Intrinsic value of NGL Energy Partners - NGL

Previous Close

$9.10

  Intrinsic Value

$14.15

stock screener

  Rating & Target

str. buy

+55%

  Value-price divergence*

+85%

Previous close

$9.10

 
Intrinsic value

$14.15

 
Up/down potential

+55%

 
Rating

str. buy

 
Value-price divergence*

+85%

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

We calculate the intrinsic value of NGL 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 1.1

 

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, %
  -30.12
  26.90
  24.71
  22.74
  20.97
  19.37
  17.93
  16.64
  15.47
  14.43
  13.48
  12.64
  11.87
  11.19
  10.57
  10.01
  9.51
  9.06
  8.65
  8.29
  7.96
  7.66
  7.40
  7.16
  6.94
  6.75
  6.57
  6.41
  6.27
  6.15
  6.03
Revenue, $m
  11,742
  14,901
  18,583
  22,808
  27,590
  32,933
  38,839
  45,301
  52,312
  59,859
  67,930
  76,514
  85,598
  95,172
  105,229
  115,762
  126,770
  138,253
  150,215
  162,664
  175,609
  189,065
  203,049
  217,581
  232,683
  248,382
  264,706
  281,687
  299,358
  317,757
  336,923
Variable operating expenses, $m
 
  14,105
  17,558
  21,521
  26,005
  31,017
  36,555
  42,615
  49,189
  56,267
  63,837
  71,755
  80,274
  89,253
  98,684
  108,562
  118,885
  129,654
  140,872
  152,546
  164,686
  177,306
  190,420
  204,047
  218,210
  232,933
  248,241
  264,166
  280,738
  297,993
  315,966
Fixed operating expenses, $m
 
  803
  823
  843
  864
  886
  908
  931
  954
  978
  1,002
  1,027
  1,053
  1,079
  1,106
  1,134
  1,162
  1,191
  1,221
  1,252
  1,283
  1,315
  1,348
  1,382
  1,416
  1,452
  1,488
  1,525
  1,563
  1,602
  1,642
Total operating expenses, $m
  11,910
  14,908
  18,381
  22,364
  26,869
  31,903
  37,463
  43,546
  50,143
  57,245
  64,839
  72,782
  81,327
  90,332
  99,790
  109,696
  120,047
  130,845
  142,093
  153,798
  165,969
  178,621
  191,768
  205,429
  219,626
  234,385
  249,729
  265,691
  282,301
  299,595
  317,608
Operating income, $m
  -168
  -7
  202
  444
  720
  1,031
  1,376
  1,755
  2,168
  2,614
  3,091
  3,732
  4,271
  4,840
  5,439
  6,066
  6,723
  7,408
  8,122
  8,866
  9,640
  10,445
  11,281
  12,152
  13,056
  13,997
  14,977
  15,996
  17,057
  18,162
  19,314
EBITDA, $m
  81
  334
  595
  897
  1,241
  1,627
  2,055
  2,525
  3,037
  3,589
  4,180
  4,810
  5,477
  6,182
  6,922
  7,698
  8,509
  9,356
  10,239
  11,158
  12,115
  13,109
  14,143
  15,218
  16,336
  17,498
  18,707
  19,965
  21,276
  22,640
  24,062
Interest expense (income), $m
  117
  119
  162
  212
  270
  335
  407
  488
  576
  671
  774
  883
  1,000
  1,123
  1,254
  1,390
  1,534
  1,683
  1,839
  2,002
  2,171
  2,347
  2,530
  2,720
  2,918
  3,123
  3,337
  3,559
  3,789
  4,030
  4,280
Earnings before tax, $m
  -187
  -127
  39
  232
  450
  696
  969
  1,268
  1,593
  1,943
  2,318
  2,848
  3,271
  3,717
  4,185
  4,676
  5,189
  5,725
  6,283
  6,864
  7,468
  8,097
  8,751
  9,431
  10,139
  10,874
  11,640
  12,437
  13,267
  14,132
  15,034
Tax expense, $m
  0
  0
  11
  63
  122
  188
  262
  342
  430
  525
  626
  769
  883
  1,004
  1,130
  1,263
  1,401
  1,546
  1,696
  1,853
  2,016
  2,186
  2,363
  2,546
  2,737
  2,936
  3,143
  3,358
  3,582
  3,816
  4,059
Net income, $m
  -199
  -127
  29
  169
  329
  508
  707
  925
  1,163
  1,418
  1,692
  2,079
  2,388
  2,713
  3,055
  3,413
  3,788
  4,179
  4,586
  5,011
  5,452
  5,911
  6,388
  6,885
  7,401
  7,938
  8,497
  9,079
  9,685
  10,316
  10,975

