Intrinsic value of Targa Resources - TRGP

Previous Close

$44.46

  Intrinsic Value

$6.05

stock screener

  Rating & Target

str. sell

-86%

  Value-price divergence*

-54%

Previous close

$44.46

 
Intrinsic value

$6.05

 
Up/down potential

-86%

 
Rating

str. sell

 
Value-price divergence*

-54%

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

We calculate the intrinsic value of TRGP 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 9.6

 

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, %
  0.48
  17.90
  16.61
  15.45
  14.40
  13.46
  12.62
  11.86
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
Revenue, $m
  6,691
  7,889
  9,199
  10,620
  12,150
  13,786
  15,525
  17,366
  19,305
  21,343
  23,477
  25,706
  28,032
  30,455
  32,977
  35,599
  38,324
  41,156
  44,100
  47,158
  50,338
  53,644
  57,084
  60,663
  64,390
  68,272
  72,318
  76,537
  80,938
  85,531
  90,327
Variable operating expenses, $m
 
  7,703
  8,980
  10,364
  11,853
  13,446
  15,140
  16,933
  18,822
  20,806
  22,884
  25,034
  27,300
  29,659
  32,115
  34,668
  37,322
  40,081
  42,947
  45,926
  49,022
  52,242
  55,592
  59,078
  62,707
  66,488
  70,428
  74,536
  78,822
  83,295
  87,966
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
  6,683
  7,703
  8,980
  10,364
  11,853
  13,446
  15,140
  16,933
  18,822
  20,806
  22,884
  25,034
  27,300
  29,659
  32,115
  34,668
  37,322
  40,081
  42,947
  45,926
  49,022
  52,242
  55,592
  59,078
  62,707
  66,488
  70,428
  74,536
  78,822
  83,295
  87,966
Operating income, $m
  8
  185
  219
  257
  297
  339
  385
  433
  484
  537
  593
  672
  733
  796
  862
  930
  1,002
  1,076
  1,153
  1,233
  1,316
  1,402
  1,492
  1,586
  1,683
  1,785
  1,890
  2,001
  2,116
  2,236
  2,361
EBITDA, $m
  766
  1,075
  1,254
  1,448
  1,656
  1,879
  2,117
  2,368
  2,632
  2,910
  3,201
  3,505
  3,822
  4,152
  4,496
  4,853
  5,225
  5,611
  6,012
  6,429
  6,863
  7,313
  7,782
  8,270
  8,778
  9,308
  9,859
  10,434
  11,034
  11,661
  12,314
Interest expense (income), $m
  282
  249
  316
  389
  469
  555
  646
  744
  847
  956
  1,070
  1,190
  1,315
  1,445
  1,581
  1,722
  1,869
  2,022
  2,181
  2,346
  2,518
  2,696
  2,881
  3,074
  3,275
  3,484
  3,701
  3,928
  4,165
  4,412
  4,669
Earnings before tax, $m
  -260
  -63
  -96
  -133
  -172
  -215
  -262
  -311
  -364
  -419
  -477
  -518
  -582
  -649
  -719
  -792
  -868
  -947
  -1,028
  -1,113
  -1,202
  -1,294
  -1,389
  -1,489
  -1,592
  -1,699
  -1,811
  -1,928
  -2,049
  -2,176
  -2,308
Tax expense, $m
  -101
  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
  -187
  -63
  -96
  -133
  -172
  -215
  -262
  -311
  -364
  -419
  -477
  -518
  -582
  -649
  -719
  -792
  -868
  -947
  -1,028
  -1,113
  -1,202
  -1,294
  -1,389
  -1,489
  -1,592
  -1,699
  -1,811
  -1,928
  -2,049
  -2,176
  -2,308

