Intrinsic value of Crestwood Equity Partners - CEQP

Previous Close

$23.75

  Intrinsic Value

$7.76

stock screener

  Rating & Target

str. sell

-67%

  Value-price divergence*

-88%

Previous close

$23.75

 
Intrinsic value

$7.76

 
Up/down potential

-67%

 
Rating

str. sell

 
Value-price divergence*

-88%

*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 1.6

 

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
  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
  7.33
Revenue, $m
  2,521
  3,895
  5,825
  8,452
  11,924
  16,393
  22,004
  28,893
  37,178
  46,958
  58,312
  71,292
  85,930
  102,240
  120,216
  139,840
  161,084
  183,914
  208,292
  234,182
  261,550
  290,368
  320,614
  352,273
  385,341
  419,823
  455,733
  493,095
  531,944
  572,321
  614,281
Variable operating expenses, $m
 
  7,086
  10,587
  15,352
  21,651
  29,758
  39,937
  52,434
  67,464
  85,207
  105,803
  129,331
  155,887
  185,474
  218,085
  253,685
  292,224
  333,639
  377,864
  424,831
  474,480
  526,759
  581,627
  639,061
  699,050
  761,604
  826,749
  894,528
  965,002
  1,038,251
  1,114,371
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
  7,086
  10,587
  15,352
  21,651
  29,758
  39,937
  52,434
  67,464
  85,207
  105,803
  129,331
  155,887
  185,474
  218,085
  253,685
  292,224
  333,639
  377,864
  424,831
  474,480
  526,759
  581,627
  639,061
  699,050
  761,604
  826,749
  894,528
  965,002
  1,038,251
  1,114,371
Operating income, $m
  -67
  -3,191
  -4,762
  -6,900
  -9,727
  -13,365
  -17,933
  -23,541
  -30,286
  -38,249
  -47,492
  -58,039
  -69,956
  -83,234
  -97,869
  -113,845
  -131,140
  -149,726
  -169,572
  -190,649
  -212,930
  -236,391
  -261,014
  -286,788
  -313,709
  -341,781
  -371,015
  -401,432
  -433,059
  -465,930
  -500,090
EBITDA, $m
  163
  -2,873
  -4,296
  -6,234
  -8,795
  -12,091
  -16,229
  -21,310
  -27,420
  -34,634
  -43,008
  -52,581
  -63,378
  -75,407
  -88,666
  -103,140
  -118,808
  -135,646
  -153,626
  -172,722
  -192,907
  -214,162
  -236,469
  -259,820
  -284,210
  -309,642
  -336,127
  -363,684
  -392,336
  -422,117
  -453,064
Interest expense (income), $m
  122
  93
  163
  261
  394
  570
  797
  1,082
  1,432
  1,853
  2,349
  2,926
  3,585
  4,328
  5,157
  6,069
  7,066
  8,145
  9,304
  10,542
  11,856
  13,246
  14,710
  16,245
  17,853
  19,532
  21,283
  23,107
  25,004
  26,977
  29,027
Earnings before tax, $m
  -192
  -3,284
  -4,925
  -7,161
  -10,121
  -13,936
  -18,731
  -24,624
  -31,718
  -40,102
  -49,841
  -60,965
  -73,541
  -87,563
  -103,025
  -119,914
  -138,206
  -157,870
  -178,876
  -201,191
  -224,786
  -249,637
  -275,723
  -303,033
  -331,562
  -361,313
  -392,299
  -424,539
  -458,063
  -492,907
  -529,117
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
  -3,284
  -4,925
  -7,161
  -10,121
  -13,936
  -18,731
  -24,624
  -31,718
  -40,102
  -49,841
  -60,965
  -73,541
  -87,563
  -103,025
  -119,914
  -138,206
  -157,870
  -178,876
  -201,191
  -224,786
  -249,637
  -275,723
  -303,033
  -331,562
  -361,313
  -392,299
  -424,539
  -458,063
  -492,907
  -529,117

