Intrinsic value of Energy Transfer Equity - ETE

Previous Close

$16.70

  Intrinsic Value

$8.90

stock screener

  Rating & Target

sell

-47%

Previous close

$16.70

 
Intrinsic value

$8.90

 
Up/down potential

-47%

 
Rating

sell

We calculate the intrinsic value of ETE 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 18.0

 

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, %
  -10.97
  20.50
  18.95
  17.56
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.01
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.58
  7.33
  7.09
  6.88
  6.70
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
Revenue, $m
  37,504
  45,192
  53,756
  63,193
  73,493
  84,642
  96,621
  109,411
  122,993
  137,349
  152,464
  168,327
  184,931
  202,273
  220,357
  239,188
  258,781
  279,152
  300,326
  322,329
  345,195
  368,959
  393,665
  419,357
  446,086
  473,905
  502,874
  533,054
  564,511
  597,316
  631,542
Variable operating expenses, $m
 
  37,507
  44,487
  52,178
  60,573
  69,660
  79,423
  89,848
  100,917
  112,618
  124,937
  137,192
  150,725
  164,860
  179,598
  194,946
  210,915
  227,519
  244,776
  262,709
  281,345
  300,714
  320,850
  341,790
  363,575
  386,249
  409,859
  434,457
  460,096
  486,833
  514,728
Fixed operating expenses, $m
 
  4,935
  5,059
  5,185
  5,315
  5,448
  5,584
  5,724
  5,867
  6,013
  6,164
  6,318
  6,476
  6,638
  6,803
  6,974
  7,148
  7,327
  7,510
  7,698
  7,890
  8,087
  8,289
  8,497
  8,709
  8,927
  9,150
  9,379
  9,613
  9,853
  10,100
Total operating expenses, $m
  35,922
  42,442
  49,546
  57,363
  65,888
  75,108
  85,007
  95,572
  106,784
  118,631
  131,101
  143,510
  157,201
  171,498
  186,401
  201,920
  218,063
  234,846
  252,286
  270,407
  289,235
  308,801
  329,139
  350,287
  372,284
  395,176
  419,009
  443,836
  469,709
  496,686
  524,828
Operating income, $m
  1,582
  2,750
  4,211
  5,830
  7,605
  9,534
  11,614
  13,840
  16,209
  18,718
  21,363
  24,817
  27,730
  30,776
  33,955
  37,268
  40,718
  44,307
  48,040
  51,922
  55,959
  60,158
  64,525
  69,070
  73,802
  78,730
  83,865
  89,218
  94,802
  100,630
  106,714
EBITDA, $m
  3,941
  5,954
  7,895
  10,042
  12,395
  14,948
  17,698
  20,641
  23,771
  27,083
  30,575
  34,243
  38,087
  42,104
  46,295
  50,663
  55,209
  59,940
  64,859
  69,973
  75,290
  80,819
  86,571
  92,554
  98,783
  105,268
  112,026
  119,069
  126,415
  134,079
  142,081
Interest expense (income), $m
  1,922
  2,048
  2,277
  3,034
  3,870
  4,781
  5,768
  6,828
  7,959
  9,161
  10,432
  11,769
  13,173
  14,643
  16,177
  17,777
  19,444
  21,178
  22,981
  24,854
  26,801
  28,825
  30,928
  33,114
  35,388
  37,753
  40,215
  42,778
  45,449
  48,233
  51,136
Earnings before tax, $m
  -176
  702
  1,934
  2,795
  3,736
  4,753
  5,846
  7,012
  8,250
  9,556
  10,931
  13,048
  14,557
  16,134
  17,778
  19,491
  21,274
  23,129
  25,060
  27,068
  29,158
  31,333
  33,597
  35,956
  38,414
  40,977
  43,650
  46,440
  49,353
  52,397
  55,578
Tax expense, $m
  -217
  190
  522
  755
  1,009
  1,283
  1,578
  1,893
  2,227
  2,580
  2,951
  3,523
  3,930
  4,356
  4,800
  5,262
  5,744
  6,245
  6,766
  7,308
  7,873
  8,460
  9,071
  9,708
  10,372
  11,064
  11,785
  12,539
  13,325
  14,147
  15,006
Net income, $m
  995
  513
  1,412
  2,040
  2,727
  3,470
  4,268
  5,119
  6,022
  6,976
  7,980
  9,525
  10,627
  11,778
  12,978
  14,228
  15,530
  16,884
  18,294
  19,760
  21,285
  22,873
  24,526
  26,248
  28,042
  29,913
  31,864
  33,901
  36,028
  38,250
  40,572

