Intrinsic value of Kinder Morgan, Inc. - KMI

Previous Close

$20.53

  Intrinsic Value

$10.13

stock screener

  Rating & Target

str. sell

-51%

Previous close

$20.53

 
Intrinsic value

$10.13

 
Up/down potential

-51%

 
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 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 46.5

 

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, %
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
Revenue, $m
  14,724
  15,341
  15,996
  16,691
  17,427
  18,206
  19,029
  19,898
  20,816
  21,784
  22,805
  23,881
  25,014
  26,208
  27,464
  28,787
  30,178
  31,642
  33,181
  34,800
  36,502
  38,291
  40,171
  42,148
  44,225
  46,408
  48,701
  51,111
  53,642
  56,301
Variable operating expenses, $m
  5,729
  5,865
  6,009
  6,162
  6,324
  6,496
  6,677
  6,869
  7,071
  7,285
  5,025
  5,262
  5,512
  5,775
  6,052
  6,343
  6,650
  6,972
  7,311
  7,668
  8,043
  8,437
  8,851
  9,287
  9,745
  10,226
  10,731
  11,262
  11,820
  12,406
Fixed operating expenses, $m
  4,955
  5,064
  5,175
  5,289
  5,405
  5,524
  5,646
  5,770
  5,897
  6,027
  6,159
  6,295
  6,433
  6,575
  6,719
  6,867
  7,018
  7,173
  7,330
  7,492
  7,657
  7,825
  7,997
  8,173
  8,353
  8,537
  8,724
  8,916
  9,113
  9,313
Total operating expenses, $m
  10,684
  10,929
  11,184
  11,451
  11,729
  12,020
  12,323
  12,639
  12,968
  13,312
  11,184
  11,557
  11,945
  12,350
  12,771
  13,210
  13,668
  14,145
  14,641
  15,160
  15,700
  16,262
  16,848
  17,460
  18,098
  18,763
  19,455
  20,178
  20,933
  21,719
Operating income, $m
  4,040
  4,412
  4,812
  5,240
  5,697
  6,185
  6,706
  7,259
  7,848
  8,473
  11,621
  12,324
  13,070
  13,859
  14,693
  15,577
  16,510
  17,497
  18,539
  19,640
  20,802
  22,029
  23,323
  24,688
  26,128
  27,645
  29,246
  30,932
  32,710
  34,583
EBITDA, $m
  8,449
  8,901
  9,386
  9,905
  10,458
  11,048
  11,676
  12,344
  13,052
  13,804
  14,601
  15,444
  16,338
  17,282
  18,282
  19,337
  20,453
  21,631
  22,874
  24,187
  25,571
  27,031
  28,571
  30,194
  31,905
  33,708
  35,608
  37,610
  39,718
  41,938
Interest expense (income), $m
  2,050
  2,015
  2,121
  2,227
  2,340
  2,461
  2,588
  2,722
  2,865
  3,015
  3,174
  3,341
  3,517
  3,703
  3,899
  4,106
  4,323
  4,551
  4,792
  5,045
  5,311
  5,591
  5,885
  6,194
  6,519
  6,861
  7,220
  7,597
  7,994
  8,410
  8,848
Earnings before tax, $m
  2,025
  2,292
  2,585
  2,899
  3,237
  3,598
  3,983
  4,395
  4,833
  5,300
  8,280
  8,807
  9,366
  9,959
  10,588
  11,254
  11,959
  12,705
  13,494
  14,329
  15,211
  16,144
  17,128
  18,168
  19,266
  20,425
  21,648
  22,939
  24,300
  25,735
Tax expense, $m
  547
  619
  698
  783
  874
  971
  1,076
  1,187
  1,305
  1,431
  2,236
  2,378
  2,529
  2,689
  2,859
  3,039
  3,229
  3,430
  3,644
  3,869
  4,107
  4,359
  4,625
  4,905
  5,202
  5,515
  5,845
  6,193
  6,561
  6,948
Net income, $m
  1,478
  1,673
  1,887
  2,117
  2,363
  2,626
  2,908
  3,208
  3,528
  3,869
  6,044
  6,429
  6,837
  7,270
  7,729
  8,215
  8,730
  9,275
  9,851
  10,460
  11,104
  11,785
  12,504
  13,263
  14,065
  14,911
  15,803
  16,745
  17,739
  18,787

