Intrinsic value of Targa Resources - TRGP

Previous Close

$42.62

  Intrinsic Value

$6.67

stock screener

  Rating & Target

str. sell

-84%

  Value-price divergence*

-32%

Previous close

$42.62

 
Intrinsic value

$6.67

 
Up/down potential

-84%

 
Rating

str. sell

 
Value-price divergence*

-32%

*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 8.3

 

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
  46.50
  42.35
  38.62
  35.25
  32.23
  29.51
  27.05
  24.85
  22.86
  21.08
  19.47
  18.02
  16.72
  15.55
  14.49
  13.54
  12.69
  11.92
  11.23
  10.61
  10.05
  9.54
  9.09
  8.68
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
Revenue, $m
  6,691
  9,802
  13,954
  19,342
  26,160
  34,591
  44,798
  56,918
  71,061
  87,309
  105,712
  126,294
  149,057
  173,980
  201,032
  230,169
  261,344
  294,509
  329,618
  366,630
  405,515
  446,251
  488,827
  533,246
  579,522
  627,682
  677,766
  729,828
  783,931
  840,154
  898,584
Variable operating expenses, $m
 
  9,567
  13,610
  18,857
  25,498
  33,708
  43,648
  55,451
  69,225
  85,048
  102,970
  122,993
  145,161
  169,433
  195,777
  224,153
  254,513
  286,811
  321,002
  357,047
  394,916
  434,586
  476,050
  519,308
  564,374
  611,275
  660,050
  710,751
  763,440
  818,194
  875,097
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
  9,567
  13,610
  18,857
  25,498
  33,708
  43,648
  55,451
  69,225
  85,048
  102,970
  122,993
  145,161
  169,433
  195,777
  224,153
  254,513
  286,811
  321,002
  357,047
  394,916
  434,586
  476,050
  519,308
  564,374
  611,275
  660,050
  710,751
  763,440
  818,194
  875,097
Operating income, $m
  8
  235
  344
  485
  663
  883
  1,150
  1,467
  1,836
  2,261
  2,742
  3,301
  3,896
  4,548
  5,255
  6,016
  6,831
  7,698
  8,616
  9,583
  10,600
  11,664
  12,777
  13,938
  15,148
  16,407
  17,716
  19,077
  20,491
  21,960
  23,488
EBITDA, $m
  766
  1,336
  1,902
  2,637
  3,567
  4,716
  6,107
  7,760
  9,688
  11,903
  14,412
  17,218
  20,321
  23,719
  27,407
  31,379
  35,630
  40,151
  44,937
  49,983
  55,285
  60,838
  66,643
  72,699
  79,007
  85,573
  92,401
  99,499
  106,875
  114,540
  122,506
Interest expense (income), $m
  282
  249
  423
  656
  958
  1,340
  1,813
  2,385
  3,065
  3,858
  4,769
  5,801
  6,955
  8,231
  9,629
  11,145
  12,779
  14,527
  16,387
  18,355
  20,431
  22,611
  24,895
  27,282
  29,773
  32,368
  35,068
  37,876
  40,795
  43,829
  46,981
Earnings before tax, $m
  -260
  -13
  -79
  -171
  -295
  -457
  -663
  -919
  -1,228
  -1,597
  -2,027
  -2,500
  -3,059
  -3,684
  -4,374
  -5,129
  -5,948
  -6,829
  -7,771
  -8,772
  -9,831
  -10,947
  -12,118
  -13,344
  -14,625
  -15,961
  -17,352
  -18,800
  -20,305
  -21,869
  -23,494
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
  -13
  -79
  -171
  -295
  -457
  -663
  -919
  -1,228
  -1,597
  -2,027
  -2,500
  -3,059
  -3,684
  -4,374
  -5,129
  -5,948
  -6,829
  -7,771
  -8,772
  -9,831
  -10,947
  -12,118
  -13,344
  -14,625
  -15,961
  -17,352
  -18,800
  -20,305
  -21,869
  -23,494

