Intrinsic value of Magellan Midstream Partners - MMP

Previous Close

$68.33

  Intrinsic Value

$27.80

stock screener

  Rating & Target

str. sell

-59%

  Value-price divergence*

+38%

Previous close

$68.33

 
Intrinsic value

$27.80

 
Up/down potential

-59%

 
Rating

str. sell

 
Value-price divergence*

+38%

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

We calculate the intrinsic value of MMP 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 15.7

 

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, %
  0.78
  19.30
  17.87
  16.58
  15.42
  14.38
  13.44
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.63
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
  5.83
  5.75
  5.67
Revenue, $m
  2,205
  2,631
  3,101
  3,615
  4,172
  4,772
  5,414
  6,096
  6,818
  7,579
  8,377
  9,214
  10,088
  11,000
  11,950
  12,938
  13,966
  15,035
  16,145
  17,299
  18,498
  19,744
  21,040
  22,389
  23,792
  25,253
  26,775
  28,361
  30,015
  31,740
  33,541
Variable operating expenses, $m
 
  1,472
  1,734
  2,021
  2,332
  2,666
  3,024
  3,405
  3,807
  4,231
  4,677
  5,138
  5,625
  6,134
  6,663
  7,214
  7,787
  8,383
  9,002
  9,646
  10,314
  11,009
  11,732
  12,484
  13,266
  14,081
  14,929
  15,814
  16,736
  17,698
  18,702
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
  1,270
  1,472
  1,734
  2,021
  2,332
  2,666
  3,024
  3,405
  3,807
  4,231
  4,677
  5,138
  5,625
  6,134
  6,663
  7,214
  7,787
  8,383
  9,002
  9,646
  10,314
  11,009
  11,732
  12,484
  13,266
  14,081
  14,929
  15,814
  16,736
  17,698
  18,702
Operating income, $m
  935
  1,158
  1,366
  1,594
  1,841
  2,106
  2,390
  2,692
  3,011
  3,348
  3,701
  4,076
  4,463
  4,866
  5,287
  5,724
  6,179
  6,651
  7,143
  7,653
  8,183
  8,735
  9,308
  9,905
  10,526
  11,172
  11,845
  12,547
  13,279
  14,042
  14,839
EBITDA, $m
  1,113
  1,374
  1,619
  1,888
  2,179
  2,493
  2,828
  3,184
  3,561
  3,958
  4,376
  4,812
  5,269
  5,745
  6,241
  6,758
  7,295
  7,853
  8,432
  9,035
  9,661
  10,312
  10,989
  11,694
  12,426
  13,189
  13,984
  14,813
  15,677
  16,578
  17,518
Interest expense (income), $m
  0
  143
  175
  210
  248
  290
  334
  382
  433
  487
  543
  603
  665
  730
  798
  868
  942
  1,018
  1,098
  1,180
  1,266
  1,356
  1,448
  1,545
  1,645
  1,749
  1,858
  1,971
  2,089
  2,212
  2,341
Earnings before tax, $m
  806
  1,015
  1,191
  1,384
  1,592
  1,816
  2,056
  2,310
  2,578
  2,861
  3,158
  3,474
  3,798
  4,137
  4,489
  4,856
  5,237
  5,633
  6,045
  6,472
  6,917
  7,379
  7,860
  8,360
  8,881
  9,422
  9,987
  10,576
  11,189
  11,829
  12,498
Tax expense, $m
  3
  274
  322
  374
  430
  490
  555
  624
  696
  772
  853
  938
  1,026
  1,117
  1,212
  1,311
  1,414
  1,521
  1,632
  1,748
  1,868
  1,992
  2,122
  2,257
  2,398
  2,544
  2,697
  2,855
  3,021
  3,194
  3,374
Net income, $m
  803
  741
  870
  1,010
  1,162
  1,326
  1,501
  1,686
  1,882
  2,089
  2,305
  2,536
  2,773
  3,020
  3,277
  3,545
  3,823
  4,112
  4,413
  4,725
  5,050
  5,387
  5,738
  6,103
  6,483
  6,878
  7,291
  7,720
  8,168
  8,636
  9,123

