Intrinsic value of Summit Midstream Partners - SMLP

Previous Close

$19.55

  Intrinsic Value

$3.78

stock screener

  Rating & Target

str. sell

-81%

  Value-price divergence*

-26%

Previous close

$19.55

 
Intrinsic value

$3.78

 
Up/down potential

-81%

 
Rating

str. sell

 
Value-price divergence*

-26%

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

We calculate the intrinsic value of SMLP 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 1.5

 

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, %
  0.25
  49.50
  45.05
  41.05
  37.44
  34.20
  31.28
  28.65
  26.28
  24.16
  22.24
  20.52
  18.96
  17.57
  16.31
  15.18
  14.16
  13.25
  12.42
  11.68
  11.01
  10.41
  9.87
  9.38
  8.94
  8.55
  8.19
  7.88
  7.59
  7.33
  7.10
Revenue, $m
  402
  601
  872
  1,230
  1,690
  2,268
  2,977
  3,830
  4,837
  6,005
  7,340
  8,846
  10,524
  12,373
  14,391
  16,576
  18,923
  21,430
  24,092
  26,906
  29,868
  32,978
  36,232
  39,631
  43,176
  46,868
  50,708
  54,701
  58,852
  63,165
  67,647
Variable operating expenses, $m
 
  835
  1,211
  1,707
  2,346
  3,147
  4,131
  5,314
  6,710
  8,331
  10,183
  12,270
  14,597
  17,162
  19,961
  22,991
  26,247
  29,724
  33,416
  37,319
  41,428
  45,740
  50,255
  54,970
  59,886
  65,006
  70,333
  75,872
  81,629
  87,611
  93,828
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
  290
  835
  1,211
  1,707
  2,346
  3,147
  4,131
  5,314
  6,710
  8,331
  10,183
  12,270
  14,597
  17,162
  19,961
  22,991
  26,247
  29,724
  33,416
  37,319
  41,428
  45,740
  50,255
  54,970
  59,886
  65,006
  70,333
  75,872
  81,629
  87,611
  93,828
Operating income, $m
  112
  -234
  -339
  -477
  -656
  -879
  -1,154
  -1,484
  -1,873
  -2,326
  -2,843
  -3,424
  -4,073
  -4,789
  -5,570
  -6,415
  -7,324
  -8,294
  -9,324
  -10,413
  -11,560
  -12,763
  -14,023
  -15,338
  -16,710
  -18,139
  -19,625
  -21,171
  -22,777
  -24,446
  -26,181
EBITDA, $m
  225
  -65
  -94
  -133
  -183
  -246
  -322
  -415
  -524
  -650
  -795
  -958
  -1,140
  -1,340
  -1,559
  -1,795
  -2,049
  -2,321
  -2,609
  -2,914
  -3,235
  -3,571
  -3,924
  -4,292
  -4,676
  -5,076
  -5,492
  -5,924
  -6,374
  -6,841
  -7,326
Interest expense (income), $m
  63
  62
  111
  177
  264
  377
  518
  691
  899
  1,145
  1,430
  1,757
  2,124
  2,534
  2,985
  3,478
  4,012
  4,585
  5,197
  5,847
  6,534
  7,258
  8,017
  8,812
  9,642
  10,507
  11,409
  12,346
  13,321
  14,335
  15,388
Earnings before tax, $m
  -8
  -296
  -450
  -654
  -920
  -1,256
  -1,672
  -2,175
  -2,773
  -3,471
  -4,273
  -5,180
  -6,197
  -7,323
  -8,555
  -9,893
  -11,335
  -12,879
  -14,521
  -16,260
  -18,094
  -20,020
  -22,039
  -24,150
  -26,352
  -28,646
  -31,034
  -33,517
  -36,098
  -38,781
  -41,569
Tax expense, $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
Net income, $m
  -38
  -296
  -450
  -654
  -920
  -1,256
  -1,672
  -2,175
  -2,773
  -3,471
  -4,273
  -5,180
  -6,197
  -7,323
  -8,555
  -9,893
  -11,335
  -12,879
  -14,521
  -16,260
  -18,094
  -20,020
  -22,039
  -24,150
  -26,352
  -28,646
  -31,034
  -33,517
  -36,098
  -38,781
  -41,569

