Intrinsic value of Kinder Morgan - KMI

Previous Close

$18.58

  Intrinsic Value

$5.71

stock screener

  Rating & Target

str. sell

-69%

  Value-price divergence*

-61%

Previous close

$18.58

 
Intrinsic value

$5.71

 
Up/down potential

-69%

 
Rating

str. sell

 
Value-price divergence*

-61%

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

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 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 41.8

 

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, %
  -9.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
Revenue, $m
  13,058
  13,985
  14,949
  15,950
  16,992
  18,076
  19,204
  20,378
  21,602
  22,877
  24,207
  25,595
  27,043
  28,556
  30,136
  31,788
  33,514
  35,321
  37,210
  39,188
  41,259
  43,427
  45,698
  48,077
  50,571
  53,184
  55,923
  58,796
  61,807
  64,965
  68,278
Variable operating expenses, $m
 
  11,478
  12,117
  12,780
  13,470
  14,188
  14,935
  15,713
  16,523
  17,368
  18,249
  16,953
  17,912
  18,914
  19,961
  21,055
  22,199
  23,395
  24,647
  25,957
  27,328
  28,764
  30,268
  31,844
  33,496
  35,227
  37,041
  38,944
  40,938
  43,030
  45,224
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
  10,096
  11,478
  12,117
  12,780
  13,470
  14,188
  14,935
  15,713
  16,523
  17,368
  18,249
  16,953
  17,912
  18,914
  19,961
  21,055
  22,199
  23,395
  24,647
  25,957
  27,328
  28,764
  30,268
  31,844
  33,496
  35,227
  37,041
  38,944
  40,938
  43,030
  45,224
Operating income, $m
  2,962
  2,507
  2,832
  3,170
  3,522
  3,888
  4,269
  4,665
  5,079
  5,509
  5,958
  8,642
  9,131
  9,642
  10,175
  10,733
  11,316
  11,926
  12,564
  13,232
  13,931
  14,663
  15,430
  16,233
  17,075
  17,957
  18,882
  19,852
  20,869
  21,935
  23,054
EBITDA, $m
  5,171
  6,265
  6,696
  7,145
  7,612
  8,097
  8,602
  9,128
  9,676
  10,248
  10,843
  11,465
  12,114
  12,791
  13,499
  14,239
  15,013
  15,822
  16,668
  17,554
  18,482
  19,453
  20,470
  21,536
  22,653
  23,824
  25,051
  26,337
  27,686
  29,101
  30,585
Interest expense (income), $m
  2,050
  1,929
  2,088
  2,252
  2,422
  2,598
  2,782
  2,974
  3,173
  3,381
  3,597
  3,823
  4,058
  4,304
  4,561
  4,829
  5,109
  5,402
  5,709
  6,029
  6,365
  6,717
  7,084
  7,470
  7,874
  8,297
  8,740
  9,205
  9,693
  10,204
  10,740
Earnings before tax, $m
  1,638
  578
  744
  919
  1,101
  1,290
  1,487
  1,692
  1,906
  2,129
  2,361
  4,819
  5,073
  5,338
  5,614
  5,904
  6,207
  6,523
  6,855
  7,202
  7,566
  7,946
  8,345
  8,763
  9,201
  9,660
  10,142
  10,647
  11,176
  11,731
  12,314
Tax expense, $m
  917
  156
  201
  248
  297
  348
  401
  457
  515
  575
  638
  1,301
  1,370
  1,441
  1,516
  1,594
  1,676
  1,761
  1,851
  1,945
  2,043
  2,145
  2,253
  2,366
  2,484
  2,608
  2,738
  2,875
  3,018
  3,167
  3,325
Net income, $m
  708
  422
  543
  671
  803
  941
  1,085
  1,235
  1,391
  1,554
  1,724
  3,518
  3,703
  3,896
  4,099
  4,310
  4,531
  4,762
  5,004
  5,258
  5,523
  5,801
  6,092
  6,397
  6,717
  7,052
  7,404
  7,772
  8,159
  8,564
  8,989

