Intrinsic value of Genesis Energy, L.P. - GEL

Previous Close

$22.09

  Intrinsic Value

$3.67

stock screener

  Rating & Target

str. sell

-83%

Previous close

$22.09

 
Intrinsic value

$3.67

 
Up/down potential

-83%

 
Rating

str. sell

We calculate the intrinsic value of GEL 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 2.7

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,971
  3,040
  3,118
  3,205
  3,303
  3,409
  3,525
  3,651
  3,786
  3,932
  4,087
  4,253
  4,430
  4,617
  4,817
  5,028
  5,251
  5,487
  5,737
  6,001
  6,279
  6,572
  6,881
  7,207
  7,550
  7,911
  8,292
  8,692
  9,113
  9,555
Variable operating expenses, $m
  2,646
  2,706
  2,775
  2,851
  2,936
  3,030
  3,131
  3,241
  3,360
  3,487
  3,576
  3,722
  3,876
  4,040
  4,215
  4,399
  4,595
  4,802
  5,020
  5,251
  5,494
  5,751
  6,021
  6,306
  6,607
  6,923
  7,255
  7,606
  7,974
  8,361
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
  2,646
  2,706
  2,775
  2,851
  2,936
  3,030
  3,131
  3,241
  3,360
  3,487
  3,576
  3,722
  3,876
  4,040
  4,215
  4,399
  4,595
  4,802
  5,020
  5,251
  5,494
  5,751
  6,021
  6,306
  6,607
  6,923
  7,255
  7,606
  7,974
  8,361
Operating income, $m
  325
  333
  343
  354
  366
  380
  394
  410
  427
  445
  511
  531
  554
  577
  602
  628
  656
  686
  717
  750
  785
  821
  860
  901
  943
  989
  1,036
  1,086
  1,139
  1,194
EBITDA, $m
  677
  692
  710
  730
  752
  776
  803
  831
  862
  895
  931
  968
  1,009
  1,051
  1,097
  1,145
  1,196
  1,250
  1,306
  1,366
  1,430
  1,497
  1,567
  1,641
  1,719
  1,802
  1,888
  1,979
  2,075
  2,176
Interest expense (income), $m
  0
  220
  216
  224
  234
  246
  258
  272
  286
  303
  320
  338
  358
  380
  402
  426
  452
  479
  507
  538
  570
  603
  639
  676
  716
  758
  802
  848
  897
  948
  1,002
Earnings before tax, $m
  105
  118
  119
  120
  121
  122
  122
  123
  124
  125
  172
  173
  174
  175
  176
  177
  177
  178
  179
  180
  181
  182
  183
  185
  186
  187
  188
  190
  191
  192
Tax expense, $m
  28
  32
  32
  32
  33
  33
  33
  33
  34
  34
  47
  47
  47
  47
  47
  48
  48
  48
  48
  49
  49
  49
  50
  50
  50
  50
  51
  51
  52
  52
Net income, $m
  77
  86
  87
  87
  88
  89
  89
  90
  91
  91
  126
  126
  127
  128
  128
  129
  130
  130
  131
  132
  132
  133
  134
  135
  136
  137
  137
  138
  139
  140

