Intrinsic value of NuSTAR Energy - NS

Previous Close

$38.22

  Intrinsic Value

$28.46

stock screener

  Rating & Target

sell

-26%

  Value-price divergence*

+126%

Previous close

$38.22

 
Intrinsic value

$28.46

 
Up/down potential

-26%

 
Rating

sell

 
Value-price divergence*

+126%

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

We calculate the intrinsic value of NS 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 3.0

 

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, %
  -15.69
  20.00
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
Revenue, $m
  1,757
  2,108
  2,498
  2,927
  3,393
  3,897
  4,437
  5,013
  5,623
  6,267
  6,945
  7,655
  8,398
  9,174
  9,982
  10,824
  11,699
  12,609
  13,555
  14,538
  15,560
  16,622
  17,725
  18,874
  20,068
  21,312
  22,607
  23,956
  25,363
  26,830
  28,361
Variable operating expenses, $m
 
  1,154
  1,355
  1,575
  1,815
  2,074
  2,352
  2,648
  2,962
  3,293
  3,641
  3,937
  4,319
  4,718
  5,134
  5,567
  6,017
  6,485
  6,972
  7,478
  8,003
  8,549
  9,117
  9,707
  10,322
  10,961
  11,627
  12,321
  13,045
  13,800
  14,587
Fixed operating expenses, $m
 
  507
  520
  533
  546
  560
  574
  588
  603
  618
  634
  649
  666
  682
  699
  717
  735
  753
  772
  791
  811
  831
  852
  873
  895
  918
  941
  964
  988
  1,013
  1,038
Total operating expenses, $m
  1,456
  1,661
  1,875
  2,108
  2,361
  2,634
  2,926
  3,236
  3,565
  3,911
  4,275
  4,586
  4,985
  5,400
  5,833
  6,284
  6,752
  7,238
  7,744
  8,269
  8,814
  9,380
  9,969
  10,580
  11,217
  11,879
  12,568
  13,285
  14,033
  14,813
  15,625
Operating income, $m
  300
  447
  624
  819
  1,032
  1,263
  1,511
  1,776
  2,058
  2,356
  2,669
  3,068
  3,413
  3,773
  4,149
  4,540
  4,947
  5,371
  5,811
  6,269
  6,746
  7,241
  7,757
  8,293
  8,851
  9,433
  10,039
  10,671
  11,330
  12,018
  12,736
EBITDA, $m
  517
  737
  955
  1,195
  1,456
  1,740
  2,045
  2,370
  2,716
  3,081
  3,465
  3,869
  4,291
  4,732
  5,192
  5,672
  6,171
  6,689
  7,229
  7,790
  8,373
  8,979
  9,610
  10,266
  10,950
  11,661
  12,403
  13,176
  13,982
  14,823
  15,702
Interest expense (income), $m
  143
  139
  170
  205
  243
  284
  329
  376
  427
  481
  538
  598
  661
  727
  795
  867
  941
  1,019
  1,099
  1,183
  1,270
  1,360
  1,454
  1,552
  1,654
  1,759
  1,869
  1,984
  2,103
  2,228
  2,358
Earnings before tax, $m
  162
  307
  453
  614
  789
  979
  1,183
  1,400
  1,631
  1,874
  2,131
  2,470
  2,752
  3,046
  3,353
  3,673
  4,006
  4,352
  4,712
  5,086
  5,476
  5,881
  6,302
  6,741
  7,198
  7,673
  8,169
  8,687
  9,226
  9,790
  10,378
Tax expense, $m
  12
  83
  122
  166
  213
  264
  319
  378
  440
  506
  575
  667
  743
  822
  905
  992
  1,082
  1,175
  1,272
  1,373
  1,478
  1,588
  1,702
  1,820
  1,943
  2,072
  2,206
  2,345
  2,491
  2,643
  2,802
Net income, $m
  150
  224
  331
  448
  576
  715
  863
  1,022
  1,190
  1,368
  1,556
  1,803
  2,009
  2,224
  2,448
  2,681
  2,924
  3,177
  3,440
  3,713
  3,997
  4,293
  4,601
  4,921
  5,254
  5,602
  5,964
  6,341
  6,735
  7,147
  7,576

