Intrinsic value of Energy Transfer Partners - ETP

Previous Close

$18.30

  Intrinsic Value

$12.27

stock screener

  Rating & Target

sell

-33%

  Value-price divergence*

+313%

Previous close

$18.30

 
Intrinsic value

$12.27

 
Up/down potential

-33%

 
Rating

sell

 
Value-price divergence*

+313%

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

We calculate the intrinsic value of ETP 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 21.3

 

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, %
  -12.73
  24.30
  22.37
  20.63
  19.07
  17.66
  16.40
  15.26
  14.23
  13.31
  12.48
  11.73
  11.06
  10.45
  9.91
  9.42
  8.97
  8.58
  8.22
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
Revenue, $m
  9,151
  11,375
  13,919
  16,791
  19,993
  23,525
  27,382
  31,559
  36,051
  40,848
  45,945
  51,334
  57,010
  62,968
  69,205
  75,721
  82,516
  89,593
  96,956
  104,613
  112,571
  120,841
  129,435
  138,366
  147,651
  157,307
  167,352
  177,807
  188,692
  200,033
  211,853
Variable operating expenses, $m
 
  10,700
  13,006
  15,609
  18,512
  21,713
  25,209
  28,996
  33,066
  37,415
  42,035
  46,530
  51,674
  57,075
  62,729
  68,635
  74,794
  81,208
  87,883
  94,822
  102,036
  109,532
  117,321
  125,417
  133,833
  142,585
  151,690
  161,166
  171,033
  181,313
  192,027
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
  8,336
  10,700
  13,006
  15,609
  18,512
  21,713
  25,209
  28,996
  33,066
  37,415
  42,035
  46,530
  51,674
  57,075
  62,729
  68,635
  74,794
  81,208
  87,883
  94,822
  102,036
  109,532
  117,321
  125,417
  133,833
  142,585
  151,690
  161,166
  171,033
  181,313
  192,027
Operating income, $m
  815
  675
  913
  1,182
  1,481
  1,812
  2,173
  2,564
  2,984
  3,433
  3,910
  4,804
  5,335
  5,893
  6,477
  7,086
  7,722
  8,385
  9,074
  9,790
  10,535
  11,309
  12,113
  12,949
  13,818
  14,722
  15,662
  16,640
  17,659
  18,720
  19,826
EBITDA, $m
  1,261
  2,453
  3,002
  3,621
  4,312
  5,073
  5,905
  6,806
  7,774
  8,809
  9,908
  11,070
  12,294
  13,579
  14,924
  16,329
  17,795
  19,321
  20,909
  22,560
  24,276
  26,060
  27,913
  29,839
  31,841
  33,924
  36,090
  38,344
  40,692
  43,138
  45,687
Interest expense (income), $m
  0
  1,140
  1,577
  2,075
  2,638
  3,265
  3,957
  4,712
  5,530
  6,410
  7,349
  8,347
  9,403
  10,514
  11,681
  12,903
  14,179
  15,509
  16,895
  18,337
  19,837
  21,395
  23,015
  24,698
  26,447
  28,266
  30,156
  32,124
  34,171
  36,303
  38,524
Earnings before tax, $m
  736
  -465
  -664
  -894
  -1,156
  -1,453
  -1,784
  -2,148
  -2,546
  -2,977
  -3,439
  -3,543
  -4,067
  -4,621
  -5,204
  -5,816
  -6,456
  -7,125
  -7,822
  -8,547
  -9,302
  -10,086
  -10,902
  -11,749
  -12,629
  -13,544
  -14,495
  -15,484
  -16,512
  -17,583
  -18,698
Tax expense, $m
  27
  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
Net income, $m
  705
  -465
  -664
  -894
  -1,156
  -1,453
  -1,784
  -2,148
  -2,546
  -2,977
  -3,439
  -3,543
  -4,067
  -4,621
  -5,204
  -5,816
  -6,456
  -7,125
  -7,822
  -8,547
  -9,302
  -10,086
  -10,902
  -11,749
  -12,629
  -13,544
  -14,495
  -15,484
  -16,512
  -17,583
  -18,698