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7
  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
  3,115
  4,659
  6,758
  9,531
  13,100
  17,580
  23,078
  29,690
  37,493
  46,550
  56,903
  68,577
  81,582
  95,915
  111,560
  128,495
  146,693
  166,123
  186,758
  208,570
  231,536
  255,640
  280,869
  307,221
  334,699
  363,314
  393,086
  424,043
  456,218
  489,653
  524,399
Adjusted assets (=assets-cash), $m
  3,108
  4,659
  6,758
  9,531
  13,100
  17,580
  23,078
  29,690
  37,493
  46,550
  56,903
  68,577
  81,582
  95,915
  111,560
  128,495
  146,693
  166,123
  186,758
  208,570
  231,536
  255,640
  280,869
  307,221
  334,699
  363,314
  393,086
  424,043
  456,218
  489,653
  524,399
Revenue / Adjusted assets
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
  0.129
Average production assets, $m
  2,275
  3,400
  4,932
  6,957
  9,561
  12,831
  16,844
  21,670
  27,366
  33,976
  41,532
  50,053
  59,546
  70,007
  81,426
  93,786
  107,068
  121,250
  136,311
  152,231
  168,994
  186,587
  205,001
  224,235
  244,290
  265,176
  286,907
  309,501
  332,985
  357,389
  382,749
Working capital, $m
  37
  45
  65
  92
  127
  170
  223
  287
  363
  450
  551
  663
  789
  928
  1,079
  1,243
  1,419
  1,607
  1,807
  2,018
  2,240
  2,473
  2,717
  2,972
  3,238
  3,515
  3,803
  4,103
  4,414
  4,737
  5,074
Total debt, $m
  1,240
  2,218
  3,540
  5,288
  7,536
  10,358
  13,822
  17,987
  22,904
  28,609
  35,132
  42,487
  50,680
  59,709
  69,566
  80,235
  91,699
  103,941
  116,941
  130,682
  145,151
  160,336
  176,230
  192,832
  210,143
  228,171
  246,927
  266,430
  286,700
  307,765
  329,654
Total liabilities, $m
  1,957
  2,935
  4,257
  6,005
  8,253
  11,075
  14,539
  18,704
  23,621
  29,326
  35,849
  43,204
  51,397
  60,426
  70,283
  80,952
  92,416
  104,658
  117,658
  131,399
  145,868
  161,053
  176,947
  193,549
  210,860
  228,888
  247,644
  267,147
  287,417
  308,482
  330,371
Total equity, $m
  1,158
  1,724
  2,500
  3,527
  4,847
  6,504
  8,539
  10,985
  13,872
  17,223
  21,054
  25,374
  30,186
  35,489
  41,277
  47,543
  54,276
  61,466
  69,101
  77,171
  85,668
  94,587
  103,922
  113,672
  123,838
  134,426
  145,442
  156,896
  168,800
  181,172
  194,028
Total liabilities and equity, $m
  3,115
  4,659
  6,757
  9,532
  13,100
  17,579
  23,078
  29,689
  37,493
  46,549
  56,903
  68,578
  81,583
  95,915
  111,560
  128,495
  146,692
  166,124
  186,759
  208,570
  231,536
  255,640
  280,869
  307,221
  334,698
  363,314
  393,086
  424,043
  456,217
  489,654
  524,399
Debt-to-equity ratio
  1.071
  1.290
  1.420
  1.500
  1.550
  1.590
  1.620
  1.640
  1.650
  1.660
  1.670
  1.670
  1.680
  1.680
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.700
  1.700
  1.700
  1.700
  1.700
  1.700
  1.700
  1.700
  1.700
  1.700
Adjusted equity ratio
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -38
  -296
  -450
  -654
  -920
  -1,256
  -1,672
  -2,175
  -2,773
  -3,471
  -4,273
  -5,180
  -6,197
  -7,323
  -8,555
  -9,893
  -11,335
  -12,879
  -14,521
  -16,260
  -18,094
  -20,020
  -22,039
  -24,150
  -26,352
  -28,646
  -31,034
  -33,517
  -36,098
  -38,781
  -41,569
Depreciation, amort., depletion, $m
  113
  169
  245
  344
  473
  634
  831
  1,069
  1,350
  1,675
  2,048
  2,466
  2,933
  3,449
  4,011
  4,620
  5,274
  5,973
  6,715
  7,499
  8,325
  9,191
  10,099
  11,046
  12,034
  13,063
  14,133
  15,246
  16,403
  17,605
  18,855
Funds from operations, $m
  287
  -127
  -205