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
  6,603
  6,755
  6,928
  7,123
  7,339
  7,576
  7,834
  8,113
  8,414
  8,737
  9,083
  9,451
  9,844
  10,261
  10,703
  11,173
  11,669
  12,194
  12,749
  13,335
  13,953
  14,605
  15,292
  16,016
  16,778
  17,581
  18,426
  19,315
  20,250
  21,234
Adjusted assets (=assets-cash), $m
  6,603
  6,755
  6,928
  7,123
  7,339
  7,576
  7,834
  8,113
  8,414
  8,737
  9,083
  9,451
  9,844
  10,261
  10,703
  11,173
  11,669
  12,194
  12,749
  13,335
  13,953
  14,605
  15,292
  16,016
  16,778
  17,581
  18,426
  19,315
  20,250
  21,234
Revenue / Adjusted assets
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
Average production assets, $m
  5,556
  5,684
  5,830
  5,994
  6,176
  6,375
  6,592
  6,827
  7,081
  7,352
  7,643
  7,953
  8,284
  8,635
  9,007
  9,402
  9,820
  10,261
  10,728
  11,221
  11,741
  12,290
  12,868
  13,477
  14,119
  14,794
  15,505
  16,254
  17,041
  17,869
Working capital, $m
  101
  103
  106
  109
  112
  116
  120
  124
  129
  134
  139
  145
  151
  157
  164
  171
  179
  187
  195
  204
  213
  223
  234
  245
  257
  269
  282
  296
  310
  325
Total debt, $m
  3,368
  3,505
  3,661
  3,836
  4,031
  4,244
  4,476
  4,727
  4,998
  5,289
  5,600
  5,932
  6,285
  6,660
  7,059
  7,481
  7,928
  8,400
  8,899
  9,427
  9,983
  10,570
  11,188
  11,840
  12,526
  13,248
  14,009
  14,809
  15,651
  16,536
Total liabilities, $m
  5,943
  6,079
  6,235
  6,411
  6,605
  6,818
  7,051
  7,302
  7,573
  7,863
  8,174
  8,506
  8,859
  9,235
  9,633
  10,055
  10,502
  10,975
  11,474
  12,001
  12,558
  13,144
  13,763
  14,414
  15,100
  15,823
  16,583
  17,384
  18,225
  19,111
Total equity, $m
  660
  675
  693
  712
  734
  758
  783
  811
  841
  874
  908
  945
  984
  1,026
  1,070
  1,117
  1,167
  1,219
  1,275
  1,333
  1,395
  1,460
  1,529
  1,602
  1,678
  1,758
  1,843
  1,932
  2,025
  2,123
Total liabilities and equity, $m
  6,603
  6,754
  6,928
  7,123
  7,339
  7,576
  7,834
  8,113
  8,414
  8,737
  9,082
  9,451
  9,843
  10,261
  10,703
  11,172
  11,669
  12,194
  12,749
  13,334
  13,953
  14,604
  15,292
  16,016
  16,778
  17,581
  18,426
  19,316
  20,250
  21,234
Debt-to-equity ratio
  5.100
  5.190
  5.280
  5.390
  5.490
  5.600
  5.710
  5.830
  5.940
  6.050
  6.170
  6.280
  6.380
  6.490
  6.590
  6.700
  6.790
  6.890
  6.980
  7.070
  7.150
  7.240
  7.320
  7.390
  7.470
  7.540
  7.600
  7.670
  7.730
  7.790
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  77
  86
  87
  87
  88
  89
  89
  90
  91
  91
  126
  126
  127
  128
  128
  129
  130
  130
  131
  132
  132
  133
  134
  135
  136
  137
  137
  138
  139
  140
Depreciation, amort., depletion, $m
  352
  359
  367
  376
  386
  397
  409
  422
  436
  450
  420
  437
  455
  474
  495
  517
  540
  564
  589
  617
  645
  675
  707
  741
  776
  813
  852
  893
  936
  982
Funds from operations, $m
  429
  445
  454
  463
  474
  486
  498
  512
  526
  542
  546
  563
  582
  602
  623
  645
  669
  694
  720
  748
  777
  808
  841
  875
  911
  949
  989
  1,031
  1,076
  1,122
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
Cash from operations, $m
  427
  442
  451
  460
  471
  482
  494
  507
  522
  537
  540
  558
  576
  596
  616
  638
  661
  686
  712
  739
  768
  798
  830
  864
  900
  937
  976
  1,018
  1,061
  1,107
Maintenance CAPEX, $m
  -299
  -305
  -312
  -320
  -329
  -339
  -350
  -362
  -375
  -389
  -404
  -420
  -437
  -455
  -474
  -495
  -517
  -540
  -564
  -589
  -617
  -645
  -675
  -707
  -741
  -776
  -813
  -852
  -893
  -936
New CAPEX, $m
  -109
  -128
  -146
  -164
  -182
  -199
  -217
  -235
  -253
  -272
  -291
  -310
  -330
  -351
  -372
  -395
  -418
  -442
  -467
  -493
  -520
  -549
  -578
  -609
  -642
  -676
  -711
  -748
  -787
  -828
Cash from investing activities, $m
  -408
  -433
  -458
  -484
  -511
  -538
  -567
  -597
  -628
  -661
  -695
  -730
  -767
  -806
  -846
  -890
  -935
  -982
  -1,031
  -1,082
  -1,137
  -1,194
  -1,253
  -1,316
  -1,383
  -1,452
  -1,524
  -1,600
  -1,680
  -1,764
Free cash flow, $m
  18
  9
  -7
  -24
  -40
  -57
  -73
  -90
  -107
  -124
  -154
  -172
  -191
  -211
  -231
  -251
  -273
  -295
  -319
  -343
  -369
  -395
  -423
  -452
  -482
  -514
  -547
  -582
  -619
  -657
Issuance/(repayment) of debt, $m
  -65
  137
  156
  175
  194
  213
  232
  251
  271
  291
  311
  332
  353
  375
  398
  422
  447
  473
  499
  527
  556
  587
  618
  652
  686
  722
  760
  800
  842
  886
Issuance/(repurchase) of shares, $m
  112
  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  
  47
  137
  156
  175
  194
  213
  232
  251
  271
  291
  311
  332
  353
  375
  398
  422
  447
  473
  499
  527
  556
  587
  618
  652
  686
  722
  760
  800
  842
  886
Total cash flow (excl. dividends), $m
  65
  146
  149
  151
  154
  156
  159
  161
  164
  167
  157
  159
  162
  165
  168
  171
  174
  177
  181
  184
  188
  191
  195
  199
  204
  208
  213
  218
  223
  228
Retained Cash Flow (-), $m
  -188
  -15
  -17
  -19
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -37
  -39
  -42
  -44
  -47
  -50
  -53
  -55
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -89
  -94
  -98
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
  -123
  131
  131
  132
  132
  133
  133
  134
  134
  134
  122
  122
  123
  123
  124
  124
  124
  125
  125
  125
  126
  126
  127
  127
  128
  128
  129
  129
  130
  130
Discount rate, %
  12.50
  13.13
  13.78
  14.47
  15.19
  15.95
  16.75
  17.59
  18.47
  19.39
  20.36
  21.38
  22.45
  23.57
  24.75
  25.99
  27.29
  28.65
  30.08
  31.59
  33.17
  34.82
  36.57
  38.39
  40.31
  42.33
  44.45
  46.67
  49.00
  51.45
PV of cash for distribution, $m
  -110
  102
  89
  77
  65
  55
  45
  37
  29
  23
  16
  12
  9
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0
  96.0