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  15
  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
  6,772
  8,069
  9,511
  11,088
  12,799
  14,640
  16,608
  18,700
  20,914
  23,247
  25,698
  28,264
  30,945
  33,742
  36,656
  39,688
  42,841
  46,118
  49,524
  53,063
  56,741
  60,565
  64,541
  68,677
  72,981
  77,462
  82,131
  86,996
  92,069
  97,362
  102,886
Adjusted assets (=assets-cash), $m
  6,757
  8,069
  9,511
  11,088
  12,799
  14,640
  16,608
  18,700
  20,914
  23,247
  25,698
  28,264
  30,945
  33,742
  36,656
  39,688
  42,841
  46,118
  49,524
  53,063
  56,741
  60,565
  64,541
  68,677
  72,981
  77,462
  82,131
  86,996
  92,069
  97,362
  102,886
Revenue / Adjusted assets
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
Average production assets, $m
  5,075
  6,053
  7,135
  8,318
  9,601
  10,981
  12,458
  14,027
  15,688
  17,438
  19,276
  21,201
  23,213
  25,311
  27,497
  29,771
  32,136
  34,594
  37,149
  39,804
  42,563
  45,431
  48,414
  51,516
  54,745
  58,106
  61,608
  65,258
  69,064
  73,034
  77,177
Working capital, $m
  -112
  -153
  -180
  -210
  -242
  -277
  -314
  -354
  -395
  -440
  -486
  -534
  -585
  -638
  -693
  -750
  -810
  -872
  -936
  -1,003
  -1,073
  -1,145
  -1,220
  -1,299
  -1,380
  -1,465
  -1,553
  -1,645
  -1,741
  -1,841
  -1,945
Total debt, $m
  4,087
  4,999
  5,998
  7,091
  8,277
  9,552
  10,916
  12,366
  13,901
  15,517
  17,215
  18,994
  20,852
  22,790
  24,810
  26,911
  29,096
  31,367
  33,727
  36,180
  38,729
  41,378
  44,134
  47,000
  49,983
  53,088
  56,324
  59,695
  63,211
  66,879
  70,707
Total liabilities, $m
  4,680
  5,592
  6,591
  7,684
  8,870
  10,145
  11,509
  12,959
  14,494
  16,110
  17,808
  19,587
  21,445
  23,383
  25,403
  27,504
  29,689
  31,960
  34,320
  36,773
  39,322
  41,971
  44,727
  47,593
  50,576
  53,681
  56,917
  60,288
  63,804
  67,472
  71,300
Total equity, $m
  2,092
  2,477
  2,920
  3,404
  3,929
  4,494
  5,099
  5,741
  6,421
  7,137
  7,889
  8,677
  9,500
  10,359
  11,253
  12,184
  13,152
  14,158
  15,204
  16,290
  17,420
  18,593
  19,814
  21,084
  22,405
  23,781
  25,214
  26,708
  28,265
  29,890
  31,586
Total liabilities and equity, $m
  6,772
  8,069
  9,511
  11,088
  12,799
  14,639
  16,608
  18,700
  20,915
  23,247
  25,697
  28,264
  30,945
  33,742
  36,656
  39,688
  42,841
  46,118
  49,524
  53,063
  56,742
  60,564
  64,541
  68,677
  72,981
  77,462
  82,131
  86,996
  92,069
  97,362
  102,886
Debt-to-equity ratio
  1.954
  2.020
  2.050
  2.080
  2.110
  2.130
  2.140
  2.150
  2.160
  2.170
  2.180
  2.190
  2.190
  2.200
  2.200
  2.210
  2.210
  2.220
  2.220
  2.220
  2.220
  2.230
  2.230
  2.230
  2.230
  2.230
  2.230
  2.240
  2.240
  2.240
  2.240
Adjusted equity ratio
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307
  0.307

