Intrinsic value of Antero Resources - AR

Previous Close

$21.35

  Intrinsic Value

$5.02

stock screener

  Rating & Target

str. sell

-77%

  Value-price divergence*

-61%

Previous close

$21.35

 
Intrinsic value

$5.02

 
Up/down potential

-77%

 
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 AR 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 6.7

 

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, %
  -58.36
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,647
  2,635
  4,071
  6,089
  8,834
  12,464
  17,135
  23,001
  30,201
  38,862
  49,086
  60,953
  74,521
  89,823
  106,872
  125,662
  146,175
  168,381
  192,245
  217,728
  244,791
  273,398
  303,522
  335,137
  368,231
  402,797
  438,841
  476,378
  515,432
  556,040
  598,247
Variable operating expenses, $m
 
  1,444
  2,231
  3,337
  4,841
  6,830
  9,390
  12,604
  16,550
  21,296
  26,899
  33,402
  40,838
  49,223
  58,566
  68,863
  80,104
  92,273
  105,350
  119,315
  134,145
  149,822
  166,330
  183,655
  201,790
  220,733
  240,485
  261,055
  282,457
  304,710
  327,839
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
  2,640
  1,444
  2,231
  3,337
  4,841
  6,830
  9,390
  12,604
  16,550
  21,296
  26,899
  33,402
  40,838
  49,223
  58,566
  68,863
  80,104
  92,273
  105,350
  119,315
  134,145
  149,822
  166,330
  183,655
  201,790
  220,733
  240,485
  261,055
  282,457
  304,710
  327,839
Operating income, $m
  -993
  1,191
  1,840
  2,752
  3,993
  5,634
  7,745
  10,396
  13,651
  17,566
  22,187
  27,551
  33,684
  40,600
  48,306
  56,799
  66,071
  76,108
  86,895
  98,413
  110,645
  123,576
  137,192
  151,482
  166,440
  182,064
  198,356
  215,323
  232,975
  251,330
  270,408
EBITDA, $m
  -181
  2,492
  3,850
  5,757
  8,354
  11,786
  16,203
  21,749
  28,558
  36,747
  46,414
  57,636
  70,465
  84,934
  101,055
  118,822
  138,219
  159,217
  181,782
  205,877
  231,467
  258,518
  287,001
  316,896
  348,188
  380,873
  414,956
  450,449
  487,378
  525,776
  565,685
Interest expense (income), $m
  239
  240
  487
  844
  1,345
  2,027
  2,928
  4,089
  5,546
  7,334
  9,486
  12,025
  14,973
  18,344
  22,145
  26,380
  31,047
  36,143
  41,659
  47,587
  53,917
  60,639
  67,746
  75,229
  83,082
  91,303
  99,889
  108,843
  118,167
  127,868
  137,956
Earnings before tax, $m
  -1,246
  951
  1,353
  1,909
  2,648
  3,607
  4,817
  6,308
  8,105
  10,231
  12,701
  15,525
  18,710
  22,256
  26,161
  30,420
  35,024
  39,965
  45,236
  50,826
  56,728
  62,937
  69,446
  76,253
  83,358
  90,762
  98,467
  106,480
  114,808
  123,462
  132,452
Tax expense, $m
  -497
  257
  365
  515
  715
  974
  1,301
  1,703
  2,188
  2,762
  3,429
  4,192
  5,052
  6,009
  7,064
  8,213
  9,456
  10,791
  12,214
  13,723
  15,317
  16,993
  18,750
  20,588
  22,507
  24,506
  26,586
  28,750
  30,998
  33,335
  35,762
Net income, $m
  -849
  694
  988
  1,393
  1,933
  2,633
  3,516
  4,604
  5,917
  7,469
  9,272
  11,334
  13,658
  16,247
  19,098
  22,206
  25,567
  29,175
  33,022
  37,103
  41,412
  45,944
  50,696
  55,665
  60,851
  66,256
  71,881
  77,730
  83,810
  90,127
  96,690

