Intrinsic value of Western Gas Equity Partners - WGP

Previous Close

$39.57

  Intrinsic Value

$28.22

stock screener

  Rating & Target

sell

-29%

  Value-price divergence*

-59%

Previous close

$39.57

 
Intrinsic value

$28.22

 
Up/down potential

-29%

 
Rating

sell

 
Value-price divergence*

-59%

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

We calculate the intrinsic value of WGP 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 8.8

 

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, %
  2.97
  34.70
  31.73
  29.06
  26.65
  24.49
  22.54
  20.78
  19.21
  17.78
  16.51
  15.36
  14.32
  13.39
  12.55
  11.79
  11.11
  10.50
  9.95
  9.46
  9.01
  8.61
  8.25
  7.92
  7.63
  7.37
  7.13
  6.92
  6.73
  6.55
  6.40
Revenue, $m
  1,804
  2,430
  3,201
  4,131
  5,232
  6,513
  7,981
  9,640
  11,491
  13,535
  15,769
  18,191
  20,796
  23,580
  26,539
  29,669
  32,967
  36,430
  40,056
  43,844
  47,795
  51,911
  56,193
  60,646
  65,275
  70,085
  75,084
  80,279
  85,679
  91,295
  97,137
Variable operating expenses, $m
 
  2,202
  2,887
  3,714
  4,692
  5,831
  7,136
  8,610
  10,256
  12,072
  14,058
  16,169
  18,484
  20,959
  23,589
  26,371
  29,302
  32,380
  35,603
  38,970
  42,482
  46,140
  49,946
  53,904
  58,018
  62,294
  66,737
  71,354
  76,154
  81,146
  86,338
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
  1,100
  2,202
  2,887
  3,714
  4,692
  5,831
  7,136
  8,610
  10,256
  12,072
  14,058
  16,169
  18,484
  20,959
  23,589
  26,371
  29,302
  32,380
  35,603
  38,970
  42,482
  46,140
  49,946
  53,904
  58,018
  62,294
  66,737
  71,354
  76,154
  81,146
  86,338
Operating income, $m
  705
  228
  314
  417
  540
  682
  845
  1,030
  1,236
  1,463
  1,711
  2,022
  2,312
  2,621
  2,950
  3,298
  3,665
  4,050
  4,453
  4,874
  5,313
  5,771
  6,247
  6,742
  7,257
  7,791
  8,347
  8,925
  9,525
  10,149
  10,799
EBITDA, $m
  978
  613
  807
  1,042
  1,319
  1,642
  2,012
  2,431
  2,897
  3,413
  3,976
  4,587
  5,243
  5,945
  6,692
  7,481
  8,312
  9,185
  10,100
  11,055
  12,051
  13,089
  14,169
  15,291
  16,458
  17,671
  18,932
  20,242
  21,603
  23,019
  24,492
Interest expense (income), $m
  108
  115
  201
  306
  434
  585
  760
  961
  1,189
  1,442
  1,722
  2,028
  2,360
  2,717
  3,098
  3,504
  3,932
  4,384
  4,859
  5,355
  5,874
  6,415
  6,979
  7,566
  8,176
  8,810
  9,469
  10,154
  10,866
  11,605
  12,375
Earnings before tax, $m
  605
  113
  113
  111
  106
  98
  85
  69
  47
  21
  -11
  -6
  -48
  -95
  -148
  -205
  -267
  -334
  -406
  -481
  -561
  -645
  -732
  -824
  -919
  -1,019
  -1,122
  -1,229
  -1,340
  -1,456
  -1,576
Tax expense, $m
  8
  30
  31
  30
  29
  26
  23
  19
  13
  6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  346
  82
  83
  81
  77
  71
  62
  50
  34
  15
  -11
  -6
  -48
  -95
  -148
  -205
  -267
  -334
  -406
  -481
  -561
  -645
  -732
  -824
  -919
  -1,019
  -1,122
  -1,229
  -1,340
  -1,456
  -1,576