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  360
  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
  70,191
  86,830
  106,254
  128,177
  152,620
  179,577
  209,021
  240,911
  275,195
  311,818
  350,724
  391,862
  435,189
  480,670
  528,284
  578,023
  629,893
  683,915
  740,124
  798,570
  859,319
  922,448
  988,050
  1,056,232
  1,127,111
  1,200,818
  1,277,497
  1,357,302
  1,440,400
  1,526,969
  1,617,198
Adjusted assets (=assets-cash), $m
  69,831
  86,830
  106,254
  128,177
  152,620
  179,577
  209,021
  240,911
  275,195
  311,818
  350,724
  391,862
  435,189
  480,670
  528,284
  578,023
  629,893
  683,915
  740,124
  798,570
  859,319
  922,448
  988,050
  1,056,232
  1,127,111
  1,200,818
  1,277,497
  1,357,302
  1,440,400
  1,526,969
  1,617,198
Revenue / Adjusted assets
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
Average production assets, $m
  33,512
  41,654
  50,972
  61,489
  73,215
  86,147
  100,272
  115,570
  132,017
  149,586
  168,250
  187,985
  208,770
  230,588
  253,429
  277,290
  302,174
  328,089
  355,054
  383,092
  412,234
  442,518
  473,989
  506,698
  540,700
  576,059
  612,843
  651,128
  690,991
  732,520
  775,805
Working capital, $m
  -474
  444
  543
  655
  780
  917
  1,068
  1,231
  1,406
  1,593
  1,792
  2,002
  2,223
  2,456
  2,699
  2,953
  3,218
  3,494
  3,781
  4,080
  4,390
  4,713
  5,048
  5,396
  5,758
  6,135
  6,527
  6,934
  7,359
  7,801
  8,262
Total debt, $m
  32,930
  45,060
  59,298
  75,368
  93,284
  113,044
  134,626
  158,002
  183,132
  209,977
  238,495
  268,649
  300,407
  333,745
  368,646
  405,105
  443,126
  482,724
  523,925
  566,766
  611,294
  657,568
  705,655
  755,632
  807,586
  861,614
  917,819
  976,316
  1,037,227
  1,100,682
  1,166,820
Total liabilities, $m
  51,516
  63,646
  77,884
  93,954
  111,870
  131,630
  153,212
  176,588
  201,718
  228,563
  257,081
  287,235
  318,993
  352,331
  387,232
  423,691
  461,712
  501,310
  542,511
  585,352
  629,880
  676,154
  724,241
  774,218
  826,172
  880,200
  936,405
  994,902
  1,055,813
  1,119,268
  1,185,406
Total equity, $m
  18,675
  23,184
  28,370
  34,223
  40,749
  47,947
  55,809
  64,323
  73,477
  83,255
  93,643
  104,627
  116,195
  128,339
  141,052
  154,332
  168,181
  182,605
  197,613
  213,218
  229,438
  246,294
  263,809
  282,014
  300,939
  320,618
  341,092
  362,400
  384,587
  407,701
  431,792
Total liabilities and equity, $m
  70,191
  86,830
  106,254
  128,177
  152,619
  179,577
  209,021
  240,911
  275,195
  311,818
  350,724
  391,862
  435,188
  480,670
  528,284
  578,023
  629,893
  683,915
  740,124
  798,570
  859,318
  922,448
  988,050
  1,056,232
  1,127,111
  1,200,818
  1,277,497
  1,357,302
  1,440,400
  1,526,969
  1,617,198
Debt-to-equity ratio
  1.763
  1.940
  2.090
  2.200
  2.290
  2.360
  2.410
  2.460
  2.490
  2.520
  2.550
  2.570
  2.590
  2.600
  2.610
  2.620
  2.630
  2.640
  2.650
  2.660
  2.660
  2.670
  2.670
  2.680
  2.680
  2.690
  2.690
  2.690
  2.700
  2.700
  2.700
Adjusted equity ratio
  0.262
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  705
  -465
  -664
  -894
  -1,156
  -1,453
  -1,784
  -2,148
  -2,546
  -2,977
  -3,439
  -3,543
  -4,067
  -4,621
  -5,204
  -5,816
  -6,456
  -7,125
  -7,822
  -8,547
  -9,302
  -10,086
  -10,902
  -11,749
  -12,629
  -13,544
  -14,495
  -15,484
  -16,512
  -17,583
  -18,698
Depreciation, amort., depletion, $m
  446
  1,778
  2,089
  2,439
  2,830
  3,261
  3,732
  4,242
  4,790
  5,376
  5,998
  6,266
  6,959
  7,686
  8,448
  9,243
  10,072
  10,936
  11,835
  12,770
  13,741
  14,751
  15,800
  16,890
  18,023
  19,202
  20,428
  21,704
  23,033
