Intrinsic value of Continental Resources - CLR

Previous Close

$55.17

  Intrinsic Value

$2.87

stock screener

  Rating & Target

str. sell

-95%

Previous close

$55.17

 
Intrinsic value

$2.87

 
Up/down potential

-95%

 
Rating

str. sell

We calculate the intrinsic value of CLR 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -26.12
  38.20
  34.88
  31.89
  29.20
  26.78
  24.60
  22.64
  20.88
  19.29
  17.86
  16.58
  15.42
  14.38
  13.44
  12.60
  11.84
  11.15
  10.54
  9.98
  9.48
  9.04
  8.63
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
  6.74
  6.56
Revenue, $m
  2,052
  2,736
  3,691
  4,868
  6,289
  7,974
  9,936
  12,186
  14,730
  17,572
  20,710
  24,143
  27,866
  31,872
  36,155
  40,709
  45,527
  50,604
  55,936
  61,521
  67,356
  73,442
  79,782
  86,380
  93,241
  100,372
  107,783
  115,484
  123,488
  131,808
  140,459
Variable operating expenses, $m
 
  2,383
  3,215
  4,240
  5,478
  6,945
  8,654
  10,614
  12,830
  15,305
  18,039
  21,029
  24,271
  27,760
  31,491
  35,458
  39,654
  44,076
  48,721
  53,585
  58,667
  63,968
  69,490
  75,237
  81,213
  87,424
  93,879
  100,587
  107,558
  114,805
  122,340
Fixed operating expenses, $m
 
  598
  613
  628
  644
  660
  676
  693
  710
  728
  746
  765
  784
  804
  824
  844
  865
  887
  909
  932
  955
  979
  1,004
  1,029
  1,054
  1,081
  1,108
  1,136
  1,164
  1,193
  1,223
Total operating expenses, $m
  2,294
  2,981
  3,828
  4,868
  6,122
  7,605
  9,330
  11,307
  13,540
  16,033
  18,785
  21,794
  25,055
  28,564
  32,315
  36,302
  40,519
  44,963
  49,630
  54,517
  59,622
  64,947
  70,494
  76,266
  82,267
  88,505
  94,987
  101,723
  108,722
  115,998
  123,563
Operating income, $m
  -314
  -245
  -136
  0
  168
  369
  606
  879
  1,190
  1,539
  1,925
  2,350
  2,811
  3,308
  3,840
  4,407
  5,008
  5,641
  6,307
  7,004
  7,734
  8,495
  9,288
  10,114
  10,974
  11,867
  12,796
  13,762
  14,766
  15,810
  16,896
EBITDA, $m
  1,396
  2,112
  3,042
  4,193
  5,585
  7,237
  9,163
  11,374
  13,876
  16,672
  19,762
  23,143
  26,810
  30,758
  34,980
  39,468
  44,219
  49,225
  54,483
  59,990
  65,745
  71,748
  78,002
  84,510
  91,279
  98,314
  105,626
  113,224
  121,122
  129,332
  137,869
Interest expense (income), $m
  316
  303
  467
  678
  937
  1,250
  1,620
  2,052
  2,547
  3,107
  3,733
  4,423
  5,179
  5,998
  6,880
  7,823
  8,825
  9,886
  11,003
  12,177
  13,406
  14,690
  16,030
  17,425
  18,877
  20,387
  21,957
  23,588
  25,283
  27,045
  28,876
Earnings before tax, $m
  -632
  -547
  -604
  -677
  -769
  -880
  -1,015
  -1,173
  -1,357
  -1,569
  -1,807
  -2,074
  -2,368
  -2,691
  -3,040
  -3,416
  -3,818
  -4,245
  -4,697
  -5,173
  -5,672
  -6,195
  -6,741
  -7,311
  -7,904
  -8,520
  -9,161
  -9,826
  -10,517
  -11,234
  -11,979
Tax expense, $m
  -232
  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
Net income, $m
  -400
  -547
  -604
  -677
  -769
  -880
  -1,015
  -1,173
  -1,357
  -1,569
  -1,807
  -2,074
  -2,368
  -2,691
  -3,040
  -3,416
  -3,818
  -4,245
  -4,697
  -5,173
  -5,672
  -6,195
  -6,741
  -7,311
  -7,904
  -8,520
  -9,161
  -9,826
  -10,517
  -11,234
  -11,979