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  359
  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
  7,736
  10,041
  13,227
  17,071
  21,620
  26,914
  32,980
  39,835
  47,485
  55,931
  65,163
  75,169
  85,933
  97,438
  109,666
  122,600
  136,227
  150,536
  165,519
  181,173
  197,501
  214,507
  232,204
  250,605
  269,732
  289,609
  310,264
  331,731
  354,047
  377,252
  401,392
Adjusted assets (=assets-cash), $m
  7,377
  10,041
  13,227
  17,071
  21,620
  26,914
  32,980
  39,835
  47,485
  55,931
  65,163
  75,169
  85,933
  97,438
  109,666
  122,600
  136,227
  150,536
  165,519
  181,173
  197,501
  214,507
  232,204
  250,605
  269,732
  289,609
  310,264
  331,731
  354,047
  377,252
  401,392
Revenue / Adjusted assets
  0.245
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
Average production assets, $m
  5,773
  7,776
  10,243
  13,220
  16,743
  20,843
  25,540
  30,848
  36,773
  43,313
  50,462
  58,211
  66,547
  75,456
  84,925
  94,942
  105,494
  116,575
  128,178
  140,301
  152,945
  166,114
  179,818
  194,069
  208,881
  224,273
  240,269
  256,893
  274,174
  292,144
  310,838
Working capital, $m
  281
  -104
  -138
  -178
  -225
  -280
  -343
  -415
  -494
  -582
  -678
  -782
  -894
  -1,014
  -1,141
  -1,276
  -1,418
  -1,566
  -1,722
  -1,885
  -2,055
  -2,232
  -2,416
  -2,608
  -2,807
  -3,014
  -3,229
  -3,452
  -3,684
  -3,926
  -4,177
Total debt, $m
  3,119
  5,428
  8,283
  11,726
  15,803
  20,546
  25,981
  32,123
  38,978
  46,545
  54,817
  63,782
  73,427
  83,736
  94,692
  106,281
  118,491
  131,311
  144,736
  158,762
  173,392
  188,630
  204,485
  220,973
  238,111
  255,921
  274,428
  293,662
  313,657
  334,449
  356,079
Total liabilities, $m
  6,688
  8,997
  11,852
  15,295
  19,372
  24,115
  29,550
  35,692
  42,547
  50,114
  58,386
  67,351
  76,996
  87,305
  98,261
  109,850
  122,060
  134,880
  148,305
  162,331
  176,961
  192,199
  208,054
  224,542
  241,680
  259,490
  277,997
  297,231
  317,226
  338,018
  359,648
Total equity, $m
  1,048
  1,044
  1,376
  1,775
  2,249
  2,799
  3,430
  4,143
  4,938
  5,817
  6,777
  7,818
  8,937
  10,134
  11,405
  12,750
  14,168
  15,656
  17,214
  18,842
  20,540
  22,309
  24,149
  26,063
  28,052
  30,119
  32,267
  34,500
  36,821
  39,234
  41,745
Total liabilities and equity, $m
  7,736
  10,041
  13,228
  17,070
  21,621
  26,914
  32,980
  39,835
  47,485
  55,931
  65,163
  75,169
  85,933
  97,439
  109,666
  122,600
  136,228
  150,536
  165,519
  181,173
  197,501
  214,508
  232,203
  250,605
  269,732
  289,609
  310,264
  331,731
  354,047
  377,252
  401,393
Debt-to-equity ratio
  2.976
  5.200
  6.020
  6.610
  7.030
  7.340
  7.570
  7.750
  7.890
  8.000
  8.090
  8.160
  8.220
  8.260
  8.300
  8.340
  8.360
  8.390
  8.410
  8.430
  8.440
  8.460
  8.470
  8.480
  8.490
  8.500
  8.500
  8.510
  8.520
  8.520
  8.530
Adjusted equity ratio
  0.093
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  346
  82
  83
  81
  77
  71
  62
  50
  34
  15
  -11
  -6
  -48
  -95
  -148
  -205
  -267
  -334
  -406
  -481
  -561
  -645
  -732
  -824
  -919
  -1,019
  -1,122
  -1,229
  -1,340
  -1,456
  -1,576
Depreciation, amort., depletion, $m
  273
  384
  493
  624
  779
  960
  1,167
  1,401
  1,662
  1,950
  2,265
  2,564
  2,932
  3,324
  3,741
  4,182
  4,647
  5,135
  5,647
  6,181
  6,738
  7,318
  7,922
  8,549
  9,202
  9,880
  10,585
  11,317
  12,078
  12,870
  13,693