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  105
  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
  14,256
  22,717
  35,098
  52,489
  76,159
  107,450
  147,719
  198,282
  260,356
  335,015
  423,151
  525,458
  642,423
  774,336
  921,307
  1,083,293
  1,260,130
  1,451,564
  1,657,286
  1,876,963
  2,110,263
  2,356,884
  2,616,566
  2,889,114
  3,174,403
  3,472,389
  3,783,113
  4,106,706
  4,443,383
  4,793,451
  5,157,301
Adjusted assets (=assets-cash), $m
  14,151
  22,717
  35,098
  52,489
  76,159
  107,450
  147,719
  198,282
  260,356
  335,015
  423,151
  525,458
  642,423
  774,336
  921,307
  1,083,293
  1,260,130
  1,451,564
  1,657,286
  1,876,963
  2,110,263
  2,356,884
  2,616,566
  2,889,114
  3,174,403
  3,472,389
  3,783,113
  4,106,706
  4,443,383
  4,793,451
  5,157,301
Revenue / Adjusted assets
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
Average production assets, $m
  11,380
  18,209
  28,133
  42,073
  61,046
  86,127
  118,405
  158,935
  208,691
  268,535
  339,181
  421,186
  514,941
  620,676
  738,483
  868,324
  1,010,070
  1,163,515
  1,328,414
  1,504,498
  1,691,502
  1,889,184
  2,097,335
  2,315,798
  2,544,474
  2,783,328
  3,032,392
  3,291,771
  3,561,638
  3,842,239
  4,133,886
Working capital, $m
  -414
  -264
  -407
  -609
  -883
  -1,246
  -1,714
  -2,300
  -3,020
  -3,886
  -4,909
  -6,095
  -7,452
  -8,982
  -10,687
  -12,566
  -14,618
  -16,838
  -19,225
  -21,773
  -24,479
  -27,340
  -30,352
  -33,514
  -36,823
  -40,280
  -43,884
  -47,638
  -51,543
  -55,604
  -59,825
Total debt, $m
  4,704
  9,546
  16,541
  26,367
  39,741
  57,420
  80,172
  108,740
  143,812
  185,995
  235,792
  293,595
  359,680
  434,211
  517,249
  608,771
  708,684
  816,845
  933,078
  1,057,195
  1,189,010
  1,328,350
  1,475,071
  1,629,060
  1,790,249
  1,958,611
  2,134,170
  2,317,000
  2,507,222
  2,705,011
  2,910,586
Total liabilities, $m
  7,993
  12,835
  19,830
  29,656
  43,030
  60,709
  83,461
  112,029
  147,101
  189,284
  239,081
  296,884
  362,969
  437,500
  520,538
  612,060
  711,973
  820,134
  936,367
  1,060,484
  1,192,299
  1,331,639
  1,478,360
  1,632,349
  1,793,538
  1,961,900
  2,137,459
  2,320,289
  2,510,511
  2,708,300
  2,913,875
Total equity, $m
  6,263
  9,882
  15,268
  22,833
  33,129
  46,741
  64,258
  86,252
  113,255
  145,732
  184,071
  228,574
  279,454
  336,836
  400,768
  471,232
  548,156
  631,430
  720,919
  816,479
  917,964
  1,025,244
  1,138,206
  1,256,765
  1,380,865
  1,510,489
  1,645,654
  1,786,417
  1,932,872
  2,085,151
  2,243,426
Total liabilities and equity, $m
  14,256
  22,717
  35,098
  52,489
  76,159
  107,450
  147,719
  198,281
  260,356
  335,016
  423,152
  525,458
  642,423
  774,336
  921,306
  1,083,292
  1,260,129
  1,451,564
  1,657,286
  1,876,963
  2,110,263
  2,356,883
  2,616,566
  2,889,114
  3,174,403
  3,472,389
  3,783,113
  4,106,706
  4,443,383
  4,793,451
  5,157,301
Debt-to-equity ratio
  0.751
  0.970
  1.080
  1.150
  1.200
  1.230
  1.250
  1.260
  1.270
  1.280
  1.280
  1.280
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.300
  1.300
  1.300
  1.300
  1.300
  1.300
  1.300
  1.300
  1.300
  1.300
  1.300
Adjusted equity ratio
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -849
  694
  988
  1,393
  1,933
  2,633
  3,516
  4,604
  5,917
  7,469
  9,272
  11,334
  13,658
  16,247
  19,098
  22,206
  25,567
  29,175
  33,022
  37,103
  41,412
  45,944
  50,696
  55,665
  60,851
  66,256
  71,881
  77,730
  83,810
  90,127
  96,690
Depreciation, amort., depletion, $m
  812
  1,301
  2,010
  3,005
  4,360
  6,152
  8,458
  11,352
  14,907
  19,181
  24,227
  30,085
  36,781
  44,334
  52,749
  62,023
  72,148
  83,108
  94,887
  107,464
  120,822
  134,942
  149,810
  165,414
  181,748
  198,809
  216,599
  235,126
  254,403
  274,446
  295,278
Funds from operations, $m
  1,196
