Intrinsic value of Enterprise Products Partners - EPD

Previous Close

$26.33

  Intrinsic Value

$1.90

stock screener

  Rating & Target

str. sell

-93%

  Value-price divergence*

-30%

Previous close

$26.33

 
Intrinsic value

$1.90

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence*

-30%

*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 56.3

 

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
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
  5.59
Revenue, $m
  23,022
  27,074
  31,498
  36,287
  41,435
  46,932
  52,770
  58,942
  65,442
  72,263
  79,404
  86,863
  94,640
  102,740
  111,168
  119,931
  129,038
  138,503
  148,339
  158,561
  169,188
  180,239
  191,736
  203,702
  216,161
  229,142
  242,672
  256,781
  271,502
  286,867
  302,913
Variable operating expenses, $m
 
  23,426
  27,160
  31,203
  35,547
  40,187
  45,115
  50,325
  55,810
  61,568
  67,595
  73,316
  79,881
  86,717
  93,831
  101,227
  108,914
  116,903
  125,205
  133,833
  142,802
  152,130
  161,834
  171,933
  182,450
  193,406
  204,826
  216,735
  229,160
  242,129
  255,672
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
  23,426
  27,160
  31,203
  35,547
  40,187
  45,115
  50,325
  55,810
  61,568
  67,595
  73,316
  79,881
  86,717
  93,831
  101,227
  108,914
  116,903
  125,205
  133,833
  142,802
  152,130
  161,834
  171,933
  182,450
  193,406
  204,826
  216,735
  229,160
  242,129
  255,672
Operating income, $m
  3,581
  3,648
  4,338
  5,085
  5,887
  6,745
  7,655
  8,618
  9,631
  10,695
  11,809
  13,547
  14,760
  16,023
  17,337
  18,704
  20,124
  21,600
  23,134
  24,728
  26,386
  28,109
  29,902
  31,768
  33,711
  35,736
  37,846
  40,046
  42,342
  44,738
  47,241
EBITDA, $m
  5,133
  5,799
  6,747
  7,773
  8,875
  10,053
  11,303
  12,625
  14,017
  15,479
  17,008
  18,606
  20,272
  22,007
  23,812
  25,689
  27,640
  29,667
  31,774
  33,963
  36,239
  38,606
  41,069
  43,632
  46,301
  49,081
  51,979
  55,002
  58,155
  61,446
  64,883
Interest expense (income), $m
  948
  969
  1,185
  1,421
  1,678
  1,953
  2,248
  2,560
  2,890
  3,238
  3,603
  3,985
  4,385
  4,801
  5,235
  5,686
  6,155
  6,642
  7,149
  7,675
  8,222
  8,791
  9,382
  9,998
  10,638
  11,305
  12,000
  12,724
  13,479
  14,267
  15,089
Earnings before tax, $m
  2,576
  2,679
  3,153
  3,663
  4,210
  4,791
  5,408
  6,058
  6,741
  7,457
  8,206
  9,561
  10,375
  11,222
  12,103
  13,018
  13,970
  14,958
  15,985
  17,053
  18,163
  19,318
  20,520
  21,770
  23,073
  24,431
  25,846
  27,322
  28,863
  30,471
  32,151
Tax expense, $m
  23
  723
  851
  989
  1,137
  1,294
  1,460
  1,636
  1,820
  2,013
  2,216
  2,582
  2,801
  3,030
  3,268
  3,515
  3,772
  4,039
  4,316
  4,604
  4,904
  5,216
  5,540
  5,878
  6,230
  6,596
  6,978
  7,377
  7,793
  8,227
  8,681
Net income, $m
  2,513
  1,955
  2,302
  2,674
  3,073
  3,498
  3,948
  4,422
  4,921
  5,444
  5,990
  6,980
  7,574
  8,192
  8,835
  9,503
  10,198
  10,919
  11,669
  12,449
  13,259
  14,102
  14,979
  15,892
  16,843
  17,834
  18,867
  19,945
  21,070
  22,244
  23,470