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  483
  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
  79,011
  94,545
  112,461
  132,203
  153,752
  177,075
  202,136
  228,893
  257,307
  287,341
  318,963
  352,149
  386,885
  423,166
  460,997
  500,393
  541,382
  584,001
  628,297
  674,329
  722,164
  771,881
  823,567
  877,316
  933,234
  991,434
  1,052,038
  1,115,175
  1,180,985
  1,249,615
  1,321,218
Adjusted assets (=assets-cash), $m
  78,528
  94,545
  112,461
  132,203
  153,752
  177,075
  202,136
  228,893
  257,307
  287,341
  318,963
  352,149
  386,885
  423,166
  460,997
  500,393
  541,382
  584,001
  628,297
  674,329
  722,164
  771,881
  823,567
  877,316
  933,234
  991,434
  1,052,038
  1,115,175
  1,180,985
  1,249,615
  1,321,218
Revenue / Adjusted assets
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
Average production assets, $m
  57,772
  69,596
  82,785
  97,317
  113,180
  130,349
  148,796
  168,493
  189,409
  211,517
  234,795
  259,224
  284,794
  311,501
  339,349
  368,349
  398,522
  429,895
  462,502
  496,387
  531,600
  568,197
  606,244
  645,810
  686,972
  729,814
  774,426
  820,903
  869,347
  919,866
  972,575
Working capital, $m
  -292
  497
  591
  695
  808
  931
  1,063
  1,204
  1,353
  1,511
  1,677
  1,852
  2,034
  2,225
  2,424
  2,631
  2,847
  3,071
  3,304
  3,546
  3,797
  4,059
  4,330
  4,613
  4,907
  5,213
  5,532
  5,864
  6,210
  6,570
  6,947
Total debt, $m
  44,052
  48,437
  64,562
  82,330
  101,724
  122,715
  145,269
  169,351
  194,924
  221,954
  250,413
  280,281
  311,544
  344,197
  378,244
  413,701
  450,591
  488,948
  528,814
  570,243
  613,295
  658,040
  704,557
  752,931
  803,257
  855,637
  910,181
  967,005
  1,026,234
  1,088,000
  1,152,444
Total liabilities, $m
  80,705
  85,090
  101,215
  118,983
  138,377
  159,368
  181,922
  206,004
  231,577
  258,607
  287,066
  316,934
  348,197
  380,850
  414,897
  450,354
  487,244
  525,601
  565,467
  606,896
  649,948
  694,693
  741,210
  789,584
  839,910
  892,290
  946,834
  1,003,658
  1,062,887
  1,124,653
  1,189,097
Total equity, $m
  -1,694
  9,454
  11,246
  13,220
  15,375
  17,708
  20,214
  22,889
  25,731
  28,734
  31,896
  35,215
  38,689
  42,317
  46,100
  50,039
  54,138
  58,400
  62,830
  67,433
  72,216
  77,188
  82,357
  87,732
  93,323
  99,143
  105,204
  111,518
  118,099
  124,961
  132,122
Total liabilities and equity, $m
  79,011
  94,544
  112,461
  132,203
  153,752
  177,076
  202,136
  228,893
  257,308
  287,341
  318,962
  352,149
  386,886
  423,167
  460,997
  500,393
  541,382
  584,001
  628,297
  674,329
  722,164
  771,881
  823,567
  877,316
  933,233
  991,433
  1,052,038
  1,115,176
  1,180,986
  1,249,614
  1,321,219
Debt-to-equity ratio
  -26.005
  5.120
  5.740
  6.230
  6.620
  6.930
  7.190
  7.400
  7.580
  7.720
  7.850
  7.960
  8.050
  8.130
  8.200
  8.270
  8.320
  8.370
  8.420
  8.460
  8.490
  8.530
  8.550
  8.580
  8.610
  8.630
  8.650
  8.670
  8.690
  8.710
  8.720
Adjusted equity ratio
  -0.028
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  995
  513
  1,412
  2,040
  2,727
  3,470
  4,268
  5,119
  6,022
  6,976
  7,980
  9,525
  10,627
  11,778
  12,978
  14,228
  15,530
  16,884
  18,294
  19,760
  21,285
  22,873
  24,526
  26,248
  28,042
  29,913
  31,864
  33,901
  36,028
  38,250
  40,572
Depreciation, amort., depletion, $m
  2,359
  3,205
  3,684
  4,213
  4,789
  5,414
  6,085
  6,801
  7,561
  8,365
  9,212
  9,426
  10,356
  11,327
  12,340
  13,395
  14,492
  15,633
  16,818
  18,050
