Intrinsic value of Enbridge - ENB

Previous Close

$41.81

  Intrinsic Value

$238.05

stock screener

  Rating & Target

str. buy

+469%

  Value-price divergence*

+402%

Previous close

$41.81

 
Intrinsic value

$238.05

 
Up/down potential

+469%

 
Rating

str. buy

 
Value-price divergence*

+402%

*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 39.9

 

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
  26.70
  24.53
  22.58
  20.82
  19.24
  17.81
  16.53
  15.38
  14.34
  13.41
  12.57
  11.81
  11.13
  10.52
  9.96
  9.47
  9.02
  8.62
  8.26
  7.93
  7.64
  7.37
  7.14
  6.92
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
Revenue, $m
  25,580
  32,410
  40,360
  49,472
  59,772
  71,270
  83,966
  97,848
  112,896
  129,086
  146,393
  164,789
  184,250
  204,755
  226,287
  248,834
  272,394
  296,966
  322,562
  349,196
  376,892
  405,680
  435,596
  466,684
  498,994
  532,581
  567,507
  603,839
  641,650
  681,020
  722,032
Variable operating expenses, $m
 
  6,124
  7,625
  9,345
  11,289
  13,460
  15,856
  18,477
  21,317
  24,374
  27,641
  31,108
  34,782
  38,652
  42,717
  46,973
  51,421
  56,059
  60,891
  65,919
  71,147
  76,581
  82,229
  88,098
  94,197
  100,537
  107,130
  113,989
  121,126
  128,558
  136,300
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
  25,989
  27,986
  30,215
  32,681
  35,387
  38,331
  41,514
  44,930
  48,577
  52,449
  56,536
  60,846
  65,368
  70,100
  75,041
  80,191
  85,548
  91,117
  96,901
  102,903
  109,131
  115,593
  122,296
  129,250
  136,466
  143,958
  151,737
  159,818
  168,217
  176,951
Operating income, $m
  1,910
  6,421
  12,374
  19,257
  27,091
  35,884
  45,635
  56,334
  67,966
  80,509
  93,944
  108,253
  123,405
  139,387
  156,186
  173,793
  192,203
  211,418
  231,445
  252,295
  273,988
  296,548
  320,003
  344,389
  369,744
  396,114
  423,549
  452,102
  481,832
  512,802
  545,080
EBITDA, $m
  3,568
  8,527
  14,995
  22,469
  30,970
  40,508
  51,082
  62,680
  75,287
  88,880
  103,436
  118,931
  135,344
  152,655
  170,850
  189,918
  209,854
  230,662
  252,347
  274,923
  298,411
  322,836
  348,230
  374,630
  402,079
  430,626
  460,323
  491,231
  523,411
  556,932
  591,868
Interest expense (income), $m
  1,347
  1,256
  1,786
  2,402
  3,109
  3,908
  4,800
  5,785
  6,862
  8,029
  9,285
  10,627
  12,054
  13,564
  15,154
  16,824
  18,573
  20,401
  22,307
  24,292
  26,358
  28,506
  30,739
  33,060
  35,471
  37,977
  40,582
  43,291
  46,110
  49,043
  52,096
Earnings before tax, $m
  1,814
  5,166
  10,588
  16,855
  23,982
  31,976
  40,835
  50,549
  61,104
  72,481
  84,659
  97,626
  111,351
  125,824
  141,032
  156,969
  173,630
  191,018
  209,138
  228,003
  247,630
  268,042
  289,264
  311,329
  334,273
  358,137
  382,967
  408,810
  435,722
  463,760
  492,984
Tax expense, $m
  105
  1,395
  2,859
  4,551
  6,475
  8,633
  11,025
  13,648
  16,498
  19,570
  22,858
  26,359
  30,065
  33,972
  38,079
  42,382
  46,880
  51,575
  56,467
  61,561
  66,860
  72,371
  78,101
  84,059
  90,254
  96,697
  103,401
  110,379
  117,645
  125,215
  133,106
Net income, $m
  1,531
  3,771
  7,730
  12,304
  17,507
  23,342
  29,809
  36,901
  44,606
  52,911
  61,801
  71,267
  81,286
  91,851
  102,954
  114,587
  126,750
  139,443
  152,671
  166,442
  180,770
  195,670
  211,163
  227,270
  244,019
  261,440
  279,566
  298,432
  318,077
  338,545
  359,878