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17
  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
  13,812
  19,003
  25,631
  33,805
  43,677
  55,374
  68,999
  84,623
  102,291
  122,025
  143,822
  167,662
  193,512
  221,333
  251,078
  282,702
  316,161
  351,419
  388,448
  427,227
  467,749
  510,016
  554,044
  599,861
  647,505
  697,027
  748,492
  801,972
  857,554
  915,331
  975,411
Adjusted assets (=assets-cash), $m
  13,795
  19,003
  25,631
  33,805
  43,677
  55,374
  68,999
  84,623
  102,291
  122,025
  143,822
  167,662
  193,512
  221,333
  251,078
  282,702
  316,161
  351,419
  388,448
  427,227
  467,749
  510,016
  554,044
  599,861
  647,505
  697,027
  748,492
  801,972
  857,554
  915,331
  975,411
Revenue / Adjusted assets
  0.149
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
Average production assets, $m
  13,473
  18,618
  25,112
  33,121
  42,793
  54,254
  67,603
  82,911
  100,223
  119,557
  140,913
  164,271
  189,599
  216,857
  246,000
  276,984
  309,767
  344,312
  380,592
  418,587
  458,289
  499,702
  542,839
  587,729
  634,410
  682,931
  733,354
  785,753
  840,210
  896,820
  955,685
Working capital, $m
  -19
  -47
  -63
  -83
  -107
  -136
  -169
  -207
  -250
  -299
  -352
  -410
  -474
  -542
  -615
  -692
  -774
  -860
  -951
  -1,046
  -1,145
  -1,249
  -1,356
  -1,468
  -1,585
  -1,706
  -1,832
  -1,963
  -2,099
  -2,241
  -2,388
Total debt, $m
  6,580
  10,163
  14,729
  20,361
  27,163
  35,223
  44,610
  55,375
  67,549
  81,145
  96,163
  112,589
  130,400
  149,569
  170,063
  191,851
  214,905
  239,198
  264,711
  291,429
  319,349
  348,471
  378,807
  410,374
  443,201
  477,322
  512,781
  549,629
  587,924
  627,733
  669,129
Total liabilities, $m
  9,510
  13,093
  17,659
  23,291
  30,093
  38,153
  47,540
  58,305
  70,479
  84,075
  99,093
  115,519
  133,330
  152,499
  172,993
  194,781
  217,835
  242,128
  267,641
  294,359
  322,279
  351,401
  381,737
  413,304
  446,131
  480,252
  515,711
  552,559
  590,854
  630,663
  672,059
Total equity, $m
  4,302
  5,910
  7,971
  10,513
  13,583
  17,221
  21,459
  26,318
  31,813
  37,950
  44,728
  52,143
  60,182
  68,835
  78,085
  87,920
  98,326
  109,291
  120,807
  132,868
  145,470
  158,615
  172,308
  186,557
  201,374
  216,776
  232,781
  249,413
  266,699
  284,668
  303,353
Total liabilities and equity, $m
  13,812
  19,003
  25,630
  33,804
  43,676
  55,374
  68,999
  84,623
  102,292
  122,025
  143,821
  167,662
  193,512
  221,334
  251,078
  282,701
  316,161
  351,419
  388,448
  427,227
  467,749
  510,016
  554,045
  599,861
  647,505
  697,028
  748,492
  801,972
  857,553
  915,331
  975,412
Debt-to-equity ratio
  1.530
  1.720
  1.850
  1.940
  2.000
  2.050
  2.080
  2.100
  2.120
  2.140
  2.150
  2.160
  2.170
  2.170
  2.180
  2.180
  2.190
  2.190
  2.190
  2.190
  2.200
  2.200
  2.200
  2.200
  2.200
  2.200
  2.200
  2.200
  2.200
  2.210
  2.210
Adjusted equity ratio
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -400
  -547
  -604
  -677
  -769
  -880
  -1,015
  -1,173
  -1,357
  -1,569
  -1,807
  -2,074
  -2,368
  -2,691
  -3,040
  -3,416
  -3,818
  -4,245
  -4,697
  -5,173
  -5,672
  -6,195
  -6,741
  -7,311
  -7,904
  -8,520
  -9,161
  -9,826
  -10,517
  -11,234
  -11,979
Depreciation, amort., depletion, $m
  1,710
  2,357
  3,179
  4,193
  5,417
  6,868
  8,557
  10,495
  12,686
  15,134
  17,837
  20,794
  24,000
  27,450
  31,139
  35,061
  39,211
  43,584
  48,176
  52,986
  58,011
  63,253
  68,714
  74,396
  80,305
  86,447
  92,830
  99,462
  106,356
  113,521
  120,973
Funds from operations, $m
  964