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  28
  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
  5,560
  7,019
  8,753
  10,743
  12,996
  15,513
  18,294
  21,338
  24,640
  28,195
  31,997
  36,040
  40,319
  44,829
  49,566
  54,528
  59,713
  65,122
  70,756
  76,620
  82,717
  89,056
  95,643
  102,487
  109,601
  116,996
  124,685
  132,683
  141,007
  149,674
  158,701
Adjusted assets (=assets-cash), $m
  5,532
  7,019
  8,753
  10,743
  12,996
  15,513
  18,294
  21,338
  24,640
  28,195
  31,997
  36,040
  40,319
  44,829
  49,566
  54,528
  59,713
  65,122
  70,756
  76,620
  82,717
  89,056
  95,643
  102,487
  109,601
  116,996
  124,685
  132,683
  141,007
  149,674
  158,701
Revenue / Adjusted assets
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
  2.123
Average production assets, $m
  2,828
  3,591
  4,478
  5,497
  6,649
  7,937
  9,360
  10,918
  12,607
  14,426
  16,371
  18,440
  20,629
  22,937
  25,360
  27,899
  30,552
  33,319
  36,202
  39,202
  42,322
  45,565
  48,935
  52,437
  56,077
  59,860
  63,794
  67,886
  72,145
  76,579
  81,198
Working capital, $m
  322
  387
  483
  593
  717
  856
  1,010
  1,178
  1,360
  1,556
  1,766
  1,989
  2,226
  2,474
  2,736
  3,010
  3,296
  3,595
  3,906
  4,229
  4,566
  4,916
  5,279
  5,657
  6,050
  6,458
  6,882
  7,324
  7,783
  8,262
  8,760
Total debt, $m
  2,921
  3,958
  5,179
  6,580
  8,166
  9,938
  11,896
  14,039
  16,364
  18,866
  21,543
  24,390
  27,402
  30,577
  33,912
  37,405
  41,055
  44,863
  48,829
  52,957
  57,250
  61,712
  66,349
  71,168
  76,176
  81,382
  86,795
  92,426
  98,286
  104,387
  110,743
Total liabilities, $m
  3,904
  4,941
  6,162
  7,563
  9,149
  10,921
  12,879
  15,022
  17,347
  19,849
  22,526
  25,373
  28,385
  31,560
  34,895
  38,388
  42,038
  45,846
  49,812
  53,940
  58,233
  62,695
  67,332
  72,151
  77,159
  82,365
  87,778
  93,409
  99,269
  105,370
  111,726
Total equity, $m
  1,656
  2,078
  2,591
  3,180
  3,847
  4,592
  5,415
  6,316
  7,294
  8,346
  9,471
  10,668
  11,935
  13,269
  14,672
  16,140
  17,675
  19,276
  20,944
  22,679
  24,484
  26,360
  28,310
  30,336
  32,442
  34,631
  36,907
  39,274
  41,738
  44,303
  46,976
Total liabilities and equity, $m
  5,560
  7,019
  8,753
  10,743
  12,996
  15,513
  18,294
  21,338
  24,641
  28,195
  31,997
  36,041
  40,320
  44,829
  49,567
  54,528
  59,713
  65,122
  70,756
  76,619
  82,717
  89,055
  95,642
  102,487
  109,601
  116,996
  124,685
  132,683
  141,007
  149,673
  158,702
Debt-to-equity ratio
  1.764
  1.910
  2.000
  2.070
  2.120
  2.160
  2.200
  2.220
  2.240
  2.260
  2.270
  2.290
  2.300
  2.300
  2.310
  2.320
  2.320
  2.330
  2.330
  2.340
  2.340
  2.340
  2.340
  2.350
  2.350
  2.350
  2.350
  2.350
  2.350
  2.360
  2.360
Adjusted equity ratio
  0.294
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -199
  -127
  29
  169
  329
  508
  707
  925
  1,163
  1,418
  1,692
  2,079
  2,388
  2,713
  3,055
  3,413
  3,788
  4,179
  4,586
  5,011
  5,452
  5,911
  6,388
  6,885
  7,401
  7,938
  8,497
  9,079
  9,685
  10,316
  10,975
Depreciation, amort., depletion, $m
  249
  342
  393
  453
  520
  596
  679
  770
  869
  975
  1,089
  1,078
  1,206
  1,341
  1,483
