
  -4,229
  -4,790
  -5,387
  -6,018
  -6,682
  -7,379
  -8,109
  -8,871
  -9,666
  -10,494
  -11,355
  -12,251
  -13,182
  -14,149
  -15,155
  -16,199
New CAPEX, $m
  -101
  -1,406
  -1,813
  -2,278
  -2,798
  -3,367
  -3,977
  -4,619
  -5,283
  -5,960
  -6,643
  -7,324
  -7,997
  -8,660
  -9,308
  -9,941
  -10,559
  -11,163
  -11,756
  -12,339
  -12,917
  -13,493
  -14,070
  -14,654
  -15,246
  -15,853
  -16,477
  -17,123
  -17,794
  -18,494
  -19,225
Cash from investing activities, $m
  867
  -1,599
  -2,086
  -2,653
  -3,302
  -4,029
  -4,829
  -5,696
  -6,621
  -7,596
  -8,616
  -9,672
  -10,759
  -11,874
  -13,011
  -14,170
  -15,349
  -16,550
  -17,774
  -19,021
  -20,296
  -21,602
  -22,941
  -24,320
  -25,740
  -27,208
  -28,728
  -30,305
  -31,943
  -33,649
  -35,424
Free cash flow, $m
  1,213
  -4,332
  -5,861
  -7,741
  -10,004
  -12,675
  -15,772
  -19,308
  -23,289
  -27,714
  -32,580
  -37,878
  -43,600
  -49,735
  -56,270
  -63,195
  -70,502
  -78,181
  -86,228
  -94,638
  -103,413
  -112,553
  -122,063
  -131,951
  -142,226
  -152,900
  -163,990
  -175,511
  -187,484
  -199,929
  -212,871
Issuance/(repayment) of debt, $m
  -973
  863
  1,114
  1,399
  1,719
  2,069
  2,443
  2,838
  3,246
  3,662
  4,081
  4,499
  4,913
  5,320
  5,718
  6,107
  6,487
  6,858
  7,222
  7,581
  7,936
  8,289
  8,644
  9,002
  9,367
  9,739
  10,123
  10,520
  10,932
  11,362
  11,811
Issuance/(repurchase) of shares, $m
  0
  3,979
  5,398
  7,154
  9,278
  11,797
  14,732
  18,097
  21,900
  26,145
  30,829
  35,926
  41,468
  47,426
  53,788
  60,545
  67,687
  75,205
  83,093
  91,349
  99,969
  108,956
  118,312
  128,044
  138,161
  148,674
  159,597
  170,946
  182,740
  194,999
  207,746
Cash from financing (excl. dividends), $m  
  -992
  4,842
  6,512
  8,553
  10,997
  13,866
  17,175
  20,935
  25,146
  29,807
  34,910
  40,425
  46,381
  52,746
  59,506
  66,652
  74,174
  82,063
  90,315
  98,930
  107,905
  117,245
  126,956
  137,046
  147,528
  158,413
  169,720
  181,466
  193,672
  206,361
  219,557
Total cash flow (excl. dividends), $m
  221
  510
  650
  812
  993
  1,191
  1,403
  1,626
  1,857
  2,093
  2,330
  2,547
  2,781
  3,012
  3,237
  3,457
  3,672
  3,882
  4,088
  4,291
  4,492
  4,692
  4,893
  5,096
  5,302
  5,513
  5,730
  5,955
  6,188
  6,431
  6,686
Retained Cash Flow (-), $m
  416
  -3,979
  -5,398
  -7,154
  -9,278
  -11,797
  -14,732
  -18,097
  -21,900
  -26,145
  -30,829
  -35,926
  -41,468
  -47,426
  -53,788
  -60,545
  -67,687
  -75,205
  -83,093
  -91,349
  -99,969
  -108,956
  -118,312
  -128,044
  -138,161
  -148,674
  -159,597
  -170,946
  -182,740
  -194,999
  -207,746
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
 
  -3,469
  -4,748
  -6,342
  -8,285
  -10,606
  -13,329
  -16,471
  -20,043
  -24,052
  -28,499
  -33,379
  -38,687
  -44,415
  -50,551
  -57,088
  -64,014
  -71,322
  -79,005
  -87,058
  -95,477
  -104,263
  -113,419
  -122,948
  -132,859
  -143,161
  -153,867
  -164,991
  -176,552
  -188,567
  -201,060
Discount rate, %
 