  1,810
  2,575
  3,515
  4,648
  5,987
  7,543
  9,322
  11,329
  13,565
  16,030
  18,720
  21,631
  24,760
  28,099
  31,646
  35,393
  39,339
  43,480
  47,813
  52,339
  57,058
  61,972
  67,085
  72,401
  77,927
  83,669
  89,636
  95,839
  102,287
  108,993
Change in working capital, $m
  -162
  -13
  -16
  -20
  -24
  -29
  -33
  -38
  -43
  -48
  -53
  -58
  -63
  -68
  -73
  -77
  -82
  -86
  -91
  -95
  -99
  -103
  -108
  -112
  -117
  -121
  -126
  -131
  -136
  -141
  -147
Cash from operations, $m
  1,126
  1,822
  2,591
  3,535
  4,672
  6,016
  7,576
  9,360
  11,372
  13,614
  16,083
  18,778
  21,695
  24,828
  28,172
  31,723
  35,475
  39,425
  43,570
  47,908
  52,438
  57,162
  62,080
  67,197
  72,518
  78,048
  83,795
  89,767
  95,975
  102,429
  109,140
Maintenance CAPEX, $m
  0
  -1,705
  -2,357
  -3,179
  -4,193
  -5,417
  -6,868
  -8,557
  -10,495
  -12,686
  -15,134
  -17,837
  -20,794
  -24,000
  -27,450
  -31,139
  -35,061
  -39,211
  -43,584
  -48,176
  -52,986
  -58,011
  -63,253
  -68,714
  -74,396
  -80,305
  -86,447
  -92,830
  -99,462
  -106,356
  -113,521
New CAPEX, $m
  -1,165
  -5,146
  -6,494
  -8,009
  -9,672
  -11,461
  -13,349
  -15,308
  -17,311
  -19,334
  -21,356
  -23,358
  -25,328
  -27,258
  -29,143
  -30,984
  -32,783
  -34,545
  -36,280
  -37,995
  -39,702
  -41,413
  -43,138
  -44,890
  -46,680
  -48,521
  -50,424
  -52,399
  -54,457
  -56,609
  -58,865
Cash from investing activities, $m
  -533
  -6,851
  -8,851
  -11,188
  -13,865
  -16,878
  -20,217
  -23,865
  -27,806
  -32,020
  -36,490
  -41,195
  -46,122
  -51,258
  -56,593
  -62,123
  -67,844
  -73,756
  -79,864
  -86,171
  -92,688
  -99,424
  -106,391
  -113,604
  -121,076
  -128,826
  -136,871
  -145,229
  -153,919
  -162,965
  -172,386
Free cash flow, $m
  593
  -5,029
  -6,260
  -7,652
  -9,193
  -10,862
  -12,640
  -14,505
  -16,434
  -18,407
  -20,406
  -22,417
  -24,427
  -26,430
  -28,421
  -30,400
  -32,369
  -34,331
  -36,293
  -38,263
  -40,250
  -42,262
  -44,311
  -46,406
  -48,558
  -50,778
  -53,076
  -55,461
  -57,945
  -60,537
  -63,246
Issuance/(repayment) of debt, $m
  -550
  3,585
  4,567
  5,632
  6,802
  8,060
  9,387
  10,765
  12,174
  13,596
  15,018
  16,426
  17,811
  19,168
  20,494
  21,789
  23,054
  24,293
  25,513
  26,719
  27,919
  29,122
  30,335
  31,567
  32,827
  34,121
  35,459
  36,848
  38,295
  39,809
  41,395
Issuance/(repurchase) of shares, $m
  -9
  2,170
  2,665
  3,220
  3,839
  4,518
  5,252
  6,032
  6,852
  7,706
  8,586
  9,488
  10,408
  11,343
  12,291
  13,251
  14,223
  15,210
  16,212
  17,233
  18,274
  19,340
  20,434
  21,560
  22,721
  23,922
  25,166
  26,458
  27,803
  29,203
  30,664
Cash from financing (excl. dividends), $m  
  -588
  5,755
  7,232
  8,852
  10,641
  12,578
  14,639
  16,797
  19,026
  21,302
  23,604
  25,914
  28,219
  30,511
  32,785
  35,040
  37,277
  39,503
  41,725
  43,952
  46,193
  48,462
  50,769
  53,127
  55,548
  58,043
  60,625
  63,306
  66,098
  69,012
  72,059
Total cash flow (excl. dividends), $m
  5
  726
  972
  1,199
  1,448
  1,716
  1,999
  2,292
  2,592
  2,895
  3,197
  3,497
  3,792
  4,081
  4,363
  4,639
  4,908
  5,172
  5,432
  5,689
  5,944
  6,200
  6,459
  6,721
  6,989
  7,265
  7,550
  7,845
  8,153
  8,476
  8,813
Retained Cash Flow (-), $m
  367
  -2,170
  -2,665
  -3,220
  -3,839
  -4,518
  -5,252
  -6,032
  -6,852
  -7,706
  -8,586
  -9,488
  -10,408
  -11,343
  -12,291
  -13,251
  -14,223
  -15,210
  -16,212
  -17,233
  -18,274
  -19,340
  -20,434
  -21,560
  -22,721
  -23,922
  -25,166
  -26,458
  -27,803
  -29,203
  -30,664
Prev. year cash balance distribution, $m
 