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
  82,256
  85,703
  89,363
  93,245
  97,357
  101,707
  106,306
  111,164
  116,291
  121,701
  127,404
  133,414
  139,746
  146,413
  153,432
  160,820
  168,592
  176,769
  185,369
  194,412
  203,920
  213,915
  224,421
  235,463
  247,067
  259,261
  272,073
  285,534
  299,677
  314,533
Adjusted assets (=assets-cash), $m
  82,256
  85,703
  89,363
  93,245
  97,357
  101,707
  106,306
  111,164
  116,291
  121,701
  127,404
  133,414
  139,746
  146,413
  153,432
  160,820
  168,592
  176,769
  185,369
  194,412
  203,920
  213,915
  224,421
  235,463
  247,067
  259,261
  272,073
  285,534
  299,677
  314,533
Revenue / Adjusted assets
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
Average production assets, $m
  53,669
  55,917
  58,306
  60,838
  63,521
  66,359
  69,360
  72,529
  75,875
  79,404
  83,125
  87,047
  91,178
  95,528
  100,108
  104,928
  109,999
  115,334
  120,945
  126,845
  133,048
  139,570
  146,425
  153,629
  161,200
  169,156
  177,515
  186,298
  195,526
  205,219
Working capital, $m
  -1,796
  -1,872
  -1,952
  -2,036
  -2,126
  -2,221
  -2,322
  -2,428
  -2,540
  -2,658
  -2,782
  -2,913
  -3,052
  -3,197
  -3,351
  -3,512
  -3,682
  -3,860
  -4,048
  -4,246
  -4,453
  -4,671
  -4,901
  -5,142
  -5,395
  -5,662
  -5,942
  -6,236
  -6,544
  -6,869
Total debt, $m
  39,269
  41,244
  43,341
  45,566
  47,921
  50,414
  53,049
  55,833
  58,771
  61,870
  65,138
  68,582
  72,210
  76,031
  80,053
  84,286
  88,739
  93,425
  98,352
  103,534
  108,982
  114,709
  120,729
  127,056
  133,705
  140,692
  148,034
  155,747
  163,851
  172,364
Total liabilities, $m
  47,133
  49,108
  51,205
  53,430
  55,785
  58,278
  60,913
  63,697
  66,635
  69,734
  73,002
  76,446
  80,074
  83,895
  87,917
  92,150
  96,603
  101,289
  106,216
  111,398
  116,846
  122,573
  128,593
  134,920
  141,569
  148,556
  155,898
  163,611
  171,715
  180,228
Total equity, $m
  35,124
  36,595
  38,158
  39,816
  41,571
  43,429
  45,393
  47,467
  49,656
  51,966
  54,401
  56,968
  59,671
  62,518
  65,516
  68,670
  71,989
  75,480
  79,152
  83,014
  87,074
  91,342
  95,828
  100,543
  105,498
  110,704
  116,175
  121,923
  127,962
  134,306
Total liabilities and equity, $m
  82,257
  85,703
  89,363
  93,246
  97,356
  101,707
  106,306
  111,164
  116,291
  121,700
  127,403
  133,414
  139,745
  146,413
  153,433
  160,820
  168,592
  176,769
  185,368
  194,412
  203,920
  213,915
  224,421
  235,463
  247,067
  259,260
  272,073
  285,534
  299,677
  314,534
Debt-to-equity ratio
  1.120
  1.130
  1.140
  1.140
  1.150
  1.160
  1.170
  1.180
  1.180
  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
  1.260
  1.270
  1.270
  1.270
  1.280
  1.280
  1.280
Adjusted equity ratio
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,478
  1,673
  1,887
  2,117
  2,363
  2,626
  2,908
  3,208
  3,528
  3,869
  6,044
  6,429
  6,837
  7,270
  7,729
  8,215
  8,730
  9,275
  9,851
  10,460
  11,104
  11,785
  12,504
  13,263
  14,065
  14,911
  15,803
  16,745
  17,739
  18,787
Depreciation, amort., depletion, $m
  4,408
  4,489
  4,574
  4,665
  4,761
  4,863
  4,971
  5,084
  5,204
  5,331
  2,979
  3,120
  3,268
  3,424
  3,588
  3,761
  3,943
  4,134
  4,335
  4,546
  4,769
  5,003
  5,248
  5,506
  5,778
  6,063
  6,363
  6,677
  7,008
  7,356
Funds from operations, $m
  5,886
  6,162
  6,461
  6,782
  7,124
  7,489
  7,878
  8,292
  8,732
  9,199
  9,024
  9,549
  10,105
  10,694
  11,317
  11,976
  12,673
  13,409
  14,186
  15,007
  15,873
  16,787
  17,752
  18,769
  19,842
  20,973
  22,166
  23,423
  24,747
  26,142
Change in working capital, $m
  -71
  -75
  -80
  -85
  -90
  -95
  -100
  -106
  -112
  -118
  -125
  -131
  -138
  -146
  -153
  -161
  -170
  -179
  -188
  -197
  -208
  -218
  -229
  -241
  -253
  -266
  -280
  -294
  -309
  -324
Cash from operations, $m
  5,957
  6,237
  6,541
  6,866
  7,214
  7,584
  7,979
  8,398
  8,844
  9,317
  9,148
  9,680
  10,244
  10,840
  11,470
  12,137
  12,842
  13,587
  14,374
  15,204
  16,081
  17,006
  17,981
  19,011
  20,096
  21,240
  22,446
  23,717
  25,056
  26,466
Maintenance CAPEX, $m
  -1,848
  -1,924
  -2,004
  -2,090
  -2,181
  -2,277
  -2,378
  -2,486
  -2,600
  -2,720
  -2,846
  -2,979