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  803
  741
  870
  1,010
  1,162
  1,326
  1,501
  1,686
  1,882
  2,089
  2,305
  2,536
  2,773
  3,020
  3,277
  3,545
  3,823
  4,112
  4,413
  4,725
  5,050
  5,387
  5,738
  6,103
  6,483
  6,878
  7,291
  7,720
  8,168
  8,636
  9,123
Depreciation, amort., depletion, $m
  178
  215
  253
  294
  339
  387
  438
  492
  550
  611
  675
  736
  806
  879
  955
  1,034
  1,116
  1,201
  1,290
  1,382
  1,478
  1,577
  1,681
  1,789
  1,901
  2,018
  2,139
  2,266
  2,398
  2,536
  2,680
Funds from operations, $m
  942
  957
  1,123
  1,304
  1,501
  1,713
  1,938
  2,178
  2,432
  2,699
  2,980
  3,272
  3,579
  3,899
  4,232
  4,578
  4,939
  5,313
  5,703
  6,107
  6,527
  6,964
  7,419
  7,892
  8,384
  8,896
  9,430
  9,986
  10,566
  11,171
  11,803
Change in working capital, $m
  -22
  -25
  -27
  -30
  -32
  -35
  -37
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -100
  -104
Cash from operations, $m
  964
  981
  1,150
  1,334
  1,533
  1,747
  1,976
  2,218
  2,474
  2,743
  3,026
  3,321
  3,629
  3,951
  4,287
  4,636
  4,998
  5,375
  5,767
  6,174
  6,597
  7,037
  7,494
  7,970
  8,465
  8,981
  9,518
  10,078
  10,662
  11,271
  11,908
Maintenance CAPEX, $m
  0
  -176
  -210
  -248
  -289
  -333
  -381
  -433
  -487
  -545
  -606
  -669
  -736
  -806
  -879
  -955
  -1,034
  -1,116
  -1,201
  -1,290
  -1,382
  -1,478
  -1,577
  -1,681
  -1,789
  -1,901
  -2,018
  -2,139
  -2,266
  -2,398
  -2,536
New CAPEX, $m
  -674
  -978
  -1,082
  -1,183
  -1,283
  -1,381
  -1,476
  -1,570
  -1,661
  -1,750
  -1,838
  -1,925
  -2,011
  -2,098
  -2,186
  -2,274
  -2,365
  -2,458
  -2,555
  -2,655
  -2,759
  -2,868
  -2,982
  -3,102
  -3,229
  -3,362
  -3,502
  -3,650
  -3,806
  -3,970
  -4,144
Cash from investing activities, $m
  -857
  -1,154
  -1,292
  -1,431
  -1,572
  -1,714
  -1,857
  -2,003
  -2,148
  -2,295
  -2,444
  -2,594
  -2,747
  -2,904
  -3,065
  -3,229
  -3,399
  -3,574
  -3,756
  -3,945
  -4,141
  -4,346
  -4,559
  -4,783
  -5,018
  -5,263
  -5,520
  -5,789
  -6,072
  -6,368
  -6,680
Free cash flow, $m
  107
  -173
  -142
  -97
  -38
  33
  118
  216
  326
  449
  583
  726
  882
  1,047
  1,222
  1,407
  1,600
  1,801
  2,011
  2,229
  2,456
  2,691
  2,934
  3,186
  3,448
  3,718
  3,999
  4,289
  4,591
  4,903
  5,228
Issuance/(repayment) of debt, $m
  644
  912
  999
  1,093
  1,185
  1,276
  1,364
  1,450
  1,534
  1,617
  1,698
  1,778
  1,858
  1,938
  2,019
  2,101
  2,185
  2,271
  2,360
  2,453
  2,549
  2,650
  2,755
  2,866
  2,983
  3,106
  3,235
  3,372
  3,516
  3,668
  3,828
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  
  618
  912
  999
  1,093
  1,185
  1,276
  1,364
  1,450
  1,534
  1,617
  1,698
  1,778
  1,858
  1,938
  2,019
  2,101
  2,185
  2,271
  2,360
  2,453
  2,549
  2,650
  2,755
  2,866
  2,983
  3,106
  3,235
  3,372
  3,516
  3,668
  3,828
Total cash flow (excl. dividends), $m
  725
  739
  858
  996
  1,147
  1,309
  1,482
  1,666
  1,860
  2,065
  2,281
  2,505
  2,740
  2,986
  3,242
  3,508
  3,784
  4,072
  4,371
  4,682
  5,005
  5,340
  5,689
  6,053
  6,430
  6,824
  7,234
  7,661
  8,106
  8,571
  9,056
Retained Cash Flow (-), $m
  -70
  -400
  -443
  -484
  -525
  -565
  -604
  -642
  -680
  -716
  -752
  -788
  -823
  -859
  -894
  -931
  -968
  -1,006
  -1,046
  -1,087
  -1,129
  -1,174
  -1,221
  -1,270
  -1,321
  -1,376
  -1,433
  -1,494
  -1,557
  -1,625
  -1,696
Prev. year cash balance distribution, $m
 
