Intrinsic value of Kinder Morgan - KMI

Previous Close

$19.45

  Intrinsic Value

$4.31

stock screener

  Rating & Target

str. sell

-78%

  Value-price divergence*

-152%

Previous close

$19.45

 
Intrinsic value

$4.31

 
Up/down potential

-78%

 
Rating

str. sell

 
Value-price divergence*

-152%

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

We calculate the intrinsic value of KMI 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 44.1

 

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, %
  -9.34
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  13,058
  13,319
  13,626
  13,976
  14,369
  14,804
  15,282
  15,803
  16,366
  16,973
  17,625
  18,321
  19,065
  19,857
  20,698
  21,591
  22,537
  23,539
  24,598
  25,717
  26,899
  28,146
  29,460
  30,846
  32,307
  33,845
  35,464
  37,169
  38,962
  40,849
  42,834
Variable operating expenses, $m
 
  11,037
  11,240
  11,472
  11,732
  12,021
  12,338
  12,682
  13,056
  13,458
  13,889
  12,135
  12,628
  13,152
  13,710
  14,301
  14,928
  15,591
  16,293
  17,034
  17,817
  18,642
  19,513
  20,431
  21,399
  22,417
  23,490
  24,619
  25,807
  27,057
  28,371
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
  10,096
  11,037
  11,240
  11,472
  11,732
  12,021
  12,338
  12,682
  13,056
  13,458
  13,889
  12,135
  12,628
  13,152
  13,710
  14,301
  14,928
  15,591
  16,293
  17,034
  17,817
  18,642
  19,513
  20,431
  21,399
  22,417
  23,490
  24,619
  25,807
  27,057
  28,371
Operating income, $m
  2,962
  2,282
  2,385
  2,504
  2,636
  2,783
  2,945
  3,121
  3,311
  3,516
  3,736
  6,186
  6,437
  6,705
  6,989
  7,290
  7,610
  7,948
  8,305
  8,683
  9,082
  9,503
  9,947
  10,415
  10,908
  11,427
  11,974
  12,550
  13,155
  13,792
  14,463
EBITDA, $m
  5,171
  5,966
  6,103
  6,260
  6,436
  6,632
  6,846
  7,079
  7,331
  7,603
  7,895
  8,207
  8,540
  8,895
  9,272
  9,672
  10,095
  10,544
  11,019
  11,520
  12,049
  12,608
  13,197
  13,817
  14,472
  15,161
  15,886
  16,649
  17,453
  18,298
  19,187
Interest expense (income), $m
  2,050
  1,919
  1,967
  2,019
  2,078
  2,145
  2,218
  2,299
  2,387
  2,482
  2,585
  2,695
  2,813
  2,939
  3,073
  3,215
  3,366
  3,526
  3,695
  3,874
  4,064
  4,263
  4,474
  4,697
  4,931
  5,178
  5,438
  5,712
  6,000
  6,304
  6,623
Earnings before tax, $m
  1,638
  363
  418
  485
  558
  639
  727
  822
  924
  1,033
  1,151
  3,491
  3,624
  3,766
  3,916
  4,075
  4,244
  4,422
  4,610
  4,809
  5,019
  5,240
  5,473
  5,718
  5,977
  6,249
  6,536
  6,838
  7,155
  7,489
  7,840
Tax expense, $m
  917
  98
  113
  131
  151
  172
  196
  222
  249
  279
  311
  943
  979
  1,017
  1,057
  1,100
  1,146
  1,194
  1,245
  1,298
  1,355
  1,415
  1,478
  1,544
  1,614
  1,687
  1,765
  1,846
  1,932
  2,022
  2,117
Net income, $m
  708
  265
  305
  354
  408
  466
  530
  600
  674
  754
  840
  2,548
  2,646
  2,749
  2,859
  2,975
  3,098
  3,228
  3,365
  3,510
  3,664
  3,825
  3,995
  4,174
  4,363
  4,562
  4,771
  4,992
  5,223
  5,467
  5,723