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
  78,474
  97,724
  119,787
  144,726
  172,567
  203,308
  236,919
  273,355
  312,558
  354,462
  399,005
  446,126
  495,774
  547,909
  602,505
  659,549
  719,047
  781,021
  845,511
  912,571
  982,275
  1,054,712
  1,129,986
  1,208,218
  1,289,542
  1,374,108
  1,462,080
  1,553,633
  1,648,958
  1,748,260
Adjusted assets (=assets-cash), $m
  61,961
  78,474
  97,724
  119,787
  144,726
  172,567
  203,308
  236,919
  273,355
  312,558
  354,462
  399,005
  446,126
  495,774
  547,909
  602,505
  659,549
  719,047
  781,021
  845,511
  912,571
  982,275
  1,054,712
  1,129,986
  1,208,218
  1,289,542
  1,374,108
  1,462,080
  1,553,633
  1,648,958
  1,748,260
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
  31,502
  39,230
  48,087
  58,098
  69,275
  81,615
  95,108
  109,735
  125,472
  142,294
  160,175
  179,091
  199,022
  219,951
  241,867
  264,767
  288,651
  313,530
  339,418
  366,339
  394,321
  423,399
  453,617
  485,022
  517,669
  551,617
  586,931
  623,684
  661,951
  701,815
Working capital, $m
  -3,372
  -1,491
  -1,857
  -2,276
  -2,750
  -3,278
  -3,862
  -4,501
  -5,193
  -5,938
  -6,734
  -7,580
  -8,476
  -9,419
  -10,409
  -11,446
  -12,530
  -13,660
  -14,838
  -16,063
  -17,337
  -18,661
  -20,037
  -21,467
  -22,954
  -24,499
  -26,105
  -27,777
  -29,516
  -31,327
  -33,213
Total debt, $m
  30,766
  41,530
  55,871
  72,308
  90,888
  111,630
  134,531
  159,572
  186,717
  215,922
  247,141
  280,326
  315,431
  352,419
  391,259
  431,933
  474,431
  518,757
  564,928
  612,972
  662,932
  714,862
  768,827
  824,907
  883,189
  943,776
  1,006,778
  1,072,316
  1,140,523
  1,211,541
  1,285,521
Total liabilities, $m
  47,700
  58,463
  72,804
  89,241
  107,821
  128,563
  151,464
  176,505
  203,650
  232,855
  264,074
  297,259
  332,364
  369,352
  408,192
  448,866
  491,364
  535,690
  581,861
  629,905
  679,865
  731,795
  785,760
  841,840
  900,122
  960,709
  1,023,711
  1,089,249
  1,157,456
  1,228,474
  1,302,454
Total equity, $m
  15,829
  20,011
  24,920
  30,546
  36,905
  44,005
  51,844
  60,414
  69,706
  79,702
  90,388
  101,746
  113,762
  126,422
  139,717
  153,639
  168,185
  183,357
  199,160
  215,605
  232,706
  250,480
  268,952
  288,146
  308,096
  328,833
  350,398
  372,830
  396,176
  420,484
  445,806
Total liabilities and equity, $m
  63,529
  78,474
  97,724
  119,787
  144,726
  172,568
  203,308
  236,919
  273,356
  312,557
  354,462
  399,005
  446,126
  495,774
  547,909
  602,505
  659,549
  719,047
  781,021
  845,510
  912,571
  982,275
  1,054,712
  1,129,986
  1,208,218
  1,289,542
  1,374,109
  1,462,079
  1,553,632
  1,648,958
  1,748,260
Debt-to-equity ratio
  1.944
  2.080
  2.240
  2.370
  2.460
  2.540
  2.590
  2.640
  2.680
  2.710
  2.730
  2.760
  2.770
  2.790
  2.800
  2.810
  2.820
  2.830
  2.840
  2.840
  2.850
  2.850
  2.860
  2.860
  2.870
  2.870
  2.870
  2.880
  2.880
  2.880
  2.880
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
  3,771
  7,730
  12,304
  17,507
  23,342
  29,809
  36,901
  44,606
  52,911
  61,801
  71,267
  81,286
  91,851
  102,954
  114,587
  126,750
  139,443
  152,671
  166,442
  180,770
  195,670
  211,163
  227,270
  244,019
  261,440
  279,566
  298,432
  318,077
  338,545
  359,878
Depreciation, amort., depletion, $m
  1,658
  2,106
  2,621
  3,212
  3,879
  4,624
  5,447
  6,346
  7,321
  8,371
  9,492
  10,678
  11,939
  13,268
  14,663
  16,124
  17,651
  19,243
  20,902
  22,628
  24,423
  26,288
  28,227
  30,241
  32,335
  34,511
  36,774
  39,129
  41,579