Funds from operations, $m
  918
  467
  576
  705
  857
  1,031
  1,229
  1,451
  1,696
  1,965
  2,254
  2,558
  2,884
  3,229
  3,593
  3,977
  4,380
  4,801
  5,241
  5,700
  6,177
  6,673
  7,189
  7,725
  8,282
  8,861
  9,463
  10,088
  10,738
  11,414
  12,117
Change in working capital, $m
  5
  -27
  -33
  -40
  -47
  -55
  -63
  -71
  -80
  -88
  -96
  -104
  -112
  -120
  -127
  -135
  -142
  -149
  -156
  -163
  -170
  -177
  -184
  -191
  -199
  -207
  -215
  -223
  -232
  -241
  -251
Cash from operations, $m
  913
  494
  609
  745
  904
  1,086
  1,292
  1,522
  1,776
  2,053
  2,350
  2,663
  2,996
  3,348
  3,721
  4,112
  4,522
  4,950
  5,397
  5,862
  6,347
  6,850
  7,373
  7,917
  8,482
  9,068
  9,678
  10,311
  10,970
  11,655
  12,369
Maintenance CAPEX, $m
  0
  -254
  -343
  -451
  -582
  -738
  -918
  -1,125
  -1,359
  -1,620
  -1,908
  -2,223
  -2,564
  -2,932
  -3,324
  -3,741
  -4,182
  -4,647
  -5,135
  -5,647
  -6,181
  -6,738
  -7,318
  -7,922
  -8,549
  -9,202
  -9,880
  -10,585
  -11,317
  -12,078
  -12,870
New CAPEX, $m
  -480
  -2,003
  -2,467
  -2,976
  -3,523
  -4,100
  -4,697
  -5,308
  -5,925
  -6,540
  -7,149
  -7,749
  -8,336
  -8,909
  -9,469
  -10,016
  -10,553
  -11,081
  -11,603
  -12,123
  -12,644
  -13,170
  -13,704
  -14,250
  -14,812
  -15,393
  -15,996
  -16,624
  -17,281
  -17,970
  -18,694
Cash from investing activities, $m
  -1,106
  -2,257
  -2,810
  -3,427
  -4,105
  -4,838
  -5,615
  -6,433
  -7,284
  -8,160
  -9,057
  -9,972
  -10,900
  -11,841
  -12,793
  -13,757
  -14,735
  -15,728
  -16,738
  -17,770
  -18,825
  -19,908
  -21,022
  -22,172
  -23,361
  -24,595
  -25,876
  -27,209
  -28,598
  -30,048
  -31,564
Free cash flow, $m
  -193
  -1,764
  -2,201
  -2,682
  -3,201
  -3,751
  -4,323
  -4,911
  -5,508
  -6,107
  -6,707
  -7,309
  -7,905
  -8,493
  -9,073
  -9,646
  -10,213
  -10,778
  -11,341
  -11,907
  -12,478
  -13,057
  -13,648
  -14,255
  -14,880
  -15,526
  -16,198
  -16,897
  -17,628
  -18,393
  -19,195
Issuance/(repayment) of debt, $m
  423
  2,309
  2,855
  3,444
  4,076
  4,743
  5,435
  6,142
  6,855
  7,567
  8,272
  8,966
  9,645
  10,308
  10,956
  11,589
  12,210
  12,821
  13,425
  14,026
  14,629
  15,238
  15,856
  16,488
  17,138
  17,810
  18,507
  19,234
  19,995
  20,792
  21,629
Issuance/(repurchase) of shares, $m
  687
  182
  249
  319
  396
  479
  569
  663
  761
  863
  971
  1,047
  1,168
  1,292
  1,420
  1,550
  1,685
  1,822
  1,964
  2,109
  2,259
  2,413
  2,573
  2,738
  2,909
  3,086
  3,270
  3,462
  3,661
  3,869
  4,086
Cash from financing (excl. dividends), $m  
  826
  2,491
  3,104
  3,763
  4,472
  5,222
  6,004
  6,805
  7,616
  8,430
  9,243
  10,013
  10,813
  11,600
  12,376
  13,139
  13,895
  14,643
  15,389
  16,135
  16,888
  17,651
  18,429
  19,226
  20,047
  20,896
  21,777
  22,696
  23,656
  24,661
  25,715
Total cash flow (excl. dividends), $m
  633
  727
  902
  1,080
  1,271
  1,472
  1,680
  1,893
  2,108
  2,323
  2,536
  2,703
  2,908
  3,108
  3,303
  3,494
  3,681
  3,865
  4,047
  4,229
  4,410
  4,594
  4,780
  4,971
  5,167
  5,369
  5,579
  5,799
  6,028
  6,268
  6,521
Retained Cash Flow (-), $m
  443
  -265
  -331
  -400
  -473
  -551
  -631
  -713
  -796
  -878
  -971
  -1,047
  -1,168
  -1,292
  -1,420
  -1,550
  -1,685
  -1,822
  -1,964
  -2,109
  -2,259
  -2,413
  -2,573
  -2,738
  -2,909
  -3,086
  -3,270
  -3,462
  -3,661
  -3,869
  -4,086
Prev. year cash balance distribution, $m
 
