Intrinsic value of Enterprise Products Partners - EPD

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$26.88

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of EPD 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 57.5

 

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, %
  -14.82
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
Revenue, $m
  23,022
  24,242
  25,520
  26,858
  28,259
  29,728
  31,267
  32,880
  34,571
  36,345
  38,204
  40,154
  42,200
  44,346
  46,597
  48,958
  51,437
  54,037
  56,766
  59,630
  62,635
  65,790
  69,101
  72,577
  76,225
  80,054
  84,074
  88,294
  92,724
  97,375
  102,257
Variable operating expenses, $m
 
  21,036
  22,114
  23,244
  24,427
  25,666
  26,965
  28,327
  29,754
  31,251
  32,820
  33,892
  35,619
  37,430
  39,330
  41,323
  43,415
  45,610
  47,913
  50,330
  52,867
  55,530
  58,324
  61,258
  64,337
  67,569
  70,962
  74,524
  78,263
  82,189
  86,310
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
  19,442
  21,036
  22,114
  23,244
  24,427
  25,666
  26,965
  28,327
  29,754
  31,251
  32,820
  33,892
  35,619
  37,430
  39,330
  41,323
  43,415
  45,610
  47,913
  50,330
  52,867
  55,530
  58,324
  61,258
  64,337
  67,569
  70,962
  74,524
  78,263
  82,189
  86,310
Operating income, $m
  3,581
  3,206
  3,405
  3,614
  3,833
  4,062
  4,302
  4,553
  4,817
  5,094
  5,384
  6,262
  6,581
  6,916
  7,267
  7,635
  8,022
  8,427
  8,853
  9,300
  9,768
  10,260
  10,777
  11,319
  11,888
  12,485
  13,112
  13,770
  14,461
  15,186
  15,948
EBITDA, $m
  5,133
  5,193
  5,466
  5,753
  6,053
  6,368
  6,697
  7,043
  7,405
  7,785
  8,183
  8,601
  9,039
  9,499
  9,981
  10,487
  11,018
  11,575
  12,159
  12,772
  13,416
  14,092
  14,801
  15,546
  16,327
  17,147
  18,008
  18,912
  19,861
  20,857
  21,903
Interest expense (income), $m
  948
  969
  1,033
  1,101
  1,173
  1,248
  1,327
  1,409
  1,495
  1,586
  1,681
  1,780
  1,885
  1,994
  2,109
  2,230
  2,356
  2,489
  2,628
  2,774
  2,927
  3,088
  3,257
  3,434
  3,620
  3,815
  4,020
  4,235
  4,461
  4,698
  4,947
Earnings before tax, $m
  2,576
  2,237
  2,372
  2,513
  2,660
  2,814
  2,975
  3,144
  3,322
  3,508
  3,703
  4,482
  4,696
  4,922
  5,158
  5,406
  5,666
  5,939
  6,225
  6,526
  6,841
  7,172
  7,520
  7,885
  8,267
  8,669
  9,091
  9,534
  9,999
  10,488
  11,000
Tax expense, $m
  23
  604
  641
  678
  718
  760
  803
  849
  897
  947
  1,000
  1,210
  1,268
  1,329
  1,393
  1,460
  1,530
  1,603
  1,681
  1,762
  1,847
  1,937
  2,030
  2,129
  2,232
  2,341
  2,455
  2,574
  2,700
  2,832
  2,970
Net income, $m
  2,513
  1,633
  1,732
  1,834
  1,941
  2,054
  2,172
  2,295
  2,425
  2,561
  2,703
  3,272
  3,428
  3,593
  3,765
  3,946
  4,136
  4,335
  4,544
  4,764
  4,994
  5,236
  5,489
  5,756
  6,035
  6,329
  6,637
  6,960
  7,300
  7,656
  8,030

