Intrinsic value of Kinder Morgan - KMI

Previous Close

$18.26

  Intrinsic Value

$9.15

stock screener

  Rating & Target

sell

-50%

Previous close

$18.26

 
Intrinsic value

$9.15

 
Up/down potential

-50%

 
Rating

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 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 40.3

 

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
  13,979
  14,301
  14,668
  15,081
  15,538
  16,040
  16,586
  17,177
  17,814
  18,498
  19,229
  20,010
  20,841
  21,724
  22,661
  23,654
  24,705
  25,817
  26,991
  28,232
  29,540
  30,920
  32,375
  33,908
  35,522
  37,221
  39,010
  40,893
  42,873
  44,956
Variable operating expenses, $m
  10,098
  10,272
  10,472
  10,695
  10,943
  11,214
  11,510
  11,831
  12,176
  12,546
  10,416
  10,839
  11,289
  11,767
  12,275
  12,813
  13,382
  13,984
  14,621
  15,292
  16,001
  16,749
  17,537
  18,367
  19,241
  20,162
  21,131
  22,151
  23,224
  24,352
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
  10,098
  10,272
  10,472
  10,695
  10,943
  11,214
  11,510
  11,831
  12,176
  12,546
  10,416
  10,839
  11,289
  11,767
  12,275
  12,813
  13,382
  13,984
  14,621
  15,292
  16,001
  16,749
  17,537
  18,367
  19,241
  20,162
  21,131
  22,151
  23,224
  24,352
Operating income, $m
  3,881
  4,028
  4,197
  4,386
  4,595
  4,825
  5,076
  5,347
  5,638
  5,952
  8,813
  9,171
  9,552
  9,956
  10,386
  10,841
  11,323
  11,832
  12,371
  12,939
  13,539
  14,171
  14,838
  15,540
  16,280
  17,059
  17,879
  18,742
  19,650
  20,604
EBITDA, $m
  8,259
  8,449
  8,666
  8,910
  9,180
  9,476
  9,799
  10,148
  10,525
  10,928
  11,361
  11,822
  12,313
  12,834
  13,388
  13,975
  14,596
  15,252
  15,946
  16,679
  17,452
  18,267
  19,127
  20,032
  20,986
  21,990
  23,047
  24,159
  25,329
  26,560
Interest expense (income), $m
  2,050
  2,044
  2,100
  2,158
  2,224
  2,298
  2,380
  2,470
  2,568
  2,674
  2,788
  2,911
  3,042
  3,182
  3,331
  3,490
  3,658
  3,836
  4,025
  4,224
  4,435
  4,658
  4,893
  5,140
  5,402
  5,677
  5,966
  6,271
  6,592
  6,930
  7,286
Earnings before tax, $m
  1,837
  1,928
  2,039
  2,162
  2,298
  2,446
  2,606
  2,779
  2,965
  3,164
  5,902
  6,129
  6,369
  6,625
  6,896
  7,183
  7,487
  7,807
  8,146
  8,504
  8,881
  9,279
  9,698
  10,139
  10,604
  11,093
  11,608
  12,149
  12,719
  13,319
Tax expense, $m
  496
  521
  551
  584
  620
  660
  704
  750
  800
  854
  1,594
  1,655
  1,720
  1,789
  1,862
  1,939
  2,021
  2,108
  2,199
  2,296
  2,398
  2,505
  2,618
  2,738
  2,863
  2,995
  3,134
  3,280
  3,434
  3,596
Net income, $m
  1,341
  1,408
  1,488
  1,578
  1,677
  1,785
  1,902
  2,029
  2,164
  2,309
  4,309
  4,474
  4,650
  4,836
  5,034
  5,244
  5,465
  5,699
  5,947
  6,208
  6,483
  6,773
  7,079
  7,401
  7,741
  8,098
  8,474
  8,869
  9,285
  9,723