  15
  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
 
  -1,429
  -1,693
  -2,020
  -2,391
  -2,802
  -3,253
  -3,740
  -4,260
  -4,811
  -5,389
  -5,991
  -6,616
  -7,262
  -7,927
  -8,612
  -9,315
  -10,038
  -10,781
  -11,544
  -12,330
  -13,140
  -13,976
  -14,839
  -15,732
  -16,657
  -17,617
  -18,613
  -19,649
  -20,728
  -21,851
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
 
  -1,312
  -1,416
  -1,526
  -1,615
  -1,677
  -1,706
  -1,700
  -1,658
  -1,583
  -1,478
  -1,351
  -1,208
  -1,057
  -903
  -755
  -616
  -491
  -381
  -289
  -213
  -153
  -107
  -72
  -48
  -30
  -19
  -11
  -6
  -4
  -2
Current shareholders' claim on cash, %
  100
  90.5
  82.7
  76.3
  70.9
  66.3
  62.4
  58.9
  55.9
  53.2
  50.8
  48.7
  46.7
  45.0
  43.4
  41.9
  40.5
  39.3
  38.1
  37.0
  36.0
  35.0
  34.1
  33.2
  32.4
  31.6
  30.9
  30.2
  29.5
  28.8
  28.2

Continental Resources, Inc. is a crude oil and natural gas company with properties in the North, South and East regions of the United States. The North region consists of properties north of Kansas and west of the Mississippi River and includes North Dakota Bakken, Montana Bakken and the Red River units. The South region includes properties south of Nebraska and west of the Mississippi River including various plays in the South Central Oklahoma Oil Province (SCOOP), Sooner Trend Anadarko Canadian Kingfisher (STACK), and Arkoma Woodford areas of Oklahoma. The East region is consists of undeveloped leasehold acreage east of the Mississippi River with no drilling or production operations. As of December 31, 2016, its estimated proved reserves were 1,275 million barrels of oil equivalent (MMBoe), with estimated proved developed reserves of 519 MMBoe. As of December 31, 2016, its average daily production from South region properties was 91,088 barrels of oil equivalent (Boe) per day.

FINANCIAL RATIOS  of  Continental Resources (CLR)

Valuation Ratios
P/E Ratio -51.7
Price to Sales 10.4
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow -529.8
Growth Rates
Sales Growth Rate -26.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -62.2%
Cap. Spend. - 3 Yr. Gr. Rate -20.8%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 152.9%
Total Debt to Equity 153%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.4%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital -3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity -8.9%
Return On Equity - 3 Yr. Avg. 1.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 70.4%
EBITDA Margin - 3 Yr. Avg. 64.5%
Operating Margin -15.9%
Oper. Margin - 3 Yr. Avg. 4.7%
Pre-Tax Margin -31.9%
Pre-Tax Margin - 3 Yr. Avg. -6.5%
Net Profit Margin -20.2%
Net Profit Margin - 3 Yr. Avg. -4.4%
Effective Tax Rate 36.7%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 0%

CLR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CLR stock intrinsic value calculation we used $1980 million for the last fiscal year's total revenue generated by Continental Resources. The default revenue input number comes from 2016 income statement of Continental 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 CLR stock valuation model: a) initial revenue growth rate of 38.2% 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 8.9%, whose default value for CLR is calculated based on our internal credit rating of Continental 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 Continental 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 CLR stock the variable cost ratio is equal to 87.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $583 million in the base year in the intrinsic value calculation for CLR 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 4.6% for Continental Resources.

Corporate tax rate of 27% is the nominal tax rate for Continental 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 CLR 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 CLR are equal to 680.4%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Continental 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 CLR is equal to -1.7%. 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 - $4302 million for Continental 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 374.929 million for Continental 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 Continental Resources at the current share price and the inputted number of shares is $20.7 billion.

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Financial statements of CLR
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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