Intrinsic value of Kinder Morgan - KMI

Previous Close

$17.82

  Intrinsic Value

$5.87

stock screener

  Rating & Target

str. sell

-67%

Previous close

$17.82

 
Intrinsic value

$5.87

 
Up/down potential

-67%

 
Rating

str. sell

We calculate the intrinsic value of KMI 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 2017), $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 39.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
Revenue, $m
  14,390
  15,110
  15,865
  16,659
  17,491
  18,366
  19,284
  20,249
  21,261
  22,324
  23,440
  24,612
  25,843
  27,135
  28,492
  29,916
  31,412
  32,983
  34,632
  36,363
  38,182
  40,091
  42,095
  44,200
  46,410
  48,730
  51,167
  53,725
  56,412
  59,232
Variable operating expenses, $m
  10,321
  10,711
  11,120
  11,550
  12,001
  12,475
  12,972
  13,494
  14,043
  14,619
  12,697
  13,332
  13,999
  14,698
  15,433
  16,205
  17,015
  17,866
  18,759
  19,697
  20,682
  21,716
  22,802
  23,942
  25,139
  26,396
  27,716
  29,102
  30,557
  32,085
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
  10,321
  10,711
  11,120
  11,550
  12,001
  12,475
  12,972
  13,494
  14,043
  14,619
  12,697
  13,332
  13,999
  14,698
  15,433
  16,205
  17,015
  17,866
  18,759
  19,697
  20,682
  21,716
  22,802
  23,942
  25,139
  26,396
  27,716
  29,102
  30,557
  32,085
Operating income, $m
  4,069
  4,399
  4,745
  5,109
  5,491
  5,891
  6,312
  6,754
  7,218
  7,705
  10,743
  11,280
  11,844
  12,436
  13,058
  13,711
  14,397
  15,117
  15,872
  16,666
  17,499
  18,374
  19,293
  20,258
  21,271
  22,334
  23,451
  24,623
  25,855
  27,147
EBITDA, $m
  13,399
  14,069
  14,772
  15,511
  16,287
  17,101
  17,956
  18,854
  19,796
  20,786
  21,826
  22,917
  24,063
  25,266
  26,529
  27,856
  29,248
  30,711
  32,246
  33,859
  35,552
  37,329
  39,196
  41,155
  43,213
  45,374
  47,643
  50,025
  52,526
  55,152
Interest expense (income), $m
  2,050
  2,044
  2,174
  2,303
  2,438
  2,581
  2,730
  2,887
  3,052
  3,225
  3,407
  3,598
  3,798
  4,008
  4,229
  4,461
  4,705
  4,960
  5,229
  5,511
  5,807
  6,117
  6,444
  6,786
  7,146
  7,524
  7,921
  8,337
  8,774
  9,234
  9,716
Earnings before tax, $m
  2,026
  2,225
  2,442
  2,670
  2,910
  3,161
  3,425
  3,702
  3,993
  4,299
  7,146
  7,482
  7,836
  8,207
  8,597
  9,007
  9,437
  9,888
  10,362
  10,859
  11,382
  11,931
  12,507
  13,112
  13,747
  14,414
  15,114
  15,849
  16,621
  17,432
Tax expense, $m
  547
  601
  659
  721
  786
  854
  925
  1,000
  1,078
  1,161
  1,929
  2,020
  2,116
  2,216
  2,321
  2,432
  2,548
  2,670
  2,798
  2,932
  3,073
  3,221
  3,377
  3,540
  3,712
  3,892
  4,081
  4,279
  4,488
  4,707
Net income, $m
  1,479
  1,625
  1,783
  1,949
  2,124
  2,308
  2,500
  2,703
  2,915
  3,138
  5,216
  5,462
  5,720
  5,991
  6,276
  6,575
  6,889
  7,218
  7,564
  7,927
  8,309
  8,709
  9,130
  9,571
  10,035
  10,522
  11,033
  11,570
  12,133
  12,725

