Stock Analysis on Net

Kinder Morgan Inc. (NYSE:KMI)

This company has been moved to the archive! The financial data has not been updated since April 29, 2020.

Present Value of Free Cash Flow to Equity (FCFE) 

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.


Intrinsic Stock Value (Valuation Summary)

Kinder Morgan Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 12.11%
01 FCFE0 -720
1 FCFE1 = -720 × (1 + 0.00%)
2 FCFE2 = × (1 + 0.00%)
3 FCFE3 = × (1 + 0.00%)
4 FCFE4 = × (1 + 0.00%)
5 FCFE5 = × (1 + 0.00%)
5 Terminal value (TV5) = × (1 + 0.00%) ÷ (12.11%0.00%)
Intrinsic value of Kinder Morgan Inc. common stock
 
Intrinsic value of Kinder Morgan Inc. common stock (per share) $—
Current share price $15.71

Based on: 10-K (reporting date: 2019-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.67%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Kinder Morgan Inc. common stock βKMI 0.82
 
Required rate of return on Kinder Morgan Inc. common stock3 rKMI 12.11%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rKMI = RF + βKMI [E(RM) – RF]
= 4.67% + 0.82 [13.79%4.67%]
= 12.11%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Kinder Morgan Inc., PRAT model

Microsoft Excel
Average Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Common stock dividends 2,163 1,618 1,120 1,118 4,224
Preferred stock dividends 128 156 156 26
Net income attributable to Kinder Morgan, Inc. 2,190 1,609 183 708 253
Revenues 13,209 14,144 13,705 13,058 14,403
Total assets 74,157 78,866 79,055 80,305 84,104
Total Kinder Morgan, Inc.’s stockholders’ equity 33,742 33,678 33,636 34,431 35,119
Financial Ratios
Retention rate1 0.01 -0.09 -40.48 -1.03 -17.61
Profit margin2 16.58% 10.47% 0.20% 4.23% 1.58%
Asset turnover3 0.18 0.18 0.17 0.16 0.17
Financial leverage4 2.20 2.34 2.35 2.33 2.39
Averages
Retention rate -11.84
Profit margin 6.61%
Asset turnover 0.17
Financial leverage 2.35
 
FCFE growth rate (g)5 0.00%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

1 Retention rate = (Net income attributable to Kinder Morgan, Inc. – Common stock dividends – Preferred stock dividends) ÷ (Net income attributable to Kinder Morgan, Inc. – Preferred stock dividends)
= (2,1902,1630) ÷ (2,1900)
= 0.01

2 Profit margin = 100 × (Net income attributable to Kinder Morgan, Inc. – Preferred stock dividends) ÷ Revenues
= 100 × (2,1900) ÷ 13,209
= 16.58%

3 Asset turnover = Revenues ÷ Total assets
= 13,209 ÷ 74,157
= 0.18

4 Financial leverage = Total assets ÷ Total Kinder Morgan, Inc.’s stockholders’ equity
= 74,157 ÷ 33,742
= 2.20

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= -11.84 × 6.61% × 0.17 × 2.35
= 0.00%


FCFE growth rate (g) forecast

Kinder Morgan Inc., H-model

Microsoft Excel
Year Value gt
1 g1 0.00%
2 g2 0.00%
3 g3 0.00%
4 g4 0.00%
5 and thereafter g5 0.00%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 0.00% + (0.00%0.00%) × (2 – 1) ÷ (5 – 1)
= 0.00%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 0.00% + (0.00%0.00%) × (3 – 1) ÷ (5 – 1)
= 0.00%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 0.00% + (0.00%0.00%) × (4 – 1) ÷ (5 – 1)
= 0.00%