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  684
  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
  80,305
  85,275
  91,151
  97,259
  103,610
  110,218
  117,096
  124,258
  131,719
  139,495
  147,605
  156,066
  164,898
  174,121
  183,756
  193,827
  204,356
  215,369
  226,892
  238,952
  251,577
  264,798
  278,647
  293,155
  308,359
  324,293
  340,997
  358,509
  376,873
  396,131
  416,329
Adjusted assets (=assets-cash), $m
  79,621
  85,275
  91,151
  97,259
  103,610
  110,218
  117,096
  124,258
  131,719
  139,495
  147,605
  156,066
  164,898
  174,121
  183,756
  193,827
  204,356
  215,369
  226,892
  238,952
  251,577
  264,798
  278,647
  293,155
  308,359
  324,293
  340,997
  358,509
  376,873
  396,131
  416,329
Revenue / Adjusted assets
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
Average production assets, $m
  43,061
  46,123
  49,301
  52,604
  56,040
  59,614
  63,334
  67,208
  71,243
  75,449
  79,835
  84,412
  89,189
  94,177
  99,389
  104,836
  110,531
  116,487
  122,720
  129,242
  136,071
  143,222
  150,712
  158,560
  166,783
  175,401
  184,436
  193,908
  203,840
  214,256
  225,181
Working capital, $m
  -2,695
  -727
  -777
  -829
  -884
  -940
  -999
  -1,060
  -1,123
  -1,190
  -1,259
  -1,331
  -1,406
  -1,485
  -1,567
  -1,653
  -1,743
  -1,837
  -1,935
  -2,038
  -2,145
  -2,258
  -2,376
  -2,500
  -2,630
  -2,766
  -2,908
  -3,057
  -3,214
  -3,378
  -3,550
Total debt, $m
  40,050
  42,612
  45,950
  49,419
  53,027
  56,780
  60,687
  64,754
  68,992
  73,409
  78,016
  82,822
  87,838
  93,077
  98,550
  104,270
  110,250
  116,506
  123,051
  129,901
  137,072
  144,582
  152,447
  160,688
  169,324
  178,375
  187,862
  197,809
  208,240
  219,178
  230,651
Total liabilities, $m
  45,874
  48,436
  51,774
  55,243
  58,851
  62,604
  66,511
  70,578
  74,816
  79,233
  83,840
  88,646
  93,662
  98,901
  104,374
  110,094
  116,074
  122,330
  128,875
  135,725
  142,896
  150,406
  158,271
  166,512
  175,148
  184,199
  193,686
  203,633
  214,064
  225,002
  236,475
Total equity, $m
  34,431
  36,839
  39,377
  42,016
  44,760
  47,614
  50,586
  53,679
  56,903
  60,262
  63,765
  67,421
  71,236
  75,220
  79,383
  83,733
  88,282
  93,040
  98,017
  103,227
  108,681
  114,393
  120,375
  126,643
  133,211
  140,095
  147,311
  154,876
  162,809
  171,128
  179,854
Total liabilities and equity, $m
  80,305
  85,275
  91,151
  97,259
  103,611
  110,218
  117,097
  124,257
  131,719
  139,495
  147,605
  156,067
  164,898
  174,121
  183,757
  193,827
  204,356
  215,370
  226,892
  238,952
  251,577
  264,799
  278,646
  293,155
  308,359
  324,294
  340,997
  358,509
  376,873
  396,130
  416,329
Debt-to-equity ratio
  1.163
  1.160
  1.170
  1.180
  1.180
  1.190
  1.200
  1.210
  1.210
  1.220
  1.220
  1.230
  1.230
  1.240
  1.240
  1.250
  1.250
  1.250
  1.260
  1.260
  1.260
  1.260
  1.270
  1.270
  1.270
  1.270
  1.280
  1.280
  1.280
  1.280
  1.280
Adjusted equity ratio
  0.424
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  708
  422
  543
  671
  803
  941
  1,085
  1,235
  1,391
  1,554
  1,724
  3,518
  3,703
  3,896
  4,099
  4,310
  4,531
  4,762
  5,004
  5,258
  5,523
  5,801
  6,092
  6,397
  6,717
  7,052
  7,404
  7,772
  8,159
  8,564
  8,989
Depreciation, amort., depletion, $m
  2,209
  3,758
  3,864
  3,975
  4,089
  4,209
  4,333
  4,463
  4,598
  4,739
  4,885