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
 
  -3,236
  -4,104
  -5,043
  -6,015
  -6,972
  -7,865
  -8,644
  -9,262
  -9,683
  -9,885
  -9,856
  -9,602
  -9,141
  -8,505
  -7,734
  -6,871
  -5,963
  -5,054
  -4,180
  -3,373
  -2,653
  -2,032
  -1,515
  -1,099
  -774
  -529
  -350
  -225
  -139
  -83
Current shareholders' claim on cash, %
  100
  29.5
  8.9
  2.8
  0.9
  0.3
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Crestwood Equity Partners LP is a holding company and a master limited partnership (MLP). The Company develops, acquires, owns or controls, and operates assets and operations within the energy midstream sector. The Company's segments include gathering and processing (G&P), which includes its natural gas, crude oil and produced water G&P operations; storage and transportation, which includes its natural gas and crude oil storage and transportation operations, and marketing, supply and logistics, which includes its natural gas liquid (NGL) supply and logistics business, crude oil storage and rail loading facilities and fleet, and salt production business. The Company provides infrastructure solutions to service natural gas and crude oil shale plays across the United States. It owns and operates a portfolio of crude oil and natural gas gathering, processing, storage and transportation assets. Its operating assets are owned by or through its subsidiary, Crestwood Midstream Partners LP.

FINANCIAL RATIOS  of  Crestwood Equity Partners (CEQP)

Valuation Ratios
P/E Ratio -7.7
Price to Sales 0.7
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 4.8
Price to Free Cash Flow 6.8
Growth Rates
Sales Growth Rate -4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -44.8%
Cap. Spend. - 3 Yr. Gr. Rate -21.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 64.9%
Total Debt to Equity 65%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.8%
Ret/ On Assets - 3 Yr. Avg. -7.1%
Return On Total Capital -4.7%
Ret/ On T. Cap. - 3 Yr. Avg. -14.1%
Return On Equity -8.5%
Return On Equity - 3 Yr. Avg. -31.9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 23.6%
Gross Margin - 3 Yr. Avg. 23.8%
EBITDA Margin 6.3%
EBITDA Margin - 3 Yr. Avg. -18.3%
Operating Margin -2.7%
Oper. Margin - 3 Yr. Avg. -27.3%
Pre-Tax Margin -7.6%
Pre-Tax Margin - 3 Yr. Avg. -31.8%
Net Profit Margin -8.6%
Net Profit Margin - 3 Yr. Avg. -23.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -3.7%
Payout Ratio -101.9%

CEQP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CEQP stock intrinsic value calculation we used $2521 million for the last fiscal year's total revenue generated by Crestwood Equity Partners. The default revenue input number comes from 2016 income statement of Crestwood Equity 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 CEQP stock valuation model: a) initial revenue growth rate of 41.2% 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 7.2%, whose default value for CEQP is calculated based on our internal credit rating of Crestwood Equity 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 Crestwood Equity 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 CEQP stock the variable cost ratio is equal to 182.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CEQP 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 6.1% for Crestwood Equity Partners.

Corporate tax rate of 27% is the nominal tax rate for Crestwood Equity 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 CEQP 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 CEQP are equal to 135.5%.

Life of production assets of 17.7 years is the average useful life of capital assets used in Crestwood Equity 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 CEQP is equal to 1.4%. 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 - $2347 million for Crestwood Equity 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 69.512 million for Crestwood Equity 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 Crestwood Equity Partners at the current share price and the inputted number of shares is $1.7 billion.

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COMPANY NEWS

▶ Crestwood moves to eye-popping new space at Crown Center   [09:29AM  American City Business Journals]
▶ These 3 Energy Stocks Are Ridiculously Cheap   [Sep-26-17 10:36AM  Motley Fool]
▶ Crestwood Provides Post-Hurricane Harvey Update   [Sep-05-17 09:00AM  Business Wire]
▶ Crestwood Supports Hurricane Harvey Relief Efforts   [Aug-31-17 01:00PM  Business Wire]
▶ Analysts Updated Their Ratings on These MLPs Last Week   [Aug-08-17 12:28PM  Market Realist]
▶ [$$] Crestwood Pledges Assets to Joint Venture With First Reserve   [May-24-17 02:09PM  The Wall Street Journal]
▶ How Analysts View EnLink Midstream before Its 1Q17 Earnings   [Apr-28-17 10:37AM  Market Realist]
▶ Handle with Care: Whats Volatile in Midstream Now   [Mar-14-17 11:12AM  Market Realist]
▶ Midstream Stocks: How Returns Impact Implied Volatility   [Feb-28-17 11:05AM  Market Realist]
▶ MLP Outperformers and Underperformers of the Week   [Jan-20-17 04:56PM  at Barrons.com]
▶ Is Crestwood Equity Partners LP (CEQP) a Good Stock to Buy?   [Dec-13-16 08:13AM  at Insider Monkey]
▶ Matson, Inc. (MATX): Are Hedge Funds Right About This Stock?   [Dec-05-16 03:27AM  at Insider Monkey]
▶ Top Dividend Paying Stocks in the Energy Sector   [Nov-16-16 02:03PM  at Investopedia]
Financial statements of CEQP
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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