Intrinsic value of TransCanada - TRP

Previous Close

$49.89

  Intrinsic Value

$2.20

stock screener

  Rating & Target

str. sell

-96%

  Value-price divergence*

-83%

Previous close

$49.89

 
Intrinsic value

$2.20

 
Up/down potential

-96%

 
Rating

str. sell

 
Value-price divergence*

-83%

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

We calculate the intrinsic value of TRP 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 43.3

 

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, %
  10.66
  16.90
  15.71
  14.64
  13.68
  12.81
  12.03
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.21
  6.98
  6.79
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
Revenue, $m
  9,256
  10,820
  12,520
  14,353
  16,316
  18,405
  20,619
  22,954
  25,408
  27,980
  30,669
  33,475
  36,399
  39,442
  42,607
  45,897
  49,317
  52,870
  56,563
  60,401
  64,392
  68,544
  72,863
  77,360
  82,044
  86,925
  92,014
  97,322
  102,862
  108,646
  114,687
Variable operating expenses, $m
 
  10,851
  12,394
  14,057
  15,838
  17,734
  19,742
  21,861
  24,088
  26,422
  28,862
  30,375
  33,028
  35,789
  38,661
  41,647
  44,749
  47,974
  51,324
  54,807
  58,429
  62,196
  66,115
  70,196
  74,446
  78,875
  83,492
  88,309
  93,335
  98,583
  104,065
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
  7,393
  10,851
  12,394
  14,057
  15,838
  17,734
  19,742
  21,861
  24,088
  26,422
  28,862
  30,375
  33,028
  35,789
  38,661
  41,647
  44,749
  47,974
  51,324
  54,807
  58,429
  62,196
  66,115
  70,196
  74,446
  78,875
  83,492
  88,309
  93,335
  98,583
  104,065
Operating income, $m
  1,863
  -31
  126
  296
  478
  671
  877
  1,093
  1,320
  1,558
  1,807
  3,100
  3,371
  3,653
  3,946
  4,251
  4,567
  4,897
  5,239
  5,594
  5,964
  6,348
  6,748
  7,165
  7,598
  8,051
  8,522
  9,013
  9,526
  10,062
  10,622
EBITDA, $m
  3,298
  2,506
  2,900
  3,325
  3,779
  4,264
  4,776
  5,317
  5,886
  6,481
  7,104
  7,754
  8,432
  9,137
  9,870
  10,632
  11,424
  12,247
  13,103
  13,992
  14,916
  15,878
  16,879
  17,920
  19,005
  20,136
  21,315
  22,544
  23,828
  25,167
  26,567
Interest expense (income), $m
  1,274
  1,395
  1,727
  2,093
  2,487
  2,910
  3,360
  3,836
  4,339
  4,868
  5,421
  6,000
  6,604
  7,234
  7,889
  8,570
  9,279
  10,015
  10,780
  11,575
  12,402
  13,261
  14,155
  15,085
  16,053
  17,061
  18,112
  19,208
  20,351
  21,543
  22,788
Earnings before tax, $m
  620
  -1,426
  -1,600
  -1,797
  -2,009
  -2,238
  -2,483
  -2,744
  -3,019
  -3,309
  -3,614
  -2,900
  -3,233
  -3,581
  -3,943
  -4,320
  -4,711
  -5,119
  -5,542
  -5,981
  -6,438
  -6,913
  -7,406
  -7,920
  -8,454
  -9,011
  -9,590
  -10,194
  -10,824
  -11,481
  -12,167
Tax expense, $m
  261
  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
  172
  -1,426
  -1,600
  -1,797
  -2,009
  -2,238
  -2,483
  -2,744
  -3,019
  -3,309
  -3,614
  -2,900
  -3,233
  -3,581
  -3,943
  -4,320
  -4,711
  -5,119
  -5,542
  -5,981
  -6,438
  -6,913
  -7,406
  -7,920
  -8,454
  -9,011
  -9,590
  -10,194
  -10,824
  -11,481
  -12,167