  2,823
  2,983
  3,150
  3,324
  3,506
  3,697
  3,896
  4,104
  4,322
  4,551
  4,790
  5,041
  5,303
  5,578
  5,866
  6,168
  6,485
  6,817
  7,166
  7,531
Funds from operations, $m
  4,612
  4,180
  4,407
  4,645
  4,893
  5,150
  5,419
  5,698
  5,989
  6,292
  6,609
  6,341
  6,686
  7,046
  7,423
  7,816
  8,228
  8,658
  9,108
  9,580
  10,074
  10,591
  11,133
  11,700
  12,295
  12,918
  13,572
  14,257
  14,976
  15,730
  16,520
Change in working capital, $m
  -175
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -118
  -124
  -130
  -136
  -142
  -149
  -157
  -164
  -172
Cash from operations, $m
  4,787
  4,228
  4,457
  4,697
  4,947
  5,207
  5,477
  5,759
  6,053
  6,359
  6,678
  6,413
  6,761
  7,125
  7,505
  7,902
  8,317
  8,752
  9,207
  9,683
  10,181
  10,704
  11,251
  11,824
  12,425
  13,054
  13,714
  14,407
  15,133
  15,894
  16,692
Maintenance CAPEX, $m
  0
  -1,440
  -1,543
  -1,649
  -1,759
  -1,874
  -1,994
  -2,118
  -2,248
  -2,383
  -2,523
  -2,670
  -2,823
  -2,983
  -3,150
  -3,324
  -3,506
  -3,697
  -3,896
  -4,104
  -4,322
  -4,551
  -4,790
  -5,041
  -5,303
  -5,578
  -5,866
  -6,168
  -6,485
  -6,817
  -7,166
New CAPEX, $m
  -2,882
  -3,062
  -3,178
  -3,304
  -3,436
  -3,574
  -3,720
  -3,874
  -4,035
  -4,206
  -4,386
  -4,576
  -4,777
  -4,988
  -5,212
  -5,447
  -5,695
  -5,957
  -6,232
  -6,523
  -6,829
  -7,151
  -7,490
  -7,847
  -8,223
  -8,619
  -9,034
  -9,472
  -9,932
  -10,416
  -10,925
Cash from investing activities, $m
  -1,705
  -4,502
  -4,721
  -4,953
  -5,195
  -5,448
  -5,714
  -5,992
  -6,283
  -6,589
  -6,909
  -7,246
  -7,600
  -7,971
  -8,362
  -8,771
  -9,201
  -9,654
  -10,128
  -10,627
  -11,151
  -11,702
  -12,280
  -12,888
  -13,526
  -14,197
  -14,900
  -15,640
  -16,417
  -17,233
  -18,091
Free cash flow, $m
  3,082
  -275
  -263
  -255
  -248
  -242
  -236
  -233
  -231
  -230
  -232
  -833
  -839
  -846
  -857
  -869
  -884
  -901
  -921
  -944
  -970
  -998
  -1,030
  -1,064
  -1,102
  -1,142
  -1,186
  -1,234
  -1,285
  -1,340
  -1,398
Issuance/(repayment) of debt, $m
  -1,431
  3,246
  3,337
  3,469
  3,608
  3,753
  3,907
  4,068
  4,238
  4,417
  4,606
  4,806
  5,016
  5,239
  5,473
  5,720
  5,981
  6,255
  6,545
  6,850
  7,171
  7,510
  7,866
  8,241
  8,636
  9,051
  9,488
  9,947
  10,430
  10,938
  11,473
Issuance/(repurchase) of shares, $m
  0
  1,986
  1,995
  1,968
  1,941
  1,913
  1,886
  1,859
  1,832
  1,806
  1,780
  137
  112
  88
  64
  41
  18
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,357
  5,232
  5,332
  5,437
  5,549
  5,666
  5,793
  5,927
  6,070
  6,223
  6,386
  4,943
  5,128
  5,327
  5,537
  5,761
  5,999
  6,255
  6,545
  6,850
  7,171
  7,510
  7,866
  8,241
  8,636
  9,051
  9,488
  9,947
  10,430
  10,938
  11,473
Total cash flow (excl. dividends), $m
  1,727
  4,958
  5,069
  5,182
  5,301
  5,425
  5,556
  5,694
  5,839
  5,993
  6,154
  4,110
  4,290
  4,480
  4,680
  4,892
  5,115
  5,354
  5,623
  5,906
  6,201
  6,511
  6,836
  7,177
  7,534
  7,908
  8,301
  8,713
  9,145
  9,599
  10,075
Retained Cash Flow (-), $m
  688
  -2,408
  -2,538
  -2,639
  -2,744
  -2,855
  -2,971
  -3,094
  -3,223
  -3,360
  -3,503
  -3,655
  -3,815
  -3,984
  -4,163
  -4,351
  -4,549
  -4,758
  -4,978
  -5,210
  -5,454
  -5,712
  -5,982
  -6,268
  -6,568
  -6,884
  -7,216
  -7,565
  -7,933
  -8,319
  -8,726
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
 