Genesis Energy L.P. is a limited partnership focused on the midstream segment of the oil and gas industry. The Company operates through four segments: Offshore Pipeline Transportation, Refinery Services, Marine Transportation, and Supply and Logistics. The Offshore Pipeline Transportation segment is engaged in the offshore transportation of crude oil and natural gas in the Gulf of Mexico. The Refinery Services segment is involved in the processing of high sulfur (or sour) gas streams as part of refining operations to remove the sulfur and selling the related by-product, sodium hydrosulfide (NaHS). The Marine Transportation segment provides waterborne transportation of petroleum products and crude oil throughout North America. The Supply and Logistics segment is engaged in terminaling, blending, storing, marketing, and transporting crude oil and petroleum products (fuel oil, asphalt and other heavy refined products) and carbon dioxide.

FINANCIAL RATIOS  of  Genesis Energy, L.P. (GEL)

Valuation Ratios
P/E Ratio 23.1
Price to Sales 1.5
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 8.7
Price to Free Cash Flow -15.8
Growth Rates
Sales Growth Rate -23.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.7%
Cap. Spend. - 3 Yr. Gr. Rate 6.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 145.1%
Total Debt to Equity 145.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.7%
Return On Equity 5.4%
Return On Equity - 3 Yr. Avg. 13.5%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 19.6%
EBITDA Margin - 3 Yr. Avg. 18.8%
Operating Margin 12%
Oper. Margin - 3 Yr. Avg. 12.4%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 9.5%
Net Profit Margin 6.6%
Net Profit Margin - 3 Yr. Avg. 9.4%
Effective Tax Rate 2.6%
Eff/ Tax Rate - 3 Yr. Avg. 2.1%
Payout Ratio 274.3%

GEL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GEL stock intrinsic value calculation we used $2913 million for the last fiscal year's total revenue generated by Genesis Energy, L.P.. The default revenue input number comes from 0001 income statement of Genesis Energy, L.P.. 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 GEL stock valuation model: a) initial revenue growth rate of 2% 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 12.5%, whose default value for GEL is calculated based on our internal credit rating of Genesis Energy, L.P., 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 Genesis Energy, L.P..
    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 GEL stock the variable cost ratio is equal to 89.1%.

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 GEL 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 6.4% for Genesis Energy, L.P..

Corporate tax rate of 27% is the nominal tax rate for Genesis Energy, L.P.. 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 GEL 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 GEL are equal to 187%.

Life of production assets of 18.2 years is the average useful life of capital assets used in Genesis Energy, L.P. 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 GEL is equal to 3.4%. 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 - $472.01 million for Genesis Energy, L.P. - 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 122.458 million for Genesis Energy, L.P. 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 Genesis Energy, L.P. at the current share price and the inputted number of shares is $2.7 billion.

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