  268
  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
 
  731
  571
  680
  798
  921
  1,049
  1,180
  1,313
  1,445
  1,565
  1,656
  1,740
  1,816
  1,883
  1,943
  1,996
  2,043
  2,083
  2,119
  2,152
  2,181
  2,207
  2,233
  2,258
  2,283
  2,309
  2,337
  2,367
  2,399
  2,434
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  675
  483
  523
  553
  570
  574
  564
  542
  510
  466
  411
  354
  298
  246
  198
  156
  120
  91
  67
  48
  33
  23
  15
  10
  6
  4
  2
  1
  1
  0
Current shareholders' claim on cash, %
  100
  97.3
  94.6
  92.1
  89.7
  87.5
  85.4
  83.5
  81.7
  80.1
  78.5
  77.1
  75.8
  74.5
  73.3
  72.1
  71.0
  69.9
  68.9
  67.9
  67.0
  66.0
  65.2
  64.3
  63.4
  62.6
  61.8
  61.1
  60.3
  59.6
  58.8

Western Gas Equity Partners, LP gathers, processes, compresses, treats, and transports natural gas, condensate, NGLs and crude oil primarily in the United States. The company owns or invests in assets located in the Rocky Mountains, including Colorado, Utah, and Wyoming; the Mid-Continent comprising Kansas and Oklahoma; North-central Pennsylvania; and Texas. Western Gas Equity Holdings, LLC serves as the general partner Western Gas Equity Partners, LP. The company was founded in 2007 and is headquartered in The Woodlands, Texas. Western Gas Equity Partners, LP is a subsidiary of Anadarko Petroleum Corporation.