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  752
  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
  65,171
  75,141
  86,945
  99,673
  113,304
  127,815
  143,187
  159,402
  176,445
  194,306
  212,979
  232,465
  252,769
  273,903
  295,883
  318,732
  342,478
  367,154
  392,798
  419,454
  447,170
  475,998
  505,995
  537,225
  569,752
  603,648
  638,987
  675,850
  714,319
  754,483
  796,436
Adjusted assets (=assets-cash), $m
  64,419
  75,141
  86,945
  99,673
  113,304
  127,815
  143,187
  159,402
  176,445
  194,306
  212,979
  232,465
  252,769
  273,903
  295,883
  318,732
  342,478
  367,154
  392,798
  419,454
  447,170
  475,998
  505,995
  537,225
  569,752
  603,648
  638,987
  675,850
  714,319
  754,483
  796,436
Revenue / Adjusted assets
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
Average production assets, $m
  38,607
  45,131
  52,221
  59,866
  68,053
  76,769
  86,002
  95,741
  105,977
  116,705
  127,920
  139,624
  151,819
  164,513
  177,715
  191,438
  205,701
  220,522
  235,924
  251,934
  268,581
  285,896
  303,913
  322,670
  342,207
  362,565
  383,791
  405,931
  429,037
  453,161
  478,359
Working capital, $m
  299
  1,731
  2,003
  2,296
  2,611
  2,945
  3,299
  3,673
  4,065
  4,477
  4,907
  5,356
  5,824
  6,311
  6,817
  7,344
  7,891
  8,459
  9,050
  9,664
  10,303
  10,967
  11,658
  12,378
  13,127
  13,908
  14,722
  15,572
  16,458
  17,383
  18,350
Total debt, $m
  33,199
  40,158
  48,670
  57,846
  67,674
  78,137
  89,220
  100,911
  113,199
  126,076
  139,540
  153,589
  168,229
  183,466
  199,314
  215,788
  232,909
  250,700
  269,190
  288,408
  308,391
  329,176
  350,805
  373,321
  396,773
  421,212
  446,692
  473,270
  501,006
  529,965
  560,213
Total liabilities, $m
  47,217
  54,176
  62,688
  71,864
  81,692
  92,155
  103,238
  114,929
  127,217
  140,094
  153,558
  167,607
  182,247
  197,484
  213,332
  229,806
  246,927
  264,718
  283,208
  302,426
  322,409
  343,194
  364,823
  387,339
  410,791
  435,230
  460,710
  487,288
  515,024
  543,983
  574,231
Total equity, $m
  17,954
  20,964
  24,258
  27,809
  31,612
  35,660
  39,949
  44,473
  49,228
  54,211
  59,421
  64,858
  70,523
  76,419
  82,551
  88,926
  95,551
  102,436
  109,591
  117,028
  124,760
  132,803
  141,173
  149,886
  158,961
  168,418
  178,277
  188,562
  199,295
  210,501
  222,206
Total liabilities and equity, $m
  65,171
  75,140
  86,946
  99,673
  113,304
  127,815
  143,187
  159,402
  176,445
  194,305
  212,979
  232,465
  252,770
  273,903
  295,883
  318,732
  342,478
  367,154
  392,799
  419,454
  447,169
  475,997
  505,996
  537,225
  569,752
  603,648
  638,987
  675,850
  714,319
  754,484
  796,437
Debt-to-equity ratio
  1.849
  1.920
  2.010
  2.080
  2.140
  2.190
  2.230
  2.270
  2.300
  2.330
  2.350
  2.370
  2.390
  2.400
  2.410
  2.430
  2.440
  2.450
  2.460
  2.460
  2.470
  2.480
  2.480
  2.490
  2.500
  2.500
  2.510
  2.510
  2.510
  2.520
  2.520
Adjusted equity ratio
  0.276
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  172
  -1,426
  -1,600
  -1,797
  -2,009
  -2,238
  -2,483
  -2,744
  -3,019
  -3,309
  -3,614
  -2,900
  -3,233
  -3,581
  -3,943
  -4,320
  -4,711
  -5,119
  -5,542
  -5,981
  -6,438
  -6,913
  -7,406
  -7,920
  -8,454
  -9,011
  -9,590
  -10,194
  -10,824
  -11,481
  -12,167
Depreciation, amort., depletion, $m
  1,435
  2,537
  2,774
  3,029
  3,302
  3,592
  3,900
  4,224
  4,566
  4,923
  5,297
  4,654
  5,061
  5,484
  5,924
  6,381
  6,857
  7,351
  7,864
  8,398
  8,953
  9,530
  10,130
  10,756
  11,407
  12,086
  12,793
  13,531
  14,301
  15,105