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
  61,253
  71,262
  82,098
  93,744
  106,181
  119,390
  133,354
  148,058
  163,492
  179,647
  196,522
  214,118
  232,444
  251,511
  271,336
  291,942
  313,355
  335,608
  358,735
  382,778
  407,780
  433,791
  460,863
  489,053
  518,421
  549,031
  580,953
  614,257
  649,020
  685,323
Adjusted assets (=assets-cash), $m
  52,131
  61,253
  71,262
  82,098
  93,744
  106,181
  119,390
  133,354
  148,058
  163,492
  179,647
  196,522
  214,118
  232,444
  251,511
  271,336
  291,942
  313,355
  335,608
  358,735
  382,778
  407,780
  433,791
  460,863
  489,053
  518,421
  549,031
  580,953
  614,257
  649,020
  685,323
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
  43,047
  50,081
  57,697
  65,881
  74,622
  83,905
  93,718
  104,052
  114,899
  126,252
  138,112
  150,478
  163,357
  176,757
  190,690
  205,171
  220,220
  235,858
  252,112
  269,009
  286,580
  304,860
  323,886
  343,697
  364,336
  385,848
  408,282
  431,687
  456,118
  481,631
Working capital, $m
  -1,723
  921
  1,071
  1,234
  1,409
  1,596
  1,794
  2,004
  2,225
  2,457
  2,700
  2,953
  3,218
  3,493
  3,780
  4,078
  4,387
  4,709
  5,044
  5,391
  5,752
  6,128
  6,519
  6,926
  7,349
  7,791
  8,251
  8,731
  9,231
  9,753
  10,299
Total debt, $m
  23,698
  28,894
  34,669
  40,922
  47,641
  54,817
  62,439
  70,496
  78,981
  87,886
  97,207
  106,944
  117,097
  127,671
  138,673
  150,112
  162,001
  174,357
  187,197
  200,541
  214,414
  228,840
  243,849
  259,469
  275,735
  292,680
  310,342
  328,761
  347,977
  368,036
  388,982
Total liabilities, $m
  30,147
  35,343
  41,118
  47,371
  54,090
  61,266
  68,888
  76,945
  85,430
  94,335
  103,656
  113,393
  123,546
  134,120
  145,122
  156,561
  168,450
  180,806
  193,646
  206,990
  220,863
  235,289
  250,298
  265,918
  282,184
  299,129
  316,791
  335,210
  354,426
  374,485
  395,431
Total equity, $m
  22,047
  25,910
  30,144
  34,727
  39,654
  44,914
  50,502
  56,409
  62,629
  69,157
  75,991
  83,129
  90,572
  98,324
  106,389
  114,775
  123,491
  132,549
  141,962
  151,745
  161,915
  172,491
  183,494
  194,945
  206,869
  219,292
  232,240
  245,743
  259,831
  274,536
  289,892
Total liabilities and equity, $m
  52,194
  61,253
  71,262
  82,098
  93,744
  106,180
  119,390
  133,354
  148,059
  163,492
  179,647
  196,522
  214,118
  232,444
  251,511
  271,336
  291,941
  313,355
  335,608
  358,735
  382,778
  407,780
  433,792
  460,863
  489,053
  518,421
  549,031
  580,953
  614,257
  649,021
  685,323
Debt-to-equity ratio
  1.075
  1.120
  1.150
  1.180
  1.200
  1.220
  1.240
  1.250
  1.260
  1.270
  1.280
  1.290
  1.290
  1.300
  1.300
  1.310
  1.310
  1.320
  1.320
  1.320
  1.320
  1.330
  1.330
  1.330
  1.330
  1.330
  1.340
  1.340
  1.340
  1.340
  1.340
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
  1,955
  2,302
  2,674
  3,073
  3,498
  3,948
  4,422
  4,921
  5,444
  5,990
  6,980
  7,574
  8,192
  8,835
  9,503
  10,198
  10,919
  11,669
  12,449
  13,259
  14,102
  14,979
  15,892
  16,843
  17,834
  18,867
  19,945
  21,070
  22,244
  23,470
Depreciation, amort., depletion, $m
  1,552
  2,151
  2,409
  2,688
  2,988
  3,308
  3,648
  4,007
  4,386
  4,783
  5,199
  5,059
  5,512
  5,984
  6,475
  6,985
  7,515
  8,067
  8,640
  9,235
  9,854
  10,497
  11,167
  11,864
  12,590
  13,346
  14,134
  14,955
  15,813
  16,708
  17,642
Funds from operations, $m
  3,883
  4,107
  4,711
  5,362
  6,061
  6,806
  7,596
  8,430
  9,307
  10,227
  11,189
  12,039
  13,086
  14,176
  15,309
  16,488
  17,713
  18,986
  20,309
  21,684
  23,113
  24,600
  26,146
  27,756
  29,433
  31,180
  33,001
  34,901
  36,882
  38,952
  41,112
Change in working capital, $m
  -184
  138
  150
  163
  175
  187
  199
  210
  221
  232
  243
  254
  264
  275
  287
  298
  310
  322
  334
  348
  361
  376
  391
  407
  424
  441
  460
  480
  500
  522
  546
Cash from operations, $m
  4,067
  3,969
  4,560
  5,199
  5,886
  6,619
  7,397
  8,220
  9,086
  9,995
  10,946
  11,785
  12,821
  13,900
  15,023
  16,190
  17,403
  18,664
  19,974
  21,336
  22,752
  24,224
  25,755
  27,349
  29,009
  30,739
  32,541
  34,421
  36,382
  38,429
  40,567
Maintenance CAPEX, $m
  0
  -1,341
  -1,577
  -1,834
  -2,113
  -2,413
  -2,733
  -3,073
  -3,433
  -3,811
  -4,209
  -4,625
  -5,059
  -5,512
  -5,984
  -6,475
  -6,985
  -7,515
  -8,067
  -8,640
  -9,235
  -9,854
  -10,497
  -11,167
  -11,864
  -12,590
  -13,346
  -14,134
  -14,955
  -15,813
  -16,708
New CAPEX, $m
  -3,025
  -6,433
  -7,034
  -7,615
  -8,185
  -8,740
  -9,283
  -9,814
  -10,334
  -10,846
  -11,354
  -11,859
  -12,367
  -12,879
  -13,400
  -13,933
  -14,481
  -15,049
  -15,639
  -16,253
  -16,897
  -17,571
  -18,280
  -19,026
  -19,811
  -20,639
  -21,512
  -22,434
  -23,406
  -24,431
  -25,513
Cash from investing activities, $m
  -4,344
  -7,774
  -8,611
  -9,449
  -10,298
  -11,153
  -12,016
  -12,887
  -13,767
  -14,657
  -15,563
  -16,484
  -17,426
  -18,391
  -19,384
  -20,408
  -21,466
  -22,564
  -23,706
  -24,893
  -26,132
  -27,425
  -28,777
  -30,193
  -31,675
  -33,229
  -34,858
  -36,568
  -38,361
  -40,244
  -42,221
Free cash flow, $m
  -277
  -3,806
  -4,050
  -4,251
  -4,412
  -4,535
  -4,619
  -4,667
  -4,681
  -4,663
  -4,616
  -4,699
  -4,604
  -4,491
  -4,361
  -4,217
  -4,063
  -3,900
  -3,731
  -3,557
  -3,380
  -3,201
  -3,022
  -2,843
  -2,666
  -2,490
  -2,317
  -2,146
  -1,979
  -1,815
  -1,654
Issuance/(repayment) of debt, $m
  1,141
  5,259
  5,775
  6,252
  6,720
  7,176
  7,622
  8,057
  8,484
  8,905
  9,322
  9,737
  10,153
  10,574
  11,002
  11,439
  11,890
  12,356
  12,840
  13,344
  13,873
  14,426
  15,008
  15,621
  16,265
  16,945
  17,662
  18,419
  19,217
  20,058
  20,947
Issuance/(repurchase) of shares, $m
  2,543
  1,908
  1,932
  1,910
  1,853
  1,763
  1,640
  1,485
  1,299
  1,085
  844
  158
  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
  7,167
  7,707
  8,162
  8,573
  8,939
  9,262
  9,542
  9,783
  9,990
  10,166
  9,895
  10,153
  10,574
  11,002
  11,439
  11,890
  12,356
  12,840
  13,344
  13,873
  14,426
  15,008
  15,621
  16,265
  16,945
  17,662
  18,419
  19,217
  20,058
  20,947
Total cash flow (excl. dividends), $m
  3,345
  3,361
  3,657
  3,911
  4,161
  4,404
  4,642
  4,875
  5,102
  5,327
  5,549
  5,196
  5,549
  6,083
  6,641
  7,222
  7,827
  8,455
  9,109
  9,788
  10,493
  11,225
  11,986
  12,777
  13,600
  14,455
  15,345
  16,272
  17,238
  18,244
  19,293
Retained Cash Flow (-), $m
  -1,752
  -3,863
  -4,234
  -4,584
  -4,926
  -5,261
  -5,587
  -5,907
  -6,220
  -6,528
  -6,834
  -7,138
  -7,443
  -7,752
  -8,065
  -8,386
  -8,716
  -9,058
  -9,413
  -9,783
  -10,170
  -10,576
  -11,003
  -11,451
  -11,924
  -12,423
  -12,948
  -13,503
  -14,088
  -14,705
  -15,356
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
 