  -310
  -447
  -622
  -840
  -1,106
  -1,423
  -1,796
  -2,225
  -2,715
  -3,264
  -3,874
  -4,544
  -5,273
  -6,061
  -6,906
  -7,806
  -8,761
  -9,769
  -10,829
  -11,941
  -13,104
  -14,318
  -15,583
  -16,900
  -18,271
  -19,695
  -21,176
  -22,714
Change in working capital, $m
  56
  15
  20
  27
  35
  43
  53
  64
  76
  88
  100
  113
  126
  139
  151
  164
  176
  188
  200
  211
  222
  233
  244
  255
  266
  277
  288
  300
  311
  323
  336
Cash from operations, $m
  231
  -142
  -226
  -337
  -482
  -666
  -894
  -1,170
  -1,499
  -1,883
  -2,326
  -2,828
  -3,390
  -4,013
  -4,695
  -5,437
  -6,237
  -7,094
  -8,006
  -8,972
  -9,991
  -11,062
  -12,185
  -13,359
  -14,583
  -15,860
  -17,188
  -18,570
  -20,007
  -21,499
  -23,051
Maintenance CAPEX, $m
  0
  -112
  -168
  -243
  -343
  -471
  -632
  -830
  -1,067
  -1,348
  -1,674
  -2,046
  -2,466
  -2,933
  -3,449
  -4,011
  -4,620
  -5,274
  -5,973
  -6,715
  -7,499
  -8,325
  -9,191
  -10,099
  -11,046
  -12,034
  -13,063
  -14,133
  -15,246
  -16,403
  -17,605
New CAPEX, $m
  -143
  -1,126
  -1,532
  -2,024
  -2,605
  -3,270
  -4,013
  -4,826
  -5,696
  -6,610
  -7,556
  -8,521
  -9,492
  -10,461
  -11,419
  -12,361
  -13,282
  -14,182
  -15,061
  -15,920
  -16,763
  -17,593
  -18,415
  -19,234
  -20,056
  -20,886
  -21,730
  -22,594
  -23,484
  -24,404
  -25,360
Cash from investing activities, $m
  -534
  -1,238
  -1,700
  -2,267
  -2,948
  -3,741
  -4,645
  -5,656
  -6,763
  -7,958
  -9,230
  -10,567
  -11,958
  -13,394
  -14,868
  -16,372
  -17,902
  -19,456
  -21,034
  -22,635
  -24,262
  -25,918
  -27,606
  -29,333
  -31,102
  -32,920
  -34,793
  -36,727
  -38,730
  -40,807
  -42,965
Free cash flow, $m
  -303
  -1,380
  -1,925
  -2,604
  -3,429
  -4,406
  -5,539
  -6,825
  -8,262
  -9,842
  -11,556
  -13,394
  -15,348
  -17,407
  -19,563
  -21,809
  -24,139
  -26,550
  -29,040
  -31,607
  -34,253
  -36,980
  -39,791
  -42,691
  -45,685
  -48,780
  -51,981
  -55,298
  -58,737
  -62,307
  -66,016
Issuance/(repayment) of debt, $m
  316
  978
  1,322
  1,747
  2,248
  2,822
  3,464
  4,165
  4,916
  5,706
  6,522
  7,355
  8,193
  9,029
  9,856
  10,669
  11,465
  12,241
  13,000
  13,741
  14,469
  15,185
  15,895
  16,602
  17,311
  18,028
  18,757
  19,502
  20,270
  21,064
  21,890
Issuance/(repurchase) of shares, $m
  125
  869
  1,226
  1,681
  2,240
  2,914
  3,706
  4,621
  5,660
  6,822
  8,104
  9,500
  11,009
  12,626
  14,344
  16,159
  18,069
  20,068
  22,156
  24,330
  26,591
  28,939
  31,374
  33,900
  36,518
  39,234
  42,049
  44,971
  48,003
  51,152
  54,425
Cash from financing (excl. dividends), $m  
  457
  1,847
  2,548
  3,428
  4,488
  5,736
  7,170
  8,786
  10,576
  12,528
  14,626
  16,855
  19,202
  21,655
  24,200
  26,828
  29,534
  32,309
  35,156
  38,071
  41,060
  44,124
  47,269
  50,502
  53,829
  57,262
  60,806
  64,473
  68,273
  72,216
  76,315
Total cash flow (excl. dividends), $m
  154
  467
  624
  824
  1,059
  1,329
  1,631
  1,961
  2,315
  2,686
  3,070
  3,460
  3,855
  4,248
  4,637
  5,019
  5,394
  5,759
  6,116
  6,465
  6,807
  7,144
  7,478
  7,811
  8,144
  8,482
  8,824
  9,175
  9,537
  9,910
  10,299
Retained Cash Flow (-), $m
  589
  -869
  -1,226
  -1,681
  -2,240
  -2,914
  -3,706
  -4,621
  -5,660
  -6,822
  -8,104
  -9,500
  -11,009
  -12,626
  -14,344
  -16,159
  -18,069
  -20,068
  -22,156
  -24,330
  -26,591
  -28,939
  -31,374
  -33,900
  -36,518
  -39,234
  -42,049
  -44,971
  -48,003
  -51,152
  -54,425
Prev. year cash balance distribution, $m
 