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
  83,181
  87,340
  91,707
  96,292
  101,107
  106,162
  111,470
  117,044
  122,896
  129,040
  135,492
  142,267
  149,380
  156,849
  164,692
  172,927
  181,573
  190,652
  200,184
  210,193
  220,703
  231,738
  243,325
  255,491
  268,266
  281,679
  295,763
  310,551
  326,079
  342,383
Adjusted assets (=assets-cash), $m
  83,181
  87,340
  91,707
  96,292
  101,107
  106,162
  111,470
  117,044
  122,896
  129,040
  135,492
  142,267
  149,380
  156,849
  164,692
  172,927
  181,573
  190,652
  200,184
  210,193
  220,703
  231,738
  243,325
  255,491
  268,266
  281,679
  295,763
  310,551
  326,079
  342,383
Revenue / Adjusted assets
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
Average production assets, $m
  68,037
  71,439
  75,011
  78,761
  82,700
  86,834
  91,176
  95,735
  100,522
  105,548
  110,825
  116,367
  122,185
  128,294
  134,709
  141,444
  148,516
  155,942
  163,739
  171,926
  180,523
  189,549
  199,026
  208,978
  219,426
  230,398
  241,918
  254,014
  266,714
  280,050
Working capital, $m
  -964
  -1,012
  -1,063
  -1,116
  -1,172
  -1,231
  -1,292
  -1,357
  -1,424
  -1,496
  -1,570
  -1,649
  -1,731
  -1,818
  -1,909
  -2,004
  -2,105
  -2,210
  -2,320
  -2,436
  -2,558
  -2,686
  -2,820
  -2,961
  -3,109
  -3,265
  -3,428
  -3,600
  -3,780
  -3,969
Total debt, $m
  40,253
  42,644
  45,155
  47,792
  50,560
  53,467
  56,519
  59,724
  63,089
  66,622
  70,332
  74,228
  78,318
  82,612
  87,122
  91,857
  96,828
  102,049
  107,530
  113,285
  119,328
  125,673
  132,336
  139,331
  146,677
  154,390
  162,488
  170,991
  179,919
  189,294
Total liabilities, $m
  47,829
  50,220
  52,731
  55,368
  58,136
  61,043
  64,095
  67,300
  70,665
  74,198
  77,908
  81,804
  85,894
  90,188
  94,698
  99,433
  104,404
  109,625
  115,106
  120,861
  126,904
  133,249
  139,912
  146,907
  154,253
  161,966
  170,064
  178,567
  187,495
  196,870
Total equity, $m
  35,352
  37,119
  38,975
  40,924
  42,970
  45,119
  47,375
  49,743
  52,231
  54,842
  57,584
  60,464
  63,487
  66,661
  69,994
  73,494
  77,168
  81,027
  85,078
  89,332
  93,799
  98,489
  103,413
  108,584
  114,013
  119,714
  125,699
  131,984
  138,584
  145,513
Total liabilities and equity, $m
  83,181
  87,339
  91,706
  96,292
  101,106
  106,162
  111,470
  117,043
  122,896
  129,040
  135,492
  142,268
  149,381
  156,849
  164,692
  172,927
  181,572
  190,652
  200,184
  210,193
  220,703
  231,738
  243,325
  255,491
  268,266
  281,680
  295,763
  310,551
  326,079
  342,383
Debt-to-equity ratio
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.190
  1.200
  1.210
  1.210
  1.220
  1.230
  1.230
  1.240
  1.240
  1.250
  1.250
  1.260
  1.260
  1.270
  1.270
  1.280
  1.280
  1.280
  1.290
  1.290
  1.290
  1.300
  1.300
  1.300
Adjusted equity ratio
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425
  0.425

