Intrinsic value of Ecopetrol ADR - EC

Previous Close

$19.59

  Intrinsic Value

$2,990

stock screener

  Rating & Target

str. buy

+999%

Previous close

$19.59

 
Intrinsic value

$2,990

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of EC 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 0001), $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 1.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  16.60
  15.44
  14.40
  13.46
  12.61
  11.85
  11.16
  10.55
  9.99
  9.49
  9.04
  8.64
  8.28
  7.95
  7.65
  7.39
  7.15
  6.93
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.67
  5.61
  5.55
Revenue, $m
  21,879
  25,257
  28,893
  32,781
  36,915
  41,289
  45,899
  50,740
  55,811
  61,110
  66,637
  72,395
  78,386
  84,617
  91,093
  97,823
  104,817
  112,086
  119,641
  127,498
  135,671
  144,177
  153,033
  162,258
  171,872
  181,897
  192,355
  203,270
  214,668
  226,574
Variable operating expenses, $m
  3,558
  4,099
  4,682
  5,305
  5,967
  6,668
  7,407
  8,183
  8,995
  9,844
  10,678
  11,601
  12,561
  13,560
  14,597
  15,676
  16,797
  17,961
  19,172
  20,431
  21,741
  23,104
  24,523
  26,001
  27,542
  29,148
  30,824
  32,574
  34,400
  36,308
Fixed operating expenses, $m
  10,979
  11,221
  11,468
  11,720
  11,978
  12,241
  12,511
  12,786
  13,067
  13,355
  13,649
  13,949
  14,256
  14,569
  14,890
  15,217
  15,552
  15,894
  16,244
  16,601
  16,967
  17,340
  17,721
  18,111
  18,510
  18,917
  19,333
  19,758
  20,193
  20,637
Total operating expenses, $m
  14,537
  15,320
  16,150
  17,025
  17,945
  18,909
  19,918
  20,969
  22,062
  23,199
  24,327
  25,550
  26,817
  28,129
  29,487
  30,893
  32,349
  33,855
  35,416
  37,032
  38,708
  40,444
  42,244
  44,112
  46,052
  48,065
  50,157
  52,332
  54,593
  56,945
Operating income, $m
  7,342
  9,937
  12,743
  15,756
  18,970
  22,380
  25,981
  29,772
  33,749
  37,911
  42,310
  46,845
  51,569
  56,488
  61,606
  66,930
  72,468
  78,230
  84,225
  90,466
  96,964
  103,733
  110,788
  118,145
  125,820
  133,831
  142,197
  150,938
  160,075
  169,629
EBITDA, $m
  10,613
  13,705
  17,047
  20,632
  24,454
  28,507
  32,787
  37,290
  42,013
  46,955
  52,116
  57,498
  63,104
  68,940
  75,011
  81,325
  87,893
  94,724
  101,831
  109,228
  116,929
  124,950
  133,308
  142,022
  151,112
  160,599
  170,504
  180,851
  191,664
  202,971
Interest expense (income), $m
  833
  1,124
  1,430
  1,762
  2,119
  2,501
  2,907
  3,337
  3,789
  4,265
  4,763
  5,284
  5,827
  6,392
  6,981
  7,593
  8,229
  8,890
  9,577
  10,291
  11,034
  11,805
  12,608
  13,444
  14,314
  15,220
  16,164
  17,149
  18,177
  19,249
  20,369
Earnings before tax, $m
  6,217
  8,507
  10,982
  13,637
  16,469
  19,473
  22,645
  25,982
  29,484
  33,148
  37,026
  41,018
  45,177
  49,507
  54,013
  58,701
  63,578
  68,653
  73,934
  79,432
  85,158
  91,125
  97,344
  103,831
  110,600
  117,667
  125,048
  132,762
  140,826
  149,260
Tax expense, $m
  1,679
  2,297
  2,965
  3,682
  4,447
  5,258
  6,114
  7,015
  7,961
  8,950
  9,997
  11,075
  12,198
  13,367
  14,583
  15,849
  17,166
  18,536
  19,962
  21,447
  22,993
  24,604
  26,283
  28,034
  29,862
  31,770
  33,763
  35,846
  38,023
  40,300
Net income, $m
  4,539
  6,210
  8,017
  9,955
  12,022
  14,215
  16,531
  18,967
  21,523
  24,198
  27,029
  29,943
  32,979
  36,140
  39,429
  42,852
  46,412
  50,116
  53,972
  57,985
  62,166
  66,521
  71,061
  75,797
  80,738
  85,897
  91,285
  96,916
  102,803
  108,960

