Intrinsic value of Energy Transfer Partners - ETP

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$18.81

  Intrinsic Value

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  Value-price divergence*

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$18.81

 
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*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 10.2

 

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, %
  -36.35
  12.00
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
Revenue, $m
  21,827
  24,446
  27,209
  30,112
  33,154
  36,334
  39,653
  43,111
  46,710
  50,453
  54,344
  58,387
  62,589
  66,956
  71,495
  76,215
  81,124
  86,232
  91,551
  97,090
  102,863
  108,881
  115,159
  121,711
  128,552
  135,697
  143,164
  150,969
  159,132
  167,672
  176,608
Variable operating expenses, $m
 
  22,810
  25,344
  28,007
  30,797
  33,714
  36,757
  39,929
  43,229
  46,662
  50,231
  53,549
  57,403
  61,408
  65,571
  69,900
  74,402
  79,088
  83,965
  89,046
  94,340
  99,860
  105,618
  111,627
  117,901
  124,454
  131,302
  138,461
  145,948
  153,780
  161,976
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
  20,250
  22,810
  25,344
  28,007
  30,797
  33,714
  36,757
  39,929
  43,229
  46,662
  50,231
  53,549
  57,403
  61,408
  65,571
  69,900
  74,402
  79,088
  83,965
  89,046
  94,340
  99,860
  105,618
  111,627
  117,901
  124,454
  131,302
  138,461
  145,948
  153,780
  161,976
Operating income, $m
  1,577
  1,636
  1,865
  2,105
  2,357
  2,621
  2,896
  3,182
  3,480
  3,791
  4,113
  4,838
  5,186
  5,548
  5,924
  6,315
  6,721
  7,145
  7,585
  8,044
  8,523
  9,021
  9,541
  10,084
  10,651
  11,243
  11,862
  12,508
  13,185
  13,892
  14,633
EBITDA, $m
  3,563
  4,069
  4,529
  5,013
  5,519
  6,048
  6,601
  7,176
  7,776
  8,399
  9,046
  9,719
  10,419
  11,146
  11,901
  12,687
  13,504
  14,355
  15,240
  16,162
  17,123
  18,125
  19,170
  20,261
  21,399
  22,589
  23,832
  25,131
  26,490
  27,912
  29,399
Interest expense (income), $m
  1,411
  1,477
  1,751
  2,042
  2,348
  2,669
  3,004
  3,354
  3,718
  4,097
  4,492
  4,902
  5,328
  5,771
  6,231
  6,709
  7,207
  7,724
  8,262
  8,823
  9,407
  10,015
  10,649
  11,311
  12,001
  12,722
  13,475
  14,262
  15,085
  15,945
  16,845
Earnings before tax, $m
  438
  158
  114
  63
  9
  -48
  -108
  -171
  -238
  -307
  -379
  -64
  -142
  -223
  -307
  -395
  -485
  -579
  -677
  -778
  -884
  -994
  -1,108
  -1,226
  -1,350
  -1,479
  -1,613
  -1,754
  -1,900
  -2,052
  -2,212
Tax expense, $m
  -186
  43
  31
  17
  2
  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
  297
  116
  83
  46
  7
  -48
  -108
  -171
  -238
  -307
  -379
  -64
  -142
  -223
  -307
  -395
  -485
  -579
  -677
  -778
  -884
  -994
  -1,108
  -1,226
  -1,350
  -1,479
  -1,613
  -1,754
  -1,900
  -2,052
  -2,212