  1,995
  2,998
  4,398
  6,294
  8,785
  11,974
  15,957
  20,823
  26,650
  33,499
  41,418
  50,440
  60,581
  71,846
  84,229
  97,715
  112,283
  127,909
  144,567
  162,233
  180,885
  200,505
  221,079
  242,600
  265,065
  288,480
  312,857
  338,213
  364,573
  391,968
Change in working capital, $m
  -45
  -99
  -144
  -202
  -275
  -363
  -467
  -587
  -720
  -866
  -1,022
  -1,187
  -1,357
  -1,530
  -1,705
  -1,879
  -2,051
  -2,221
  -2,386
  -2,548
  -2,706
  -2,861
  -3,012
  -3,162
  -3,309
  -3,457
  -3,604
  -3,754
  -3,905
  -4,061
  -4,221
Cash from operations, $m
  1,241
  2,094
  3,141
  4,600
  6,568
  9,148
  12,441
  16,543
  21,543
  27,516
  34,521
  42,605
  51,797
  62,111
  73,551
  86,108
  99,766
  114,504
  130,295
  147,115
  164,940
  183,746
  203,517
  224,241
  245,909
  268,522
  292,085
  316,611
  342,118
  368,634
  396,188
Maintenance CAPEX, $m
  0
  -813
  -1,301
  -2,010
  -3,005
  -4,360
  -6,152
  -8,458
  -11,352
  -14,907
  -19,181
  -24,227
  -30,085
  -36,781
  -44,334
  -52,749
  -62,023
  -72,148
  -83,108
  -94,887
  -107,464
  -120,822
  -134,942
  -149,810
  -165,414
  -181,748
  -198,809
  -216,599
  -235,126
  -254,403
  -274,446
New CAPEX, $m
  -2,495
  -6,829
  -9,924
  -13,940
  -18,973
  -25,081
  -32,278
  -40,529
  -49,757
  -59,844
  -70,646
  -82,005
  -93,754
  -105,736
  -117,806
  -129,842
  -141,745
  -153,446
  -164,899
  -176,084
  -187,004
  -197,681
  -208,151
  -218,463
  -228,676
  -238,854
  -249,064
  -259,379
  -269,867
  -280,601
  -291,648
Cash from investing activities, $m
  -2,395
  -7,642
  -11,225
  -15,950
  -21,978
  -29,441
  -38,430
  -48,987
  -61,109
  -74,751
  -89,827
  -106,232
  -123,839
  -142,517
  -162,140
  -182,591
  -203,768
  -225,594
  -248,007
  -270,971
  -294,468
  -318,503
  -343,093
  -368,273
  -394,090
  -420,602
  -447,873
  -475,978
  -504,993
  -535,004
  -566,094
Free cash flow, $m
  -1,154
  -5,548
  -8,084
  -11,349
  -15,410
  -20,294
  -25,989
  -32,443
  -39,566
  -47,234
  -55,306
  -63,627
  -72,042
  -80,406
  -88,589
  -96,482
  -104,002
  -111,090
  -117,712
  -123,855
  -129,529
  -134,756
  -139,575
  -144,032
  -148,181
  -152,080
  -155,789
  -159,367
  -162,875
  -166,370
  -169,905
Issuance/(repayment) of debt, $m
  48
  4,842
  6,995
  9,826
  13,374
  17,679
  22,752
  28,568
  35,072
  42,182
  49,797
  57,803
  66,085
  74,531
  83,039
  91,522
  99,913
  108,160
  116,233
  124,117
  131,815
  139,341
  146,721
  153,990
  161,188
  168,362
  175,559
  182,830
  190,223
  197,788
  205,575
Issuance/(repurchase) of shares, $m
  1,256
  3,030
  4,398
  6,172
  8,363
  10,978
  14,001
  17,390
  21,086
  25,008
  29,068
  33,170
  37,221
  41,135
  44,835
  48,258
  51,357
  54,099
  56,467
  58,456
  60,074
  61,336
  62,266
  62,893
  63,249
  63,368
  63,284
  63,032
  62,644
  62,152
  61,585
Cash from financing (excl. dividends), $m  
  1,162
  7,872
  11,393
  15,998
  21,737
  28,657
  36,753
  45,958
  56,158
  67,190
  78,865
  90,973
  103,306
  115,666
  127,874
  139,780
  151,270
  162,259
  172,700
  182,573
  191,889
  200,677
  208,987
  216,883
  224,437
  231,730
  238,843
  245,862
  252,867
  259,940
  267,160
Total cash flow (excl. dividends), $m
  8
  2,324
  3,309
  4,649
  6,327
  8,364
  10,764
  13,515
  16,592
  19,956
  23,558
  27,346
  31,264
  35,260
  39,284
  43,298
  47,267
  51,169
  54,988
  58,718
  62,360
  65,920
  69,412
  72,850
  76,256
  79,650
  83,055
  86,494
  89,992
  93,571
  97,255
Retained Cash Flow (-), $m
  -329
  -3,724
  -5,386
  -7,565
  -10,296
  -13,611
  -17,517
  -21,995
  -27,002
  -32,477
  -38,339
  -44,503
  -50,880
  -57,382
  -63,932
  -70,464
  -76,924
  -83,274
  -89,489
  -95,559
  -101,486
  -107,280
  -112,962
  -118,558
  -124,101
  -129,624
  -135,165
  -140,763
  -146,455
  -152,280
  -158,275
Prev. year cash balance distribution, $m
 