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
  80,804
  82,663
  84,787
  87,172
  89,815
  92,715
  95,872
  99,290
  102,972
  106,924
  111,152
  115,663
  120,466
  125,571
  130,988
  136,728
  142,804
  149,230
  156,019
  163,188
  170,752
  178,730
  187,138
  195,997
  205,328
  215,152
  225,493
  236,374
  247,822
  259,863
Adjusted assets (=assets-cash), $m
  80,804
  82,663
  84,787
  87,172
  89,815
  92,715
  95,872
  99,290
  102,972
  106,924
  111,152
  115,663
  120,466
  125,571
  130,988
  136,728
  142,804
  149,230
  156,019
  163,188
  170,752
  178,730
  187,138
  195,997
  205,328
  215,152
  225,493
  236,374
  247,822
  259,863
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
  53,149
  54,371
  55,768
  57,337
  59,075
  60,983
  63,059
  65,308
  67,730
  70,329
  73,110
  76,077
  79,236
  82,594
  86,157
  89,932
  93,929
  98,155
  102,621
  107,336
  112,312
  117,559
  123,089
  128,916
  135,054
  141,516
  148,317
  155,474
  163,004
  170,924
Working capital, $m
  -923
  -944
  -968
  -995
  -1,026
  -1,059
  -1,095
  -1,134
  -1,176
  -1,221
  -1,269
  -1,321
  -1,375
  -1,434
  -1,496
  -1,561
  -1,631
  -1,704
  -1,781
  -1,863
  -1,950
  -2,041
  -2,137
  -2,238
  -2,344
  -2,457
  -2,575
  -2,699
  -2,830
  -2,967
Total debt, $m
  38,886
  39,955
  41,177
  42,548
  44,068
  45,735
  47,550
  49,516
  51,633
  53,905
  56,336
  58,930
  61,692
  64,627
  67,742
  71,043
  74,536
  78,231
  82,135
  86,257
  90,607
  95,193
  100,028
  105,122
  110,488
  116,137
  122,082
  128,339
  134,922
  141,845
Total liabilities, $m
  46,462
  47,531
  48,753
  50,124
  51,644
  53,311
  55,126
  57,092
  59,209
  61,481
  63,912
  66,506
  69,268
  72,203
  75,318
  78,619
  82,112
  85,807
  89,711
  93,833
  98,183
  102,769
  107,604
  112,698
  118,064
  123,713
  129,658
  135,915
  142,498
  149,421
Total equity, $m
  34,342
  35,132
  36,034
  37,048
  38,171
  39,404
  40,746
  42,198
  43,763
  45,443
  47,240
  49,157
  51,198
  53,368
  55,670
  58,109
  60,692
  63,423
  66,308
  69,355
  72,570
  75,960
  79,534
  83,299
  87,264
  91,440
  95,834
  100,459
  105,324
  110,442
Total liabilities and equity, $m
  80,804
  82,663
  84,787
  87,172
  89,815
  92,715
  95,872
  99,290
  102,972
  106,924
  111,152
  115,663
  120,466
  125,571
  130,988
  136,728
  142,804
  149,230
  156,019
  163,188
  170,753
  178,729
  187,138
  195,997
  205,328
  215,153
  225,492
  236,374
  247,822
  259,863
Debt-to-equity ratio
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.170
  1.170
  1.180
  1.190
  1.190
  1.200
  1.200
  1.210
  1.220
  1.220
  1.230
  1.230
  1.240
  1.240
  1.250
  1.250
  1.260
  1.260
  1.270
  1.270
  1.270
  1.280
  1.280
  1.280
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
  1,341
  1,408
  1,488
  1,578
  1,677
  1,785
  1,902
  2,029
  2,164
  2,309
  4,309
  4,474
  4,650
  4,836
  5,034
  5,244
  5,465
  5,699
  5,947
  6,208
  6,483
  6,773
  7,079
  7,401
  7,741
  8,098
  8,474
  8,869
  9,285
  9,723
Depreciation, amort., depletion, $m
  4,378
  4,421
  4,469
  4,524
  4,584
  4,651
  4,723
  4,802
  4,886
  4,977
  2,547
  2,651
  2,761
  2,878
  3,002
  3,134
  3,273
  3,420
  3,576
  3,740
  3,913
  4,096
  4,289
  4,492
  4,706
  4,931
  5,168
  5,417
  5,680
  5,956
Funds from operations, $m
  5,719
  5,828
  5,958
  6,102
  6,262
  6,436
  6,626
  6,830
  7,050
  7,286
  6,856
  7,125
  7,411
  7,714
  8,036
  8,377
  8,738
  9,119
  9,522
  9,948
  10,396
  10,869
  11,368
  11,893
  12,446
  13,029
  13,642
  14,286
  14,965
  15,678
Change in working capital, $m
  -18
  -21
  -24
  -27
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -58
  -62
  -66
  -69
  -73
  -78
  -82
  -86
  -91
  -96
  -101
  -107
  -112
  -118
  -124