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
  6,869
  10,273
  14,906
  21,030
  28,911
  38,808
  50,957
  65,569
  82,819
  102,842
  125,735
  151,553
  180,318
  212,022
  246,632
  284,099
  324,363
  367,358
  413,020
  461,288
  512,113
  565,456
  621,293
  679,614
  740,429
  803,763
  869,657
  938,172
  1,009,385
  1,083,388
Adjusted assets (=assets-cash), $m
  4,447
  6,869
  10,273
  14,906
  21,030
  28,911
  38,808
  50,957
  65,569
  82,819
  102,842
  125,735
  151,553
  180,318
  212,022
  246,632
  284,099
  324,363
  367,358
  413,020
  461,288
  512,113
  565,456
  621,293
  679,614
  740,429
  803,763
  869,657
  938,172
  1,009,385
  1,083,388
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
  5,278
  7,893
  11,452
  16,157
  22,212
  29,815
  39,149
  50,376
  63,629
  79,012
  96,600
  116,436
  138,535
  162,893
  189,484
  218,269
  249,203
  282,236
  317,317
  354,401
  393,449
  434,431
  477,330
  522,138
  568,861
  617,519
  668,144
  720,784
  775,495
  832,351
Working capital, $m
  36
  55
  82
  118
  167
  229
  308
  404
  520
  657
  816
  998
  1,203
  1,431
  1,683
  1,958
  2,255
  2,575
  2,916
  3,279
  3,662
  4,065
  4,489
  4,932
  5,395
  5,878
  6,380
  6,903
  7,447
  8,012
  8,600
Total debt, $m
  1,525
  2,665
  4,272
  6,459
  9,349
  13,069
  17,740
  23,475
  30,372
  38,514
  47,965
  58,770
  70,956
  84,533
  99,497
  115,833
  133,518
  152,522
  172,816
  194,368
  217,151
  241,140
  266,318
  292,673
  320,201
  348,906
  378,799
  409,901
  442,240
  475,853
  510,782
Total liabilities, $m
  2,102
  3,242
  4,849
  7,036
  9,926
  13,646
  18,317
  24,052
  30,949
  39,091
  48,542
  59,347
  71,533
  85,110
  100,074
  116,410
  134,095
  153,099
  173,393
  194,945
  217,728
  241,717
  266,895
  293,250
  320,778
  349,483
  379,376
  410,478
  442,817
  476,430
  511,359
Total equity, $m
  2,347
  3,627
  5,424
  7,870
  11,104
  15,265
  20,490
  26,905
  34,620
  43,728
  54,301
  66,388
  80,020
  95,208
  111,947
  130,222
  150,004
  171,264
  193,965
  218,074
  243,560
  270,396
  298,561
  328,043
  358,836
  390,947
  424,387
  459,179
  495,355
  532,955
  572,029
Total liabilities and equity, $m
  4,449
  6,869
  10,273
  14,906
  21,030
  28,911
  38,807
  50,957
  65,569
  82,819
  102,843
  125,735
  151,553
  180,318
  212,021
  246,632
  284,099
  324,363
  367,358
  413,019
  461,288
  512,113
  565,456
  621,293
  679,614
  740,430
  803,763
  869,657
  938,172
  1,009,385
  1,083,388
Debt-to-equity ratio
  0.650
  0.730
  0.790
  0.820
  0.840
  0.860
  0.870
  0.870
  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
  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
  -3,284
  -4,925
  -7,161
  -10,121
  -13,936
  -18,731
  -24,624
  -31,718
  -40,102
  -49,841
  -60,965
  -73,541
  -87,563
  -103,025
  -119,914
  -138,206
  -157,870
  -178,876
  -201,191
  -224,786
  -249,637
  -275,723
  -303,033
  -331,562
  -361,313
  -392,299
  -424,539
  -458,063
  -492,907
  -529,117
Depreciation, amort., depletion, $m
  230
  318
  466
  667
  933
  1,275
  1,704
  2,232
  2,866
  3,615
  4,484
  5,458
  6,578
  7,827
  9,203
  10,705
  12,332
  14,079
  15,946
  17,928
  20,023
  22,229
  24,544
  26,968
  29,499
  32,139
  34,888
  37,748
  40,722
  43,813
  47,025
Funds from operations, $m
  404
  -2,966
  -4,459
  -6,494
  -9,189
  -12,661
  -17,026
  -22,392
  -28,852
  -36,487
  -45,357
  -55,507
  -66,963
  -79,736
  -93,822
  -109,209
  -125,874
  -143,791
  -162,930
  -183,263
  -204,764
  -227,408
  -251,179