  44,130
  46,788
Funds from operations, $m
  3,589
  5,877
  10,351
  15,515
  21,386
  27,966
  35,256
  43,247
  51,927
  61,281
  71,293
  81,945
  93,225
  105,119
  117,617
  130,712
  144,401
  158,686
  173,573
  189,070
  205,193
  221,959
  239,389
  257,511
  276,354
  295,952
  316,340
  337,560
  359,656
  382,675
  406,666
Change in working capital, $m
  -268
  -314
  -366
  -419
  -474
  -529
  -584
  -639
  -692
  -745
  -796
  -846
  -895
  -943
  -990
  -1,037
  -1,084
  -1,130
  -1,177
  -1,225
  -1,274
  -1,324
  -1,376
  -1,430
  -1,486
  -1,545
  -1,607
  -1,671
  -1,739
  -1,811
  -1,887
Cash from operations, $m
  3,857
  6,191
  10,716
  15,935
  21,859
  28,495
  35,840
  43,886
  52,620
  62,026
  72,089
  82,792
  94,121
  106,063
  118,607
  131,749
  145,485
  159,817
  174,750
  190,295
  206,467
  223,283
  240,765
  258,941
  277,840
  297,497
  317,947
  339,232
  361,396
  384,486
  408,553
Maintenance CAPEX, $m
  0
  -1,658
  -2,100
  -2,615
  -3,206
  -3,873
  -4,618
  -5,441
  -6,341
  -7,316
  -8,365
  -9,486
  -10,678
  -11,939
  -13,268
  -14,663
  -16,124
  -17,651
  -19,243
  -20,902
  -22,628
  -24,423
  -26,288
  -28,227
  -30,241
  -32,335
  -34,511
  -36,774
  -39,129
  -41,579
  -44,130
New CAPEX, $m
  -3,889
  -6,631
  -7,728
  -8,857
  -10,011
  -11,177
  -12,340
  -13,493
  -14,627
  -15,737
  -16,822
  -17,881
  -18,916
  -19,931
  -20,929
  -21,916
  -22,900
  -23,885
  -24,879
  -25,888
  -26,920
  -27,982
  -29,079
  -30,218
  -31,405
  -32,647
  -33,948
  -35,315
  -36,753
  -38,267
  -39,863
Cash from investing activities, $m
  -3,843
  -8,289
  -9,828
  -11,472
  -13,217
  -15,050
  -16,958
  -18,934
  -20,968
  -23,053
  -25,187
  -27,367
  -29,594
  -31,870
  -34,197
  -36,579
  -39,024
  -41,536
  -44,122
  -46,790
  -49,548
  -52,405
  -55,367
  -58,445
  -61,646
  -64,982
  -68,459
  -72,089
  -75,882
  -79,846
  -83,993
Free cash flow, $m
  14
  -2,098
  889
  4,462
  8,642
  13,446
  18,882
  24,952
  31,652
  38,973
  46,903
  55,424
  64,526
  74,193
  84,410
  95,169
  106,461
  118,281
  130,628
  143,505
  156,919
  170,878
  185,399
  200,497
  216,194
  232,515
  249,488
  267,142
  285,514
  304,640
  324,559
Issuance/(repayment) of debt, $m
  -110
  12,331
  14,341
  16,437
  18,579
  20,742
  22,902
  25,041
  27,145
  29,206
  31,219
  33,184
  35,105
  36,988
  38,840
  40,673
  42,498
  44,326
  46,171
  48,045
  49,960
  51,930
  53,965
  56,079
  58,283
  60,587
  63,002
  65,539
  68,207
  71,018
  73,980
Issuance/(repurchase) of shares, $m
  2,218
  411
  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
  12,742
  14,341
  16,437
  18,579
  20,742
  22,902
  25,041
  27,145
  29,206
  31,219
  33,184
  35,105
  36,988
  38,840
  40,673
  42,498
  44,326
  46,171
  48,045
  49,960
  51,930
  53,965
  56,079
  58,283
  60,587
  63,002
  65,539
  68,207
  71,018
  73,980
Total cash flow (excl. dividends), $m
  1,884
  10,644
  15,230
  20,899
  27,222
  34,187
  41,783
  49,993
  58,797
  68,179
  78,122
  88,609
  99,631
  111,180
  123,251
  135,843
  148,959
  162,607
  176,799
  191,550
  206,879
  222,808
  239,364
  256,576
  274,477
  293,102
  312,489
  332,681
  353,721
  375,657
  398,539
Retained Cash Flow (-), $m
  -1,842
  -4,182
  -4,909
  -5,626
  -6,359
  -7,100
  -7,839
  -8,571
  -9,291
  -9,997
  -10,686
  -11,358
  -12,016
  -12,660
  -13,294
  -13,922
  -14,546
  -15,172
  -15,803
  -16,445
  -17,100
  -17,775
  -18,471
  -19,195
  -19,949
  -20,738
  -21,564
  -22,433
  -23,346
  -24,308
  -25,322
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
 