  19,331
  20,662
  22,045
  23,484
  24,981
  26,539
  28,161
  29,851
  31,613
  33,450
  35,366
Funds from operations, $m
  3,356
  3,717
  5,096
  6,253
  7,516
  8,884
  10,352
  11,920
  13,584
  15,342
  17,192
  18,951
  20,983
  23,105
  25,318
  27,623
  30,022
  32,517
  35,112
  37,810
  40,616
  43,535
  46,571
  49,732
  53,023
  56,452
  60,025
  63,752
  67,640
  71,699
  75,938
Change in working capital, $m
  -61
  85
  94
  104
  113
  123
  132
  141
  149
  158
  166
  174
  183
  191
  199
  207
  216
  224
  233
  242
  252
  261
  272
  283
  294
  306
  319
  332
  346
  361
  376
Cash from operations, $m
  3,417
  3,633
  5,002
  6,149
  7,403
  8,761
  10,221
  11,779
  13,434
  15,184
  17,026
  18,777
  20,800
  22,914
  25,119
  27,416
  29,806
  32,293
  34,879
  37,568
  40,365
  43,273
  46,300
  49,449
  52,729
  56,146
  59,707
  63,420
  67,294
  71,338
  75,562
Maintenance CAPEX, $m
  0
  -2,101
  -2,531
  -3,010
  -3,539
  -4,116
  -4,740
  -5,411
  -6,127
  -6,888
  -7,692
  -8,538
  -9,426
  -10,356
  -11,327
  -12,340
  -13,395
  -14,492
  -15,633
  -16,818
  -18,050
  -19,331
  -20,662
  -22,045
  -23,484
  -24,981
  -26,539
  -28,161
  -29,851
  -31,613
  -33,450
New CAPEX, $m
  -8,092
  -11,824
  -13,188
  -14,533
  -15,862
  -17,169
  -18,448
  -19,697
  -20,916
  -22,108
  -23,278
  -24,429
  -25,570
  -26,707
  -27,848
  -29,000
  -30,173
  -31,372
  -32,607
  -33,885
  -35,213
  -36,598
  -38,046
  -39,566
  -41,162
  -42,842
  -44,612
  -46,477
  -48,444
  -50,519
  -52,709
Cash from investing activities, $m
  -9,467
  -13,925
  -15,719
  -17,543
  -19,401
  -21,285
  -23,188
  -25,108
  -27,043
  -28,996
  -30,970
  -32,967
  -34,996
  -37,063
  -39,175
  -41,340
  -43,568
  -45,864
  -48,240
  -50,703
  -53,263
  -55,929
  -58,708
  -61,611
  -64,646
  -67,823
  -71,151
  -74,638
  -78,295
  -82,132
  -86,159
Free cash flow, $m
  -6,050
  -10,292
  -10,717
  -11,394
  -11,998
  -12,523
  -12,967
  -13,328
  -13,609
  -13,812
  -13,944
  -14,191
  -14,196
  -14,149
  -14,056
  -13,925
  -13,761
  -13,571
  -13,361
  -13,135
  -12,899
  -12,655
  -12,409
  -12,162
  -11,917
  -11,677
  -11,444
  -11,218
  -11,001
  -10,794
  -10,597
Issuance/(repayment) of debt, $m
  1,658
  4,868
  16,125
  17,768
  19,394
  20,991
  22,555
  24,082
  25,573
  27,030
  28,460
  29,868
  31,263
  32,653
  34,048
  35,457
  36,890
  38,357
  39,867
  41,429
  43,052
  44,745
  46,517
  48,374
  50,326
  52,380
  54,543
  56,824
  59,229
  61,766
  64,443
Issuance/(repurchase) of shares, $m
  2,559
  10,636
  380
  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  
  9,715
  15,504
  16,505
  17,768
  19,394
  20,991
  22,555
  24,082
  25,573
  27,030
  28,460
  29,868
  31,263
  32,653
  34,048
  35,457
  36,890
  38,357
  39,867
  41,429
  43,052
  44,745
  46,517
  48,374
  50,326
  52,380
  54,543
  56,824
  59,229
  61,766
  64,443
Total cash flow (excl. dividends), $m
  3,665
  5,212
  5,787
  6,374
  7,396
  8,468
  9,588
  10,753
  11,964
  13,218
  14,516
  15,677
  17,066
  18,504
  19,991
  21,532
  23,129
  24,785
  26,506
  28,294
  30,154
  32,090
  34,108
  36,212
  38,409
  40,703
  43,100
  45,606
  48,228
  50,973
  53,847
Retained Cash Flow (-), $m
  762
  -11,148
  -1,792
  -1,974
  -2,155
  -2,332
  -2,506
  -2,676
  -2,841
  -3,003
  -3,162
  -3,319
  -3,474
  -3,628
  -3,783
  -3,940
  -4,099
  -4,262
  -4,430
  -4,603
  -4,784
  -4,972
  -5,169
  -5,375
  -5,592
  -5,820
  -6,060
  -6,314
  -6,581
  -6,863
  -7,160
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
 