  -276,065
  -302,063
  -329,174
  -357,411
  -386,791
  -417,340
  -449,094
  -482,092
Change in working capital, $m
  58
  19
  27
  37
  49
  63
  79
  96
  116
  137
  159
  182
  205
  228
  252
  275
  297
  320
  341
  362
  383
  403
  423
  443
  463
  483
  503
  523
  544
  565
  587
Cash from operations, $m
  346
  -2,985
  -4,486
  -6,531
  -9,237
  -12,723
  -17,105
  -22,488
  -28,968
  -36,624
  -45,516
  -55,689
  -67,168
  -79,964
  -94,074
  -109,484
  -126,171
  -144,110
  -163,272
  -183,626
  -205,147
  -227,811
  -251,602
  -276,508
  -302,526
  -329,657
  -357,913
  -387,314
  -417,884
  -449,659
  -482,679
Maintenance CAPEX, $m
  0
  -193
  -298
  -446
  -647
  -913
  -1,255
  -1,684
  -2,212
  -2,846
  -3,595
  -4,464
  -5,458
  -6,578
  -7,827
  -9,203
  -10,705
  -12,332
  -14,079
  -15,946
  -17,928
  -20,023
  -22,229
  -24,544
  -26,968
  -29,499
  -32,139
  -34,888
  -37,748
  -40,722
  -43,813
New CAPEX, $m
  -101
  -1,861
  -2,615
  -3,559
  -4,705
  -6,055
  -7,603
  -9,334
  -11,226
  -13,253
  -15,384
  -17,588
  -19,836
  -22,100
  -24,358
  -26,591
  -28,786
  -30,934
  -33,032
  -35,081
  -37,084
  -39,048
  -40,983
  -42,898
  -44,808
  -46,723
  -48,658
  -50,626
  -52,639
  -54,712
  -56,856
Cash from investing activities, $m
  867
  -2,054
  -2,913
  -4,005
  -5,352
  -6,968
  -8,858
  -11,018
  -13,438
  -16,099
  -18,979
  -22,052
  -25,294
  -28,678
  -32,185
  -35,794
  -39,491
  -43,266
  -47,111
  -51,027
  -55,012
  -59,071
  -63,212
  -67,442
  -71,776
  -76,222
  -80,797
  -85,514
  -90,387
  -95,434
  -100,669
Free cash flow, $m
  1,213
  -5,039
  -7,399
  -10,536
  -14,589
  -19,691
  -25,963
  -33,507
  -42,407
  -52,723
  -64,495
  -77,741
  -92,461
  -108,642
  -126,258
  -145,277
  -165,662
  -187,376
  -210,383
  -234,652
  -260,158
  -286,882
  -314,814
  -343,951
  -374,301
  -405,879
  -438,710
  -472,827
  -508,272
  -545,093
  -583,348
Issuance/(repayment) of debt, $m
  -973
  1,142
  1,607
  2,187
  2,891
  3,720
  4,671
  5,734
  6,897
  8,142
  9,451
  10,805
  12,186
  13,577
  14,964
  16,336
  17,685
  19,005
  20,294
  21,552
  22,783
  23,989
  25,178
  26,355
  27,528
  28,705
  29,893
  31,102
  32,339
  33,612
  34,929
Issuance/(repurchase) of shares, $m
  0
  4,564
  6,722
  9,607
  13,355
  18,097
  23,956
  31,038
  39,434
  49,210
  60,413
  73,052
  87,173
  102,751
  119,765
  138,189
  157,988
  179,129
  201,577
  225,300
  250,272
  276,472
  303,888
  332,515
  362,356
  393,423
  425,739
  459,331
  494,239
  530,507
  568,191
Cash from financing (excl. dividends), $m  
  -992
  5,706
  8,329
  11,794
  16,246
  21,817
  28,627
  36,772
  46,331
  57,352
  69,864
  83,857
  99,359
  116,328
  134,729
  154,525
  175,673
  198,134
  221,871
  246,852
  273,055
  300,461
  329,066
  358,870
  389,884
  422,128
  455,632
  490,433
  526,578
  564,119
  603,120
Total cash flow (excl. dividends), $m
  221
  668
  929
  1,258
  1,656
  2,126
  2,664
  3,266
  3,924
  4,629
  5,370
  6,116
  6,898
  7,686
  8,471
  9,247
  10,011
  10,758
  11,488
  12,200
  12,897
  13,580
  14,252
  14,919
  15,583
  16,249
  16,922
  17,606
  18,306
  19,027
  19,772
Retained Cash Flow (-), $m
  416
  -4,564
  -6,722
  -9,607
  -13,355
  -18,097
  -23,956
  -31,038
  -39,434
  -49,210
  -60,413
  -73,052
  -87,173
  -102,751
  -119,765
  -138,189
  -157,988
  -179,129
  -201,577
  -225,300
  -250,272
  -276,472
  -303,888
  -332,515
  -362,356
  -393,423
  -425,739
  -459,331
  -494,239
  -530,507
  -568,191
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
 