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  882
  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
  80,305
  81,214
  83,082
  85,218
  87,615
  90,271
  93,185
  96,359
  99,794
  103,495
  107,467
  111,716
  116,250
  121,078
  126,209
  131,653
  137,422
  143,529
  149,988
  156,812
  164,017
  171,620
  179,637
  188,088
  196,993
  206,371
  216,245
  226,638
  237,575
  249,080
  261,182
Adjusted assets (=assets-cash), $m
  79,423
  81,214
  83,082
  85,218
  87,615
  90,271
  93,185
  96,359
  99,794
  103,495
  107,467
  111,716
  116,250
  121,078
  126,209
  131,653
  137,422
  143,529
  149,988
  156,812
  164,017
  171,620
  179,637
  188,088
  196,993
  206,371
  216,245
  226,638
  237,575
  249,080
  261,182
Revenue / Adjusted assets
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
Average production assets, $m
  43,061
  43,927
  44,937
  46,092
  47,388
  48,825
  50,401
  52,118
  53,976
  55,978
  58,126
  60,424
  62,877
  65,488
  68,263
  71,207
  74,328
  77,631
  81,124
  84,815
  88,712
  92,824
  97,161
  101,732
  106,548
  111,620
  116,961
  122,582
  128,497
  134,721
  141,266
Working capital, $m
  -2,695
  -892
  -913
  -936
  -963
  -992
  -1,024
  -1,059
  -1,097
  -1,137
  -1,181
  -1,228
  -1,277
  -1,330
  -1,387
  -1,447
  -1,510
  -1,577
  -1,648
  -1,723
  -1,802
  -1,886
  -1,974
  -2,067
  -2,165
  -2,268
  -2,376
  -2,490
  -2,610
  -2,737
  -2,870
Total debt, $m
  40,050
  40,143
  41,201
  42,409
  43,766
  45,269
  46,919
  48,715
  50,660
  52,754
  55,002
  57,407
  59,974
  62,706
  65,610
  68,691
  71,957
  75,414
  79,069
  82,931
  87,010
  91,313
  95,851
  100,634
  105,674
  110,982
  116,571
  122,453
  128,643
  135,155
  142,005
Total liabilities, $m
  45,874
  45,967
  47,025
  48,233
  49,590
  51,093
  52,743
  54,539
  56,484
  58,578
  60,826
  63,231
  65,798
  68,530
  71,434
  74,515
  77,781
  81,238
  84,893
  88,755
  92,834
  97,137
  101,675
  106,458
  111,498
  116,806
  122,395
  128,277
  134,467
  140,979
  147,829
Total equity, $m
  34,431
  35,247
  36,058
  36,984
  38,025
  39,178
  40,442
  41,820
  43,311
  44,917
  46,641
  48,485
  50,453
  52,548
  54,774
  57,137
  59,641
  62,292
  65,095
  68,056
  71,183
  74,483
  77,963
  81,630
  85,495
  89,565
  93,850
  98,361
  103,107
  108,101
  113,353
Total liabilities and equity, $m
  80,305
  81,214
  83,083
  85,217
  87,615
  90,271
  93,185
  96,359
  99,795
  103,495
  107,467
  111,716
  116,251
  121,078
  126,208
  131,652
  137,422
  143,530
  149,988
  156,811
  164,017
  171,620
  179,638
  188,088
  196,993
  206,371
  216,245
  226,638
  237,574
  249,080
  261,182
Debt-to-equity ratio
  1.163
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
  1.160
  1.170
  1.170
  1.180
  1.180
  1.190
  1.190
  1.200
  1.200
  1.210
  1.210
  1.210
  1.220
  1.220
  1.230
  1.230
  1.230
  1.240
  1.240
  1.240
  1.240
  1.250
  1.250
  1.250
Adjusted equity ratio
  0.422
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  708
  265
  305
  354
  408
  466
  530
  600
  674
  754
  840
  2,548
  2,646
  2,749
  2,859
  2,975
  3,098
  3,228
  3,365
  3,510
  3,664
  3,825
  3,995
  4,174
  4,363
  4,562
  4,771
  4,992
  5,223
  5,467
  5,723
Depreciation, amort., depletion, $m
  2,209
  3,684
  3,718
  3,757
  3,800
  3,848
  3,901
  3,958
  4,020
  4,087
  4,159
  2,021
  2,103
  2,190
  2,283
  2,382
  2,486
  2,596
  2,713
  2,837
  2,967
  3,104
  3,250
  3,402
  3,563
  3,733
  3,912
  4,100
  4,298
  4,506
  4,725
Funds from operations, $m
  4,665
  3,949
  4,023
  4,111
  4,208
  4,315
  4,431
  4,558
  4,695
  4,842
  4,999
  4,569
  4,749
  4,939
  5,142
  5,356
  5,584
  5,824
  6,079
  6,347
  6,630
  6,929
  7,245
  7,577
  7,927
  8,295
  8,683
  9,091
  9,521
  9,973
  10,448
Change in working capital, $m
  -122
  -17
  -21
  -23
  -26
  -29
  -32
  -35
  -38
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -120
  -126
  -133
Cash from operations, $m
  4,787
  2,929
  4,044
  4,134
  4,234
  4,344
  4,463
  4,593
  4,732
  4,882
  5,043
  4,616
  4,798
  4,992
  5,198
  5,416
  5,647
  5,891
  6,150
  6,422
  6,710
  7,013
  7,333
  7,670
  8,025
  8,398
  8,792
  9,206
  9,641
  10,099
  10,581
Maintenance CAPEX, $m
  0
  -1,440
  -1,469
  -1,503
  -1,542
  -1,585
  -1,633
  -1,686
  -1,743
  -1,805
  -1,872
  -1,944
  -2,021
  -2,103
  -2,190
  -2,283
  -2,382
  -2,486
  -2,596
  -2,713
  -2,837
  -2,967
  -3,104
  -3,250
  -3,402
  -3,563
  -3,733
  -3,912
  -4,100
  -4,298
  -4,506
New CAPEX, $m
  -2,882
  -866
  -1,010
  -1,155
  -1,297
  -1,437
  -1,576
  -1,717
  -1,858
  -2,002
  -2,148
  -2,298
  -2,452
  -2,611
  -2,775
  -2,945
  -3,121
  -3,303
  -3,493
  -3,691
  -3,897
  -4,112
  -4,337
  -4,571
  -4,816
  -5,072
  -5,341
  -5,621
  -5,915
  -6,223
  -6,546
Cash from investing activities, $m
  -1,705
  -2,306
  -2,479
  -2,658
  -2,839
  -3,022
  -3,209
  -3,403
  -3,601
  -3,807
  -4,020
  -4,242
  -4,473
  -4,714
  -4,965
  -5,228
  -5,503
  -5,789
  -6,089
  -6,404
  -6,734
  -7,079
  -7,441
  -7,821
  -8,218
  -8,635
  -9,074
  -9,533
  -10,015
  -10,521
  -11,052
Free cash flow, $m
  3,082
  623
  1,565
  1,476
  1,396
  1,322
  1,254
  1,191
  1,131
  1,075
  1,022
  374
  325
  278
  233
  189
  145
  102
  60
  18
  -24
  -66
  -108
  -151
  -194
  -238
  -282
  -328
  -374
  -422
  -471
Issuance/(repayment) of debt, $m
  -1,431
  975
  1,057
  1,209
  1,357
  1,503
  1,650
  1,796
  1,944
  2,095
  2,248
  2,405
  2,566
  2,732
  2,904
  3,081
  3,266
  3,457
  3,655
  3,862
  4,078
  4,303
  4,538
  4,783
  5,040
  5,308
  5,589
  5,882
  6,190
  6,512
  6,850
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -1,357
  975
  1,057
  1,209
  1,357
  1,503
  1,650
  1,796
  1,944
  2,095
  2,248
  2,405
  2,566
  2,732
  2,904
  3,081
  3,266
  3,457
  3,655
  3,862
  4,078
  4,303
  4,538
  4,783
  5,040
  5,308
  5,589
  5,882
  6,190
  6,512
  6,850
Total cash flow (excl. dividends), $m
  1,727
  1,598
  2,622
  2,685
  2,753
  2,826
  2,904
  2,987
  3,076
  3,170
  3,270
  2,779
  2,891
  3,011
  3,137
  3,270
  3,411
  3,559
  3,715
  3,880
  4,054
  4,237
  4,430
  4,633
  4,846
  5,070
  5,307
  5,555
  5,816
  6,091
  6,379
Retained Cash Flow (-), $m
  688
  -816
  -811
  -927
  -1,040
  -1,153
  -1,265
  -1,377
  -1,491
  -1,606
  -1,724
  -1,844
  -1,968
  -2,095
  -2,227
  -2,363
  -2,504
  -2,651
  -2,803
  -2,962
  -3,127
  -3,300
  -3,480
  -3,668
  -3,864
  -4,070
  -4,285
  -4,511
  -4,746
  -4,993
  -5,252
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
 