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  74
  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
  12,871
  15,084
  17,589
  20,306
  23,231
  26,359
  29,685
  33,204
  36,913
  40,808
  44,888
  49,152
  53,599
  58,232
  63,053
  68,066
  73,277
  78,693
  84,320
  90,169
  96,249
  102,571
  109,147
  115,991
  123,117
  130,539
  138,275
  146,341
  154,756
  163,539
  172,710
Adjusted assets (=assets-cash), $m
  12,797
  15,084
  17,589
  20,306
  23,231
  26,359
  29,685
  33,204
  36,913
  40,808
  44,888
  49,152
  53,599
  58,232
  63,053
  68,066
  73,277
  78,693
  84,320
  90,169
  96,249
  102,571
  109,147
  115,991
  123,117
  130,539
  138,275
  146,341
  154,756
  163,539
  172,710
Revenue / Adjusted assets
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
  0.523
Average production assets, $m
  11,429
  13,474
  15,712
  18,139
  20,752
  23,546
  26,517
  29,661
  32,974
  36,453
  40,098
  43,906
  47,879
  52,018
  56,324
  60,802
  65,457
  70,295
  75,322
  80,547
  85,978
  91,625
  97,499
  103,613
  109,978
  116,609
  123,519
  130,725
  138,241
  146,087
  154,279
Working capital, $m
  -161
  47
  55
  64
  73
  83
  93
  104
  116
  128
  141
  154
  168
  183
  198
  214
  230
  247
  265
  283
  302
  322
  343
  364
  386
  410
  434
  459
  486
  513
  542
Total debt, $m
  4,950
  6,191
  7,632
  9,194
  10,876
  12,674
  14,587
  16,610
  18,743
  20,983
  23,329
  25,780
  28,337
  31,001
  33,773
  36,656
  39,652
  42,766
  46,002
  49,365
  52,861
  56,496
  60,278
  64,213
  68,310
  72,578
  77,026
  81,664
  86,503
  91,553
  96,826
Total liabilities, $m
  7,432
  8,673
  10,114
  11,676
  13,358
  15,156
  17,069
  19,092
  21,225
  23,465
  25,811
  28,262
  30,819
  33,483
  36,255
  39,138
  42,134
  45,248
  48,484
  51,847
  55,343
  58,978
  62,760
  66,695
  70,792
  75,060
  79,508
  84,146
  88,985
  94,035
  99,308
Total equity, $m
  5,439
  6,411
  7,475
  8,630
  9,873
  11,203
  12,616
  14,112
  15,688
  17,344
  19,078
  20,889
  22,780
  24,749
  26,797
  28,928
  31,143
  33,444
  35,836
  38,322
  40,906
  43,593
  46,388
  49,296
  52,325
  55,479
  58,767
  62,195
  65,771
  69,504
  73,402
Total liabilities and equity, $m
  12,871
  15,084
  17,589
  20,306
  23,231
  26,359
  29,685
  33,204
  36,913
  40,809
  44,889
  49,151
  53,599
  58,232
  63,052
  68,066
  73,277
  78,692
  84,320
  90,169
  96,249
  102,571
  109,148
  115,991
  123,117
  130,539
  138,275
  146,341
  154,756
  163,539
  172,710
Debt-to-equity ratio
  0.910
  0.970
  1.020
  1.070
  1.100
  1.130
  1.160
  1.180
  1.190
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.270
  1.280
  1.280
  1.290
  1.290
  1.300
  1.300
  1.300
  1.310
  1.310
  1.310
  1.310
  1.320
  1.320
  1.320
Adjusted equity ratio
  0.419
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -187
  -63
  -96
  -133
  -172
  -215
  -262
  -311
  -364
  -419
  -477
  -518
  -582
  -649
  -719
  -792
  -868
  -947
  -1,028
  -1,113
  -1,202
  -1,294
  -1,389
  -1,489
  -1,592
  -1,699
  -1,811
  -1,928
  -2,049
  -2,176
  -2,308
Depreciation, amort., depletion, $m
  758
  890
  1,035
  1,191
  1,360
  1,540
  1,732
  1,935
  2,148
  2,373
  2,608
  2,833
  3,089
  3,356
  3,634
  3,923
  4,223
  4,535
  4,859
  5,197
  5,547
  5,911
  6,290
  6,685
  7,095