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,479
  1,625
  1,783
  1,949
  2,124
  2,308
  2,500
  2,703
  2,915
  3,138
  5,216
  5,462
  5,720
  5,991
  6,276
  6,575
  6,889
  7,218
  7,564
  7,927
  8,309
  8,709
  9,130
  9,571
  10,035
  10,522
  11,033
  11,570
  12,133
  12,725
Depreciation, amort., depletion, $m
  9,330
  9,670
  10,027
  10,402
  10,796
  11,210
  11,644
  12,100
  12,578
  13,081
  11,083
  11,637
  12,218
  12,829
  13,471
  14,144
  14,852
  15,594
  16,374
  17,193
  18,052
  18,955
  19,903
  20,898
  21,943
  23,040
  24,192
  25,401
  26,671
  28,005
Funds from operations, $m
  10,809
  11,294
  11,810
  12,352
  12,920
  13,517
  14,144
  14,802
  15,493
  16,219
  16,299
  17,099
  17,939
  18,821
  19,747
  20,719
  21,740
  22,812
  23,938
  25,120
  26,361
  27,664
  29,033
  30,469
  31,978
  33,562
  35,225
  36,971
  38,805
  40,730
Change in working capital, $m
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -79
  -82
  -87
  -91
  -95
  -100
  -105
  -110
  -116
  -122
  -128
  -134
  -141
  -148
  -155
  -163
  -171
  -180
  -189
Cash from operations, $m
  10,854
  11,343
  11,861
  12,405
  12,976
  13,576
  14,206
  14,867
  15,561
  16,290
  16,374
  17,177
  18,021
  18,907
  19,838
  20,815
  21,841
  22,918
  24,049
  25,236
  26,483
  27,792
  29,167
  30,610
  32,126
  33,717
  35,388
  37,143
  38,985
  40,919
Maintenance CAPEX, $m
  -6,480
  -6,804
  -7,144
  -7,501
  -7,876
  -8,270
  -8,683
  -9,118
  -9,574
  -10,052
  -10,555
  -11,083
  -11,637
  -12,218
  -12,829
  -13,471
  -14,144
  -14,852
  -15,594
  -16,374
  -17,193
  -18,052
  -18,955
  -19,903
  -20,898
  -21,943
  -23,040
  -24,192
  -25,401
  -26,671
New CAPEX, $m
  -3,242
  -3,402
  -3,572
  -3,751
  -3,938
  -4,135
  -4,342
  -4,559
  -4,787
  -5,026
  -5,277
  -5,541
  -5,818
  -6,109
  -6,415
  -6,735
  -7,072
  -7,426
  -7,797
  -8,187
  -8,596
  -9,026
  -9,477
  -9,951
  -10,449
  -10,971
  -11,520
  -12,096
  -12,701
  -13,336
Cash from investing activities, $m
  -9,722
  -10,206
  -10,716
  -11,252
  -11,814
  -12,405
  -13,025
  -13,677
  -14,361
  -15,078
  -15,832
  -16,624
  -17,455
  -18,327
  -19,244
  -20,206
  -21,216
  -22,278
  -23,391
  -24,561
  -25,789
  -27,078
  -28,432
  -29,854
  -31,347
  -32,914
  -34,560
  -36,288
  -38,102
  -40,007
Free cash flow, $m
  1,133
  1,137
  1,145
  1,153
  1,162
  1,171
  1,180
  1,190
  1,201
  1,212
  541
  553
  566
  580
  594
  608
  624
  640
  657
  675
  694
  714
  735
  756
  779
  803
  828
  855
  883
  912
Issuance/(repayment) of debt, $m
  2,410
  2,391
  2,511
  2,637
  2,768
  2,907
  3,052
  3,205
  3,365
  3,533
  3,710
  3,895
  4,090
  4,295
  4,509
  4,735
  4,972
  5,220
  5,481
  5,755
  6,043
  6,345
  6,662
  6,996
  7,345
  7,713
  8,098
  8,503
  8,928
  9,375
Issuance/(repurchase) of shares, $m
  237
  143
  73
  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  
  2,647
  2,534
  2,584
  2,637
  2,768
  2,907
  3,052
  3,205
  3,365
  3,533
  3,710
  3,895
  4,090
  4,295
  4,509
  4,735
  4,972
  5,220
  5,481
  5,755
  6,043
  6,345
  6,662
  6,996
  7,345
  7,713
  8,098
  8,503
  8,928
  9,375
Total cash flow (excl. dividends), $m
  3,780
  3,672
  3,729
  3,790
  3,930
  4,078
  4,233
  4,395
  4,566
  4,745
  4,251
  4,449
  4,656
  4,874
  5,103
  5,343
  5,596
  5,860
  6,138
  6,430
  6,737
  7,059
  7,397
  7,752
  8,125
  8,516
  8,927
  9,358
  9,811
  10,287
Retained Cash Flow (-), $m
  -1,716
  -1,768
  -1,856
  -1,949
  -2,046
  -2,149
  -2,256
  -2,369
  -2,487
  -2,612
  -2,742
  -2,879
  -3,023
  -3,174
  -3,333
  -3,500
  -3,675
  -3,858
  -4,051
  -4,254
  -4,467
  -4,690
  -4,924
  -5,171
  -5,429
  -5,701
  -5,986
  -6,285
  -6,599
  -6,929
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
  2,064
  1,904
  1,873
  1,841
  1,884
  1,929
  1,977
  2,026
  2,079
  2,134
  1,509
  1,570
  1,633
  1,700
  1,770
  1,844
  1,921
  2,002
  2,087
  2,177
  2,270
  2,369
  2,473
  2,581
  2,695
  2,815
  2,941
  3,073
  3,212
  3,358
Discount rate, %
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
  1,901
  1,602
  1,427
  1,259
  1,146
  1,033
  921
  813
  708
  610
  357
  302
  252
  207
  167
  133
  103
  79
  59
  43
  30
  21
  14
  9
  6
  4
  2
  1
  1
  0
Current shareholders' claim on cash, %
  99.4
  99.1
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9

