Intrinsic value of Williams Partners - WPZ

Previous Close

$37.74

  Intrinsic Value

$5.47

stock screener

  Rating & Target

str. sell

-86%

  Value-price divergence*

-89%

Previous close

$37.74

 
Intrinsic value

$5.47

 
Up/down potential

-86%

 
Rating

str. sell

 
Value-price divergence*

-89%

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

We calculate the intrinsic value of WPZ 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 36.9

 

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, %
  2.18
  19.90
  18.41
  17.07
  15.86
  14.78
  13.80
  12.92
  12.13
  11.41
  10.77
  10.20
  9.68
  9.21
  8.79
  8.41
  8.07
  7.76
  7.48
  7.24
  7.01
  6.81
  6.63
  6.47
  6.32
  6.19
  6.07
  5.96
  5.87
  5.78
  5.70
Revenue, $m
  7,491
  8,982
  10,635
  12,451
  14,425
  16,557
  18,842
  21,276
  23,856
  26,578
  29,442
  32,443
  35,583
  38,859
  42,274
  45,828
  49,526
  53,369
  57,364
  61,515
  65,829
  70,313
  74,975
  79,824
  84,869
  90,121
  95,591
  101,291
  107,233
  113,431
  119,899
Variable operating expenses, $m
 
  10,175
  12,048
  14,103
  16,340
  18,753
  21,340
  24,097
  27,018
  30,101
  33,344
  36,738
  40,293
  44,003
  47,870
  51,895
  56,082
  60,434
  64,957
  69,658
  74,543
  79,620
  84,900
  90,390
  96,103
  102,051
  108,245
  114,699
  121,428
  128,446
  135,770
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
  6,624
  10,175
  12,048
  14,103
  16,340
  18,753
  21,340
  24,097
  27,018
  30,101
  33,344
  36,738
  40,293
  44,003
  47,870
  51,895
  56,082
  60,434
  64,957
  69,658
  74,543
  79,620
  84,900
  90,390
  96,103
  102,051
  108,245
  114,699
  121,428
  128,446
  135,770
Operating income, $m
  867
  -1,194
  -1,413
  -1,653
  -1,914
  -2,196
  -2,499
  -2,821
  -3,163
  -3,523
  -3,902
  -4,295
  -4,710
  -5,144
  -5,596
  -6,066
  -6,556
  -7,065
  -7,593
  -8,143
  -8,714
  -9,308
  -9,925
  -10,566
  -11,234
  -11,930
  -12,654
  -13,408
  -14,195
  -15,015
  -15,871
EBITDA, $m
  2,587
  869
  1,029
  1,204
  1,395
  1,601
  1,822
  2,058
  2,307
  2,571
  2,848
  3,138
  3,442
  3,759
  4,089
  4,433
  4,790
  5,162
  5,549
  5,950
  6,367
  6,801
  7,252
  7,721
  8,209
  8,717
  9,246
  9,798
  10,372
  10,972
  11,597
Interest expense (income), $m
  0
  645
  819
  1,011
  1,220
  1,449
  1,695
  1,959
  2,240
  2,539
  2,853
  3,184
  3,531
  3,894
  4,273
  4,668
  5,078
  5,506
  5,950
  6,412
  6,892
  7,390
  7,909
  8,447
  9,008
  9,591
  10,198
  10,830
  11,489
  12,176
  12,892
Earnings before tax, $m
  439
  -1,838
  -2,232
  -2,663
  -3,135
  -3,645
  -4,194
  -4,780
  -5,403
  -6,062
  -6,755
  -7,479
  -8,241
  -9,038
  -9,869
  -10,734
  -11,634
  -12,570
  -13,543
  -14,555
  -15,606
  -16,698
  -17,833
  -19,014
  -20,242
  -21,521
  -22,852
  -24,239
  -25,684
  -27,191
  -28,764
Tax expense, $m
  -80
  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
  431
  -1,838
  -2,232
  -2,663
  -3,135
  -3,645
  -4,194
  -4,780
  -5,403
  -6,062
  -6,755
  -7,479
  -8,241
  -9,038
  -9,869
  -10,734
  -11,634
  -12,570
  -13,543
  -14,555
  -15,606
  -16,698
  -17,833
  -19,014
  -20,242
  -21,521
  -22,852
  -24,239
  -25,684
  -27,191
  -28,764