  7,523
  7,969
  8,434
  8,919
  9,425
  9,953
Funds from operations, $m
  765
  827
  938
  1,059
  1,188
  1,325
  1,470
  1,624
  1,785
  1,954
  2,130
  2,315
  2,507
  2,707
  2,915
  3,131
  3,355
  3,589
  3,831
  4,083
  4,345
  4,618
  4,901
  5,196
  5,504
  5,824
  6,158
  6,506
  6,870
  7,249
  7,645
Change in working capital, $m
  -72
  7
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
Cash from operations, $m
  837
  820
  931
  1,050
  1,178
  1,315
  1,460
  1,613
  1,773
  1,942
  2,118
  2,301
  2,493
  2,692
  2,900
  3,115
  3,339
  3,572
  3,813
  4,065
  4,326
  4,598
  4,880
  5,175
  5,481
  5,801
  6,133
  6,481
  6,843
  7,221
  7,617
Maintenance CAPEX, $m
  0
  -737
  -869
  -1,014
  -1,170
  -1,339
  -1,519
  -1,711
  -1,914
  -2,127
  -2,352
  -2,587
  -2,833
  -3,089
  -3,356
  -3,634
  -3,923
  -4,223
  -4,535
  -4,859
  -5,197
  -5,547
  -5,911
  -6,290
  -6,685
  -7,095
  -7,523
  -7,969
  -8,434
  -8,919
  -9,425
New CAPEX, $m
  -562
  -2,045
  -2,238
  -2,427
  -2,613
  -2,794
  -2,971
  -3,144
  -3,313
  -3,480
  -3,645
  -3,808
  -3,973
  -4,138
  -4,307
  -4,478
  -4,655
  -4,838
  -5,027
  -5,225
  -5,431
  -5,647
  -5,875
  -6,114
  -6,365
  -6,631
  -6,910
  -7,205
  -7,517
  -7,845
  -8,192
Cash from investing activities, $m
  -559
  -2,782
  -3,107
  -3,441
  -3,783
  -4,133
  -4,490
  -4,855
  -5,227
  -5,607
  -5,997
  -6,395
  -6,806
  -7,227
  -7,663
  -8,112
  -8,578
  -9,061
  -9,562
  -10,084
  -10,628
  -11,194
  -11,786
  -12,404
  -13,050
  -13,726
  -14,433
  -15,174
  -15,951
  -16,764
  -17,617
Free cash flow, $m
  278
  -1,963
  -2,177
  -2,391
  -2,605
  -2,818
  -3,030
  -3,242
  -3,453
  -3,665
  -3,879
  -4,094
  -4,312
  -4,535
  -4,763
  -4,997
  -5,239
  -5,489
  -5,749
  -6,019
  -6,301
  -6,597
  -6,905
  -7,229
  -7,569
  -7,925
  -8,300
  -8,694
  -9,108
  -9,543
  -10,000
Issuance/(repayment) of debt, $m
  -1,105
  1,315
  1,441
  1,562
  1,682
  1,798
  1,912
  2,024
  2,133
  2,240
  2,346
  2,451
  2,557
  2,664
  2,772
  2,883
  2,996
  3,114
  3,236
  3,363
  3,496
  3,635
  3,781
  3,935
  4,097
  4,268
  4,448
  4,638
  4,839
  5,050
  5,273
Issuance/(repurchase) of shares, $m
  1,568
  1,035
  1,161
  1,287
  1,415
  1,545
  1,675
  1,807
  1,940
  2,075
  2,211
  2,330
  2,472
  2,618
  2,768
  2,923
  3,082
  3,248
  3,420
  3,599
  3,786
  3,981
  4,184
  4,397
  4,620
  4,854
  5,099
  5,356
  5,626
  5,909
  6,206
Cash from financing (excl. dividends), $m  
  220
  2,350
  2,602
  2,849
  3,097
  3,343
  3,587
  3,831
  4,073
  4,315
  4,557
  4,781
  5,029
  5,282
  5,540
  5,806
  6,078
  6,362
  6,656
  6,962
  7,282
  7,616
  7,965
  8,332
  8,717
  9,122
  9,547
  9,994
  10,465
  10,959
  11,479
Total cash flow (excl. dividends), $m
  499
  387
  425
  459
  493
  525
  557
  588
  619
  649
  679
  687
  717
  747
  777
  808
  840
  873
  907
  943
  980
  1,019
  1,060
  1,103
  1,149
  1,197
  1,247
  1,300
  1,357
  1,416
  1,478
Retained Cash Flow (-), $m
  -3,978
  -1,035
  -1,161
  -1,287
  -1,415
  -1,545
  -1,675
  -1,807
  -1,940
  -2,075
  -2,211
  -2,330
  -2,472
  -2,618
  -2,768
  -2,923
  -3,082
  -3,248
  -3,420
  -3,599
  -3,786
  -3,981
  -4,184
  -4,397
  -4,620
  -4,854
  -5,099
  -5,356
  -5,626
  -5,909
  -6,206
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
 