  15,945
Funds from operations, $m
  3,936
  1,111
  1,173
  1,232
  1,292
  1,354
  1,416
  1,481
  1,547
  1,614
  1,683
  1,754
  1,827
  1,903
  1,981
  2,062
  2,145
  2,232
  2,323
  2,417
  2,515
  2,617
  2,724
  2,836
  2,953
  3,075
  3,203
  3,337
  3,477
  3,624
  3,778
Change in working capital, $m
  184
  250
  272
  293
  314
  334
  354
  374
  393
  412
  430
  449
  468
  487
  506
  526
  547
  569
  591
  614
  639
  664
  691
  720
  749
  781
  814
  849
  886
  925
  967
Cash from operations, $m
  3,752
  861
  901
  939
  978
  1,019
  1,062
  1,107
  1,154
  1,202
  1,253
  1,305
  1,360
  1,416
  1,474
  1,535
  1,598
  1,664
  1,732
  1,803
  1,876
  1,953
  2,033
  2,116
  2,203
  2,294
  2,389
  2,487
  2,591
  2,699
  2,812
Maintenance CAPEX, $m
  0
  -1,287
  -1,504
  -1,741
  -1,996
  -2,268
  -2,559
  -2,867
  -3,191
  -3,533
  -3,890
  -4,264
  -4,654
  -5,061
  -5,484
  -5,924
  -6,381
  -6,857
  -7,351
  -7,864
  -8,398
  -8,953
  -9,530
  -10,130
  -10,756
  -11,407
  -12,086
  -12,793
  -13,531
  -14,301
  -15,105
New CAPEX, $m
  -3,924
  -6,525
  -7,090
  -7,645
  -8,187
  -8,716
  -9,233
  -9,739
  -10,236
  -10,728
  -11,216
  -11,704
  -12,195
  -12,693
  -13,202
  -13,724
  -14,262
  -14,821
  -15,403
  -16,010
  -16,647
  -17,315
  -18,017
  -18,757
  -19,537
  -20,359
  -21,226
  -22,140
  -23,106
  -24,124
  -25,198
Cash from investing activities, $m
  -13,902
  -7,812
  -8,594
  -9,386
  -10,183
  -10,984
  -11,792
  -12,606
  -13,427
  -14,261
  -15,106
  -15,968
  -16,849
  -17,754
  -18,686
  -19,648
  -20,643
  -21,678
  -22,754
  -23,874
  -25,045
  -26,268
  -27,547
  -28,887
  -30,293
  -31,766
  -33,312
  -34,933
  -36,637
  -38,425
  -40,303
Free cash flow, $m
  -10,150
  -6,951
  -7,693
  -8,447
  -9,204
  -9,965
  -10,730
  -11,499
  -12,274
  -13,058
  -13,853
  -14,663
  -15,490
  -16,338
  -17,211
  -18,112
  -19,045
  -20,014
  -21,022
  -22,072
  -23,168
  -24,315
  -25,514
  -26,771
  -28,089
  -29,472
  -30,923
  -32,446
  -34,046
  -35,726
  -37,492
Issuance/(repayment) of debt, $m
  4,737
  7,711
  8,511
  9,177
  9,828
  10,463
  11,083
  11,691
  12,288
  12,878
  13,463
  14,049
  14,639
  15,237
  15,848
  16,474
  17,121
  17,791
  18,489
  19,219
  19,983
  20,785
  21,628
  22,516
  23,452
  24,439
  25,480
  26,578
  27,736
  28,959
  30,248
Issuance/(repurchase) of shares, $m
  6,815
  4,436
  4,894
  5,348
  5,812
  6,287
  6,772
  7,268
  7,774
  8,292
  8,824
  8,337
  8,898
  9,477
  10,075
  10,695
  11,337
  12,003
  12,696
  13,418
  14,171
  14,956
  15,776
  16,633
  17,529
  18,468
  19,450
  20,479
  21,557
  22,687
  23,872
Cash from financing (excl. dividends), $m  
  11,504
  12,147
  13,405
  14,525
  15,640
  16,750
  17,855
  18,959
  20,062
  21,170
  22,287
  22,386
  23,537
  24,714
  25,923
  27,169
  28,458
  29,794
  31,185
  32,637
  34,154
  35,741
  37,404
  39,149
  40,981
  42,907
  44,930
  47,057
  49,293
  51,646
  54,120
Total cash flow (excl. dividends), $m
  1,260
  5,197
  5,712
  6,078
  6,436
  6,785
  7,126
  7,460
  7,788
  8,112
  8,434
  7,723
  8,048
  8,377
  8,712
  9,056
  9,412
  9,780
  10,164
  10,565
  10,985
  11,426
  11,890
  12,378
  12,892
  13,435
  14,007
  14,611
  15,248
  15,920
  16,628
Retained Cash Flow (-), $m
  -5,787
  -4,436
  -4,894
  -5,348
  -5,812
  -6,287
  -6,772
  -7,268
  -7,774
  -8,292
  -8,824
  -8,337
  -8,898
  -9,477
  -10,075
  -10,695
  -11,337
  -12,003
  -12,696
  -13,418
  -14,171
  -14,956
  -15,776
  -16,633
  -17,529
  -18,468
  -19,450
  -20,479
  -21,557
  -22,687
  -23,872
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
 