  1,632
  1,787
  1,948
  2,117
  2,293
  2,475
  2,665
  2,862
  3,066
  3,279
  3,501
  3,731
  3,970
  4,219
  4,478
  4,748
Funds from operations, $m
  394
  215
  422
  622
  849
  1,104
  1,386
  1,695
  2,031
  2,393
  2,781
  3,158
  3,594
  4,055
  4,538
  5,045
  5,575
  6,127
  6,703
  7,303
  7,927
  8,576
  9,250
  9,951
  10,680
  11,439
  12,228
  13,049
  13,904
  14,795
  15,723
Change in working capital, $m
  42
  82
  96
  110
  124
  139
  154
  168
  182
  196
  210
  223
  236
  249
  261
  274
  286
  299
  311
  324
  337
  350
  364
  378
  393
  408
  424
  442
  459
  478
  498
Cash from operations, $m
  352
  133
  326
  512
  725
  965
  1,233
  1,527
  1,849
  2,197
  2,571
  2,935
  3,358
  3,806
  4,277
  4,771
  5,288
  5,829
  6,392
  6,979
  7,590
  8,226
  8,887
  9,574
  10,288
  11,031
  11,803
  12,607
  13,445
  14,316
  15,225
Maintenance CAPEX, $m
  0
  -165
  -210
  -262
  -321
  -389
  -464
  -547
  -638
  -737
  -844
  -957
  -1,078
  -1,206
  -1,341
  -1,483
  -1,632
  -1,787
  -1,948
  -2,117
  -2,293
  -2,475
  -2,665
  -2,862
  -3,066
  -3,279
  -3,501
  -3,731
  -3,970
  -4,219
  -4,478
New CAPEX, $m
  -662
  -764
  -887
  -1,018
  -1,152
  -1,288
  -1,423
  -1,557
  -1,689
  -1,819
  -1,945
  -2,069
  -2,189
  -2,307
  -2,424
  -2,539
  -2,653
  -2,767
  -2,883
  -3,000
  -3,120
  -3,243
  -3,370
  -3,502
  -3,640
  -3,783
  -3,934
  -4,092
  -4,259
  -4,434
  -4,619
Cash from investing activities, $m
  -445
  -929
  -1,097
  -1,280
  -1,473
  -1,677
  -1,887
  -2,104
  -2,327
  -2,556
  -2,789
  -3,026
  -3,267
  -3,513
  -3,765
  -4,022
  -4,285
  -4,554
  -4,831
  -5,117
  -5,413
  -5,718
  -6,035
  -6,364
  -6,706
  -7,062
  -7,435
  -7,823
  -8,229
  -8,653
  -9,097
Free cash flow, $m
  -93
  -796
  -771
  -768
  -749
  -712
  -655
  -577
  -479
  -359
  -218
  -91
  90
  292
  512
  749
  1,004
  1,275
  1,561
  1,862
  2,178
  2,508
  2,852
  3,210
  3,582
  3,968
  4,369
  4,784
  5,216
  5,663
  6,128
Issuance/(repayment) of debt, $m
  474
  1,045
  1,221
  1,401
  1,586
  1,772
  1,958
  2,143
  2,325
  2,503
  2,677
  2,846
  3,012
  3,175
  3,335
  3,493
  3,650
  3,808
  3,967
  4,128
  4,293
  4,462
  4,637
  4,819
  5,008
  5,206
  5,413
  5,631
  5,860
  6,101
  6,355
Issuance/(repurchase) of shares, $m
  -21
  568
  485
  420
  338
  237
  116
  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  
  403
  1,613
  1,706
  1,821
  1,924
  2,009
  2,074
  2,143
  2,325
  2,503
  2,677
  2,846
  3,012
  3,175
  3,335
  3,493
  3,650
  3,808
  3,967
  4,128
  4,293
  4,462
  4,637
  4,819
  5,008
  5,206
  5,413
  5,631
  5,860
  6,101
  6,355
Total cash flow (excl. dividends), $m
  309
  817
  935
  1,053
  1,175
  1,297
  1,420
  1,566
  1,846
  2,144
  2,459
  2,755
  3,103
  3,467
  3,847
  4,242
  4,654
  5,083
  5,528
  5,990
  6,471
  6,970
  7,489
  8,028
  8,590
  9,174
  9,782
  10,415
  11,076
  11,764
  12,483
Retained Cash Flow (-), $m
  490
  -568
  -513
  -589
  -667
  -745
  -823
  -901
  -977
  -1,052
  -1,125
  -1,197
  -1,267
  -1,335
  -1,402
  -1,469
  -1,535
  -1,601
  -1,668
  -1,736
  -1,805
  -1,876
  -1,950
  -2,026
  -2,106
  -2,189
  -2,276
  -2,368
  -2,464
  -2,565
  -2,672
Prev. year cash balance distribution, $m
 