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
  18,742
  26,680
  36,982
  50,020
  66,140
  85,655
  108,829
  135,873
  166,939
  202,126
  241,481
  285,003
  332,658
  384,382
  440,094
  499,703
  563,115
  630,244
  701,014
  775,363
  853,252
  934,660
  1,019,591
  1,108,072
  1,200,156
  1,295,920
  1,395,464
  1,498,913
  1,606,413
  1,718,134
Adjusted assets (=assets-cash), $m
  12,797
  18,742
  26,680
  36,982
  50,020
  66,140
  85,655
  108,829
  135,873
  166,939
  202,126
  241,481
  285,003
  332,658
  384,382
  440,094
  499,703
  563,115
  630,244
  701,014
  775,363
  853,252
  934,660
  1,019,591
  1,108,072
  1,200,156
  1,295,920
  1,395,464
  1,498,913
  1,606,413
  1,718,134
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
  16,742
  23,833
  33,036
  44,682
  59,082
  76,515
  97,215
  121,373
  149,124
  180,556
  215,711
  254,589
  297,158
  343,362
  393,129
  446,376
  503,022
  562,987
  626,204
  692,620
  762,196
  834,917
  910,784
  989,823
  1,072,080
  1,157,624
  1,246,546
  1,338,955
  1,434,983
  1,534,782
Working capital, $m
  -161
  59
  84
  116
  157
  208
  269
  342
  426
  524
  634
  758
  894
  1,044
  1,206
  1,381
  1,568
  1,767
  1,978
  2,200
  2,433
  2,678
  2,933
  3,199
  3,477
  3,766
  4,067
  4,379
  4,704
  5,041
  5,392
Total debt, $m
  4,950
  8,295
  12,859
  18,783
  26,279
  35,549
  46,770
  60,095
  75,645
  93,508
  113,741
  136,369
  161,395
  188,796
  218,538
  250,572
  284,847
  321,309
  359,908
  400,601
  443,352
  488,138
  534,947
  583,783
  634,659
  687,608
  742,672
  799,910
  859,393
  921,205
  985,445
Total liabilities, $m
  7,432
  10,777
  15,341
  21,265
  28,761
  38,031
  49,252
  62,577
  78,127
  95,990
  116,223
  138,851
  163,877
  191,278
  221,020
  253,054
  287,329
  323,791
  362,390
  403,083
  445,834
  490,620
  537,429
  586,265
  637,141
  690,090
  745,154
  802,392
  861,875
  923,687
  987,927
Total equity, $m
  5,439
  7,966
  11,339
  15,718
  21,258
  28,110
  36,404
  46,252
  57,746
  70,949
  85,904
  102,629
  121,126
  141,380
  163,362
  187,040
  212,374
  239,324
  267,854
  297,931
  329,529
  362,632
  397,230
  433,326
  470,931
  510,066
  550,766
  593,072
  637,038
  682,726
  730,207
Total liabilities and equity, $m
  12,871
  18,743
  26,680
  36,983
  50,019
  66,141
  85,656
  108,829
  135,873
  166,939
  202,127
  241,480
  285,003
  332,658
  384,382
  440,094
  499,703
  563,115
  630,244
  701,014
  775,363
  853,252
  934,659
  1,019,591
  1,108,072
  1,200,156
  1,295,920
  1,395,464
  1,498,913
  1,606,413
  1,718,134
Debt-to-equity ratio
  0.910
  1.040
  1.130
  1.200
  1.240
  1.260
  1.280
  1.300
  1.310
  1.320
  1.320
  1.330
  1.330
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
  1.350
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
  -13
  -79
  -171
  -295
  -457
  -663
  -919
  -1,228
  -1,597
  -2,027
  -2,500
  -3,059
  -3,684
  -4,374
  -5,129
  -5,948
  -6,829
  -7,771
  -8,772
  -9,831
  -10,947
  -12,118
  -13,344
  -14,625
  -15,961
  -17,352
  -18,800
  -20,305
  -21,869
  -23,494
Depreciation, amort., depletion, $m
  758
  1,101
  1,559
  2,152
  2,904
  3,833
  4,957
  6,293
  7,852
  9,642
  11,670
  13,917
  16,425
  19,171
  22,152
  25,363
  28,798
  32,453
  36,322
  40,400
  44,685
  49,174
  53,866
  58,760
  63,860
  69,166
  74,685
  80,422
  86,384
  92,580
  99,018
Funds from operations, $m
  957
  1,088
  1,479
  1,981
  2,609
  3,376
  4,294
  5,374
  6,623
  8,045
  9,643
  11,417
  13,366
  15,488
  17,778