  6,462
  10,321
  15,273
  20,862
  27,088
  33,944
  41,422
  49,506
  58,182
  67,436
  77,250
  87,616
  98,520
  109,957
  121,921
  134,412
  147,435
  160,995
  175,105
  189,778
  205,033
  220,893
  237,381
  254,528
  272,364
  290,925
  310,248
  330,375
  351,349
  373,217
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
 
  5,891
  8,501
  11,261
  13,630
  15,515
  16,851
  17,608
  17,788
  17,430
  16,600
  15,385
  13,888
  12,215
  10,469
  8,743
  7,111
  5,632
  4,340
  3,251
  2,366
  1,671
  1,145
  759
  487
  302
  181
  104
  58
  31
  16
Current shareholders' claim on cash, %
  100
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0

Enbridge Inc. engages in energy transportation activities in the United States and Canada. It operates through five segments: Liquids Pipelines, Gas Distribution, Gas Pipelines and Processing, Green Power and Transmission, and Energy Services. The Liquids Pipelines segment operates common carrier and contract crude oil, natural gas liquids (NGL), and refined products pipelines and terminals. The Gas Distribution segment operates as a natural gas utility that serves residential, commercial, and industrial customers in Central and Eastern Ontario, and Northern New York State, as well as in Quebec and New Brunswick. The Gas Pipelines and Processing segment holds interests in natural gas pipelines, and gathering and processing facilities, including the Alliance pipeline, the Vector pipeline, and transmission and gathering pipelines in the Gulf of Mexico; the Aux Sable, a natural gas fractionation and extraction facility. The Green Power and Transmission segment engages in the renewable energy projects, such as wind, solar, and geothermal projects with a generating capacity of approximately 1,900 MW; and operates waste heat recovery facilities. The Energy Services segment provides energy supply and marketing services to refiners, producers, and other customers; crude oil and NGL marketing services; physical barrel marketing services; and natural gas marketing services. This segment also provides natural gas supply, transportation, balancing, and storage services for third parties. The company was formerly known as IPL Energy Inc. and changed its name to Enbridge Inc. in October 1998. Enbridge Inc. was founded in 1949 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Enbridge (ENB)

Valuation Ratios
P/E Ratio 25.8
Price to Sales 1.5
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 10.2
Price to Free Cash Flow -1232.1
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 26.7% 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 953.185 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 $39.9 billion.

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Stock chart of ENB 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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