  20
  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
 
  269
  421
  464
  508
  552
  596
  665
  868
  1,091
  1,333
  1,558
  1,836
  2,132
  2,444
  2,774
  3,120
  3,482
  3,860
  4,255
  4,666
  5,094
  5,539
  6,002
  6,484
  6,985
  7,506
  8,048
  8,612
  9,199
  9,811
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
 
  244
  344
  338
  326
  309
  288
  273
  300
  312
  311
  292
  271
  244
  213
  180
  148
  118
  91
  68
  49
  35
  24
  16
  10
  6
  4
  2
  1
  1
  0
Current shareholders' claim on cash, %
  100
  66.8
  50.1
  40.7
  35.3
  32.5
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4
  31.4

NGL Energy Partners LP, through its subsidiaries, engages in the crude oil logistics, water solutions, liquids, retail propane, and refined products and renewables businesses in the United States. The Crude Oil Logistics segment purchases crude oil from producers and transports it for resale at pipeline injection points, storage terminals, barge loading facilities, rail facilities, refineries, and other trade hubs. The Water Solutions segment is involved in the treatment and disposal of wastewater generated from crude oil and natural gas production operations; disposal of solids, such as tank bottoms, drilling fluids, and performs truck washouts; and sale of recycled water and recovered hydrocarbons. The Liquids segment supplies natural gas liquids to retailers, wholesalers, refiners, and petrochemical plants in the United States and Canada. This segment also provides natural gas liquids terminaling and storage services through its 19 terminals in the United States; and leased storage and rail car transportation services through its fleet of leased rail cars. The Retail Propane segment sells propane, distillates, and equipment and supplies to end users consisting of residential, agricultural, commercial, and industrial customers, as well as re-sellers. The Refined Products and Renewables segment markets gasoline, diesel, ethanol, and biodiesel products; and purchase and delivers refined petroleum and renewable products. NGL Energy Holdings LLC serves as the general partner of the company. The company was founded in 1940 and is headquartered in Tulsa, Oklahoma.