  24,417
  25,860
Funds from operations, $m
  790
  1,313
  1,425
  1,546
  1,674
  1,808
  1,948
  2,094
  2,244
  2,399
  2,559
  2,723
  2,892
  3,065
  3,243
  3,427
  3,616
  3,811
  4,013
  4,223
  4,439
  4,664
  4,898
  5,141
  5,394
  5,658
  5,933
  6,221
  6,521
  6,835
  7,163
Change in working capital, $m
  -98
  87
  99
  112
  125
  138
  150
  163
  175
  187
  199
  210
  221
  232
  243
  254
  265
  276
  287
  299
  310
  323
  335
  348
  362
  377
  392
  408
  425
  442
  461
Cash from operations, $m
  888
  1,226
  1,325
  1,434
  1,549
  1,670
  1,798
  1,931
  2,069
  2,212
  2,360
  2,513
  2,670
  2,833
  3,000
  3,173
  3,351
  3,535
  3,726
  3,924
  4,129
  4,342
  4,563
  4,793
  5,032
  5,282
  5,542
  5,813
  6,096
  6,392
  6,702
Maintenance CAPEX, $m
  0
  -1,117
  -1,388
  -1,699
  -2,050
  -2,441
  -2,872
  -3,342
  -3,852
  -4,401
  -4,986
  -5,608
  -6,266
  -6,959
  -7,686
  -8,448
  -9,243
  -10,072
  -10,936
  -11,835
  -12,770
  -13,741
  -14,751
  -15,800
  -16,890
  -18,023
  -19,202
  -20,428
  -21,704
  -23,033
  -24,417
New CAPEX, $m
  -1,949
  -8,143
  -9,318
  -10,517
  -11,726
  -12,932
  -14,125
  -15,298
  -16,447
  -17,569
  -18,664
  -19,735
  -20,785
  -21,818
  -22,842
  -23,861
  -24,883
  -25,915
  -26,965
  -28,038
  -29,142
  -30,284
  -31,471
  -32,708
  -34,002
  -35,359
  -36,784
  -38,284
  -39,864
  -41,529
  -43,285
Cash from investing activities, $m
  -3,038
  -9,260
  -10,706
  -12,216
  -13,776
  -15,373
  -16,997
  -18,640
  -20,299
  -21,970
  -23,650
  -25,343
  -27,051
  -28,777
  -30,528
  -32,309
  -34,126
  -35,987
  -37,901
  -39,873
  -41,912
  -44,025
  -46,222
  -48,508
  -50,892
  -53,382
  -55,986
  -58,712
  -61,568
  -64,562
  -67,702
Free cash flow, $m
  -2,150
  -8,033
  -9,381
  -10,783
  -12,227
  -13,702
  -15,199
  -16,710
  -18,230
  -19,757
  -21,290
  -22,830
  -24,381
  -25,945
  -27,528
  -29,136
  -30,775
  -32,452
  -34,175
  -35,949
  -37,783
  -39,684
  -41,659
  -43,715
  -45,860
  -48,101
  -50,445
  -52,899
  -55,472
  -58,170
  -61,001
Issuance/(repayment) of debt, $m
  1,729
  12,490
  14,238
  16,070
  17,917
  19,759
  21,583
  23,375
  25,130
  26,845
  28,518
  30,154
  31,758
  33,338
  34,901
  36,459
  38,021
  39,598
  41,201
  42,841
  44,529
  46,274
  48,087
  49,977
  51,954
  54,027
  56,206
  58,497
  60,911
  63,455
  66,138
Issuance/(repurchase) of shares, $m
  1,388
  4,974
  5,850
  6,747
  7,683
  8,651
  9,645
  10,663
  11,700
  12,755
  13,827
  14,527
  15,636
  16,765
  17,917
  19,097
  20,306
  21,549
  22,829
  24,152
  25,522
  26,942
  28,418
  29,953
  31,554
  33,224
  34,968
  36,792
  38,699
  40,697
  42,789
Cash from financing (excl. dividends), $m  
  3,115
  17,464
  20,088
  22,817
  25,600
  28,410
  31,228
  34,038
  36,830
  39,600
  42,345
  44,681
  47,394
  50,103
  52,818
  55,556
  58,327
  61,147
  64,030
  66,993
  70,051
  73,216
  76,505
  79,930
  83,508
  87,251
  91,174
  95,289
  99,610
  104,152
  108,927
Total cash flow (excl. dividends), $m
  965
  9,430
  10,707
  12,034
  13,373
  14,708
  16,029
  17,328
  18,600
  19,842
  21,055
  21,851
  23,013
  24,158
  25,291
  26,419
  27,551
  28,694
  29,856
  31,044
  32,267
  33,532
  34,845
  36,215
  37,648
  39,150
  40,729
  42,389
  44,138
  45,982
  47,926
Retained Cash Flow (-), $m
  -10,868
  -4,974
  -5,850
  -6,747
  -7,683
  -8,651
  -9,645
  -10,663
  -11,700
  -12,755
  -13,827
  -14,527
  -15,636
  -16,765
  -17,917
  -19,097
  -20,306
  -21,549
  -22,829
  -24,152
  -25,522
  -26,942
  -28,418
  -29,953
  -31,554
  -33,224
  -34,968
  -36,792
  -38,699
  -40,697
  -42,789
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
 