  -5,937
  3,995
  4,400
  5,241
  6,135
  7,082
  8,078
  9,122
  10,215
  11,354
  12,359
  13,593
  14,876
  16,208
  17,592
  19,030
  20,524
  22,076
  23,690
  25,370
  27,118
  28,939
  30,838
  32,817
  34,883
  37,039
  39,292
  41,647
  44,110
  46,686
Discount rate, %
 
  14.90
  15.65
  16.43
  17.25
  18.11
  19.02
  19.97
  20.97
  22.01
  23.11
  24.27
  25.48
  26.76
  28.10
  29.50
  30.98
  32.52
  34.15
  35.86
  37.65
  39.53
  41.51
  43.59
  45.77
  48.05
  50.46
  52.98
  55.63
  58.41
  61.33
PV of cash for distribution, $m
 
  -5,167
  2,987
  2,788
  2,773
  2,669
  2,492
  2,259
  1,990
  1,704
  1,419
  1,132
  892
  682
  506
  364
  254
  171
  111
  70
  43
  25
  14
  8
  4
  2
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1
  48.1

Energy Transfer Equity, L.P. (ETE) owns equity interests in Energy Transfer Partners, L.P. (ETP) and Sunoco LP, which are engaged in diversified energy-related services. The Company's segments include Investment in ETP, including the consolidated operations of ETP; Investment in Sunoco LP, including the consolidated operations of Sunoco LP; Investment in Lake Charles LNG, including the operations of Lake Charles LNG, and Corporate and Other. Its Investment in ETP segment includes the ETP's operations, which include intrastate transportation and storage operations; interstate transportation and storage operations; midstream operations; liquids transportation and services operations; ETP's Investment in Sunoco Logistics; Retail Marketing operations, and ETP's other operations and Investments. The Investment in Sunoco LP segment includes wholesale operations and retail operations. Lake Charles LNG owns a LNG import terminal and regasification facility located on Louisiana's Gulf Coast.

FINANCIAL RATIOS  of  Energy Transfer Equity (ETE)

Valuation Ratios
P/E Ratio 17.6
Price to Sales 0.5
Price to Book -10.3
Price to Tangible Book
Price to Cash Flow 5.1
Price to Free Cash Flow -3.7
Growth Rates
Sales Growth Rate -11%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.8%
Cap. Spend. - 3 Yr. Gr. Rate 18.2%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity -2530%
Total Debt to Equity -2600.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 0.7%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 2.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.8%
Return On Equity -75.8%
Return On Equity - 3 Yr. Avg. -296.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 24.2%
Gross Margin - 3 Yr. Avg. 18.7%
EBITDA Margin 10.9%
EBITDA Margin - 3 Yr. Avg. 10.2%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 4.7%
Pre-Tax Margin -0.5%
Pre-Tax Margin - 3 Yr. Avg. 1.5%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 2.2%
Effective Tax Rate 123.3%
Eff/ Tax Rate - 3 Yr. Avg. 46.1%
Payout Ratio 380.7%

