Intrinsic value of Enbridge - ENB

Previous Close

$41.13

  Intrinsic Value

$312.68

stock screener

  Rating & Target

str. buy

+660%

  Value-price divergence*

+5000%

Previous close

$41.13

 
Intrinsic value

$312.68

 
Up/down potential

+660%

 
Rating

str. buy

 
Value-price divergence*

+5000%

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

We calculate the intrinsic value of ENB 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 66.9

 

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, %
  2.27
  40.00
  36.50
  33.35
  30.52
  27.96
  25.67
  23.60
  21.74
  20.07
  18.56
  17.20
  15.98
  14.89
  13.90
  13.01
  12.21
  11.49
  10.84
  10.25
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
Revenue, $m
  25,580
  35,812
  48,883
  65,186
  85,077
  108,868
  136,811
  169,100
  205,863
  247,172
  293,046
  343,461
  398,357
  457,653
  521,251
  589,049
  660,950
  736,864
  816,718
  900,458
  988,055
  1,079,501
  1,174,818
  1,274,051
  1,377,275
  1,484,590
  1,596,122
  1,712,022
  1,832,467
  1,957,656
  2,087,811
Variable operating expenses, $m
 
  6,766
  9,234
  12,311
  16,066
  20,557
  25,832
  31,927
  38,867
  46,665
  55,325
  64,836
  75,199
  86,393
  98,398
  111,197
  124,770
  139,100
  154,174
  169,982
  186,518
  203,781
  221,774
  240,507
  259,993
  280,251
  301,305
  323,184
  345,921
  369,553
  394,123
Fixed operating expenses, $m
 
  19,865
  20,361
  20,870
  21,392
  21,927
  22,475
  23,037
  23,613
  24,203
  24,808
  25,428
  26,064
  26,716
  27,383
  28,068
  28,770
  29,489
  30,226
  30,982
  31,756
  32,550
  33,364
  34,198
  35,053
  35,929
  36,828
  37,748
  38,692
  39,659
  40,651
Total operating expenses, $m
  23,669
  26,631
  29,595
  33,181
  37,458
  42,484
  48,307
  54,964
  62,480
  70,868
  80,133
  90,264
  101,263
  113,109
  125,781
  139,265
  153,540
  168,589
  184,400
  200,964
  218,274
  236,331
  255,138
  274,705
  295,046
  316,180
  338,133
  360,932
  384,613
  409,212
  434,774
Operating income, $m
  1,910
  9,181
  19,289
  32,005
  47,619
  66,384
  88,504
  114,136
  143,383
  176,303
  212,913
  253,196
  297,094
  344,545
  395,469
  449,785
  507,411
  568,275
  632,317
  699,494
  769,780
  843,170
  919,679
  999,346
  1,082,229
  1,168,409
  1,257,989
  1,351,090
  1,447,854
  1,548,443
  1,653,038
EBITDA, $m
  3,568
  11,508
  22,462
  36,235
  53,138
  73,445
  97,376
  125,099
  156,728
  192,326
  231,908
  275,453
  322,908
  374,201
  429,246
  487,955
  550,240
  616,023
  685,240
  757,844
  833,806
  913,122
  995,808
  1,081,904
  1,171,476
  1,264,611
  1,361,417
  1,462,029
  1,566,598
  1,675,299
  1,788,328
Interest expense (income), $m
  1,347
  1,256
  2,050
  3,064
  4,328
  5,871
  7,716
  9,884
  12,388
  15,240
  18,444
  22,002
  25,913
  30,171
  34,770
  39,704
  44,962
  50,540
  56,428
  62,622
  69,117
  75,912
  83,005
  90,398
  98,096
  106,102
  114,426
  123,078
  132,068
  141,410
  151,121
Earnings before tax, $m
  1,814
  7,926
  17,239
  28,941
  43,291
  60,513
  80,788
  104,252
  130,994
  161,064
  194,469
  231,194
  271,181
  314,374
  360,699
  410,081
  462,448
  517,735
  575,889
  636,872
  700,663
  767,258
  836,674
  908,947
  984,133
  1,062,307
  1,143,562
  1,228,012
  1,315,786
  1,407,033
  1,501,917
Tax expense, $m
  105
  2,140
  4,655
  7,814
  11,689
  16,339
  21,813
  28,148
  35,368
  43,487
  52,507
  62,422
  73,219
  84,881
  97,389
  110,722
  124,861
  139,788
  155,490
  171,956
  189,179
  207,160
  225,902
  245,416
  265,716
  286,823
  308,762
  331,563
  355,262
  379,899
  405,518
Net income, $m
  1,531
  5,786
  12,584
  21,127
  31,603
  44,175
  58,975
  76,104
  95,626
  117,576
  141,962
  168,772
  197,962
  229,493
  263,310
  299,359
  337,587
  377,947
  420,399
  464,917
  511,484
  560,098
  610,772
  663,532
  718,417
  775,484
  834,801
  896,449
  960,524
  1,027,134
  1,096,399