  -3,120
  -3,268
  -3,424
  -3,588
  -3,761
  -3,943
  -4,134
  -4,335
  -4,546
  -4,769
  -5,003
  -5,248
  -5,506
  -5,778
  -6,063
  -6,363
  -6,677
  -7,008
New CAPEX, $m
  -2,116
  -2,249
  -2,388
  -2,533
  -2,683
  -2,838
  -3,001
  -3,169
  -3,345
  -3,529
  -3,721
  -3,921
  -4,131
  -4,350
  -4,580
  -4,820
  -5,071
  -5,335
  -5,611
  -5,900
  -6,203
  -6,521
  -6,855
  -7,204
  -7,571
  -7,956
  -8,359
  -8,783
  -9,227
  -9,693
Cash from investing activities, $m
  -3,964
  -4,173
  -4,392
  -4,623
  -4,864
  -5,115
  -5,379
  -5,655
  -5,945
  -6,249
  -6,567
  -6,900
  -7,251
  -7,618
  -8,004
  -8,408
  -8,832
  -9,278
  -9,745
  -10,235
  -10,749
  -11,290
  -11,858
  -12,452
  -13,077
  -13,734
  -14,422
  -15,146
  -15,904
  -16,701
Free cash flow, $m
  1,993
  2,065
  2,149
  2,244
  2,351
  2,469
  2,600
  2,743
  2,899
  3,069
  2,581
  2,779
  2,993
  3,221
  3,467
  3,729
  4,010
  4,310
  4,629
  4,969
  5,331
  5,716
  6,124
  6,558
  7,018
  7,506
  8,023
  8,571
  9,151
  9,765
Issuance/(repayment) of debt, $m
  1,945
  1,975
  2,097
  2,224
  2,356
  2,493
  2,635
  2,783
  2,938
  3,099
  3,268
  3,444
  3,628
  3,821
  4,022
  4,233
  4,454
  4,685
  4,928
  5,182
  5,448
  5,727
  6,020
  6,327
  6,649
  6,987
  7,341
  7,713
  8,103
  8,513
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  
  1,945
  1,975
  2,097
  2,224
  2,356
  2,493
  2,635
  2,783
  2,938
  3,099
  3,268
  3,444
  3,628
  3,821
  4,022
  4,233
  4,454
  4,685
  4,928
  5,182
  5,448
  5,727
  6,020
  6,327
  6,649
  6,987
  7,341
  7,713
  8,103
  8,513
Total cash flow (excl. dividends), $m
  3,938
  4,040
  4,246
  4,468
  4,707
  4,962
  5,235
  5,526
  5,837
  6,168
  5,849
  6,223
  6,621
  7,042
  7,489
  7,962
  8,464
  8,995
  9,557
  10,151
  10,779
  11,443
  12,144
  12,885
  13,667
  14,493
  15,365
  16,284
  17,255
  18,278
Retained Cash Flow (-), $m
  -1,446
  -1,472
  -1,563
  -1,658
  -1,756
  -1,858
  -1,964
  -2,074
  -2,189
  -2,310
  -2,435
  -2,566
  -2,704
  -2,847
  -2,997
  -3,154
  -3,319
  -3,491
  -3,672
  -3,861
  -4,060
  -4,268
  -4,486
  -4,715
  -4,955
  -5,207
  -5,471
  -5,748
  -6,039
  -6,344
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
  2,493
  2,568
  2,683
  2,811
  2,951
  3,104
  3,271
  3,452
  3,648
  3,858
  3,414
  3,657
  3,917
  4,195
  4,492
  4,808
  5,145
  5,503
  5,885
  6,289
  6,719
  7,175
  7,658
  8,170
  8,712
  9,286
  9,894
  10,536
  11,216
  11,934
Discount rate, %
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
  2,308
  2,185
  2,082
  1,972
  1,855
  1,732
  1,604
  1,471
  1,335
  1,198
  887
  785
  684
  587
  495
  410
  333
  266
  207
  158
  118
  86
  61
  42
  28
  18
  11
  7
  4
  2
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, Inc. (KMI)

Valuation Ratios
P/E Ratio 64.7
Price to Sales 3.5
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 9.6
Price to Free Cash Flow 24
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 $14144 million for the last fiscal year's total revenue generated by Kinder Morgan, Inc.. The default revenue input number comes from 0001 income statement of Kinder Morgan, Inc.. 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 4.1% 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%, whose default value for KMI is calculated based on our internal credit rating of Kinder Morgan, Inc., 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, Inc..
    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 39.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4848 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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Kinder Morgan, Inc.. 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 364.5%.

Life of production assets of 27.9 years is the average useful life of capital assets used in Kinder Morgan, Inc. 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 -12.2%. 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 - $33678 million for Kinder Morgan, Inc. - 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 2263.714 million for Kinder Morgan, Inc. 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, Inc. at the current share price and the inputted number of shares is $46.5 billion.

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