  4,457
  4,857
  5,287
  5,690
  6,058
  6,384
  6,666
  6,900
  7,087
  7,228
  7,324
  7,378
  7,393
  7,373
  7,323
  7,246
  7,146
  7,026
  6,892
  6,745
  6,590
  6,428
  6,262
  6,094
  5,927
  5,761
  5,598
  5,439
  5,285
  5,137
Discount rate, %
 
  10.90
  11.45
  12.02
  12.62
  13.25
  13.91
  14.61
  15.34
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.66
  23.79
  24.98
  26.23
  27.54
  28.92
  30.37
  31.89
  33.48
  35.15
  36.91
  38.76
  40.69
  42.73
  44.87
PV of cash for distribution, $m
 
  4,019
  3,910
  3,762
  3,537
  3,252
  2,922
  2,567
  2,203
  1,849
  1,515
  1,213
  948
  724
  538
  391
  276
  190
  127
  82
  52
  32
  19
  11
  6
  3
  2
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  81.1
  66.4
  54.9
  45.9
  38.7
  32.9
  28.2
  24.3
  21.1
  18.4
  16.2
  14.3
  12.7
  11.3
  10.1
  9.1
  8.2
  7.4
  6.7
  6.0
  5.5
  5.0
  4.5
  4.1
  3.7
  3.4
  3.1
  2.9
  2.6
  2.4

Energy Transfer Partners, L.P., formerly Sunoco Logistics Partners L.P., owns and operates a logistics business. The Company is engaged in the transport, terminaling and storage of crude oil, refined products and natural gas liquids (NGLs). The Company's segments include Crude Oil, Natural Gas Liquids and Refined Products. In addition to logistics services, it also owns acquisition and marketing assets. The Crude Oil segment provides transportation, terminaling and acquisition and marketing services to crude oil markets throughout the southwest, midwest and northeastern United States. The Natural Gas Liquids segment transports, stores, and executes acquisition and marketing activities utilizing a network of pipelines, storage and blending facilities, and strategic off-take locations that provide access to multiple NGL markets. The Refined Products segment provides transportation and terminaling services, using refined products pipelines and refined products marketing terminals.