  20,234
  22,850
  25,624
  28,551
  31,628
  34,854
  38,227
  41,748
  45,416
  49,234
  53,206
  57,333
  61,623
  66,080
  70,711
  75,524
Change in working capital, $m
  120
  19
  25
  32
  41
  51
  61
  73
  85
  97
  110
  123
  137
  150
  162
  175
  187
  199
  211
  222
  233
  244
  255
  267
  278
  289
  301
  312
  325
  337
  351
Cash from operations, $m
  837
  1,069
  1,454
  1,949
  2,568
  3,325
  4,233
  5,302
  6,538
  7,948
  9,533
  11,294
  13,230
  15,338
  17,616
  20,059
  22,663
  25,425
  28,340
  31,406
  34,621
  37,983
  41,492
  45,150
  48,957
  52,917
  57,033
  61,310
  65,755
  70,374
  75,174
Maintenance CAPEX, $m
  0
  -737
  -1,080
  -1,538
  -2,131
  -2,883
  -3,812
  -4,936
  -6,272
  -7,831
  -9,621
  -11,649
  -13,917
  -16,425
  -19,171
  -22,152
  -25,363
  -28,798
  -32,453
  -36,322
  -40,400
  -44,685
  -49,174
  -53,866
  -58,760
  -63,860
  -69,166
  -74,685
  -80,422
  -86,384
  -92,580
New CAPEX, $m
  -562
  -5,313
  -7,090
  -9,203
  -11,646
  -14,400
  -17,432
  -20,701
  -24,157
  -27,751
  -31,432
  -35,155
  -38,878
  -42,569
  -46,204
  -49,767
  -53,247
  -56,645
  -59,965
  -63,217
  -66,415
  -69,577
  -72,720
  -75,867
  -79,039
  -82,257
  -85,544
  -88,921
  -92,409
  -96,028
  -99,799
Cash from investing activities, $m
  -559
  -6,050
  -8,170
  -10,741
  -13,777
  -17,283
  -21,244
  -25,637
  -30,429
  -35,582
  -41,053
  -46,804
  -52,795
  -58,994
  -65,375
  -71,919
  -78,610
  -85,443
  -92,418
  -99,539
  -106,815
  -114,262
  -121,894
  -129,733
  -137,799
  -146,117
  -154,710
  -163,606
  -172,831
  -182,412
  -192,379
Free cash flow, $m
  278
  -4,982
  -6,716
  -8,792
  -11,210
  -13,958
  -17,011
  -20,336
  -23,891
  -27,634
  -31,521
  -35,510
  -39,565
  -43,656
  -47,760
  -51,860
  -55,947
  -60,019
  -64,078
  -68,133
  -72,195
  -76,279
  -80,402
  -84,583
  -88,842
  -93,200
  -97,678
  -102,296
  -107,076
  -112,039
  -117,205
Issuance/(repayment) of debt, $m
  -1,105
  3,419
  4,564
  5,924
  7,497
  9,269
  11,221
  13,325
  15,550
  17,863
  20,233
  22,629
  25,025
  27,402
  29,741
  32,034
  34,275
  36,462
  38,599
  40,693
  42,751
  44,786
  46,809
  48,835
  50,877
  52,948
  55,064
  57,238
  59,483
  61,813
  64,240
Issuance/(repurchase) of shares, $m
  1,568
  2,540
  3,453
  4,550
  5,836
  7,308
  8,957
  10,767
  12,722
  14,800
  16,981
  19,225
  21,556
  23,937
  26,357
  28,807
  31,282
  33,779
  36,301
  38,849
  41,430
  44,049
  46,716
  49,440
  52,230
  55,097
  58,052
  61,106
  64,270
  67,556
  70,975
Cash from financing (excl. dividends), $m  
  220
  5,959
  8,017
  10,474
  13,333
  16,577
  20,178
  24,092
  28,272
  32,663
  37,214
  41,854
  46,581
  51,339
  56,098
  60,841
  65,557
  70,241
  74,900
  79,542
  84,181
  88,835
  93,525
  98,275
  103,107
  108,045
  113,116
  118,344
  123,753
  129,369
  135,215
Total cash flow (excl. dividends), $m
  499
  977
  1,301
  1,682
  2,123
  2,620
  3,167
  3,757
  4,381
  5,029
  5,694
  6,344
  7,016
  7,682
  8,338
  8,981
  9,609
  10,223
  10,822
  11,409
  11,986
  12,556
  13,124
  13,692
  14,264
  14,845
  15,438
  16,047
  16,677
  17,330
  18,010
Retained Cash Flow (-), $m
  -3,978
  -2,540
  -3,453
  -4,550
  -5,836
  -7,308
  -8,957
  -10,767
  -12,722
  -14,800
  -16,981
  -19,225
  -21,556
  -23,937
  -26,357
  -28,807
  -31,282
  -33,779
  -36,301
  -38,849
  -41,430
  -44,049
  -46,716
  -49,440
  -52,230
  -55,097
  -58,052
  -61,106
  -64,270
  -67,556
  -70,975
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
 