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  63
  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
  52,194
  54,847
  57,737
  60,764
  63,935
  67,258
  70,740
  74,390
  78,216
  82,228
  86,435
  90,847
  95,475
  100,329
  105,422
  110,766
  116,372
  122,256
  128,430
  134,909
  141,709
  148,846
  156,337
  164,200
  172,454
  181,118
  190,213
  199,760
  209,783
  220,305
  231,352
Adjusted assets (=assets-cash), $m
  52,131
  54,847
  57,737
  60,764
  63,935
  67,258
  70,740
  74,390
  78,216
  82,228
  86,435
  90,847
  95,475
  100,329
  105,422
  110,766
  116,372
  122,256
  128,430
  134,909
  141,709
  148,846
  156,337
  164,200
  172,454
  181,118
  190,213
  199,760
  209,783
  220,305
  231,352
Revenue / Adjusted assets
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
Average production assets, $m
  36,614
  38,545
  40,576
  42,704
  44,932
  47,267
  49,715
  52,280
  54,969
  57,788
  60,744
  63,845
  67,098
  70,509
  74,089
  77,844
  81,784
  85,919
  90,258
  94,811
  99,590
  104,606
  109,871
  115,397
  121,197
  127,286
  133,678
  140,388
  147,431
  154,826
  162,589
Working capital, $m
  -1,723
  824
  868
  913
  961
  1,011
  1,063
  1,118
  1,175
  1,236
  1,299
  1,365
  1,435
  1,508
  1,584
  1,665
  1,749
  1,837
  1,930
  2,027
  2,130
  2,237
  2,349
  2,468
  2,592
  2,722
  2,859
  3,002
  3,153
  3,311
  3,477
Total debt, $m
  23,698
  25,197
  26,865
  28,612
  30,442
  32,359
  34,368
  36,474
  38,682
  40,996
  43,424
  45,970
  48,640
  51,441
  54,380
  57,463
  60,698
  64,092
  67,655
  71,393
  75,317
  79,435
  83,758
  88,295
  93,057
  98,056
  103,304
  108,813
  114,596
  120,667
  127,041
Total liabilities, $m
  30,147
  31,646
  33,314
  35,061
  36,891
  38,808
  40,817
  42,923
  45,131
  47,445
  49,873
  52,419
  55,089
  57,890
  60,829
  63,912
  67,147
  70,541
  74,104
  77,842
  81,766
  85,884
  90,207
  94,744
  99,506
  104,505
  109,753
  115,262
  121,045
  127,116
  133,490
Total equity, $m
  22,047
  23,200
  24,423
  25,703
  27,045
  28,450
  29,923
  31,467
  33,085
  34,782
  36,562
  38,428
  40,386
  42,439
  44,594
  46,854
  49,225
  51,714
  54,326
  57,066
  59,943
  62,962
  66,131
  69,457
  72,948
  76,613
  80,460
  84,499
  88,738
  93,189
  97,862
Total liabilities and equity, $m
  52,194
  54,846
  57,737
  60,764
  63,936
  67,258
  70,740
  74,390
  78,216
  82,227
  86,435
  90,847
  95,475
  100,329
  105,423
  110,766
  116,372
  122,255
  128,430
  134,908
  141,709
  148,846
  156,338
  164,201
  172,454
  181,118
  190,213
  199,761
  209,783
  220,305
  231,352
Debt-to-equity ratio
  1.075
  1.090
  1.100
  1.110
  1.130
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
  1.200
  1.210
  1.220
  1.230
  1.230
  1.240
  1.250
  1.250
  1.260
  1.260
  1.270
  1.270
  1.280
  1.280
  1.280
  1.290
  1.290
  1.290
  1.300
Adjusted equity ratio
  0.422
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,513
  1,633
  1,732
  1,834
  1,941
  2,054
  2,172
  2,295
  2,425
  2,561
  2,703
  3,272
  3,428
  3,593
  3,765
  3,946
  4,136
  4,335
  4,544
  4,764
  4,994
  5,236
  5,489
  5,756
  6,035
  6,329
  6,637
  6,960
  7,300
  7,656
  8,030
Depreciation, amort., depletion, $m
  1,552
  1,986
  2,061
  2,139
  2,220
  2,306
  2,396
  2,490
  2,588
  2,691
  2,800
  2,339
  2,458
  2,583
  2,714
  2,851
  2,996
  3,147
  3,306
  3,473
  3,648
  3,832
  4,025
  4,227
  4,439
  4,662
  4,897
  5,142
  5,400
  5,671
  5,956
Funds from operations, $m
  3,883
  3,620
  3,793
  3,973
  4,162
  4,360
  4,567
  4,785
  5,013
  5,252
  5,503
  5,610
  5,886
  6,176
  6,479
  6,798
  7,132
  7,482
  7,850
  8,237
  8,642
  9,067
  9,514
  9,983
  10,475
  10,991
  11,533
  12,103
  12,700
  13,327
  13,986
Change in working capital, $m
  -184
  41
  43
  45
  48
  50
  52
  55
  58
  60
  63
  66
  70
  73
  77
  80
  84
  88
  93
  97
  102
  107
  113
  118
  124
  130
  137
  143
  151
  158
  166
Cash from operations, $m
  4,067
  4,120
  3,749
  3,927
  4,114
  4,310
  4,515
  4,730
  4,955
  5,192
  5,439
  5,544
  5,817
  6,103
  6,403
  6,717
  7,048
  7,394
  7,758
  8,139
  8,540
  8,960
  9,401
  9,865
  10,351
  10,861
  11,397
  11,959
  12,549
  13,169
  13,820
Maintenance CAPEX, $m
  0
  -1,341
  -1,412
  -1,486
  -1,564
  -1,646
  -1,731
  -1,821
  -1,915
  -2,013
  -2,117
  -2,225
  -2,339
  -2,458
  -2,583
  -2,714
  -2,851
  -2,996
  -3,147
  -3,306
  -3,473
  -3,648
  -3,832
  -4,025
  -4,227
  -4,439
  -4,662
  -4,897
  -5,142
  -5,400
  -5,671
New CAPEX, $m
  -3,025
  -1,931
  -2,031
  -2,127
  -2,229
  -2,335
  -2,447
  -2,565
  -2,689
  -2,819
  -2,957
  -3,101
  -3,252
  -3,412
  -3,579
  -3,755
  -3,940
  -4,135
  -4,339
  -4,554
  -4,779
  -5,016
  -5,265
  -5,526
  -5,801
  -6,089
  -6,392
  -6,710
  -7,044
  -7,395
  -7,763
Cash from investing activities, $m
  -4,344
  -3,272
  -3,443
  -3,613
  -3,793
  -3,981
  -4,178
  -4,386
  -4,604
  -4,832
  -5,074
  -5,326
  -5,591
  -5,870
  -6,162
  -6,469
  -6,791
  -7,131
  -7,486
  -7,860
  -8,252
  -8,664
  -9,097
  -9,551
  -10,028
  -10,528
  -11,054
  -11,607
  -12,186
  -12,795
  -13,434
Free cash flow, $m
  -277
  848
  306
  314
  321
  329
  336
  344
  351
  359
  366
  218
  226
  233
  241
  248
  256
  264
  272
  280
  288
  296
  305
  314
  323
  333
  342
  353
  363
  374
  385
Issuance/(repayment) of debt, $m
  1,141
  1,562
  1,668
  1,747
  1,830
  1,917
  2,009
  2,106
  2,208
  2,315
  2,427
  2,546
  2,670
  2,801
  2,939
  3,083
  3,235
  3,395
  3,562
  3,739
  3,924
  4,118
  4,322
  4,537
  4,762
  4,999
  5,248
  5,509
  5,783
  6,071
  6,374
Issuance/(repurchase) of shares, $m
  2,543
  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 from financing (excl. dividends), $m  
  3,623
  1,562
  1,668
  1,747
  1,830
  1,917
  2,009
  2,106
  2,208
  2,315
  2,427
  2,546
  2,670
  2,801
  2,939
  3,083
  3,235
  3,395
  3,562
  3,739
  3,924
  4,118
  4,322
  4,537
  4,762
  4,999
  5,248
  5,509
  5,783
  6,071
  6,374
Total cash flow (excl. dividends), $m
  3,345
  2,410
  1,974
  2,060
  2,151
  2,246
  2,346
  2,450
  2,559
  2,673
  2,793
  2,764
  2,896
  3,034
  3,179
  3,331
  3,491
  3,658
  3,834
  4,018
  4,212
  4,414
  4,627
  4,851
  5,086
  5,332
  5,590
  5,862
  6,146
  6,445
  6,759
Retained Cash Flow (-), $m
  -1,752
  -1,153
  -1,223
  -1,280
  -1,341
  -1,405
  -1,473
  -1,544
  -1,618
  -1,697
  -1,780
  -1,866
  -1,958
  -2,054
  -2,154
  -2,260
  -2,372
  -2,489
  -2,612
  -2,741
  -2,876
  -3,019
  -3,169
  -3,326
  -3,491
  -3,665
  -3,847
  -4,039
  -4,240
  -4,451
  -4,673
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
 