  -131
  -137
Cash from operations, $m
  5,737
  5,849
  5,982
  6,130
  6,292
  6,469
  6,662
  6,869
  7,092
  7,331
  6,904
  7,176
  7,465
  7,772
  8,098
  8,443
  8,807
  9,193
  9,600
  10,030
  10,483
  10,961
  11,464
  11,994
  12,553
  13,141
  13,760
  14,411
  15,095
  15,816
Maintenance CAPEX, $m
  -1,816
  -1,852
  -1,894
  -1,943
  -1,998
  -2,058
  -2,125
  -2,197
  -2,276
  -2,360
  -2,450
  -2,547
  -2,651
  -2,761
  -2,878
  -3,002
  -3,134
  -3,273
  -3,420
  -3,576
  -3,740
  -3,913
  -4,096
  -4,289
  -4,492
  -4,706
  -4,931
  -5,168
  -5,417
  -5,680
New CAPEX, $m
  -1,036
  -1,222
  -1,397
  -1,569
  -1,738
  -1,907
  -2,077
  -2,248
  -2,422
  -2,599
  -2,781
  -2,967
  -3,159
  -3,358
  -3,563
  -3,776
  -3,997
  -4,227
  -4,466
  -4,715
  -4,975
  -5,247
  -5,531
  -5,827
  -6,137
  -6,462
  -6,801
  -7,157
  -7,530
  -7,920
Cash from investing activities, $m
  -2,852
  -3,074
  -3,291
  -3,512
  -3,736
  -3,965
  -4,202
  -4,445
  -4,698
  -4,959
  -5,231
  -5,514
  -5,810
  -6,119
  -6,441
  -6,778
  -7,131
  -7,500
  -7,886
  -8,291
  -8,715
  -9,160
  -9,627
  -10,116
  -10,629
  -11,168
  -11,732
  -12,325
  -12,947
  -13,600
Free cash flow, $m
  2,886
  2,775
  2,690
  2,618
  2,556
  2,504
  2,460
  2,424
  2,395
  2,372
  1,673
  1,662
  1,655
  1,654
  1,657
  1,665
  1,677
  1,694
  1,714
  1,739
  1,767
  1,800
  1,837
  1,878
  1,924
  1,973
  2,027
  2,086
  2,149
  2,216
Issuance/(repayment) of debt, $m
  1,043
  1,069
  1,222
  1,371
  1,520
  1,667
  1,816
  1,965
  2,117
  2,272
  2,431
  2,594
  2,762
  2,935
  3,115
  3,301
  3,494
  3,695
  3,904
  4,122
  4,349
  4,587
  4,835
  5,094
  5,365
  5,649
  5,946
  6,257
  6,582
  6,924
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  
  1,043
  1,069
  1,222
  1,371
  1,520
  1,667
  1,816
  1,965
  2,117
  2,272
  2,431
  2,594
  2,762
  2,935
  3,115
  3,301
  3,494
  3,695
  3,904
  4,122
  4,349
  4,587
  4,835
  5,094
  5,365
  5,649
  5,946
  6,257
  6,582
  6,924
Total cash flow (excl. dividends), $m
  3,929
  3,844
  3,912
  3,989
  4,075
  4,171
  4,276
  4,389
  4,512
  4,644
  4,104
  4,256
  4,417
  4,589
  4,772
  4,966
  5,171
  5,388
  5,618
  5,861
  6,117
  6,387
  6,672
  6,973
  7,289
  7,622
  7,973
  8,342
  8,731
  9,140
Retained Cash Flow (-), $m
  -706
  -790
  -903
  -1,014
  -1,123
  -1,232
  -1,342
  -1,453
  -1,565
  -1,680
  -1,797
  -1,917
  -2,041
  -2,169
  -2,302
  -2,440
  -2,582
  -2,731
  -2,886
  -3,047
  -3,215
  -3,390
  -3,574
  -3,765
  -3,966
  -4,175
  -4,395
  -4,625
  -4,865
  -5,117
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
  3,223
  3,054
  3,009
  2,975
  2,952
  2,939
  2,934
  2,937
  2,947
  2,965
  2,307
  2,338
  2,376
  2,420
  2,470
  2,526
  2,589
  2,657
  2,732
  2,814
  2,902
  2,997
  3,099
  3,207
  3,323
  3,447
  3,578
  3,718
  3,866
  4,022
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
  2,968
  2,569
  2,293
  2,036
  1,796
  1,573
  1,367
  1,177
  1,004
  847
  545
  451
  367
  295
  234
  182
  139
  104
  77
  55
  39
  27
  18
  12
  7
  4
  3
  2
  1
  0
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

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 57.5
Price to Sales 3.1
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 21.4
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 0001 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 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 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 380.2%.

Life of production assets of 28.7 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 -6.6%. 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 2206.83 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 $40.3 billion.

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