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,567
  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
  63,528
  86,712
  118,362
  157,835
  205,999
  263,603
  331,263
  409,442
  498,456
  598,478
  709,554
  831,624
  964,546
  1,108,119
  1,262,109
  1,426,270
  1,600,363
  1,784,174
  1,977,525
  2,180,287
  2,392,385
  2,613,804
  2,844,595
  3,084,869
  3,334,806
  3,594,648
  3,864,701
  4,145,332
  4,436,966
  4,740,087
  5,055,233
Adjusted assets (=assets-cash), $m
  61,961
  86,712
  118,362
  157,835
  205,999
  263,603
  331,263
  409,442
  498,456
  598,478
  709,554
  831,624
  964,546
  1,108,119
  1,262,109
  1,426,270
  1,600,363
  1,784,174
  1,977,525
  2,180,287
  2,392,385
  2,613,804
  2,844,595
  3,084,869
  3,334,806
  3,594,648
  3,864,701
  4,145,332
  4,436,966
  4,740,087
  5,055,233
Revenue / Adjusted assets
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
Average production assets, $m
  24,871
  34,809
  47,515
  63,361
  82,695
  105,820
  132,981
  164,365
  200,098
  240,251
  284,841
  333,844
  387,203
  444,839
  506,656
  572,556
  642,443
  716,232
  793,850
  875,246
  960,389
  1,049,275
  1,141,923
  1,238,377
  1,338,711
  1,443,021
  1,551,430
  1,664,085
  1,781,158
  1,902,841
  2,029,353
Working capital, $m
  -3,372
  -1,647
  -2,249
  -2,999
  -3,914
  -5,008
  -6,293
  -7,779
  -9,470
  -11,370
  -13,480
  -15,799
  -18,324
  -21,052
  -23,978
  -27,096
  -30,404
  -33,896
  -37,569
  -41,421
  -45,451
  -49,657
  -54,042
  -58,606
  -63,355
  -68,291
  -73,422
  -78,753
  -84,293
  -90,052
  -96,039
Total debt, $m
  30,766
  47,667
  71,246
  100,654
  136,536
  179,451
  229,858
  288,101
  354,417
  428,933
  511,685
  602,627
  701,654
  808,616
  923,338
  1,045,638
  1,175,337
  1,312,277
  1,456,323
  1,607,381
  1,765,394
  1,930,351
  2,102,290
  2,281,294
  2,467,497
  2,661,080
  2,862,269
  3,071,339
  3,288,606
  3,514,432
  3,749,216
Total liabilities, $m
  47,700
  64,600
  88,179
  117,587
  153,469
  196,384
  246,791
  305,034
  371,350
  445,866
  528,618
  619,560
  718,587
  825,549
  940,271
  1,062,571
  1,192,270
  1,329,210
  1,473,256
  1,624,314
  1,782,327
  1,947,284
  2,119,223
  2,298,227
  2,484,430
  2,678,013
  2,879,202
  3,088,272
  3,305,539
  3,531,365
  3,766,149
Total equity, $m
  15,829
  22,112
  30,182
  40,248
  52,530
  67,219
  84,472
  104,408
  127,106
  152,612
  180,936
  212,064
  245,959
  282,570
  321,838
  363,699
  408,093
  454,964
  504,269
  555,973
  610,058
  666,520
  725,372
  786,642
  850,375
  916,635
  985,499
  1,057,060
  1,131,426
  1,208,722
  1,289,085
Total liabilities and equity, $m
  63,529
  86,712
  118,361
  157,835
  205,999
  263,603
  331,263
  409,442
  498,456
  598,478
  709,554
  831,624
  964,546
  1,108,119
  1,262,109
  1,426,270
  1,600,363
  1,784,174
  1,977,525
  2,180,287
  2,392,385
  2,613,804
  2,844,595
  3,084,869
  3,334,805
  3,594,648
  3,864,701
  4,145,332
  4,436,965
  4,740,087
  5,055,234
Debt-to-equity ratio
  1.944
  2.160
  2.360
  2.500
  2.600
  2.670
  2.720
  2.760
  2.790
  2.810
  2.830
  2.840
  2.850
  2.860
  2.870
  2.880
  2.880
  2.880
  2.890
  2.890
  2.890
  2.900
  2.900
  2.900
  2.900
  2.900
  2.900
  2.910
  2.910
  2.910
  2.910
Adjusted equity ratio
  0.242
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255
  0.255