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  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
  0
  0
Total assets, $m
  70,191
  78,103
  86,929
  96,204
  105,923
  116,084
  126,687
  137,734
  149,232
  161,191
  173,621
  186,540
  199,965
  213,916
  228,418
  243,497
  259,181
  275,502
  292,494
  310,192
  328,634
  347,863
  367,920
  388,853
  410,708
  433,536
  457,392
  482,330
  508,410
  535,693
  564,244
Adjusted assets (=assets-cash), $m
  69,811
  78,103
  86,929
  96,204
  105,923
  116,084
  126,687
  137,734
  149,232
  161,191
  173,621
  186,540
  199,965
  213,916
  228,418
  243,497
  259,181
  275,502
  292,494
  310,192
  328,634
  347,863
  367,920
  388,853
  410,708
  433,536
  457,392
  482,330
  508,410
  535,693
  564,244
Revenue / Adjusted assets
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
Average production assets, $m
  52,561
  58,867
  65,518
  72,509
  79,835
  87,493
  95,484
  103,811
  112,477
  121,490
  130,859
  140,596
  150,714
  161,230
  172,160
  183,525
  195,346
  207,647
  220,454
  233,793
  247,693
  262,186
  277,303
  293,080
  309,552
  326,758
  344,738
  363,534
  383,191
  403,754
  425,273
Working capital, $m
  -474
  367
  408
  452
  497
  545
  595
  647
  701
  757
  815
  876
  939
  1,004
  1,072
  1,143
  1,217
  1,293
  1,373
  1,456
  1,543
  1,633
  1,727
  1,826
  1,928
  2,035
  2,147
  2,265
  2,387
  2,515
  2,649
Total debt, $m
  33,213
  38,914
  45,383
  52,181
  59,306
  66,754
  74,525
  82,623
  91,051
  99,817
  108,929
  118,398
  128,238
  138,465
  149,095
  160,147
  171,644
  183,607
  196,062
  209,034
  222,553
  236,647
  251,350
  266,693
  282,713
  299,446
  316,932
  335,212
  354,328
  374,327
  395,255
Total liabilities, $m
  51,549
  57,250
  63,719
  70,517
  77,642
  85,090
  92,861
  100,959
  109,387
  118,153
  127,265
  136,734
  146,574
  156,801
  167,431
  178,483
  189,980
  201,943
  214,398
  227,370
  240,889
  254,983
  269,686
  285,029
  301,049
  317,782
  335,268
  353,548
  372,664
  392,663
  413,591
Total equity, $m
  18,642
  20,854
  23,210
  25,686
  28,282
  30,995
  33,825
  36,775
  39,845
  43,038
  46,357
  49,806
  53,391
  57,116
  60,988
  65,014
  69,201
  73,559
  78,096
  82,821
  87,745
  92,879
  98,235
  103,824
  109,659
  115,754
  122,124
  128,782
  135,745
  143,030
  150,653
Total liabilities and equity, $m
  70,191
  78,104
  86,929
  96,203
  105,924
  116,085
  126,686
  137,734
  149,232
  161,191
  173,622
  186,540
  199,965
  213,917
  228,419
  243,497
  259,181
  275,502
  292,494
  310,191
  328,634
  347,862
  367,921
  388,853
  410,708
  433,536
  457,392
  482,330
  508,409
  535,693
  564,244
Debt-to-equity ratio
  1.782
  1.870
  1.960
  2.030
  2.100
  2.150
  2.200
  2.250
  2.290
  2.320
  2.350
  2.380
  2.400
  2.420
  2.440
  2.460
  2.480
  2.500
  2.510
  2.520
  2.540
  2.550
  2.560
  2.570
  2.580
  2.590
  2.600
  2.600
  2.610
  2.620
  2.620
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
  297
  116
  83
  46
  7
  -48
  -108
  -171
  -238
  -307
  -379
  -64
  -142
  -223
  -307
  -395
  -485
  -579
  -677
  -778
  -884
  -994
  -1,108
  -1,226
  -1,350
  -1,479
  -1,613
  -1,754
  -1,900
  -2,052
  -2,212
Depreciation, amort., depletion, $m
  1,986
  2,434
  2,665
  2,907
  3,162
  3,428
  3,705
  3,994
  4,295
  4,608
  4,933
  4,882
  5,233
  5,598
  5,978
  6,372
  6,783
  7,210
  7,655
  8,118
  8,600
  9,104
  9,629
  10,176
  10,748
  11,346
  11,970
  12,623
  13,305