  761
  818
  730
  623
  498
  354
  192
  14
  -180
  -389
  -613
  -850
  -1,101
  -1,363
  -1,638
  -1,925
  -2,223
  -2,532
  -2,853
  -3,185
  -3,530
  -3,886
  -4,255
  -4,637
  -5,033
  -5,443
  -5,868
  -6,310
  -6,768
  -7,243
Discount rate, %
 
  10.10
  10.61
  11.14
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.05
  20.00
  21.00
  22.05
  23.15
  24.31
  25.52
  26.80
  28.14
  29.55
  31.02
  32.57
  34.20
  35.91
  37.71
  39.59
  41.57
PV of cash for distribution, $m
 
  691
  669
  532
  401
  279
  171
  79
  5
  -52
  -91
  -115
  -126
  -126
  -119
  -106
  -91
  -75
  -60
  -46
  -34
  -24
  -17
  -11
  -7
  -4
  -3
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  100
  90.7
  82.7
  75.8
  69.7
  64.4
  59.7
  55.5
  51.8
  48.4
  45.3
  42.8
  40.5
  38.4
  36.4
  34.5
  32.8
  31.2
  29.7
  28.2
  26.9
  25.6
  24.4
  23.3
  22.2
  21.2
  20.2
  19.3
  18.4
  17.6
  16.8

TransCanada Corporation is an energy infrastructure company. The Company is engaged in the development and operation of North American energy infrastructure, including natural gas and liquids pipelines, power generation and natural gas storage facilities. Its segments include Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines and Energy. The Company operates in three businesses: Natural Gas Pipelines, Liquids Pipelines and Energy. The Natural Gas Pipelines and Liquids Pipelines segments principally consist of its respective natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States. The Energy segment includes its power operations and the non-regulated natural gas storage business in Canada. TransCanada PipeLines Limited (TCPL) is its principal operating subsidiary.