FINANCIAL RATIOS  of  NGL Energy Partners (NGL)

Valuation Ratios
P/E Ratio -4.8
Price to Sales 0.1
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 2.7
Price to Free Cash Flow -3.1
Growth Rates
Sales Growth Rate -30.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 190.4%
Cap. Spend. - 3 Yr. Gr. Rate 55.8%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 175.9%
Total Debt to Equity 176.4%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.3%
Ret/ On Assets - 3 Yr. Avg. 1.2%
Return On Total Capital -4.2%
Ret/ On T. Cap. - 3 Yr. Avg. -0.4%
Return On Equity -10.5%
Return On Equity - 3 Yr. Avg. -1.5%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 7.6%
Gross Margin - 3 Yr. Avg. 6.2%
EBITDA Margin 1.5%
EBITDA Margin - 3 Yr. Avg. 1.9%
Operating Margin -1.4%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin -1.6%
Pre-Tax Margin - 3 Yr. Avg. -0.3%
Net Profit Margin -1.7%
Net Profit Margin - 3 Yr. Avg. -0.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -1.5%
Payout Ratio -161.8%

NGL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NGL stock intrinsic value calculation we used $11742 million for the last fiscal year's total revenue generated by NGL Energy Partners. The default revenue input number comes from 2016 income statement of NGL Energy 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 NGL stock valuation model: a) initial revenue growth rate of 26.9% 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 NGL is calculated based on our internal credit rating of NGL Energy 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 NGL Energy 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 NGL 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 $783 million in the base year in the intrinsic value calculation for NGL 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 4.1% for NGL Energy Partners.

Corporate tax rate of 27% is the nominal tax rate for NGL Energy 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 NGL 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 NGL are equal to 24.1%.

Life of production assets of 17.1 years is the average useful life of capital assets used in NGL Energy 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 NGL is equal to 2.6%. 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 - $1656 million for NGL Energy 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 120.899 million for NGL Energy 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 NGL Energy Partners at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ NGL Energy Partners Hit With Quant Downgrade, Weak Charts   [Aug-16-17 04:00PM  TheStreet.com]
▶ These MLPs Fell More than 5% Last Week   [Aug-08-17 12:28PM  Market Realist]
▶ These Energy Stocks Fell the Most Last Week   [11:36AM  Market Realist]
▶ Which Segment Could Drive Williams Partners Q2 Performance   [Jul-28-17 07:40AM  Market Realist]
▶ Who Were the Top Energy Losers Last Week?   [Jul-25-17 08:12AM  Market Realist]
▶ NGL Energy Partners Announces Quarterly Cash Distribution   [Jul-20-17 07:40PM  Business Wire]
▶ Stay Away! 5 Dividend Stocks That Are Yield Traps   [Jul-13-17 11:30AM  Motley Fool]
▶ NGL Energy Hits New Year-to-Date Lows: Key for Investors   [Jun-23-17 09:09AM  Market Realist]
▶ Which MLP Stocks Were the Biggest Losers in April 2017?   [May-05-17 04:34PM  Market Realist]
▶ Which Segment Will Drive Williams Partners 1Q17 Performance?   [Apr-28-17 04:05PM  Market Realist]
▶ Midstream Stocks Returns and Implied Volatilities   [Apr-27-17 03:06PM  Market Realist]
▶ Implied Volatility in Midstream: Inside the Latest Returns   [Mar-14-17 01:05PM  Market Realist]
▶ MLPs Issue Equity; Tailwind or Headwind for Sector?   [Mar-03-17 04:13PM  at Barrons.com]
▶ Midstream Stocks: How Returns Impact Implied Volatility   [Feb-28-17 11:05AM  Market Realist]
▶ Inside Sunoco Logistics 4Q16 Earnings Drivers   [Feb-24-17 10:38AM  Market Realist]
▶ Is NGL Energy Partners LP (NGL) Going to Burn Investors?   [Dec-15-16 09:15PM  at Insider Monkey]
Stock chart of NGL Financial statements of NGL
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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