Kinder Morgan, Inc. is an energy infrastructure company. It operates through five segments. Its Natural Gas Pipelines segment is engaged in the ownership and operation of interstate and intrastate natural gas pipeline and storage systems, and liquefied natural gas facilities, among others. Its CO2 segment is engaged in the production, transportation and marketing of carbon dioxide (CO2) to oil fields and the ownership and operation of a crude oil pipeline system, among others. Its Terminals segment is engaged in the ownership and/or operation of liquids and bulk terminal facilities located throughout the United States and portions of Canada, and Jones Act tankers. Its Products Pipelines segment is engaged in the ownership and operation of refined petroleum products, natural gas liquids and crude oil and condensate pipelines. Its Kinder Morgan Canada segment is engaged in the ownership and operation of the Trans Mountain pipeline system and Jet Fuel aviation turbine fuel pipeline.

FINANCIAL RATIOS  of  Kinder Morgan (KMI)

Valuation Ratios
P/E Ratio 56.1
Price to Sales 3
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 20.9
Growth Rates
Sales Growth Rate -9.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26%
Cap. Spend. - 3 Yr. Gr. Rate -3.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 108.5%
Total Debt to Equity 116.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 0.9%
Ret/ On T. Cap. - 3 Yr. Avg. 1%
Return On Equity 2%
Return On Equity - 3 Yr. Avg. 2.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 55.6%
Gross Margin - 3 Yr. Avg. 52.9%
EBITDA Margin 45.2%
EBITDA Margin - 3 Yr. Avg. 40.8%
Operating Margin 22.7%
Oper. Margin - 3 Yr. Avg. 22.3%
Pre-Tax Margin 12.5%
Pre-Tax Margin - 3 Yr. Avg. 12.3%
Net Profit Margin 5.4%
Net Profit Margin - 3 Yr. Avg. 4.5%
Effective Tax Rate 56%
Eff/ Tax Rate - 3 Yr. Avg. 50%
Payout Ratio 179.7%

KMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KMI stock intrinsic value calculation we used $13705 million for the last fiscal year's total revenue generated by Kinder Morgan. The default revenue input number comes from 2017 income statement of Kinder Morgan. 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 KMI stock valuation model: a) initial revenue growth rate of 5% 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 8.6%, whose default value for KMI is calculated based on our internal credit rating of Kinder Morgan, 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 Kinder Morgan.
    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 KMI stock the variable cost ratio is equal to 72.6%.

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 KMI 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 5.4% for Kinder Morgan.

Corporate tax rate of 27% is the nominal tax rate for Kinder Morgan. 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 KMI 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 KMI are equal to 472.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Kinder Morgan 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 KMI is equal to -6.7%. 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 - $33636 million for Kinder Morgan - 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 2230 million for Kinder Morgan 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 Kinder Morgan at the current share price and the inputted number of shares is $39.7 billion.

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