  782
  1,811
  1,758
  1,712
  1,673
  1,639
  1,610
  1,585
  1,564
  1,547
  935
  924
  916
  910
  907
  907
  908
  913
  919
  927
  938
  950
  965
  981
  1,000
  1,021
  1,044
  1,070
  1,097
  1,127
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  718
  1,515
  1,328
  1,157
  1,001
  859
  731
  617
  514
  424
  211
  169
  133
  104
  80
  60
  44
  32
  23
  16
  11
  7
  5
  3
  2
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Kinder Morgan, Inc. operates as an energy infrastructure company in North America. It operates through Natural Gas Pipelines, CO2, Terminals, Products Pipelines, and Kinder Morgan Canada segments. The Natural Gas Pipelines segment owns and operates interstate and intrastate natural gas pipeline and storage systems; natural gas and crude oil gathering systems, and natural gas processing and treating facilities; natural gas liquids (NGL) fractionation facilities and transportation systems; and liquefied natural gas facilities. The CO2 segment produces, transports, and markets CO2 for recovering crude oil from mature oil fields; and owns interests in/or operates oil fields and gas processing plants, as well as operates a crude oil pipeline system in West Texas. The Terminals segment owns and operates liquids and bulk terminals that transload and store refined petroleum products, crude oil, chemicals, and ethanol, as well as bulk products, including coal, petroleum coke, fertilizer, and steel and ore products; and owns tankers. The Products Pipelines segment owns and operates refined petroleum products, NGL, and crude oil and condensate pipelines; and associated product terminals and petroleum pipeline transmix facilities. The Kinder Morgan Canada segment owns and operates Trans Mountain pipeline system that transports crude oil and refined petroleum products from Edmonton, Alberta, and Canada to marketing terminals and refineries in British Columbia, Canada, and Washington; and jet fuel aviation turbine fuel pipeline that serves the Vancouver (Canada) International Airport. Kinder Morgan, Inc. owns interests in or operates approximately 84,000 miles of pipelines and 155 terminals. The company was formerly known as Kinder Morgan Holdco LLC and changed its name to Kinder Morgan, Inc. in February 2011. Kinder Morgan, Inc. was founded in 1936 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Kinder Morgan (KMI)