  15
  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
 
  354
  415
  512
  622
  744
  878
  1,023
  1,181
  1,349
  1,528
  1,717
  1,917
  2,127
  2,347
  2,577
  2,817
  3,066
  3,326
  3,595
  3,876
  4,167
  4,469
  4,783
  5,109
  5,448
  5,801
  6,167
  6,549
  6,946
  7,360
Discount rate, %
 
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
 
  324
  346
  386
  418
  443
  457
  461
  455
  439
  414
  381
  344
  303
  261
  220
  181
  145
  114
  87
  64
  46
  33
  22
  15
  9
  6
  3
  2
  1
  1
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

Magellan Midstream Partners, L.P. is principally engaged in the transportation, storage and distribution of refined petroleum products and crude oil. The Company operates through three segments: refined products, crude oil and marine storage. As of December 31, 2016, its asset portfolio, including the assets of its joint ventures, consisted of its refined products segment, consisting 9,700-mile refined products pipeline system with 53 terminals, as well as 26 independent terminals not connected to its pipeline system and its 1,100-mile ammonia pipeline system; its crude oil segment, consisted of approximately 2,200 miles of crude oil pipelines and storage facilities with an aggregate storage capacity of approximately 26 million barrels, of which 16 million are used for contract storage, and its marine storage segment, consisted of five marine terminals located along coastal waterways with an aggregate storage capacity of approximately 26 million barrels.

FINANCIAL RATIOS  of  Magellan Midstream Partners (MMP)

Valuation Ratios
P/E Ratio 19.4
Price to Sales 7.1
Price to Book 7.4
Price to Tangible Book
Price to Cash Flow 16.1
Price to Free Cash Flow 53.7
Growth Rates
Sales Growth Rate 0.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 8.5%
Cap. Spend. - 3 Yr. Gr. Rate 10.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 195.4%
Total Debt to Equity 195.4%
Interest Coverage 0
Management Effectiveness
Return On Assets 12.5%
Ret/ On Assets - 3 Yr. Avg. 14.3%
Return On Total Capital 13.8%
Ret/ On T. Cap. - 3 Yr. Avg. 16%
Return On Equity 39%
Return On Equity - 3 Yr. Avg. 43%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 55.2%
Gross Margin - 3 Yr. Avg. 54.7%
EBITDA Margin 44.6%
EBITDA Margin - 3 Yr. Avg. 44.1%
Operating Margin 42.4%
Oper. Margin - 3 Yr. Avg. 42.6%
Pre-Tax Margin 36.6%
Pre-Tax Margin - 3 Yr. Avg. 36.6%
Net Profit Margin 36.4%
Net Profit Margin - 3 Yr. Avg. 36.5%
Effective Tax Rate 0.4%
Eff/ Tax Rate - 3 Yr. Avg. 0.4%
Payout Ratio 92%

MMP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MMP stock intrinsic value calculation we used $2205 million for the last fiscal year's total revenue generated by Magellan Midstream Partners. The default revenue input number comes from 2016 income statement of Magellan Midstream 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 MMP stock valuation model: a) initial revenue growth rate of 19.3% 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 9%, whose default value for MMP is calculated based on our internal credit rating of Magellan Midstream 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 Magellan Midstream 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 MMP stock the variable cost ratio is equal to 56%.