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  46,061
  53,172
  60,827
  69,012
  77,715
  86,924
  96,629
  106,822
  117,497
  128,652
  140,288
  152,410
  165,023
  178,140
  191,775
  205,943
  220,667
  235,970
  251,877
  268,417
  285,624
  303,530
  322,174
  341,595
  361,836
  382,941
  404,958
  427,937
  451,932
  476,998
Adjusted assets (=assets-cash), $m
  46,061
  53,172
  60,827
  69,012
  77,715
  86,924
  96,629
  106,822
  117,497
  128,652
  140,288
  152,410
  165,023
  178,140
  191,775
  205,943
  220,667
  235,970
  251,877
  268,417
  285,624
  303,530
  322,174
  341,595
  361,836
  382,941
  404,958
  427,937
  451,932
  476,998
Revenue / Adjusted assets
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
Average production assets, $m
  32,840
  37,911
  43,368
  49,204
  55,409
  61,975
  68,894
  76,161
  83,772
  91,726
  100,022
  108,664
  117,657
  127,010
  136,730
  146,833
  157,330
  168,241
  179,582
  191,375
  203,643
  216,409
  229,702
  243,549
  257,980
  273,027
  288,725
  305,108
  322,216
  340,087
Working capital, $m
  241
  278
  318
  361
  406
  454
  505
  558
  614
  672
  733
  796
  862
  931
  1,002
  1,076
  1,153
  1,233
  1,316
  1,402
  1,492
  1,586
  1,683
  1,785
  1,891
  2,001
  2,116
  2,236
  2,361
  2,492
Total debt, $m
  18,568
  22,878
  27,517
  32,477
  37,751
  43,332
  49,213
  55,390
  61,859
  68,619
  75,670
  83,016
  90,660
  98,609
  106,871
  115,457
  124,380
  133,653
  143,293
  153,317
  163,744
  174,595
  185,893
  197,662
  209,928
  222,718
  236,060
  249,986
  264,526
  279,716
Total liabilities, $m
  27,913
  32,222
  36,861
  41,821
  47,095
  52,676
  58,557
  64,734
  71,203
  77,963
  85,015
  92,360
  100,004
  107,953
  116,215
  124,802
  133,724
  142,998
  152,637
  162,661
  173,088
  183,939
  195,237
  207,007
  219,272
  232,062
  245,404
  259,330
  273,871
  289,061
Total equity, $m
  18,148
  20,950
  23,966
  27,191
  30,620
  34,248
  38,072
  42,088
  46,294
  50,689
  55,274
  60,049
  65,019
  70,187
  75,559
  81,142
  86,943
  92,972
  99,239
  105,756
  112,536
  119,591
  126,937
  134,588
  142,563
  150,879
  159,553
  168,607
  178,061
  187,937
Total liabilities and equity, $m
  46,061
  53,172
  60,827
  69,012
  77,715
  86,924
  96,629
  106,822
  117,497
  128,652
  140,289
  152,409
  165,023
  178,140
  191,774
  205,944
  220,667
  235,970
  251,876
  268,417
  285,624
  303,530
  322,174
  341,595
  361,835
  382,941
  404,957
  427,937
  451,932
  476,998
Debt-to-equity ratio
  1.020
  1.090
  1.150
  1.190
  1.230
  1.270
  1.290
  1.320
  1.340
  1.350
  1.370
  1.380
  1.390
  1.400
  1.410
  1.420
  1.430
  1.440
  1.440
  1.450
  1.460
  1.460
  1.460
  1.470
  1.470
  1.480
  1.480
  1.480
  1.490
  1.490
Adjusted equity ratio
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,539
  6,210
  8,017
  9,955
  12,022
  14,215
  16,531
  18,967
  21,523
  24,198
  27,029
  29,943
  32,979
  36,140
  39,429
  42,852
  46,412
  50,116
  53,972
  57,985
  62,166
  66,521
  71,061
  75,797
  80,738
  85,897
  91,285
  96,916
  102,803
  108,960
Depreciation, amort., depletion, $m
  3,271
  3,768
  4,303
  4,876
  5,484
  6,128
  6,806
  7,518
  8,265
  9,044
  9,806
  10,653
  11,535
  12,452
  13,405
  14,395
  15,425
  16,494
  17,606
  18,762
  19,965
  21,217
  22,520
  23,877
  25,292
  26,767
  28,306
  29,913
  31,590
  33,342
Funds from operations, $m
  7,810
  9,979
  12,320
  14,831
  17,506
  20,343
  23,337
  26,486
  29,788
  33,242
  36,835
  40,597
  44,514
  48,592
  52,834
  57,247
  61,836
  66,611
  71,578
  76,748
  82,131
  87,738
  93,581
  99,674
  106,030
  112,664
  119,592
  126,829
  134,393
  142,302
Change in working capital, $m
  34
  37
  40
  43
  45
  48
  51
  53
  56
  58
  61
  63
  66
  69
  71
  74
  77
  80
  83
  86
  90
  94
  97
  101
  106
  110
  115
  120
  125
  131
Cash from operations, $m
  7,776
  9,941
  12,280
  14,788
  17,461
  20,295
  23,286
  26,432
  29,732
  33,184
  36,775
  40,533
  44,448
  48,523
  52,763
  57,173
  61,760
  66,531
  71,495
  76,661
  82,041
  87,644