FINANCIAL RATIOS  of  TransCanada (TRP)

Valuation Ratios
P/E Ratio 250.6
Price to Sales 4.7
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 11.5
Price to Free Cash Flow -250.6
Growth Rates
Sales Growth Rate 10.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.7%
Cap. Spend. - 3 Yr. Gr. Rate 3.5%
Financial Strength
Quick Ratio 0
Current Ratio 0.6
LT Debt to Equity 174.1%
Total Debt to Equity 184.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 0.4%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity 1.1%
Return On Equity - 3 Yr. Avg. 1.5%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 52.1%
Gross Margin - 3 Yr. Avg. 52.1%
EBITDA Margin 36%
EBITDA Margin - 3 Yr. Avg. 35.9%
Operating Margin 20.1%
Oper. Margin - 3 Yr. Avg. 16.9%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 8.2%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 42.1%
Eff/ Tax Rate - 3 Yr. Avg. 22.8%
Payout Ratio 661%

TRP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRP stock intrinsic value calculation we used $9256 million for the last fiscal year's total revenue generated by TransCanada. The default revenue input number comes from 2016 income statement of TransCanada. 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 TRP stock valuation model: a) initial revenue growth rate of 16.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 10.1%, whose default value for TRP is calculated based on our internal credit rating of TransCanada, 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 TransCanada.
    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 TRP stock the variable cost ratio is equal to 101.9%.

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 TRP 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 4.3% for TransCanada.

Corporate tax rate of 27% is the nominal tax rate for TransCanada. 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 TRP 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 TRP are equal to 417.1%.

Life of production assets of 31.7 years is the average useful life of capital assets used in TransCanada 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 TRP is equal to 16%. 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 - $17954 million for TransCanada - 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 867.554 million for TransCanada 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 TransCanada at the current share price and the inputted number of shares is $43.3 billion.

RELATED COMPANIES Price Int.Val. Rating
TCP TC PipeLines 52.30 3.97  str.sell
PTR PetroChina ADR 64.06 12.65  str.sell
SU Suncor Energy 33.61 4.95  str.sell
TAC Transalta 6.30 2.02  str.sell
ENB Enbridge 40.33 312.63  str.buy
EPD Enterprise Pro 25.33 1.90  str.sell
MMP Magellan Midst 68.33 27.80  str.sell

COMPANY NEWS

▶ TransCanada expands in downtown Houston tower Bank of America plans to vacate   [Oct-17-17 03:50PM  American City Business Journals]
▶ Canadas Pipeline Industry Takes Another Hit   [Oct-14-17 01:00PM  Oilprice.com]
▶ Trump administration: Court can't suspend pipeline decision   [Oct-10-17 06:50PM  Associated Press]
▶ TransCanada Corporation Pulls the Plug on Energy East   [Oct-05-17 05:33PM  Motley Fool]
▶ [$$] TransCanada Nixes Two Pipelines   [05:08PM  The Wall Street Journal]
▶ [$$] TransCanada Ends Two Pipeline Projects   [09:13AM  The Wall Street Journal]
▶ Should You Sell TransCanada Corporation (TSX:TRP) At $61.65?   [Oct-03-17 03:32PM  Simply Wall St.]
▶ Wall Street Analysts Are Bullish on Enbridge and TransCanada   [Sep-28-17 10:40AM  Market Realist]
▶ Is Enbridges Dividend Yield Attractive?   [Sep-27-17 04:36PM  Market Realist]
▶ Enbridge and TransCanadas Business Segments   [01:21PM  Market Realist]
▶ Is TransCanada Corporation a Buy?   [Sep-11-17 10:05AM  Motley Fool]
▶ Bearish Backlash Drives Oil Prices Down   [03:30PM  Oilprice.com]
▶ Oil Prices Sag As Gasoline Prices Peak   [Sep-01-17 03:00PM  Oilprice.com]
▶ Controversy in the Pipelines of KMI, ETP, TRP, ENB   [Aug-18-17 03:25PM  Market Realist]
▶ Why I Love TransCanada Corporation   [Aug-16-17 04:42PM  Motley Fool]
▶ ETFs with exposure to TransCanada Corp. : August 15, 2017   [Aug-15-17 05:19PM  Capital Cube]
Financial statements of TRP
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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