  -3,896
  -5,792
  -8,349
  -11,699
  -15,971
  -21,292
  -27,772
  -35,510
  -44,581
  -55,044
  -66,935
  -80,275
  -95,065
  -111,294
  -128,941
  -147,978
  -168,372
  -190,090
  -213,100
  -237,376
  -262,893
  -289,636
  -317,596
  -346,773
  -377,175
  -408,817
  -441,725
  -475,932
  -511,480
  -548,418
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
 
  -3,635
  -5,007
  -6,639
  -8,493
  -10,499
  -12,564
  -14,574
  -16,408
  -17,948
  -19,092
  -19,764
  -19,923
  -19,566
  -18,725
  -17,468
  -15,884
  -14,078
  -12,160
  -10,232
  -8,385
  -6,689
  -5,190
  -3,915
  -2,868
  -2,039
  -1,406
  -938
  -606
  -378
  -228
Current shareholders' claim on cash, %
  100
  26.5
  7.3
  2.1
  0.6
  0.2
  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 provides infrastructure solutions to liquids-rich natural gas and crude oil shale plays in the United States. It operates through three segments: Gathering and Processing; Storage and Transportation; and Marketing, Supply, and Logistics. The Gathering and Processing segment provides gathering, processing, treating, compression, and transportation services to producers in unconventional shale plays and tight-gas plays in Arkansas, Louisiana, New Mexico, North Dakota, Texas, West Virginia, and Wyoming. The Storage and Transportation segment offers natural gas and crude oil storage and transportation services to producers, utilities, and other customers. This segment owns and operates natural gas storage facilities with approximately 79.3 billion cubic feet of working gas storage capacity. The Marketing, Supply, and Logistics segment provides NGL and crude oil storage, marketing, and transportation services to producers, refiners, marketers and other customers. This segment also produces salt. Crestwood Equity GP LLC serves as the general partner of Crestwood Equity Partners LP. The company was formerly known as Inergy L.P. and changed its name to Crestwood Equity Partners LP in October 2013. The company was founded in 2001 and is headquartered in Houston, Texas. Crestwood Equity Partners LP is a subsidiary of Crestwood Holdings LLC.

FINANCIAL RATIOS  of  Crestwood Equity Partners (CEQP)

Valuation Ratios
P/E Ratio -7.6
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 6.7
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 54.5% 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 69.173 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 $1.6 billion.

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COMPANY NEWS

▶ 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]
Stock chart of CEQP 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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