  93,484
  99,573
  105,925
  112,554
  119,477
  126,709
  134,267
  142,171
Maintenance CAPEX, $m
  -2,762
  -3,220
  -3,717
  -4,252
  -4,824
  -5,432
  -6,076
  -6,754
  -7,467
  -8,213
  -8,993
  -9,806
  -10,653
  -11,535
  -12,452
  -13,405
  -14,395
  -15,425
  -16,494
  -17,606
  -18,762
  -19,965
  -21,217
  -22,520
  -23,877
  -25,292
  -26,767
  -28,306
  -29,913
  -31,590
New CAPEX, $m
  -4,669
  -5,071
  -5,458
  -5,836
  -6,205
  -6,566
  -6,919
  -7,267
  -7,611
  -7,953
  -8,296
  -8,642
  -8,993
  -9,352
  -9,721
  -10,102
  -10,498
  -10,910
  -11,341
  -11,793
  -12,268
  -12,767
  -13,293
  -13,847
  -14,431
  -15,047
  -15,698
  -16,384
  -17,108
  -17,871
Cash from investing activities, $m
  -7,431
  -8,291
  -9,175
  -10,088
  -11,029
  -11,998
  -12,995
  -14,021
  -15,078
  -16,166
  -17,289
  -18,448
  -19,646
  -20,887
  -22,173
  -23,507
  -24,893
  -26,335
  -27,835
  -29,399
  -31,030
  -32,732
  -34,510
  -36,367
  -38,308
  -40,339
  -42,465
  -44,690
  -47,021
  -49,461
Free cash flow, $m
  345
  1,651
  3,106
  4,700
  6,432
  8,296
  10,291
  12,411
  14,654
  17,017
  19,486
  22,085
  24,802
  27,636
  30,590
  33,666
  36,866
  40,196
  43,659
  47,262
  51,011
  54,912
  58,975
  63,206
  67,616
  72,214
  77,011
  82,018
  87,247
  92,710
Issuance/(repayment) of debt, $m
  3,965
  4,310
  4,639
  4,960
  5,274
  5,581
  5,881
  6,177
  6,469
  6,760
  7,052
  7,345
  7,644
  7,949
  8,262
  8,586
  8,923
  9,273
  9,640
  10,024
  10,427
  10,851
  11,298
  11,769
  12,266
  12,790
  13,342
  13,926
  14,541
  15,190
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  3,965
  4,310
  4,639
  4,960
  5,274
  5,581
  5,881
  6,177
  6,469
  6,760
  7,052
  7,345
  7,644
  7,949
  8,262
  8,586
  8,923
  9,273
  9,640
  10,024
  10,427
  10,851
  11,298
  11,769
  12,266
  12,790
  13,342
  13,926
  14,541
  15,190
Total cash flow (excl. dividends), $m
  4,310
  5,961
  7,745
  9,661
  11,706
  13,877
  16,172
  18,588
  21,123
  23,778
  26,537
  29,430
  32,446
  35,585
  38,853
  42,252
  45,789
  49,469
  53,299
  57,286
  61,438
  65,764
  70,273
  74,975
  79,882
  85,004
  90,354
  95,944
  101,788
  107,900
Retained Cash Flow (-), $m
  -2,576
  -2,802
  -3,016
  -3,225
  -3,429
  -3,628
  -3,824
  -4,016
  -4,206
  -4,395
  -4,585
  -4,776
  -4,970
  -5,168
  -5,372
  -5,583
  -5,801
  -6,029
  -6,267
  -6,517
  -6,779
  -7,055
  -7,346
  -7,652
  -7,975
  -8,315
  -8,675
  -9,054
  -9,454
  -9,876
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
  1,734
  3,159
  4,729
  6,436
  8,277
  10,249
  12,348
  14,572
  16,917
  19,382
  21,952
  24,655
  27,476
  30,417
  33,481
  36,670
  39,988
  43,440
  47,032
  50,769
  54,658
  58,708
  62,927
  67,323
  71,907
  76,689
  81,679
  86,890
  92,334
  98,024
Discount rate, %
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
  1,654
  2,863
  4,051
  5,184
  6,234
  7,174
  7,981
  8,638
  9,131
  9,451
  9,591
  9,566
  9,378
  9,043
  8,578
  8,005
  7,349
  6,637
  5,893
  5,143
  4,409
  3,711
  3,065
  2,481
  1,968
  1,528
  1,160
  860
  622
  439
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Ecopetrol S.A. is an oil company. The Company operates in Colombia, Peru, Brazil and the United States Gulf Coast. The Company's segments include Exploration and Production, Transportation and Logistics, and Refining, Petrochemicals and Biofuels. The Company's Exploration and Production segment includes exploration, development and production activities in Colombia and abroad. The Company's Transportation and Logistics segment includes the transportation of crude oil, motor fuels, fuel oil and other refined products, including diesel and biofuels. The Company's main crude oil pipeline systems' operating capacity is approximately 1.34 million barrels per day (BPD). The Company's main refineries are the Barrancabermeja refinery, which it directly owns and operates, and a refinery in the Free Trade Zone in Cartagena that is operated by Reficar S.A., a subsidiary of the Company. The Company also owns and operates two other minor refineries: Orito and Apiay.