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 MMP 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 Magellan Midstream Partners.

Corporate tax rate of 27% is the nominal tax rate for Magellan Midstream 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 MMP 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 MMP are equal to 230.1%.

Life of production assets of 28.8 years is the average useful life of capital assets used in Magellan Midstream 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 MMP is equal to -5.8%. 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 - $2092 million for Magellan Midstream 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 229.57 million for Magellan Midstream 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 Magellan Midstream Partners at the current share price and the inputted number of shares is $15.7 billion.

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COMPANY NEWS

▶ Short Interest in Enterprise Products Rose 8% Recently   [Oct-18-17 09:14AM  Market Realist]
▶ Analysts Expect 11% Upside for Magellan Midstream Partners   [Oct-16-17 09:06AM  Market Realist]
▶ Enterprise Products Partners Raised 3Q17 Distributions 0.6%   [Oct-13-17 11:23AM  Market Realist]
▶ MMPs Fee-Based Businesses Contribute to Its Stable Cash Flow   [Oct-12-17 04:36PM  Market Realist]
▶ Love Dividends? Here Are 3 Stocks You Might Want to Buy   [Oct-04-17 08:32AM  Motley Fool]
▶ Magellan Midstream Prices $500 Million Debt Offering   [Sep-26-17 03:20PM  PR Newswire]
▶ 3 Growth Stocks for Nest-Egg Building   [Sep-19-17 06:02AM  Motley Fool]
▶ 3 Stocks You Can Safely Own Until 2030   [Sep-16-17 07:00AM  Motley Fool]
▶ Coast Guard: Most fuel spilled from tank farm unrecoverable   [Sep-14-17 09:39PM  Associated Press]
▶ Energy cos. team up to build $820 million terminal near Houston   [03:55PM  American City Business Journals]
▶ Harvey caused a major gasoline leak near Houston, updated numbers show   [Sep-12-17 03:25PM  American City Business Journals]
▶ What Analysts Recommend for Kinder Morgan   [07:38AM  Market Realist]
▶ Harvey's flooding blamed in major gasoline spill in Texas   [Sep-11-17 11:30PM  Associated Press]
▶ Valero announces new Texas pipeline deal   [Sep-08-17 04:00PM  American City Business Journals]
▶ $380M oil pipeline planned to reach from Gulf Coast to Austin suburbs   [Sep-07-17 11:43AM  American City Business Journals]
▶ My 3 Biggest Stock Holdings   [Sep-05-17 11:36AM  Motley Fool]
▶ Institutional Investors Hold Positions in Magellan Midstream   [Aug-30-17 11:09AM  Market Realist]
▶ 3 High-Yield Stocks Still Worth Buying   [Aug-24-17 06:30PM  Motley Fool]
▶ Is It the Right Time Now to Buy MLPs?   [Aug-22-17 03:35PM  Market Realist]
▶ How Large-Cap MLPs Fared in 2Q17   [Aug-10-17 01:34PM  Market Realist]
▶ Action Alerts PLUS: There's Strength in (Earnings) Numbers   [Aug-06-17 10:00AM  TheStreet.com]
▶ Enterprise Products Partners Revenue Rose 1.7% in 2Q17   [Aug-04-17 12:06PM  Market Realist]
▶ Magellan Midstream beats Street 2Q forecasts   [Aug-02-17 10:32PM  Associated Press]
Financial statements of MMP
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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