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  36
  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
  5,031
  5,990
  7,098
  8,315
  9,640
  11,071
  12,605
  14,240
  15,974
  17,804
  19,729
  21,747
  23,858
  26,062
  28,358
  30,750
  33,237
  35,822
  38,510
  41,302
  44,204
  47,220
  50,356
  53,618
  57,012
  60,545
  64,224
  68,057
  72,054
  76,222
  80,572
Adjusted assets (=assets-cash), $m
  4,995
  5,990
  7,098
  8,315
  9,640
  11,071
  12,605
  14,240
  15,974
  17,804
  19,729
  21,747
  23,858
  26,062
  28,358
  30,750
  33,237
  35,822
  38,510
  41,302
  44,204
  47,220
  50,356
  53,618
  57,012
  60,545
  64,224
  68,057
  72,054
  76,222
  80,572
Revenue / Adjusted assets
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
Average production assets, $m
  3,822
  4,586
  5,434
  6,366
  7,381
  8,476
  9,650
  10,902
  12,230
  13,631
  15,104
  16,650
  18,266
  19,953
  21,711
  23,542
  25,446
  27,426
  29,483
  31,621
  33,843
  36,152
  38,553
  41,050
  43,648
  46,353
  49,170
  52,105
  55,164
  58,356
  61,686
Working capital, $m
  88
  127
  150
  176
  204
  234
  266
  301
  337
  376
  417
  459
  504
  550
  599
  649
  702
  757
  813
  872
  934
  997
  1,064
  1,132
  1,204
  1,279
  1,356
  1,437
  1,522
  1,610
  1,702
Total debt, $m
  3,068
  3,704
  4,454
  5,278
  6,175
  7,144
  8,183
  9,290
  10,463
  11,702
  13,005
  14,372
  15,801
  17,293
  18,848
  20,466
  22,150
  23,901
  25,720
  27,611
  29,575
  31,617
  33,740
  35,948
  38,246
  40,638
  43,129
  45,724
  48,429
  51,251
  54,196
Total liabilities, $m
  3,419
  4,055
  4,805
  5,629
  6,526
  7,495
  8,534
  9,641
  10,814
  12,053
  13,356
  14,723
  16,152
  17,644
  19,199
  20,817
  22,501
  24,252
  26,071
  27,962
  29,926
  31,968
  34,091
  36,299
  38,597
  40,989
  43,480
  46,075
  48,780
  51,602
  54,547
Total equity, $m
  1,612
  1,935
  2,293
  2,686
  3,114
  3,576
  4,071
  4,600
  5,160
  5,751
  6,372
  7,024
  7,706
  8,418
  9,160
  9,932
  10,735
  11,571
  12,439
  13,341
  14,278
  15,252
  16,265
  17,319
  18,415
  19,556
  20,744
  21,983
  23,273
  24,620
  26,025
Total liabilities and equity, $m
  5,031
  5,990
  7,098
  8,315
  9,640
  11,071
  12,605
  14,241
  15,974
  17,804
  19,728
  21,747
  23,858
  26,062
  28,359
  30,749
  33,236
  35,823
  38,510
  41,303
  44,204
  47,220
  50,356
  53,618
  57,012
  60,545
  64,224
  68,058
  72,053
  76,222
  80,572
Debt-to-equity ratio
  1.903
  1.910
  1.940
  1.970
  1.980
  2.000
  2.010
  2.020
  2.030
  2.030
  2.040
  2.050
  2.050
  2.050
  2.060
  2.060
  2.060
  2.070
  2.070
  2.070
  2.070
  2.070
  2.070
  2.080
  2.080
  2.080
  2.080
  2.080
  2.080
  2.080
  2.080
Adjusted equity ratio
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  150
  224
  331
  448
  576
  715
  863
  1,022
  1,190
  1,368
  1,556
  1,803
  2,009
  2,224
  2,448
  2,681
  2,924
  3,177
  3,440
  3,713
  3,997
  4,293
  4,601
  4,921
  5,254
  5,602
  5,964
  6,341
  6,735
  7,147
  7,576
Depreciation, amort., depletion, $m
  217
  290
  331
  376
  425
  477
  534
  594
  658
  725
  796
  800
  878