FINANCIAL RATIOS  of  Ecopetrol ADR (EC)

Valuation Ratios
P/E Ratio 1543.1
Price to Sales 50.6
Price to Book 55.3
Price to Tangible Book
Price to Cash Flow 167.1
Price to Free Cash Flow 280.6
Growth Rates
Sales Growth Rate -8.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -59%
Cap. Spend. - 3 Yr. Gr. Rate -6%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 110.1%
Total Debt to Equity 119.6%
Interest Coverage 4
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. 1.2%
Return On Equity 3.6%
Return On Equity - 3 Yr. Avg. 1.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 28.3%
Gross Margin - 3 Yr. Avg. 30.7%
EBITDA Margin 35.9%
EBITDA Margin - 3 Yr. Avg. 31.2%
Operating Margin 17.3%
Oper. Margin - 3 Yr. Avg. 14%
Pre-Tax Margin 14.8%
Pre-Tax Margin - 3 Yr. Avg. 9%
Net Profit Margin 3.3%
Net Profit Margin - 3 Yr. Avg. 1.4%
Effective Tax Rate 66%
Eff/ Tax Rate - 3 Yr. Avg. 28.1%
Payout Ratio 109.4%

EC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EC stock intrinsic value calculation we used $18763.9932931 million for the last fiscal year's total revenue generated by Ecopetrol ADR. The default revenue input number comes from 0001 income statement of Ecopetrol ADR. 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 EC stock valuation model: a) initial revenue growth rate of 16.6% 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 4.8%, whose default value for EC is calculated based on our internal credit rating of Ecopetrol ADR, 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 Ecopetrol ADR.
    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 EC stock the variable cost ratio is equal to 16.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10743 million in the base year in the intrinsic value calculation for EC 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 7.7% for Ecopetrol ADR.

Corporate tax rate of 27% is the nominal tax rate for Ecopetrol ADR. 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 EC 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 EC are equal to 150.1%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Ecopetrol ADR 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 EC is equal to 1.1%. 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 - $15571.7481556 million for Ecopetrol ADR - 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 54.382 million for Ecopetrol ADR 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 Ecopetrol ADR at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

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▶ MARKETS: Strategist - Turkey panic overblown   [Aug-16-18 01:12PM  Yahoo Finance Video]
▶ Ecopetrol SA Sponsored ADR to Host Earnings Call   [Aug-15-18 07:30AM  ACCESSWIRE]
▶ Ride Ecopetrol Through the Crude Oil Turbulence   [Jul-30-18 12:56PM  InvestorPlace]
▶ Oil prices rise as Trump, Iran's leader escalate threats   [Jul-23-18 12:48PM  Yahoo Finance Video]
▶ Ecopetrol announces new oil finding at Cundinamarca   [Jul-05-18 09:36AM  PR Newswire]
▶ S&P affirms Ecopetrol S.A.'s investment rating   [Jun-27-18 07:29PM  PR Newswire]
▶ The 2018 ETF World Cup   [Jun-15-18 02:30PM  Investopedia]
▶ Colombia vote worries oil, mining investors   [Jun-12-18 07:10PM  Reuters]
▶ Anatomy of Success: Ecopetrol SA (EC)   [May-14-18 12:53PM  Zacks]
▶ Ecopetrol S.A. Announces 2018 First Quarter Results   [May-03-18 08:23PM  PR Newswire]
▶ Top 10 Stocks Under $20   [May-02-18 11:56AM  Zacks]
▶ Colombia's Transandino Pipeline Halted After Bomb Attack   [Apr-22-18 08:00PM  Rigzone.com]
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