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,531
  5,786
  12,584
  21,127
  31,603
  44,175
  58,975
  76,104
  95,626
  117,576
  141,962
  168,772
  197,962
  229,493
  263,310
  299,359
  337,587
  377,947
  420,399
  464,917
  511,484
  560,098
  610,772
  663,532
  718,417
  775,484
  834,801
  896,449
  960,524
  1,027,134
  1,096,399
Depreciation, amort., depletion, $m
  1,658
  2,326
  3,173
  4,230
  5,519
  7,060
  8,871
  10,963
  13,346
  16,023
  18,995
  22,256
  25,814
  29,656
  33,777
  38,170
  42,830
  47,749
  52,923
  58,350
  64,026
  69,952
  76,128
  82,558
  89,247
  96,201
  103,429
  110,939
  118,744
  126,856
  135,290
Funds from operations, $m
  3,589
  8,112
  15,758
  25,357
  37,121
  51,235
  67,846
  87,067
  108,972
  133,599
  160,957
  191,028
  223,776
  259,149
  297,087
  337,530
  380,417
  425,695
  473,322
  523,266
  575,510
  630,050
  686,900
  746,090
  807,665
  871,686
  938,229
  1,007,388
  1,079,268
  1,153,990
  1,231,690
Change in working capital, $m
  -268
  -471
  -601
  -750
  -915
  -1,094
  -1,285
  -1,485
  -1,691
  -1,900
  -2,110
  -2,319
  -2,525
  -2,728
  -2,926
  -3,119
  -3,307
  -3,492
  -3,673
  -3,852
  -4,029
  -4,207
  -4,385
  -4,565
  -4,748
  -4,936
  -5,130
  -5,331
  -5,540
  -5,759
  -5,987
Cash from operations, $m
  3,857
  8,583
  16,359
  26,107
  38,036
  52,329
  69,132
  88,552
  110,663
  135,499
  163,068
  193,347
  226,301
  261,876
  300,013
  340,648
  383,724
  429,187
  476,996
  527,119
  579,539
  634,257
  691,285
  750,655
  812,413
  876,622
  943,360
  1,012,719
  1,084,808
  1,159,749
  1,237,677
Maintenance CAPEX, $m
  0
  -1,658
  -2,321
  -3,168
  -4,224
  -5,513
  -7,055
  -8,865
  -10,958
  -13,340
  -16,017
  -18,989
  -22,256
  -25,814
  -29,656
  -33,777
  -38,170
  -42,830
  -47,749
  -52,923
  -58,350
  -64,026
  -69,952
  -76,128
  -82,558
  -89,247
  -96,201
  -103,429
  -110,939
  -118,744
  -126,856
New CAPEX, $m
  -3,889
  -9,938
  -12,705
  -15,846
  -19,335
  -23,125
  -27,161
  -31,384
  -35,734
  -40,152
  -44,590
  -49,003
  -53,360
  -57,635
  -61,817
  -65,900
  -69,887
  -73,788
  -77,618
  -81,396
  -85,144
  -88,886
  -92,647
  -96,455
  -100,334
  -104,310
  -108,409
  -112,655
  -117,072
  -121,684
  -126,511
Cash from investing activities, $m
  -3,843
  -11,596
  -15,026
  -19,014
  -23,559
  -28,638
  -34,216
  -40,249
  -46,692
  -53,492
  -60,607
  -67,992
  -75,616
  -83,449
  -91,473
  -99,677
  -108,057
  -116,618
  -125,367
  -134,319
  -143,494
  -152,912
  -162,599
  -172,583
  -182,892
  -193,557
  -204,610
  -216,084
  -228,011
  -240,428
  -253,367
Free cash flow, $m
  14
  -3,013
  1,333
  7,093
  14,478
  23,692
  34,916
  48,303
  63,971
  82,007
  102,461
  125,354
  150,685
  178,427
  208,540
  240,971
  275,666
  312,570
  351,629
  392,799
  436,046
  481,345
  528,686
  578,072
  629,521
  683,065
  738,749
  796,635
  856,797
  919,322
  984,309
Issuance/(repayment) of debt, $m
  -110
  18,468
  23,579
  29,408
  35,882
  42,915
  50,406
  58,244
  66,316
  74,516
  82,752
  90,942
  99,027
  106,962
  114,723
  122,300
  129,699
  136,939
  144,047
  151,058
  158,013
  164,958
  171,939
  179,004
  186,203
  193,582
  201,190
  209,070
  217,267
  225,825
  234,784
Issuance/(repurchase) of shares, $m
  2,218
  497
  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 from financing (excl. dividends), $m  
  1,884
  18,965
  23,579
  29,408
  35,882
  42,915
  50,406
  58,244
  66,316
  74,516
  82,752
  90,942
  99,027
  106,962
  114,723
  122,300
  129,699
  136,939
  144,047
  151,058
  158,013
  164,958
  171,939
  179,004
  186,203
  193,582
  201,190
  209,070
  217,267
  225,825
  234,784
Total cash flow (excl. dividends), $m
  1,884
  15,952
  24,912
  36,501
  50,360
  66,607
  85,323
  106,547
  130,287
  156,523
  185,213
  216,296
  249,712
  285,389
  323,262
  363,271
  405,366
  449,509
  495,676
  543,857
  594,059
  646,302
  700,624
  757,076
  815,724
  876,647
  939,939
  1,005,705
  1,074,064
  1,145,147
  1,219,094
Retained Cash Flow (-), $m
  -1,842
  -6,283
  -8,071
  -10,066
  -12,282
  -14,689
  -17,253
  -19,936
  -22,699
  -25,506
  -28,324
  -31,128
  -33,895
  -36,611
  -39,267
  -41,861
  -44,394
  -46,872
  -49,305
  -51,704
  -54,085
  -56,462
  -58,851
  -61,270
  -63,734
  -66,260
  -68,864
  -71,561
  -74,367
  -77,296
  -80,362
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
 