  -648
  -736
  -828
  -923
  -1,019
  -1,118
  -1,218
  -1,321
  -1,426
  -1,533
  -1,643
  -1,755
  -1,871
  -1,991
  -2,114
  -2,242
  -2,375
  -2,513
  -2,656
  -2,806
  -2,961
  -3,124
  -3,294
  -3,471
  -3,657
  -3,852
  -4,056
  -4,269
  -4,493
  -4,727
Discount rate, %
 
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  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
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
 
  -601
  -629
  -647
  -653
  -648
  -633
  -607
  -574
  -534
  -489
  -441
  -391
  -340
  -292
  -245
  -203
  -164
  -130
  -101
  -77
  -57
  -41
  -29
  -20
  -13
  -9
  -5
  -3
  -2
  -1
Current shareholders' claim on cash, %
  100
  90.3
  81.9
  74.6
  68.3
  62.7
  57.8
  53.5
  49.6
  46.2
  43.1
  40.3
  37.8
  35.4
  33.3
  31.4
  29.6
  28.0
  26.4
  25.0
  23.7
  22.4
  21.3
  20.2
  19.2
  18.2
  17.3
  16.5
  15.7
  14.9
  14.2

Targa Resources Corp. is a midstream energy company in North America. It provides midstream services. Its segments include Gathering and Processing, and Logistics and Marketing (Downstream Business). It is engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling natural gas liquids (NGLs) and NGL products, including services to liquefied petroleum gas exporters; gathering, storing and terminalling crude oil, and storing, terminalling and selling refined petroleum products. The Gathering and Processing segment consists of gathering, compressing, dehydrating, treating, conditioning, processing, and marketing natural gas and gathering crude oil. The Logistics and Marketing segment includes all the activities necessary to convert mixed NGLs into NGL products and provides certain services, such as storing, fractionating, terminalling, transporting and marketing of NGLs and NGL products.

FINANCIAL RATIOS  of  Targa Resources (TRGP)

Valuation Ratios
P/E Ratio -43.9
Price to Sales 1.2
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 9.8
Price to Free Cash Flow 29.9
Growth Rates
Sales Growth Rate 0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -31.2%
Cap. Spend. - 3 Yr. Gr. Rate -11.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 86%
Total Debt to Equity 91%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.1%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital -2.1%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity -5.4%
Return On Equity - 3 Yr. Avg. 21.9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 26.4%
Gross Margin - 3 Yr. Avg. 23.8%
EBITDA Margin 11.7%
EBITDA Margin - 3 Yr. Avg. 11.6%
Operating Margin 0.1%
Oper. Margin - 3 Yr. Avg. 3.2%
Pre-Tax Margin -3.9%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin -2.8%
Net Profit Margin - 3 Yr. Avg. -0.2%
Effective Tax Rate 38.8%
Eff/ Tax Rate - 3 Yr. Avg. 6%
Payout Ratio -302.7%

TRGP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRGP stock intrinsic value calculation we used $6691 million for the last fiscal year's total revenue generated by Targa Resources. The default revenue input number comes from 2016 income statement of Targa Resources. 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 TRGP stock valuation model: a) initial revenue growth rate of 17.9% 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 7.8%, whose default value for TRGP is calculated based on our internal credit rating of Targa Resources, 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 Targa Resources.
    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 TRGP stock the variable cost ratio is equal to 97.7%.

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 TRGP 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 5.1% for Targa Resources.

Corporate tax rate of 27% is the nominal tax rate for Targa Resources. 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 TRGP 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 TRGP are equal to 170.8%.

Life of production assets of 15.5 years is the average useful life of capital assets used in Targa Resources 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 TRGP is equal to 0.6%. 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 - $5439 million for Targa Resources - 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 216.149 million for Targa Resources 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 Targa Resources at the current share price and the inputted number of shares is $9.6 billion.

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COMPANY NEWS

▶ Targa Resources Corp. Announces Quarterly Dividends   [Oct-18-17 06:06PM  GlobeNewswire]
▶ Targa creates JV for one Texas pipeline, intends to join JV for another   [Oct-06-17 02:05PM  American City Business Journals]
▶ Which Pipeline Company Is the Best Dividend Stock?   [Sep-27-17 02:21PM  Motley Fool]
▶ Is Kinder Morgans Valuation Attractive?   [Sep-25-17 04:36PM  Market Realist]
▶ ONEOK Has Risen 6% since It Acquired ONEOK Partners   [Sep-22-17 11:38AM  Market Realist]
▶ Why I Love TransCanada Corporation   [Aug-16-17 04:42PM  Motley Fool]
▶ [$$] Three Favorites in Midstream, MLPs   [03:03PM  Barrons.com]
▶ 3 No-Brainer Stocks to Buy in the Energy Sector   [Jul-30-17 09:07AM  Motley Fool]
▶ Targa Resources Corp. Announces Quarterly Dividends   [Jul-19-17 05:37PM  GlobeNewswire]
▶ Why More Than 60% of Analysts Rate Targa Resources a Buy   [Jul-11-17 09:06AM  Market Realist]
▶ A Look at Targa Resources Current Valuation   [07:36AM  Market Realist]
▶ Are Institutional Investors Bullish on Targa Resources?   [Jul-10-17 10:36AM  Market Realist]
▶ Is Targa Resources Leverage a Concern?   [09:07AM  Market Realist]
▶ A Closer Look at Targa Resources Operating Metrics   [Jul-07-17 04:06PM  Market Realist]
▶ How Sustainable Is Targa Resources Corp.'s 8% Dividend?   [Jun-13-17 05:25PM  Motley Fool]
▶ Narrowed Margins Hurt Targas Logistics and Marketing Segment   [May-05-17 05:22PM  Market Realist]
▶ A Different Kind Of Permian Play   [Apr-04-17 08:00AM  Bloomberg]
Financial statements of TRGP
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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