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  145
  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
  46,265
  55,443
  65,650
  76,855
  89,046
  102,204
  116,306
  131,331
  147,257
  164,065
  181,739
  200,268
  219,645
  239,870
  260,949
  282,891
  305,714
  329,441
  354,099
  379,723
  406,352
  434,031
  462,808
  492,740
  523,883
  556,304
  590,070
  625,254
  661,934
  700,193
  740,116
Adjusted assets (=assets-cash), $m
  46,120
  55,443
  65,650
  76,855
  89,046
  102,204
  116,306
  131,331
  147,257
  164,065
  181,739
  200,268
  219,645
  239,870
  260,949
  282,891
  305,714
  329,441
  354,099
  379,723
  406,352
  434,031
  462,808
  492,740
  523,883
  556,304
  590,070
  625,254
  661,934
  700,193
  740,116
Revenue / Adjusted assets
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
Average production assets, $m
  38,103
  45,681
  54,091
  63,324
  73,368
  84,209
  95,828
  108,208
  121,330
  135,178
  149,740
  165,007
  180,973
  197,637
  215,004
  233,083
  251,888
  271,437
  291,753
  312,866
  334,806
  357,612
  381,323
  405,984
  431,644
  458,357
  486,178
  515,167
  545,389
  576,911
  609,805
Working capital, $m
  -1,285
  -665
  -787
  -921
  -1,067
  -1,225
  -1,394
  -1,574
  -1,765
  -1,967
  -2,179
  -2,401
  -2,633
  -2,876
  -3,128
  -3,391
  -3,665
  -3,949
  -4,245
  -4,552
  -4,871
  -5,203
  -5,548
  -5,907
  -6,280
  -6,669
  -7,074
  -7,496
  -7,935
  -8,394
  -8,873
Total debt, $m
  18,563
  23,413
  28,874
  34,869
  41,391
  48,430
  55,975
  64,013
  72,533
  81,526
  90,981
  100,894
  111,261
  122,082
  133,359
  145,098
  157,308
  170,002
  183,194
  196,903
  211,149
  225,957
  241,353
  257,367
  274,029
  291,374
  309,438
  328,262
  347,886
  368,354
  389,713
Total liabilities, $m
  24,812
  29,662
  35,123
  41,118
  47,640
  54,679
  62,224
  70,262
  78,782
  87,775
  97,230
  107,143
  117,510
  128,331
  139,608
  151,347
  163,557
  176,251
  189,443
  203,152
  217,398
  232,206
  247,602
  263,616
  280,278
  297,623
  315,687
  334,511
  354,135
  374,603
  395,962
Total equity, $m
  21,453
  25,781
  30,527
  35,738
  41,407
  47,525
  54,082
  61,069
  68,474
  76,290
  84,509
  93,124
  102,135
  111,540
  121,341
  131,544
  142,157
  153,190
  164,656
  176,571
  188,954
  201,824
  215,206
  229,124
  243,606
  258,681
  274,383
  290,743
  307,799
  325,590
  344,154
Total liabilities and equity, $m
  46,265
  55,443
  65,650
  76,856
  89,047
  102,204
  116,306
  131,331
  147,256
  164,065
  181,739
  200,267
  219,645
  239,871
  260,949
  282,891
  305,714
  329,441
  354,099
  379,723
  406,352
  434,030
  462,808
  492,740
  523,884
  556,304
  590,070
  625,254
  661,934
  700,193
  740,116
Debt-to-equity ratio
  0.865
  0.910
  0.950
  0.980
  1.000
  1.020
  1.030
  1.050
  1.060
  1.070
  1.080
  1.080
  1.090
  1.090
  1.100
  1.100
  1.110
  1.110
  1.110
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
Adjusted equity ratio
  0.464
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  431
  -1,838
  -2,232
  -2,663
  -3,135
  -3,645
  -4,194
  -4,780
  -5,403
  -6,062
  -6,755
  -7,479
  -8,241
  -9,038
  -9,869
  -10,734
  -11,634
  -12,570
  -13,543
  -14,555
  -15,606
  -16,698
  -17,833
  -19,014
  -20,242
  -21,521
  -22,852
  -24,239
  -25,684
  -27,191
  -28,764
Depreciation, amort., depletion, $m
  1,720
  2,062
  2,441
  2,857
  3,310
  3,798
  4,321
  4,879
  5,470
  6,094
  6,750
  7,433
  8,152
  8,903
  9,685
  10,499
  11,346
  12,227
  13,142
  14,093
  15,081
  16,109
  17,177
  18,288
  19,443
  20,647
  21,900
  23,206