  105
  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
 
  -1,295
  -2,076
  -2,917
  -3,970
  -5,248
  -6,753
  -8,480
  -10,410
  -12,521
  -14,781
  -17,157
  -19,616
  -22,123
  -24,648
  -27,166
  -29,657
  -32,105
  -34,501
  -36,841
  -39,126
  -41,360
  -43,550
  -45,708
  -47,845
  -49,974
  -52,110
  -54,268
  -56,463
  -58,708
  -61,020
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  -1,213
  -1,809
  -2,348
  -2,932
  -3,528
  -4,099
  -4,605
  -5,012
  -5,290
  -5,422
  -5,403
  -5,239
  -4,947
  -4,552
  -4,085
  -3,575
  -3,053
  -2,544
  -2,069
  -1,641
  -1,270
  -958
  -704
  -504
  -351
  -238
  -157
  -100
  -62
  -37
Current shareholders' claim on cash, %
  100
  68.4
  48.2
  34.9
  26.0
  19.8
  15.5
  12.3
  10.0
  8.3
  7.0
  6.0
  5.2
  4.6
  4.1
  3.6
  3.3
  3.0
  2.8
  2.6
  2.4
  2.3
  2.2
  2.1
  2.0
  1.9
  1.8
  1.7
  1.7
  1.6
  1.6

Antero Resources Corporation, an independent oil and natural gas company, acquires, explores, and develops natural gas, natural gas liquids, and oil properties in the United States. As of December 31, 2015, the company had 569,000 net acres of oil and gas properties located in the Appalachian Basin in West Virginia, Ohio, and Pennsylvania. It also owned and operated 182 miles of gas gathering pipelines in the Marcellus Shale; and 110 miles of low-pressure, high-pressure, and condensate pipelines in the Utica Shale. The company was formerly known as Antero Resources Appalachian Corporation and changed its name to Antero Resources Corporation in June 2013. Antero Resources Corporation was founded in 2002 and is headquartered in Denver, Colorado. Antero Resources Corporation is a subsidiary of Antero Resources Investment LLC.

FINANCIAL RATIOS  of  Antero Resources (AR)

Valuation Ratios
P/E Ratio -7.9
Price to Sales 4.1
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow -5.4
Growth Rates
Sales Growth Rate -58.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 6.3%
Cap. Spend. - 3 Yr. Gr. Rate -1.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 75.1%
Total Debt to Equity 75.1%
Interest Coverage -4
Management Effectiveness
Return On Assets -5%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital -7.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.7%
Return On Equity -13.9%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 92.9%
Gross Margin - 3 Yr. Avg. 95.2%
EBITDA Margin -11.8%
EBITDA Margin - 3 Yr. Avg. 38.9%
Operating Margin -60.3%
Oper. Margin - 3 Yr. Avg. 10.9%
Pre-Tax Margin -75.7%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin -51.5%
Net Profit Margin - 3 Yr. Avg. -0.9%
Effective Tax Rate 39.9%
Eff/ Tax Rate - 3 Yr. Avg. 38.9%
Payout Ratio 0%

AR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AR stock intrinsic value calculation we used $1647 million for the last fiscal year's total revenue generated by Antero Resources. The default revenue input number comes from 2016 income statement of Antero Resources. 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 AR stock valuation model: a) initial revenue growth rate of 60% 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 6.8%, whose default value for AR is calculated based on our internal credit rating of Antero Resources, 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 Antero Resources.
    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 AR stock the variable cost ratio is equal to 54.8%.

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 AR 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 5.1% for Antero Resources.

Corporate tax rate of 27% is the nominal tax rate for Antero Resources. 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 AR 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 AR are equal to 691%.

Life of production assets of 14 years is the average useful life of capital assets used in Antero Resources 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 AR is equal to -10%. 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 - $6263 million for Antero Resources - 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 312.219 million for Antero Resources 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 Antero Resources at the current share price and the inputted number of shares is $6.7 billion.

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Stock chart of AR Financial statements of AR Annual reports of AR
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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