  7
  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
 
  -395
  -603
  -857
  -1,181
  -1,584
  -2,075
  -2,660
  -3,346
  -4,136
  -5,033
  -6,040
  -7,155
  -8,378
  -9,707
  -11,140
  -12,675
  -14,309
  -16,040
  -17,865
  -19,784
  -21,795
  -23,896
  -26,089
  -28,374
  -30,752
  -33,225
  -35,795
  -38,467
  -41,242
  -44,127
Discount rate, %
 
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
 
  -364
  -507
  -653
  -808
  -964
  -1,111
  -1,240
  -1,342
  -1,409
  -1,439
  -1,428
  -1,379
  -1,295
  -1,184
  -1,053
  -912
  -768
  -629
  -501
  -387
  -291
  -212
  -150
  -102
  -68
  -43
  -27
  -16
  -9
  -5
Current shareholders' claim on cash, %
  100
  62.8
  40.3
  26.4
  17.6
  12.0
  8.3
  5.8
  4.1
  3.0
  2.2
  1.6
  1.2
  0.9
  0.7
  0.5
  0.4
  0.3
  0.2
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Summit Midstream Partners, LP focuses on owning, developing, and operating midstream energy infrastructure assets primarily shale formations in North America. The company provides natural gas gathering, treating, and processing services. It operates in four unconventional resource basins, including the Appalachian Basin, which comprises the Marcellus Shale formation in northern West Virginia; the Williston Basin that consists the Bakken and Three Forks shale formations in northwestern North Dakota; the Fort Worth Basin, which includes the Barnett Shale formation in north-central Texas; and the Piceance Basin that comprises the Mesaverde formation, and the Mancos and Niobrara shale formations in western Colorado and eastern Utah. The company serves crude oil and natural gas producers. As of February 29, 2016, it had approximately 2,700 miles of pipelines. Summit Midstream GP, LLC operates as a general partner of the company. Summit Midstream Partners, LP was founded in 2009 and is headquartered in The Woodlands, Texas.