  9,669
  16,842
  26,435
  38,078
  51,918
  68,069
  86,611
  107,588
  131,018
  156,888
  185,169
  215,817
  248,778
  283,995
  321,410
  360,972
  402,637
  446,371
  492,153
  539,974
  589,840
  641,773
  695,806
  751,990
  810,387
  871,075
  934,144
  999,698
  1,067,851
  1,138,731
Discount rate, %
 
  9.70
  10.19
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.38
  29.79
  31.28
  32.85
  34.49
  36.21
  38.03
  39.93
PV of cash for distribution, $m
 
  8,814
  13,872
  19,490
  24,877
  29,737
  33,792
  36,817
  38,658
  39,250
  38,619
  36,878
  34,209
  30,844
  27,039
  23,048
  19,098
  15,380
  12,032
  9,138
  6,733
  4,809
  3,326
  2,226
  1,439
  898
  541
  313
  174
  93
  48
Current shareholders' claim on cash, %
  100
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3

Enbridge Inc. is a Canada-based energy transportation and distribution company. The Company is engaged in delivering energy. It operates through five segments: Liquids Pipelines, Gas Distribution, Gas Pipelines and Processing, Green Power and Transmission, and Energy Services. Liquids Pipelines consists of common carrier and contract crude oil, natural gas liquids (NGL), and refined products pipelines and terminals, including Canadian Mainline, Lakehead Pipeline System, Mid-Continent and Gulf Coast and Regional Oil Sands System. Gas Distribution consists of its natural gas utility operations, the core of which is Enbridge Gas Distribution Inc. Green Power and Transmission consists of its investments in renewable energy assets and transmission facilities. Renewable energy assets consist of wind, solar, geothermal and waste heat recovery facilities in Canada. Energy Services undertake physical commodity marketing activity and logistical services, and oversee refinery supply services.

FINANCIAL RATIOS  of  Enbridge (ENB)

Valuation Ratios
P/E Ratio 25.3
Price to Sales 1.5
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 10.1
Price to Free Cash Flow -1212
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.7%
Cap. Spend. - 3 Yr. Gr. Rate -9.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 170.6%
Total Debt to Equity 194.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. -8.6%
Return On Total Capital 3.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.3%
Return On Equity 10.3%
Return On Equity - 3 Yr. Avg. 7%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 30.5%
Gross Margin - 3 Yr. Avg. 25.8%
EBITDA Margin 18.8%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin 7.5%
Oper. Margin - 3 Yr. Avg. 7.2%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 4.3%
Net Profit Margin 6%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 5.8%
Eff/ Tax Rate - 3 Yr. Avg. 536.3%
Payout Ratio 69.8%

ENB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ENB stock intrinsic value calculation we used $25580 million for the last fiscal year's total revenue generated by Enbridge. The default revenue input number comes from 2016 income statement of Enbridge. 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 ENB stock valuation model: a) initial revenue growth rate of 40% 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 9.7%, whose default value for ENB is calculated based on our internal credit rating of Enbridge, 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 Enbridge.
    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 ENB stock the variable cost ratio is equal to 18.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $19380 million in the base year in the intrinsic value calculation for ENB 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 Enbridge.