FINANCIAL RATIOS  of  Western Gas Equity Partners (WGP)

Valuation Ratios
P/E Ratio 25
Price to Sales 4.8
Price to Book 8.3
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 20
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -24.8%
Cap. Spend. - 3 Yr. Gr. Rate -6.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 297.6%
Total Debt to Equity 297.6%
Interest Coverage 7
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 8.3%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 27.3%
Return On Equity - 3 Yr. Avg. 19.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 72.6%
Gross Margin - 3 Yr. Avg. 69.9%
EBITDA Margin 54.7%
EBITDA Margin - 3 Yr. Avg. 43.1%
Operating Margin 39%
Oper. Margin - 3 Yr. Avg. 27.4%
Pre-Tax Margin 33.5%
Pre-Tax Margin - 3 Yr. Avg. 22.3%
Net Profit Margin 19.2%
Net Profit Margin - 3 Yr. Avg. 15.3%
Effective Tax Rate 1.3%
Eff/ Tax Rate - 3 Yr. Avg. 28.2%
Payout Ratio 108.1%

WGP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WGP stock intrinsic value calculation we used $1804 million for the last fiscal year's total revenue generated by Western Gas Equity Partners. The default revenue input number comes from 2016 income statement of Western Gas Equity 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 WGP stock valuation model: a) initial revenue growth rate of 34.7% 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 8.3%, whose default value for WGP is calculated based on our internal credit rating of Western Gas Equity 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 Western Gas Equity 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 WGP stock the variable cost ratio is equal to 91.2%.

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 WGP 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 3.7% for Western Gas Equity Partners.

Corporate tax rate of 27% is the nominal tax rate for Western Gas Equity 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 WGP 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 WGP are equal to 320%.

Life of production assets of 22.7 years is the average useful life of capital assets used in Western Gas Equity 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 WGP is equal to -4.3%. 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 - $1048 million for Western Gas Equity 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 223.114 million for Western Gas Equity 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 Western Gas Equity Partners at the current share price and the inputted number of shares is $8.8 billion.

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COMPANY NEWS

▶ Why Western Gas Partners is Underperforming AMLP   [Aug-18-17 05:47PM  Market Realist]
▶ What Analysts Recommend for ETE   [Aug-17-17 10:37AM  Market Realist]
▶ First Reserve GP XIII Ltd Buys Western Gas Partners, LP   [Aug-14-17 09:38AM  GuruFocus.com]
▶ MLP Earnings: Wrap-Up for Last Week   [Aug-01-17 05:05PM  Market Realist]
▶ Western Gas Equity posts 2Q profit   [Jul-25-17 11:14PM  Associated Press]
▶ What Analysts Recommend for ETE   [Jul-20-17 10:37AM  Market Realist]
▶ Analysts Ratings: WES Has the Most Buys, ENBL the Most Sells   [Jul-05-17 09:05AM  Market Realist]
▶ Examining the Growth Prospects of WES, ENLK, ENBL, and DCP   [Jul-04-17 09:06AM  Market Realist]
▶ A Look into the Shale Exposures of WES, ENLK, ENBL, and DCP   [Jun-30-17 03:06PM  Market Realist]
▶ Analysts Ratings: ETE Has Most Buys, ENLC Has Most Sells   [Jun-01-17 09:06AM  Market Realist]
▶ Why PAGP Has the Highest Distribution Yield among Its Peers   [May-30-17 09:06AM  Market Realist]
▶ Western Gas names new CFO to succeed recently promoted CEO   [May-22-17 09:15AM  American City Business Journals]
▶ The Recent Analyst Recommendations for ETE   [07:36AM  Market Realist]
▶ Western Gas Equity misses 1Q profit forecasts   [May-02-17 06:43PM  Associated Press]
▶ Are Analysts Bullish on Western Gas?   [Apr-28-17 07:36AM  Market Realist]
▶ Will Western Gass Gross Margins Continue to Expand in 1Q17?   [Apr-26-17 02:35PM  Market Realist]
▶ Western Gas Annual Reports Availble   [Feb-23-17 05:30PM  PR Newswire]
▶ Is Williams Companies Undervalued Currently?   [07:51AM  Market Realist]
▶ Houston energy co. CEO to step down, replacement named   [Feb-15-17 06:45PM  at bizjournals.com]
Stock chart of WGP Financial statements of WGP
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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