  24,567
  25,987
  27,469
Funds from operations, $m
  4,789
  224
  209
  194
  175
  153
  127
  99
  67
  32
  -6
  -46
  -90
  -135
  -184
  -235
  -288
  -344
  -401
  -462
  -524
  -589
  -656
  -726
  -799
  -874
  -952
  -1,033
  -1,117
  -1,204
  -1,295
Change in working capital, $m
  851
  -110
  -122
  -134
  -146
  -158
  -169
  -180
  -191
  -201
  -212
  -222
  -232
  -242
  -253
  -263
  -274
  -284
  -296
  -307
  -319
  -332
  -345
  -359
  -373
  -389
  -405
  -422
  -440
  -459
  -479
Cash from operations, $m
  3,938
  334
  332
  328
  321
  311
  296
  279
  258
  234
  206
  176
  143
  107
  69
  28
  -14
  -59
  -106
  -154
  -205
  -257
  -311
  -367
  -425
  -485
  -547
  -611
  -677
  -746
  -816
Maintenance CAPEX, $m
  0
  -1,716
  -2,058
  -2,437
  -2,852
  -3,305
  -3,793
  -4,317
  -4,874
  -5,465
  -6,089
  -6,745
  -7,433
  -8,152
  -8,903
  -9,685
  -10,499
  -11,346
  -12,227
  -13,142
  -14,093
  -15,081
  -16,109
  -17,177
  -18,288
  -19,443
  -20,647
  -21,900
  -23,206
  -24,567
  -25,987
New CAPEX, $m
  -1,944
  -7,578
  -8,410
  -9,233
  -10,044
  -10,841
  -11,619
  -12,380
  -13,122
  -13,849
  -14,562
  -15,266
  -15,966
  -16,664
  -17,367
  -18,079
  -18,805
  -19,549
  -20,317
  -21,112
  -21,941
  -22,805
  -23,711
  -24,661
  -25,661
  -26,712
  -27,821
  -28,989
  -30,222
  -31,522
  -32,894
Cash from investing activities, $m
  -681
  -9,294
  -10,468
  -11,670
  -12,896
  -14,146
  -15,412
  -16,697
  -17,996
  -19,314
  -20,651
  -22,011
  -23,399
  -24,816
  -26,270
  -27,764
  -29,304
  -30,895
  -32,544
  -34,254
  -36,034
  -37,886
  -39,820
  -41,838
  -43,949
  -46,155
  -48,468
  -50,889
  -53,428
  -56,089
  -58,881
Free cash flow, $m
  3,257
  -8,960
  -10,136
  -11,341
  -12,576
  -13,835
  -15,116
  -16,417
  -17,738
  -19,080
  -20,445
  -21,836
  -23,256
  -24,709
  -26,201
  -27,735
  -29,318
  -30,954
  -32,649
  -34,409
  -36,239
  -38,144
  -40,131
  -42,205
  -44,373
  -46,641
  -49,015
  -51,500
  -54,105
  -56,835
  -59,698
Issuance/(repayment) of debt, $m
  -836
  4,995
  5,461
  5,995
  6,522
  7,039
  7,545
  8,038
  8,520
  8,992
  9,456
  9,913
  10,367
  10,821
  11,277
  11,739
  12,210
  12,694
  13,192
  13,709
  14,247
  14,808
  15,396
  16,013
  16,662
  17,345
  18,065
  18,823
  19,624
  20,468
  21,359
Issuance/(repurchase) of shares, $m
  614
  6,166
  6,978
  7,874
  8,803
  9,763
  10,751
  11,767
  12,809
  13,877
  14,974
  16,095
  17,252
  18,443
  19,670
  20,937
  22,247
  23,603
  25,010
  26,470
  27,988
  29,568
  31,215
  32,932
  34,724
  36,596
  38,553
  40,599
  42,740
  44,981
  47,328
Cash from financing (excl. dividends), $m  
  -677
  11,161
  12,439
  13,869
  15,325
  16,802
  18,296
  19,805
  21,329
  22,869
  24,430
  26,008
  27,619
  29,264
  30,947
  32,676
  34,457
  36,297
  38,202
  40,179
  42,235
  44,376
  46,611
  48,945
  51,386
  53,941
  56,618
  59,422
  62,364
  65,449
  68,687
Total cash flow (excl. dividends), $m
  2,580
  2,201
  2,303
  2,528
  2,750
  2,967
  3,180
  3,388
  3,591
  3,789
  3,984
  4,172
  4,363
  4,554
  4,746
  4,941
  5,139
  5,342
  5,552
  5,770
  5,996
  6,232
  6,480
  6,740
  7,013
  7,300
  7,603
  7,922
  8,259
  8,615
  8,990
Retained Cash Flow (-), $m
  1,428
  -6,166
  -6,978
  -7,874
  -8,803
  -9,763
  -10,751
  -11,767
  -12,809
  -13,877
  -14,974
  -16,095
  -17,252
  -18,443
  -19,670
  -20,937
  -22,247
  -23,603
  -25,010
  -26,470
  -27,988
  -29,568
  -31,215
  -32,932
  -34,724
  -36,596
  -38,553
  -40,599
  -42,740
  -44,981
  -47,328
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
 