Corporate tax rate of 27% is the nominal tax rate for Enbridge. 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 ENB 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 ENB are equal to 97.2%.

Life of production assets of 15 years is the average useful life of capital assets used in Enbridge 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 ENB is equal to -4.6%. 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 - $15829 million for Enbridge - 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 1626.15 million for Enbridge 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 Enbridge at the current share price and the inputted number of shares is $66.9 billion.

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COMPANY NEWS

▶ Better Buy: Enbridge Inc. vs. Buckeye Partners L.P.   [Sep-19-17 10:33AM  Motley Fool]
▶ Company finds gaps in underwater oil pipeline's coating   [Aug-30-17 07:49PM  Associated Press]
▶ 3 Stocks to Buy With Dividends Yielding More Than 4%   [Aug-19-17 10:33AM  Motley Fool]
▶ How Enbridge Inc Makes Most of Its Money   [Aug-18-17 10:32AM  Motley Fool]
▶ The $50 Billion Backlog Of U.S. Energy Projects   [Aug-08-17 04:00PM  Oilprice.com]
▶ 3 Stocks Retirees Should Consider   [03:33PM  Motley Fool]
▶ Enbridge misses 2Q profit forecasts   [01:49AM  Associated Press]
▶ 5 Energy Stocks Poised to Trump Earnings in Q2   [Jul-31-17 12:59PM  Zacks]
▶ 3 No-Brainer Stocks to Buy in the Energy Sector   [Jul-30-17 09:07AM  Motley Fool]
▶ Westcoast Energy and Union Gas Declare Dividends   [Jul-28-17 05:15PM  Marketwired]
▶ 3 Dividend Stocks That Shine in Market Crashes   [Jul-26-17 02:17PM  Motley Fool]
▶ Appeals court overturns $535M verdict against Enterprise Products Partners   [Jul-19-17 04:50PM  American City Business Journals]
▶ In Focus: TransCanadas Keystone XL Pipeline Project   [Jul-14-17 02:29PM  Market Realist]
▶ ETFs with exposure to Enbridge, Inc. : July 11, 2017   [Jul-11-17 02:28PM  Capital Cube]
▶ 3 Growth Dividend Stocks for July   [Jul-08-17 11:06AM  Motley Fool]
▶ Enbridge Inc: the Bear Case from a Bull   [10:36AM  Motley Fool]
▶ ETFs with exposure to Enbridge, Inc. : June 30, 2017   [Jun-30-17 02:53PM  Capital Cube]
▶ Meet the top 5 largest employers in the Uptown and Galleria area   [03:00AM  American City Business Journals]
▶ 5 Things You Didn't Know About TransCanada Corporation   [Jun-27-17 10:00AM  Motley Fool]
▶ 3 Large-Cap Stocks for the Long Term   [Jun-26-17 04:15PM  Motley Fool]
▶ Spectra Energy Looks to Recover from Its 52-Week Lows   [Jun-23-17 09:09AM  Market Realist]
▶ ETFs with exposure to Enbridge, Inc. : June 19, 2017   [Jun-19-17 03:16PM  Capital Cube]
▶ 3 Large-Cap Stocks for Astute Investors   [Jun-17-17 01:09PM  Motley Fool]
▶ 3 Dividend Stock Winners   [10:23AM  Motley Fool]
▶ Here's Why the Best Is Yet to Come for Enbridge Inc.   [Jun-06-17 10:00AM  Motley Fool]
▶ The 5 Best Energy Stocks for 2017   [May-31-17 06:00AM  Investopedia]
▶ Why Enbridge Inc Is a Dividend Investor's Dream   [May-27-17 10:00AM  Motley Fool]
▶ Houston companies shuffle around Forbes Global 2000 list   [May-24-17 01:40PM  American City Business Journals]
▶ Canada And Brazil Could Jeopardize Oil Market Balance   [May-22-17 06:00PM  Oilprice.com]
▶ Enbridge misses 1Q profit forecasts   [09:52AM  Associated Press]
▶ Morning News Call - Canada, May 11   [07:51AM  Reuters]
Financial statements of ENB
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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