ETE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ETE stock intrinsic value calculation we used $37504 million for the last fiscal year's total revenue generated by Energy Transfer Equity. The default revenue input number comes from 2016 income statement of Energy Transfer Equity. 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 ETE stock valuation model: a) initial revenue growth rate of 20.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 14.9%, whose default value for ETE is calculated based on our internal credit rating of Energy Transfer Equity, 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 Energy Transfer Equity.
    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 ETE stock the variable cost ratio is equal to 83.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4815 million in the base year in the intrinsic value calculation for ETE 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 4.7% for Energy Transfer Equity.

Corporate tax rate of 27% is the nominal tax rate for Energy Transfer Equity. 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 ETE 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 ETE are equal to 154%.

Life of production assets of 27.5 years is the average useful life of capital assets used in Energy Transfer Equity 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 ETE is equal to 1.1%. 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 - $-1694 million for Energy Transfer Equity - 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 1079.37 million for Energy Transfer Equity 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 Energy Transfer Equity at the current share price and the inputted number of shares is $18.0 billion.

RELATED COMPANIES Price Int.Val. Rating
ETP Energy Transfe 17.42 11.95  sell
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TEP Tallgrass Ener 45.92 18.07  str.sell
ENB Enbridge 38.67 308.90  str.buy
TRP TransCanada 48.48 2.18  str.sell
PAA Plains All Ame 20.37 4.40  str.sell
EPD Enterprise Pro 26.07 1.90  str.sell
TRGP Targa Resource 47.00 6.06  str.sell

COMPANY NEWS

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▶ [$$] A Promising Game Plan for an Energy MLP   [Dec-02-17 12:01AM  Barrons.com]
▶ Energy Transfer Partners Needs to Retest Its Recent Low   [Dec-01-17 12:47PM  TheStreet.com]
▶ 52-Week Company Lows   [Nov-30-17 10:25AM  GuruFocus.com]
▶ 4 Stocks to Buy at Their 52-Week Lows   [Nov-28-17 04:53PM  Zacks]
▶ JPMorgan Lowered Energy Transfer Equitys Target Price   [Nov-27-17 07:31AM  Market Realist]
▶ Can Energy Transfer Partners Gain Upward Momentum?   [Nov-21-17 05:25PM  Market Realist]
▶ Why Only 9 MLPs Ended in the Green Last Week   [03:55PM  Market Realist]
▶ Reading the Top Institutional Holders in MPLX   [Nov-17-17 09:02AM  Market Realist]
▶ These Institutions Added Major Positions in ETP in 3Q17   [Nov-16-17 03:16PM  Market Realist]
▶ These Stocks Were Biggest Losers in Energy Sector Last Week   [Nov-14-17 08:31AM  Market Realist]
▶ Why 3Q17 Was Good for MLPs   [Nov-10-17 02:29PM  Market Realist]
▶ 2 MLPs That Could Energize Returns   [Nov-09-17 10:48AM  Barrons.com]
▶ Energy Transfer Equity misses 3Q profit forecasts   [Nov-07-17 04:55PM  Associated Press]
▶ Sunoco LP Announces Joe Kim As CEO   [07:00AM  PR Newswire]
▶ Top Dividend Stocks For The Week   [Nov-04-17 09:02AM  Simply Wall St.]
▶ What Drove EnLink Midstream Partners 3Q17 Earnings Growth?   [Nov-03-17 11:15AM  Market Realist]
▶ What to Watch in ETEs and ETPs 3Q17 Results   [09:02AM  Market Realist]
▶ A Sneak Peek into Energy Transfer Partners 3Q17 Volumes   [Nov-02-17 03:15PM  Market Realist]
▶ J.P. Morgan Downgrades Kinder Morgan to Underweight   [Oct-23-17 03:06PM  Market Realist]
▶ Goldman Sachs Upgraded ETE to Buy, Raised the Target Price   [Oct-20-17 10:40AM  Market Realist]
▶ What Does Energy Transfer Equitys Current Valuation Suggest?   [Oct-16-17 10:40AM  Market Realist]
Financial statements of ETE
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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