FINANCIAL RATIOS  of  Summit Midstream Partners (SMLP)

Valuation Ratios
P/E Ratio -37.1
Price to Sales 3.5
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 6.1
Price to Free Cash Flow 16
Growth Rates
Sales Growth Rate 0.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -47.4%
Cap. Spend. - 3 Yr. Gr. Rate 5.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 107.1%
Total Debt to Equity 107.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. -1.8%
Return On Total Capital -1.4%
Ret/ On T. Cap. - 3 Yr. Avg. -4.1%
Return On Equity -2.6%
Return On Equity - 3 Yr. Avg. -6.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 69.7%
Gross Margin - 3 Yr. Avg. 64.9%
EBITDA Margin 41.8%
EBITDA Margin - 3 Yr. Avg. 18.3%
Operating Margin 27.9%
Oper. Margin - 3 Yr. Avg. -2.2%
Pre-Tax Margin -2%
Pre-Tax Margin - 3 Yr. Avg. -21.2%
Net Profit Margin -9.5%
Net Profit Margin - 3 Yr. Avg. -25.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -1.1%
Payout Ratio -442.1%

SMLP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SMLP stock intrinsic value calculation we used $402 million for the last fiscal year's total revenue generated by Summit Midstream Partners. The default revenue input number comes from 2016 income statement of Summit 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 SMLP stock valuation model: a) initial revenue growth rate of 49.5% 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 8.6%, whose default value for SMLP is calculated based on our internal credit rating of Summit 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 Summit 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 SMLP stock the variable cost ratio is equal to 139.1%.

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 SMLP 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 5% for Summit Midstream Partners.

Corporate tax rate of 27% is the nominal tax rate for Summit 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 SMLP 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 SMLP are equal to 565.8%.

Life of production assets of 20.3 years is the average useful life of capital assets used in Summit 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 SMLP is equal to 7.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1158 million for Summit 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 75.565 million for Summit 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 Summit Midstream Partners at the current share price and the inputted number of shares is $1.5 billion.

RELATED COMPANIES Price Int.Val. Rating
ETP Energy Transfe 18.26 6.77  str.sell
ENB Enbridge 39.42 237.94  str.buy
SEP Spectra Energy 43.44 6.97  str.sell
KMI Kinder Morgan 18.55 5.79  str.sell
AM Antero Midstre 31.31 1.67  str.sell
OKS ONEOK Partners 51.07 237.81  str.buy
WPZ Williams Partn 37.74 5.47  str.sell

COMPANY NEWS

▶ 3 Hidden Gems in the Energy Sector   [Jul-20-17 08:04PM  Motley Fool]
▶ Woodlands-based midstream co., Exxons XTO Energy strike deal for Permian system   [Jul-14-17 09:50AM  American City Business Journals]
▶ 3 Embarrassingly Cheap Dividend Stocks   [Jul-09-17 07:09AM  Motley Fool]
▶ 3 Small-Cap Stocks for the Long Term   [Jun-22-17 09:11AM  Motley Fool]
▶ Can This 10% Dividend Even Survive?   [Mar-16-17 10:00AM  Motley Fool]
▶ Can This 10% Dividend Even Survive?   [10:00AM  at Motley Fool]
▶ Danger Lurks for These 3 High-Yield Energy Stocks   [Sep-17-16 01:12PM  at Motley Fool]
Stock chart of SMLP Financial statements of SMLP
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.