Valuation Ratios
P/E Ratio 61.3
Price to Sales 3.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 9.1
Price to Free Cash Flow 22.8
Growth Rates
Sales Growth Rate -9.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26%
Cap. Spend. - 3 Yr. Gr. Rate -3.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 108.5%
Total Debt to Equity 116.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 0.9%
Ret/ On T. Cap. - 3 Yr. Avg. 1%
Return On Equity 2%
Return On Equity - 3 Yr. Avg. 2.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 55.6%
Gross Margin - 3 Yr. Avg. 52.9%
EBITDA Margin 45.2%
EBITDA Margin - 3 Yr. Avg. 40.8%
Operating Margin 22.7%
Oper. Margin - 3 Yr. Avg. 22.3%
Pre-Tax Margin 12.5%
Pre-Tax Margin - 3 Yr. Avg. 12.3%
Net Profit Margin 5.4%
Net Profit Margin - 3 Yr. Avg. 4.5%
Effective Tax Rate 56%
Eff/ Tax Rate - 3 Yr. Avg. 50%
Payout Ratio 179.7%

KMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KMI stock intrinsic value calculation we used $13058 million for the last fiscal year's total revenue generated by Kinder Morgan. The default revenue input number comes from 2016 income statement of Kinder Morgan. 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 KMI stock valuation model: a) initial revenue growth rate of 2% 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 8.9%, whose default value for KMI is calculated based on our internal credit rating of Kinder Morgan, 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 Kinder Morgan.
    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 KMI stock the variable cost ratio is equal to 83.2%.