  -1,563
  -2,152
  -2,868
  -3,713
  -4,689
  -5,790
  -7,011
  -8,341
  -9,771
  -11,288
  -12,881
  -14,540
  -16,254
  -18,018
  -19,825
  -21,672
  -23,557
  -25,479
  -27,441
  -29,444
  -31,493
  -33,592
  -35,748
  -37,966
  -40,252
  -42,614
  -45,058
  -47,593
  -50,226
  -52,965
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  -1,444
  -1,824
  -2,212
  -2,584
  -2,916
  -3,186
  -3,379
  -3,482
  -3,491
  -3,409
  -3,244
  -3,010
  -2,725
  -2,407
  -2,076
  -1,746
  -1,434
  -1,148
  -896
  -681
  -504
  -363
  -254
  -173
  -114
  -73
  -45
  -27
  -16
  -9
Current shareholders' claim on cash, %
  100
  76.7
  59.8
  47.4
  38.2
  31.2
  25.8
  21.7
  18.4
  15.7
  13.6
  11.9
  10.5
  9.3
  8.3
  7.4
  6.7
  6.1
  5.5
  5.0
  4.6
  4.2
  3.9
  3.6
  3.4
  3.1
  2.9
  2.7
  2.5
  2.4
  2.2

Targa Resources Corp., through its general and limited partner interests in Targa Resources Partners LP, provides midstream natural gas and natural gas liquid (NGL) services in the United States. The company operates in two segments, Gathering and Processing, and Logistics and Marketing. It is involved in gathering, compressing, treating, processing, and selling natural gas; storing, fractionating, treating, transporting, terminaling, and selling NGLs and NGL products; and gathering, storing, and terminaling crude oil and refined petroleum products. The company also purchases and resells component NGL products; sells propane and provides related logistics services to multi-state retailers, independent retailers, and other end-users; offers NGL balancing services; and provides transportation services to refineries and petrochemical companies in the Gulf Coast area. It operates approximately 27,000 miles of natural gas pipelines, including 36 owned and operated processing plants; and 39 storage wells with a net storage capacity of approximately 66 million barrels. As of December 31, 2016, the company leased and managed approximately 700 railcars; 90 leased and managed transport tractors; and 20 company-owned pressurized NGL barges. Targa Resources Corp. was founded in 2005 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Targa Resources (TRGP)

Valuation Ratios
P/E Ratio -42.1
Price to Sales 1.2
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 9.4
Price to Free Cash Flow 28.6
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 46.5% 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 8.2%, 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 195.914 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 $8.3 billion.

RELATED COMPANIES Price Int.Val. Rating
OKE ONEOK 50.36 885.77  str.buy
EPD Enterprise Pro 24.98 1.91  str.sell
ETP Energy Transfe 18.50 6.77  str.sell
KMI Kinder Morgan 18.40 5.79  str.sell
MMLP Martin Midstre 17.15 2.14  str.sell
ENLK EnLink Midstre 15.10 2.71  str.sell
ETE Energy Transfe 16.75 48.95  str.buy
WES Western Gas Pa 49.48 6.28  str.sell

COMPANY NEWS

▶ 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]
▶ Three Upside Swing Trades   [Mar-29-17 01:00PM  Investopedia]
▶ Targa Resources Corp. Completes Permian Acquisition   [Mar-01-17 05:52PM  GlobeNewswire]
Stock chart of TRGP 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.

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.