  1,257
  751
  780
  810
  841
  873
  906
  941
  976
  1,014
  898
  938
  981
  1,025
  1,071
  1,119
  1,170
  1,222
  1,277
  1,335
  1,395
  1,459
  1,525
  1,594
  1,667
  1,743
  1,823
  1,907
  1,994
  2,086
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  1,161
  635
  600
  561
  520
  477
  433
  389
  345
  302
  223
  191
  161
  134
  109
  88
  69
  53
  40
  30
  21
  15
  10
  7
  4
  3
  2
  1
  1
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Enterprise Products Partners L.P., a master limited partnership, provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. The company operates through NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services segments. The NGL Pipelines & Services segment provides natural gas processing and related NGL marketing services, as well as NGL export docks and related services. It operates approximately 19,500 miles of NGL pipelines; NGL and related product storage facilities; 15 NGL fractionators; and a liquefied petroleum gas export terminal and NGL import facility. The Crude Oil Pipelines & Services segment operates approximately 5,400 miles of crude oil pipelines and related operations; and crude oil storage and marine terminals located in Oklahoma and Texas, as well as a fleet of 478 tractor-trailer tank trucks used to transport crude oil. It also engages in crude oil marketing activities. The Natural Gas Pipelines & Services segment operates approximately 19,100 miles of natural gas pipeline systems to gather and transport natural gas in Colorado, Louisiana, New Mexico, Texas, and Wyoming. It leases underground salt dome natural gas storage facilities in Texas and Louisiana; owns an underground salt dome storage cavern in Texas; and markets natural gas. The Petrochemical & Refined Products Services segment operates propylene fractionation and related operations, including 674 miles of pipelines; butane isomerization complex, associated deisobutanizer units, and related pipeline assets; and octane enhancement and high purity isobutylene production facilities. It also operates refined products pipelines of approximately 4,200 miles; and terminals, as well as provides refined products marketing and marine transportation services. The company was founded in 1968 and is based in Houston, Texas.