  -502
  -577
  -672
  -766
  -857
  -945
  -1,032
  -1,117
  -1,201
  -1,284
  -1,942
  -1,894
  -1,668
  -1,424
  -1,164
  -890
  -602
  -304
  5
  323
  649
  984
  1,326
  1,675
  2,032
  2,397
  2,769
  3,150
  3,539
  3,937
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
 
  -464
  -488
  -517
  -530
  -530
  -517
  -493
  -462
  -424
  -383
  -481
  -385
  -274
  -186
  -119
  -70
  -36
  -13
  0
  7
  10
  10
  9
  7
  5
  4
  3
  2
  1
  1
Current shareholders' claim on cash, %
  100
  96.7
  94.0
  91.7
  89.8
  88.3
  87.1
  86.1
  85.3
  84.7
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3
  84.3

Enterprise Products Partners L.P. (Enterprise) is a provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals and refined products in North America. The Company's segments include NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services. The Company's midstream energy operations include natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage, and import and export terminals, including liquefied petroleum gas (LPG); crude oil gathering, transportation, storage and terminals; petrochemical and refined products transportation, storage, export and import terminals, and related services, and a marine transportation business that operates primarily on the United States inland and Intracoastal Waterway systems.

FINANCIAL RATIOS  of  Enterprise Products Partners (EPD)

Valuation Ratios
P/E Ratio 22.2
Price to Sales 2.4
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 13.7
Price to Free Cash Flow 53.5
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 17.6% 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 2139.99 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 $56.3 billion.

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Financial statements 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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