  959
  1,044
  1,132
  1,223
  1,319
  1,417
  1,520
  1,627
  1,738
  1,854
  1,974
  2,098
  2,229
  2,364
  2,505
  2,652
  2,806
  2,966
Funds from operations, $m
  434
  515
  662
  824
  1,001
  1,192
  1,397
  1,616
  1,848
  2,093
  2,352
  2,604
  2,887
  3,183
  3,492
  3,813
  4,148
  4,495
  4,857
  5,233
  5,624
  6,031
  6,454
  6,894
  7,353
  7,830
  8,328
  8,846
  9,387
  9,952
  10,542
Change in working capital, $m
  -3
  21
  23
  26
  28
  30
  32
  35
  37
  39
  41
  43
  45
  47
  49
  50
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  81
  84
  88
  92
Cash from operations, $m
  437
  494
  638
  798
  973
  1,162
  1,365
  1,581
  1,811
  2,055
  2,311
  2,561
  2,842
  3,136
  3,443
  3,763
  4,095
  4,441
  4,800
  5,174
  5,563
  5,967
  6,388
  6,825
  7,281
  7,755
  8,250
  8,765
  9,303
  9,864
  10,450
Maintenance CAPEX, $m
  0
  -184
  -220
  -261
  -306
  -355
  -407
  -464
  -524
  -588
  -655
  -726
  -800
  -878
  -959
  -1,044
  -1,132
  -1,223
  -1,319
  -1,417
  -1,520
  -1,627
  -1,738
  -1,854
  -1,974
  -2,098
  -2,229
  -2,364
  -2,505
  -2,652
  -2,806
New CAPEX, $m
  -204
  -764
  -848
  -932
  -1,014
  -1,095
  -1,175
  -1,252
  -1,327
  -1,401
  -1,474
  -1,545
  -1,616
  -1,687
  -1,758
  -1,831
  -1,904
  -1,980
  -2,057
  -2,138
  -2,222
  -2,309
  -2,401
  -2,497
  -2,598
  -2,705
  -2,817
  -2,935
  -3,060
  -3,191
  -3,330
Cash from investing activities, $m
  -311
  -948
  -1,068
  -1,193
  -1,320
  -1,450
  -1,582
  -1,716
  -1,851
  -1,989
  -2,129
  -2,271
  -2,416
  -2,565
  -2,717
  -2,875
  -3,036
  -3,203
  -3,376
  -3,555
  -3,742
  -3,936
  -4,139
  -4,351
  -4,572
  -4,803
  -5,046
  -5,299
  -5,565
  -5,843
  -6,136
Free cash flow, $m
  126
  -454
  -430
  -395
  -348
  -289
  -218
  -135
  -40
  66
  182
  290
  426
  571
  725
  888
  1,059
  1,238
  1,425
  1,619
  1,821
  2,031
  2,249
  2,475
  2,709
  2,952
  3,205
  3,466
  3,738
  4,021
  4,314
Issuance/(repayment) of debt, $m
  -61
  672
  750
  824
  897
  969
  1,039
  1,107
  1,174
  1,239
  1,303
  1,366
  1,429
  1,492
  1,555
  1,619
  1,684
  1,750
  1,819
  1,891
  1,965
  2,042
  2,123
  2,208
  2,298
  2,392
  2,491
  2,595
  2,706
  2,822
  2,945
Issuance/(repurchase) of shares, $m
  246
  98
  27
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  182
  770
  777
  824
  897
  969
  1,039
  1,107
  1,174
  1,239
  1,303
  1,366
  1,429
  1,492
  1,555
  1,619
  1,684
  1,750
  1,819
  1,891
  1,965
  2,042
  2,123
  2,208
  2,298
  2,392
  2,491
  2,595
  2,706
  2,822
  2,945
Total cash flow (excl. dividends), $m
  310
  316
  347
  429
  549
  680
  821
  972
  1,134
  1,305
  1,485
  1,656
  1,855
  2,063
  2,280
  2,507
  2,743
  2,988
  3,244
  3,509
  3,786
  4,073
  4,372
  4,683
  5,007
  5,344
  5,695
  6,062
  6,444
  6,843
  7,259
Retained Cash Flow (-), $m
  -2
  -323
  -358
  -393
  -428
  -462
  -496
  -528
  -560
  -591
  -622
  -652
  -682
  -712
  -742
  -772
  -803
  -835
  -868
  -902
  -937
  -974
  -1,013
  -1,054
  -1,096
  -1,141
  -1,188
  -1,238
  -1,291
  -1,346
  -1,405
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
 