FINANCIAL RATIOS  of  Enterprise Products Partners (EPD)

Valuation Ratios
P/E Ratio 22.7
Price to Sales 2.5
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 14
Price to Free Cash Flow 54.6
Growth Rates
Sales Growth Rate -14.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21%
Cap. Spend. - 3 Yr. Gr. Rate -2.4%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 95.8%
Total Debt to Equity 107.5%
Interest Coverage 4
Management Effectiveness
Return On Assets 6.8%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital 5.7%
Ret/ On T. Cap. - 3 Yr. Avg. 6.5%
Return On Equity 11.9%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 14.7%
Gross Margin - 3 Yr. Avg. 11.6%
EBITDA Margin 22%
EBITDA Margin - 3 Yr. Avg. 17%
Operating Margin 15.6%
Oper. Margin - 3 Yr. Avg. 12.2%
Pre-Tax Margin 11.2%
Pre-Tax Margin - 3 Yr. Avg. 8.9%
Net Profit Margin 10.9%
Net Profit Margin - 3 Yr. Avg. 8.7%
Effective Tax Rate 0.9%
Eff/ Tax Rate - 3 Yr. Avg. 0.5%
Payout Ratio 131.4%

EPD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EPD stock intrinsic value calculation we used $23022 million for the last fiscal year's total revenue generated by Enterprise Products Partners. The default revenue input number comes from 2016 income statement of Enterprise Products 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 EPD stock valuation model: a) initial revenue growth rate of 5.3% 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 8.3%, whose default value for EPD is calculated based on our internal credit rating of Enterprise Products 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 Enterprise Products 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 EPD stock the variable cost ratio is equal to 86.9%.

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 EPD 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 4.1% for Enterprise Products Partners.

Corporate tax rate of 27% is the nominal tax rate for Enterprise Products 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 EPD 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 EPD are equal to 159%.

Life of production assets of 27.3 years is the average useful life of capital assets used in Enterprise Products 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 EPD is equal to 3.4%. 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 - $22047 million for Enterprise Products 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 2138.52 million for Enterprise Products 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 Enterprise Products Partners at the current share price and the inputted number of shares is $57.5 billion.


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Stock chart of EPD Financial statements of EPD Annual reports of EPD
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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