FINANCIAL RATIOS  of  Energy Transfer Partners (ETP)

Valuation Ratios
P/E Ratio 20.6
Price to Sales 1.6
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 16.4
Price to Free Cash Flow -13.7
Growth Rates
Sales Growth Rate -12.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28%
Cap. Spend. - 3 Yr. Gr. Rate 16.8%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 170%
Total Debt to Equity 176.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.8%
Return On Equity 5.3%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 14.4%
Gross Margin - 3 Yr. Avg. 11.5%
EBITDA Margin 12.9%
EBITDA Margin - 3 Yr. Avg. 8%
Operating Margin 8.9%
Oper. Margin - 3 Yr. Avg. 5.3%
Pre-Tax Margin 8%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 3.7%
Eff/ Tax Rate - 3 Yr. Avg. 5.5%
Payout Ratio 136.3%

ETP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ETP stock intrinsic value calculation we used $9151 million for the last fiscal year's total revenue generated by Energy Transfer Partners. The default revenue input number comes from 2016 income statement of Energy Transfer 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 ETP stock valuation model: a) initial revenue growth rate of 24.3% 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 10.9%, whose default value for ETP is calculated based on our internal credit rating of Energy Transfer 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 Energy Transfer 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 ETP stock the variable cost ratio is equal to 94.9%.

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 ETP 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 3.5% for Energy Transfer Partners.

Corporate tax rate of 27% is the nominal tax rate for Energy Transfer 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 ETP 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 ETP are equal to 366.2%.

Life of production assets of 81 years is the average useful life of capital assets used in Energy Transfer 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 ETP is equal to 3.9%. 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 - $18675 million for Energy Transfer 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 1164.33 million for Energy Transfer 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 Energy Transfer Partners at the current share price and the inputted number of shares is $21.3 billion.

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COMPANY NEWS

▶ What Does Energy Transfer Equitys Current Valuation Suggest?   [Oct-16-17 10:40AM  Market Realist]
▶ Forecasting Energy Transfer Equitys Price   [09:10AM  Market Realist]
▶ 2 Dividend Stocks I'd Never Buy   [Oct-15-17 07:30AM  Motley Fool]
▶ Could Energy Transfer Equity Gain Upward Momentum?   [Oct-13-17 06:48PM  Market Realist]
▶ A timeline of the Dakota Access oil pipeline   [Oct-12-17 01:24PM  Associated Press]
▶ Judge allows Dakota Access pipeline to keep running   [Oct-11-17 05:06PM  Associated Press]
▶ 3 Hated Dividend Stocks to Buy Now   [06:33AM  Motley Fool]
▶ 3 High-Yield Stocks for Aggressive Investors   [Oct-06-17 06:12AM  Motley Fool]
▶ 52-Week Company Lows   [11:11AM  GuruFocus.com]
▶ At $17.41, Is It Time To Buy Energy Transfer Equity LP (ETE)?   [Sep-29-17 05:27PM  Simply Wall St.]
▶ The Latest: Governor grateful for help on pipeline costs   [Sep-28-17 07:08PM  Associated Press]
▶ Tribal leader irked by state deal with Dakota Access builder   [Sep-26-17 01:46PM  Associated Press]
▶ Why I Hate Sunoco LP   [01:35PM  Motley Fool]
▶ 3 Value Stocks for Bold Investors   [03:11PM  Motley Fool]
▶ This High-Yield Stock Just Locked In 30% Growth for 2018   [Sep-22-17 02:04PM  Motley Fool]
▶ Whats Next for Energy Transfer Partners?   [Sep-21-17 05:36PM  Market Realist]
▶ Ohio increases fines to $2.3M against pipeline developer   [Sep-20-17 06:09PM  Associated Press]
▶ Enable Midstreams Commodity Price Sensitivities   [Sep-18-17 07:38AM  Market Realist]
▶ [$$] MLPs Stage a Surprise Post-Harvey Comeback   [Sep-15-17 10:54PM  Barrons.com]
▶ What Analysts Recommend for Kinder Morgan   [07:38AM  Market Realist]
▶ Analysts Ratings for Energy Transfer Equity   [Sep-08-17 07:37AM  Market Realist]
▶ Hurricane impacts talks between pipeline company, state   [Sep-06-17 01:36PM  Associated Press]
▶ The Latest: Pipeline developer seeks to resolve state probes   [Aug-28-17 06:23PM  Associated Press]
▶ Groups sued by pipeline company decry attack on free speech   [Aug-24-17 01:46PM  Associated Press]
▶ Energy Transfer Partners Selloff Is Long in the Tooth   [Aug-23-17 08:20AM  TheStreet.com]
▶ [$$] Dakota Access Pipeline Owner Sues Greenpeace   [12:58AM  The Wall Street Journal]
Financial statements of ETP
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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