  -3,966
  -4,675
  -5,346
  -6,054
  -6,796
  -7,571
  -8,379
  -9,218
  -10,088
  -10,989
  -11,923
  -12,889
  -13,889
  -14,924
  -15,996
  -17,108
  -18,261
  -19,457
  -20,700
  -21,992
  -23,336
  -24,735
  -26,192
  -27,711
  -29,296
  -30,950
  -32,677
  -34,481
  -36,367
  -38,339
Discount rate, %
 
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.42
  17.24
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
  28.09
  29.49
  30.97
  32.52
PV of cash for distribution, $m
 
  -3,675
  -3,986
  -4,161
  -4,266
  -4,297
  -4,255
  -4,143
  -3,967
  -3,735
  -3,459
  -3,148
  -2,817
  -2,475
  -2,136
  -1,808
  -1,502
  -1,222
  -973
  -758
  -577
  -429
  -311
  -220
  -151
  -101
  -65
  -41
  -25
  -15
  -8
Current shareholders' claim on cash, %
  100
  85.7
  74.0
  64.4
  56.3
  49.6
  43.8
  38.9
  34.7
  31.0
  27.8
  25.1
  22.6
  20.5
  18.6
  16.9
  15.4
  14.0
  12.8
  11.7
  10.7
  9.8
  9.0
  8.3
  7.6
  7.0
  6.4
  5.9
  5.5
  5.0
  4.6

Williams Partners L.P. operates as an energy infrastructure company. It operates through Central, Northeast G&P, Atlantic-Gulf, West, and NGL & Petchem Services segments. The Central segment provides gathering, treating, and compression services to producers in the Barnett shale region of north-central Texas, the Eagle Ford shale region of south Texas, the Haynesville shale region of northwest Louisiana, and the Mid-Continent region. The Northeast G&P segment engages in the midstream gathering and processing, and NGL fractionation businesses in the Marcellus and Utica shale regions in Pennsylvania, West Virginia, New York, and Ohio. The Atlantic-Gulf segment is involved in the interstate natural gas pipeline; and natural gas gathering and processing, and crude oil production handling and transportation activities in the Gulf Coast region. The West segment engages in the natural gas gathering, processing, and treating operations in New Mexico, Colorado, and Wyoming, as well as operates the interstate natural gas pipeline and the Northwest Pipeline. The NGL & Petchem Services segment engages in the operation of an olefins production facility in Geismar, Louisiana; a refinery grade propylene splitter, and various petrochemical and feedstock pipelines in the Gulf Coast region; an oil sands offgas processing plant near Fort McMurray, Alberta; a (natural gas liquids) NGL/olefin fractionation facility; and storage facilities and an NGL fractionator near Conway, Kansas, as well as NGL and natural gas marketing business. WPZ GP LLC serves as the general partner of the company. The company was founded in 2005 and is based in Tulsa, Oklahoma. Williams Partners L.P. is a subsidiary of The Williams Companies, Inc.

FINANCIAL RATIOS  of  Williams Partners (WPZ)

Valuation Ratios
P/E Ratio 54.6
Price to Sales 3.1
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 6
Price to Free Cash Flow 11.8
Growth Rates
Sales Growth Rate 2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -30.4%
Cap. Spend. - 3 Yr. Gr. Rate -10.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 82.4%
Total Debt to Equity 86.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.9%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital 1%
Ret/ On T. Cap. - 3 Yr. Avg. 0.9%
Return On Equity 1.9%
Return On Equity - 3 Yr. Avg. 1.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 76.9%
Gross Margin - 3 Yr. Avg. 70.7%
EBITDA Margin 28.8%
EBITDA Margin - 3 Yr. Avg. 22.3%
Operating Margin 11.6%
Oper. Margin - 3 Yr. Avg. 6.7%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 1.7%
Net Profit Margin 5.8%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate -18.2%
Eff/ Tax Rate - 3 Yr. Avg. -5.4%
Payout Ratio 587.2%

WPZ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WPZ stock intrinsic value calculation we used $7491 million for the last fiscal year's total revenue generated by Williams Partners. The default revenue input number comes from 2016 income statement of Williams 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 WPZ stock valuation model: a) initial revenue growth rate of 19.9% 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 7.9%, whose default value for WPZ is calculated based on our internal credit rating of Williams 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 Williams 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 WPZ stock the variable cost ratio is equal to 113.3%.