  14,019
  14,766
Funds from operations, $m
  3,186
  2,549
  2,748
  2,953
  3,168
  3,380
  3,597
  3,823
  4,057
  4,301
  4,555
  4,818
  5,091
  5,375
  5,671
  5,978
  6,298
  6,631
  6,978
  7,339
  7,716
  8,110
  8,521
  8,950
  9,398
  9,867
  10,357
  10,869
  11,405
  11,967
  12,554
Change in working capital, $m
  -117
  39
  41
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
  74
  77
  80
  83
  87
  90
  94
  98
  103
  107
  112
  117
  122
  128
  134
Cash from operations, $m
  3,303
  5,562
  2,706
  2,910
  3,123
  3,332
  3,547
  3,771
  4,004
  4,245
  4,496
  4,757
  5,028
  5,310
  5,602
  5,907
  6,224
  6,554
  6,898
  7,256
  7,630
  8,020
  8,427
  8,852
  9,296
  9,760
  10,245
  10,752
  11,283
  11,839
  12,420
Maintenance CAPEX, $m
  0
  -1,825
  -2,044
  -2,275
  -2,518
  -2,772
  -3,038
  -3,315
  -3,605
  -3,905
  -4,218
  -4,544
  -4,882
  -5,233
  -5,598
  -5,978
  -6,372
  -6,783
  -7,210
  -7,655
  -8,118
  -8,600
  -9,104
  -9,629
  -10,176
  -10,748
  -11,346
  -11,970
  -12,623
  -13,305
  -14,019
New CAPEX, $m
  -7,550
  -6,306
  -6,652
  -6,991
  -7,326
  -7,658
  -7,991
  -8,326
  -8,666
  -9,013
  -9,369
  -9,737
  -10,118
  -10,515
  -10,930
  -11,365
  -11,821
  -12,301
  -12,806
  -13,339
  -13,900
  -14,493
  -15,117
  -15,777
  -16,472
  -17,206
  -17,980
  -18,796
  -19,656
  -20,563
  -21,519
Cash from investing activities, $m
  -6,390
  -8,131
  -8,696
  -9,266
  -9,844
  -10,430
  -11,029
  -11,641
  -12,271
  -12,918
  -13,587
  -14,281
  -15,000
  -15,748
  -16,528
  -17,343
  -18,193
  -19,084
  -20,016
  -20,994
  -22,018
  -23,093
  -24,221
  -25,406
  -26,648
  -27,954
  -29,326
  -30,766
  -32,279
  -33,868
  -35,538
Free cash flow, $m
  -3,087
  -2,569
  -5,990
  -6,356
  -6,721
  -7,098
  -7,482
  -7,871
  -8,267
  -8,673
  -9,091
  -9,524
  -9,972
  -10,439
  -10,926
  -11,436
  -11,970
  -12,530
  -13,119
  -13,737
  -14,388
  -15,073
  -15,794
  -16,554
  -17,353
  -18,195
  -19,081
  -20,014
  -20,996
  -22,030
  -23,118
Issuance/(repayment) of debt, $m
  4,241
  6,081
  6,469
  6,799
  7,124
  7,448
  7,772
  8,098
  8,428
  8,765
  9,112
  9,469
  9,840
  10,226
  10,630
  11,053
  11,497
  11,963
  12,455
  12,972
  13,519
  14,095
  14,702
  15,343
  16,020
  16,733
  17,486
  18,280
  19,117
  19,998
  20,928
Issuance/(repurchase) of shares, $m
  2,486
  0
  1,877
  2,034
  2,191
  2,363
  2,541
  2,723
  2,909
  3,101
  3,299
  3,504
  3,716
  3,937
  4,168
  4,409
  4,661
  4,924
  5,201
  5,490
  5,794
  6,113
  6,448
  6,799
  7,169
  7,557
  7,964
  8,393
  8,843
  9,316
  9,813
Cash from financing (excl. dividends), $m  
  6,462
  6,081
  8,346
  8,833
  9,315
  9,811
  10,313
  10,821
  11,337
  11,866
  12,411
  12,973
  13,556
  14,163
  14,798
  15,462
  16,158
  16,887
  17,656
  18,462
  19,313
  20,208
  21,150
  22,142
  23,189
  24,290
  25,450
  26,673
  27,960
  29,314
  30,741
Total cash flow (excl. dividends), $m
  3,375
  3,512
  479
  443
  404
  350
  290
  227
  161
  92
  20
  -54
  -132
  -212
  -296
  -383
  -473
  -567
  -664
  -765
  -870
  -979
  -1,092
  -1,210
  -1,333
  -1,461
  -1,595
  -1,734
  -1,880
  -2,031
  -2,190
Retained Cash Flow (-), $m
  2,194
  -2,212
  -2,356
  -2,477
  -2,595
  -2,713
  -2,831
  -2,950
  -3,070
  -3,193
  -3,319
  -3,449
  -3,584
  -3,725
  -3,872
  -4,026
  -4,188
  -4,358
  -4,537
  -4,725
  -4,924
  -5,134
  -5,355
  -5,589
  -5,835
  -6,095
  -6,369
  -6,659
  -6,963
  -7,285
  -7,623
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
 