  2,550
  2,531
  2,543
  2,557
  2,570
  2,585
  2,600
  2,616
  2,633
  2,651
  455
  475
  496
  518
  541
  566
  596
  646
  696
  747
  800
  854
  909
  966
  1,025
  1,085
  1,148
  1,213
  1,280
  1,349
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  2,341
  2,117
  1,921
  1,727
  1,538
  1,355
  1,182
  1,018
  866
  727
  103
  87
  72
  59
  47
  37
  29
  23
  17
  13
  9
  7
  4
  3
  2
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  95.5
  91.4
  87.8
  84.5
  81.7
  79.1
  76.8
  74.7
  72.8
  71.0
  70.9
  70.8
  70.7
  70.7
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6

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 58.5
Price to Sales 3.2
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 8.7
Price to Free Cash Flow 21.8
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 $13058 million for the last fiscal year's total revenue generated by Kinder Morgan. The default revenue input number comes from 2016 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 7.1% 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 8.9%, 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 83.2%.

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 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 4.9% 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 329.8%.

Life of production assets of 29.9 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 -5.2%. 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 - $34431 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 2247.26 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 $41.8 billion.

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COMPANY NEWS

▶ Kinder Morgan Announces Third Quarter 17 Earnings Webcast   [Oct-16-17 09:30AM  Business Wire]
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▶ Whats Hurting Kinder Morgan Stock?   [07:38AM  Market Realist]
▶ Will Kinder Morgan Beat Its Net Income Estimates for 3Q17?   [Oct-11-17 05:35PM  Market Realist]
▶ Why Kinder Morgan Stock Underperformed Peers Last Week   [Oct-09-17 06:05PM  Market Realist]
▶ Targa creates JV for one Texas pipeline, intends to join JV for another   [02:05PM  American City Business Journals]
▶ 52-Week Company Lows   [11:11AM  GuruFocus.com]
▶ Short Interest in Kinder Morgan Rose 2% Recently   [Oct-03-17 03:06PM  Market Realist]
▶ 2 Stocks You've Been Ignoring   [Sep-30-17 09:00PM  Motley Fool]
▶ Whats Driving Williams Companies Sluggish Performance?   [Sep-29-17 11:57AM  Market Realist]
▶ 3 Value Stocks to Hold for a Decade   [06:08AM  Motley Fool]
▶ Is Kinder Morgans Valuation Attractive?   [04:36PM  Market Realist]
▶ Is Kinder Morgan, Inc. a Buy?   [Sep-24-17 09:09AM  Motley Fool]
▶ More than 70% of the Analysts Rate ONEOK as a Hold   [Sep-22-17 03:05PM  Market Realist]
▶ Can ONEOK Stock Gain Upward Momentum?   [01:36PM  Market Realist]
▶ Short Interest in Kinder Morgan Has Risen 12%   [Sep-19-17 10:38AM  Market Realist]
▶ If You're Retired, Consider Buying These 3 Stocks   [Sep-16-17 11:32AM  Motley Fool]
▶ Better Buy: Kinder Morgan, Inc. vs. ONEOK, Inc.   [Sep-14-17 02:17PM  Motley Fool]
▶ What Analysts Recommend for Kinder Morgan   [07:38AM  Market Realist]
▶ Kinder Morgan Underperformed Peers Last Week   [04:04PM  Market Realist]
▶ Is TransCanada Corporation a Buy?   [10:05AM  Motley Fool]
Financial statements of KMI
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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