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 KMI 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 4.9% for Kinder Morgan.

Corporate tax rate of 27% is the nominal tax rate for Kinder Morgan. 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 KMI 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 KMI are equal to 329.8%.

Life of production assets of 29.9 years is the average useful life of capital assets used in Kinder Morgan 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 KMI is equal to -6.7%. 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 - $34431 million for Kinder Morgan - 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 2264.95 million for Kinder Morgan 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 Kinder Morgan at the current share price and the inputted number of shares is $44.1 billion.

RELATED COMPANIES Price Int.Val. Rating
XOM Exxon Mobil 81.75 10.30  str.sell
ENB Enbridge 38.79 24.80  sell
EPD Enterprise Pro 26.51 3.07  str.sell
OXY Occidental Pet 60.29 7.13  str.sell
SXE Southcross Ene 4.00 1.79  sell
WES Western Gas Pa 55.64 6.22  str.sell
AMID American Midst 13.10 1.36  str.sell
ETP Energy Transfe 22.92 6.53  str.sell
TCP TC PipeLines 57.72 7.18  str.sell
WGP Western Gas Eq 43.89 8.83  str.sell

COMPANY NEWS

▶ Will Kinder Morgan Stock Fall More in the Short Term?   [May-22-17 11:05AM  Market Realist]
▶ Kinder Morgans Canada IPO Faces a Challenge   [09:30AM  Market Realist]
▶ Shareholders Assess Climate Risks To Oil Majors   [May-20-17 07:00PM  Oilprice.com]
▶ 3 Value Stocks for Thrifty Investors   [09:07AM  Motley Fool]
▶ Kinder Morgans Valuation: Is It Attractive?   [09:07AM  Market Realist]
▶ Star Commodities Investor Sees $100 Oil   [May-15-17 06:59PM  Forbes]
▶ Kinder Morgan Continued to Fall Last Week   [09:35AM  Market Realist]
▶ 3 Stocks That Generate Tons of Cash   [08:21AM  Motley Fool]
▶ 11 stocks Warren Buffett didn't hold forever   [May-07-17 04:26PM  Yahoo Finance]
▶ Trading a rough day in oil: 6 plays   [May-04-17 05:00PM  CNBC Videos]
▶ Where Kinder Morgans Valuation Stands Next to Peers   [May-03-17 07:37AM  Market Realist]
▶ The Permian Has a Pipeline Problem Already   [May-02-17 02:15PM  Motley Fool]
▶ Whats Ahead for Kinder Morgan Stock?   [07:40AM  Market Realist]
▶ Understanding Kinder Morgans Gains Last Week   [04:44PM  Market Realist]
▶ Yes, Kinder Morgan Is Still a Buy   [09:52AM  Motley Fool]
▶ Phillips 66 Bounces Back With a Big Profit Beat   [Apr-28-17 05:35PM  Motley Fool]
▶ Why Kinder Morgan Fell 5.2% Last Week   [11:36AM  Market Realist]
▶ 5 things to know in Texas energy this week   [10:20AM  American City Business Journals]
▶ Why Kinder Morgans Earnings Fell in 1Q17   [Apr-21-17 10:37AM  Market Realist]
▶ TransCanada Corporation: The Bear Case From a Bull   [Apr-20-17 12:00PM  Motley Fool]
▶ CEO: Kinder Morgan to spend more than $1B on pipeline project   [10:00AM  American City Business Journals]
▶ Kinder Morgan misses 1Q profit forecasts   [Apr-19-17 05:32PM  Associated Press]
▶ What Does Kinder Morgans Valuation Indicate?   [10:37AM  Market Realist]
▶ Where Kinder Morgan Stock Is Headed in the Short Term   [Apr-17-17 05:05PM  Market Realist]
▶ Analysts Recommendations for Kinder Morgan   [Apr-13-17 07:37AM  Market Realist]
▶ Why You Should Keep an Eye on Kinder Morgans Leverage   [Apr-12-17 02:05PM  Market Realist]
▶ Analyzing Kinder Morgans Natural Gas Business   [10:57AM  Market Realist]
Stock chart of KMI Financial statements of KMI Annual reports of KMI
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.