  1,300
  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
Discount rate, %
 
  10.10
  10.61
  11.14
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.05
  20.00
  21.00
  22.05
  23.15
  24.31
  25.52
  26.80
  28.14
  29.55
  31.02
  32.57
  34.20
  35.91
  37.71
  39.59
  41.57
PV of cash for distribution, $m
 
  1,181
  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
Current shareholders' claim on cash, %
  100
  100.0
  88.6
  78.7
  70.2
  62.7
  56.1
  50.3
  45.2
  40.7
  36.7
  33.1
  29.9
  27.1
  24.5
  22.2
  20.2
  18.3
  16.6
  15.1
  13.7
  12.5
  11.4
  10.3
  9.4
  8.6
  7.8
  7.1
  6.5
  5.9
  5.4

Energy Transfer Partners, L.P. engages in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The company’s Intrastate Transportation and Storage segment transports natural gas from various natural gas producing areas, and through ET fuel system and HPL system. It owns and operates 7,500 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas. Its Interstate Transportation and Storage segment provides natural gas transportation and storage services; owns and operates approximately 12,300 miles of interstate natural gas pipeline; and has interests in various natural gas pipelines. The company’s Midstream segment gathers, compresses, treats, blends, processes, and markets natural gas. It owns and operates 35,000 miles of in service natural gas, 31 natural gas processing plants, 21 natural gas treating facilities, and 4 natural gas conditioning facilities. The company’s Liquids Transportation and Services segment transports mixed NGLs and other hydrocarbons; stores mixed NGLs, NGL products, and petrochemical products; and separates mixed NGL streams into purity products. It owns and operates various NGL pipelines, and NGL storage facilities with aggregate storage capacity of approximately 51 million barrels. Its Investment in Sunoco Logistics segment gathers, purchases, markets, and sells crude oil; and owns and operates 1,800 miles of refined products pipelines. The company’s Retail Marketing segment sells motor fuel and merchandise at company-operated retail locations and branded convenience stores in 14 states, primarily on the east coast and south regions of the United States. Its Other segment provides natural gas compression equipment and compression services; manages coal and natural resources property, sells standing timber, and leases coal-related infrastructure facilities; and generates electrical power. The company was founded in 1995 and is based in Dallas, Texas.

FINANCIAL RATIOS  of  Energy Transfer Partners (ETP)

Valuation Ratios
P/E Ratio 11.4
Price to Sales 0.2
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 1
Price to Free Cash Flow -0.8
Growth Rates
Sales Growth Rate -36.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17%
Cap. Spend. - 3 Yr. Gr. Rate 24%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 171.8%
Total Debt to Equity 178.2%
Interest Coverage 1
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 1.5%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 30.4%
Gross Margin - 3 Yr. Avg. 21.3%
EBITDA Margin 17.6%
EBITDA Margin - 3 Yr. Avg. 13.2%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 6%
Pre-Tax Margin 2%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin 1.4%
Net Profit Margin - 3 Yr. Avg. 2.6%
Effective Tax Rate -42.5%
Eff/ Tax Rate - 3 Yr. Avg. -9.6%
Payout Ratio 1192.6%

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 $21827 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 12% 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 10.1%, 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 93.5%.

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 4.5% 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 240.8%.

Life of production assets of 28.8 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 1.5%. 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 - $18642 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 544.5 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 $10.2 billion.


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COMPANY NEWS

▶ Energy Transfer Partners Has Fallen 20% in 2017   [Jun-19-17 03:05PM  Market Realist]
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▶ Energy Transfer Equitys Price Forecast amid High Volatility   [Jun-13-17 06:05PM  Market Realist]
▶ The Top MLPs Short Interests Rose Recently   [Jun-12-17 06:05PM  Market Realist]
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▶ Hearings scheduled on potential Dakota Access pipeline fines   [Jun-07-17 01:09PM  Associated Press]
▶ A Look at the Top-Performing MLPs in May 2017   [09:07AM  Market Realist]
▶ How Top MLPs Fared Last Week: EPD, ETP, PAA, and WPZ   [Jun-05-17 04:29PM  Market Realist]
▶ OPECs Conundrum: Higher Prices Or Market Share   [Jun-02-17 03:00PM  Oilprice.com]
▶ [$$] Dakota Access Pipeline Starts Shipping Oil   [01:35PM  The Wall Street Journal]
▶ Dakota Access pipeline expected to begin shipping Thursday   [May-31-17 06:30PM  Associated Press]
▶ Dakota Access pipeline, law officers had close relationship   [May-30-17 06:31PM  Associated Press]
▶ 2 Leakages Found in ETP Pipeline   [May-23-17 05:12PM  Zacks]
▶ Why Energy Transfer Equity Underperformed AMLP Last Week   [May-22-17 05:29PM  Market Realist]
▶ Analyzing Energy Transfer Partners Cash Flow   [10:30AM  Market Realist]
Stock chart of ETP Financial statements of ETP Annual reports 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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