  -6
  -11
  36
  121
  218
  326
  444
  574
  714
  863
  1,004
  1,173
  1,351
  1,538
  1,735
  1,939
  2,153
  2,376
  2,607
  2,848
  3,099
  3,359
  3,629
  3,911
  4,203
  4,507
  4,824
  5,153
  5,496
  5,854
Discount rate, %
 
  9.90
  10.40
  10.91
  11.46
  12.03
  12.64
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.83
  25.02
  26.27
  27.58
  28.96
  30.41
  31.93
  33.52
  35.20
  36.96
  38.81
  40.75
PV of cash for distribution, $m
 
  -6
  -9
  26
  79
  123
  159
  186
  202
  209
  207
  194
  180
  161
  140
  118
  97
  77
  60
  45
  33
  23
  16
  10
  7
  4
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  96.9
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1

NuStar Energy L.P. engages in the terminalling, storage, and marketing of petroleum products; and transportation of petroleum products and anhydrous ammonia. It operates through three segments: Pipeline, Storage, and Fuels Marketing. The Pipeline segment transports refined petroleum products, crude oil, and anhydrous ammonia. The Storage segment owns terminal and storage facilities, which offer storage, handling, and other services for petroleum products, crude oil, specialty chemicals, and other liquids. This segment also provides pilotage, tug assistance, line handling, launch, emergency response, and other ship services. The Fuels Marketing segment is involved in the purchase of crude oil, fuel oil, bunker fuel, fuel oil blending components, and other refined products for resale. As of December 31, 2015, the company had 5,500 miles of refined product pipelines with 21 associated terminals that offer storage capacity of 4.9 million barrels and 2 tank farms providing storage capacity of 1.4 million barrels; 2,000 miles of anhydrous ammonia pipelines; 1,200 miles of crude oil pipelines with 4.0 million barrels of associated storage capacity; and 50 terminal and storage facilities, which offer 82.9 million barrels of storage capacity. The company has operations in the United States, Canada, Mexico, the Netherlands, St. Eustatius in the Caribbean, and the United Kingdom. Riverwalk Logistics, L.P. serves as the general partner of the company and is owned by NuStar GP Holdings, LLC. NuStar Energy L.P. was founded in 1999 and is headquartered in San Antonio, Texas.

FINANCIAL RATIOS  of  NuSTAR Energy (NS)

Valuation Ratios
P/E Ratio 20
Price to Sales 1.7
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 6.9
Price to Free Cash Flow 12.9
Growth Rates
Sales Growth Rate -15.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -37.2%
Cap. Spend. - 3 Yr. Gr. Rate -9.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 187%
Total Debt to Equity 190.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. 7%
Return On Total Capital 3.2%
Ret/ On T. Cap. - 3 Yr. Avg. 4.8%
Return On Equity 9.3%
Return On Equity - 3 Yr. Avg. 13.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 63.7%
Gross Margin - 3 Yr. Avg. 51.8%
EBITDA Margin 29.7%
EBITDA Margin - 3 Yr. Avg. 26.4%
Operating Margin 17.1%
Oper. Margin - 3 Yr. Avg. 16.6%
Pre-Tax Margin 9.2%
Pre-Tax Margin - 3 Yr. Avg. 10.6%
Net Profit Margin 8.5%
Net Profit Margin - 3 Yr. Avg. 10%
Effective Tax Rate 7.4%
Eff/ Tax Rate - 3 Yr. Avg. 5.7%
Payout Ratio 262%

NS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NS stock intrinsic value calculation we used $1757 million for the last fiscal year's total revenue generated by NuSTAR Energy. The default revenue input number comes from 2016 income statement of NuSTAR Energy. 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 NS stock valuation model: a) initial revenue growth rate of 20% 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 9.9%, whose default value for NS is calculated based on our internal credit rating of NuSTAR Energy, 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 NuSTAR Energy.
    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 NS stock the variable cost ratio is equal to 55.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $495 million in the base year in the intrinsic value calculation for NS 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 4.6% for NuSTAR Energy.

Corporate tax rate of 27% is the nominal tax rate for NuSTAR Energy. 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 NS 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 NS are equal to 217.5%.

Life of production assets of 20.8 years is the average useful life of capital assets used in NuSTAR Energy 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 NS is equal to 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 - $1612 million for NuSTAR Energy - 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 79.296 million for NuSTAR Energy 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 NuSTAR Energy at the current share price and the inputted number of shares is $3.0 billion.

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Stock chart of NS Financial statements of NS
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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