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 WPZ 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 3.5% for Williams Partners.

Corporate tax rate of 27% is the nominal tax rate for Williams 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 WPZ 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 WPZ are equal to 508.6%.

Life of production assets of 22.2 years is the average useful life of capital assets used in Williams 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 WPZ is equal to -7.4%. 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 - $21453 million for Williams 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 978.545 million for Williams 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 Williams Partners at the current share price and the inputted number of shares is $36.9 billion.

RELATED COMPANIES Price Int.Val. Rating
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APC Anadarko Petro 42.17 5.48  str.sell

COMPANY NEWS

▶ How Large-Cap MLPs Fared in 2Q17   [Aug-10-17 01:34PM  Market Realist]
▶ Williams Partners Expansion Projects in 2Q17   [08:57AM  Market Realist]
▶ What Analysts Recommend for Williams ahead of 2Q17 Earnings   [Jul-31-17 10:36AM  Market Realist]
▶ Will Williams Partners Coverage Ratio Improve in 2Q17?   [Jul-28-17 10:38AM  Market Realist]
▶ Why Analysts Expect Growth in Williams Partners Q2 Earnings   [Jul-27-17 05:18PM  Market Realist]
▶ PAA, WPZ, MMP, and CQP: Last Weeks Key MLP Rating Changes   [Jul-25-17 07:41AM  Market Realist]
▶ Williams Partners Announces Quarterly Cash Distribution   [Jul-24-17 02:36PM  Business Wire]
▶ Is Williams Companies a Buy at Current Price Levels?   [Jul-20-17 12:14PM  Market Realist]
▶ ETE, WPZ, MPLX: Last Weeks Key MLP Rating Changes   [Jul-17-17 04:05PM  Market Realist]
▶ Behind Williams Companies Recent Market Performance   [Jul-12-17 04:29PM  Market Realist]
▶ EPD, ETP, PAA, WPZ: What Do Current Valuations Indicate?   [Jul-10-17 05:06PM  Market Realist]
▶ Boardwalk Pipeline on the Street: Analyst Recommendations   [Jul-05-17 09:06AM  Market Realist]
▶ MLPs Rose 4.2% in the Last Week of 1H17   [12:43PM  Market Realist]
▶ Williams Rose 3.9% in June: Can It Gain Upward Momentum?   [Jun-30-17 03:27PM  Market Realist]
▶ Chart in Focus: Williams Partners Valuations   [Jun-27-17 10:36AM  Market Realist]
▶ How Williams Partners Can Benefit from Rising US LNG Exports   [Jun-26-17 10:37AM  Market Realist]
▶ Can Williams Partners Bounce Back from Its YTD Lows?   [Jun-23-17 05:18PM  Market Realist]
▶ Better Buy: Kinder Morgan, Inc. vs. Williams Partners LP   [Jun-21-17 02:30PM  Motley Fool]
▶ On Williams Partners, Stand Aside for Now   [Jun-19-17 10:45AM  TheStreet.com]
▶ Most Analysts Rate Williams Companies A Buy   [Jun-16-17 10:38AM  Market Realist]
▶ Could Williams Companies Bounce Back?   [Jun-15-17 03:19PM  Market Realist]
▶ The Top MLPs Short Interests Rose Recently   [Jun-12-17 06:05PM  Market Realist]
▶ 3 Large-Cap Stocks for Savvy Investors   [Jun-09-17 03:03PM  Motley Fool]
▶ Whats Ahead for Williams Partners Stock?   [Jun-05-17 06:06PM  Market Realist]
▶ Williams Partners Prices $1.45 Billion of Senior Notes   [May-31-17 05:20PM  Business Wire]
▶ Is Williams Companies Relative Valuation Low?   [10:38AM  Market Realist]
▶ 3 Stocks With Huge Business Advantages   [May-26-17 11:26AM  Motley Fool]
▶ Williams Companies Current Valuation: Whats the Story?   [May-25-17 04:06PM  Market Realist]
▶ The 1 Stock You've Been Overlooking for Your IRA   [May-20-17 12:00PM  Motley Fool]
▶ Energy Stocks And Industry News: Oil, Gas, Solar, Coal   [May-19-17 04:13PM  Investor's Business Daily]
Stock chart of WPZ Financial statements of WPZ
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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