Intrinsic value of Continental Resources - CLR

Previous Close

$31.41

  Intrinsic Value

$2.88

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

-83%

Previous close

$31.41

 
Intrinsic value

$2.88

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

-83%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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

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 11.7

 

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, %
  -26.12
  51.20
  46.58
  42.42
  38.68
  35.31
  32.28
  29.55
  27.10
  24.89
  22.90
  21.11
  19.50
  18.05
  16.74
  15.57
  14.51
  13.56
  12.70
  11.93
  11.24
  10.62
  10.06
  9.55
  9.09
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
Revenue, $m
  2,052
  2,994
  4,388
  6,250
  8,667
  11,728
  15,514
  20,098
  25,544
  31,902
  39,207
  47,483
  56,741
  66,982
  78,197
  90,372
  103,487
  117,521
  132,452
  148,259
  164,925
  182,434
  200,778
  219,952
  239,956
  260,797
  282,486
  305,043
  328,490
  352,857
  378,178
Variable operating expenses, $m
 
  2,608
  3,822
  5,444
  7,549
  10,215
  13,512
  17,506
  22,249
  27,787
  34,149
  41,358
  49,422
  58,342
  68,110
  78,714
  90,137
  102,361
  115,365
  129,134
  143,649
  158,900
  174,878
  191,578
  209,002
  227,154
  246,046
  265,692
  286,115
  307,339
  329,393
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
  3,206
  4,435
  6,072
  8,193
  10,875
  14,188
  18,199
  22,959
  28,515
  34,895
  42,123
  50,206
  59,146
  68,934
  79,558
  91,002
  103,248
  116,274
  130,066
  144,604
  159,879
  175,882
  192,607
  210,056
  228,235
  247,154
  266,828
  287,279
  308,532
  330,616
Operating income, $m
  -314
  -211
  -46
  178
  475
  853
  1,325
  1,900
  2,585
  3,387
  4,311
  5,360
  6,536
  7,837
  9,264
  10,814
  12,484
  14,273
  16,177
  18,193
  20,320
  22,555
  24,897
  27,345
  29,900
  32,562
  35,333
  38,215
  41,211
  44,326
  47,562
EBITDA, $m
  1,396
  1,826
  2,939
  4,431
  6,372
  8,833
  11,881
  15,575
  19,965
  25,093
  30,988
  37,668
  45,142
  53,412
  62,469
  72,303
  82,897
  94,234
  106,297
  119,069
  132,535
  146,683
  161,506
  177,000
  193,166
  210,008
  227,537
  245,766
  264,716
  284,409
  304,875
Interest expense (income), $m
  316
  303
  524
  831
  1,241
  1,773
  2,446
  3,280
  4,289
  5,487
  6,887
  8,495
  10,316
  12,354
  14,608
  17,076
  19,756
  22,642
  25,731
  29,017
  32,497
  36,165
  40,019
  44,056
  48,276
  52,679
  57,266
  62,040
  67,004
  72,165
  77,528
Earnings before tax, $m
  -632
  -514
  -571
  -653
  -766
  -920
  -1,121
  -1,380
  -1,704
  -2,100
  -2,575
  -3,134
  -3,781
  -4,517
  -5,344
  -6,263
  -7,272
  -8,369
  -9,554
  -10,824
  -12,177
  -13,610
  -15,122
  -16,711
  -18,376
  -20,117
  -21,933
  -23,825
  -25,793
  -27,839
  -29,966
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
  -514
  -571
  -653
  -766
  -920
  -1,121
  -1,380
  -1,704
  -2,100
  -2,575
  -3,134
  -3,781
  -4,517
  -5,344
  -6,263
  -7,272
  -8,369
  -9,554
  -10,824
  -12,177
  -13,610
  -15,122
  -16,711
  -18,376
  -20,117
  -21,933
  -23,825
  -25,793
  -27,839
  -29,966

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
  20,790
  30,474
  43,402
  60,189
  81,443
  107,734
  139,572
  177,392
  221,541
  272,271
  329,744
  394,038
  465,155
  543,038
  627,584
  718,660
  816,117
  919,803
  1,029,576
  1,145,310
  1,266,906
  1,394,295
  1,527,445
  1,666,361
  1,811,088
  1,961,711
  2,118,354
  2,281,181
  2,450,396
  2,626,239
Adjusted assets (=assets-cash), $m
  13,795
  20,790
  30,474
  43,402
  60,189
  81,443
  107,734
  139,572
  177,392
  221,541
  272,271
  329,744
  394,038
  465,155
  543,038
  627,584
  718,660
  816,117
  919,803
  1,029,576
  1,145,310
  1,266,906
  1,394,295
  1,527,445
  1,666,361
  1,811,088
  1,961,711
  2,118,354
  2,281,181
  2,450,396
  2,626,239
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
  20,370
  29,858
  42,524
  58,972
  79,796
  105,555
  136,749
  173,804
  217,060
  266,764
  323,075
  386,069
  455,748
  532,055
  614,891
  704,125
  799,612
  901,201
  1,008,754
  1,122,147
  1,241,284
  1,366,097
  1,496,554
  1,632,661
  1,774,461
  1,922,037
  2,075,512
  2,235,047
  2,400,840
  2,573,126
Working capital, $m
  -19
  -51
  -75
  -106
  -147
  -199
  -264
  -342
  -434
  -542
  -667
  -807
  -965
  -1,139
  -1,329
  -1,536
  -1,759
  -1,998
  -2,252
  -2,520
  -2,804
  -3,101
  -3,413
  -3,739
  -4,079
  -4,434
  -4,802
  -5,186
  -5,584
  -5,999
  -6,429
Total debt, $m
  6,580
  11,394
  18,067
  26,974
  38,540
  53,184
  71,299
  93,235
  119,293
  149,711
  184,665
  224,264
  268,562
  317,562
  371,223
  429,475
  492,226
  559,374
  630,814
  706,448
  786,188
  869,968
  957,739
  1,049,480
  1,145,193
  1,244,910
  1,348,689
  1,456,616
  1,568,804
  1,685,393
  1,806,549
Total liabilities, $m
  9,510
  14,324
  20,997
  29,904
  41,470
  56,114
  74,229
  96,165
  122,223
  152,641
  187,595
  227,194
  271,492
  320,492
  374,153
  432,405
  495,156
  562,304
  633,744
  709,378
  789,118
  872,898
  960,669
  1,052,410
  1,148,123
  1,247,840
  1,351,619
  1,459,546
  1,571,734
  1,688,323
  1,809,479
Total equity, $m
  4,302
  6,466
  9,477
  13,498
  18,719
  25,329
  33,505
  43,407
  55,169
  68,899
  84,676
  102,550
  122,546
  144,663
  168,885
  195,178
  223,503
  253,812
  286,059
  320,198
  356,191
  394,008
  433,626
  475,035
  518,238
  563,248
  610,092
  658,808
  709,447
  762,073
  816,760
Total liabilities and equity, $m
  13,812
  20,790
  30,474
  43,402
  60,189
  81,443
  107,734
  139,572
  177,392
  221,540
  272,271
  329,744
  394,038
  465,155
  543,038
  627,583
  718,659
  816,116
  919,803
  1,029,576
  1,145,309
  1,266,906
  1,394,295
  1,527,445
  1,666,361
  1,811,088
  1,961,711
  2,118,354
  2,281,181
  2,450,396
  2,626,239
Debt-to-equity ratio
  1.530
  1.760
  1.910
  2.000
  2.060
  2.100
  2.130
  2.150
  2.160
  2.170
  2.180
  2.190
  2.190
  2.200
  2.200
  2.200
  2.200
  2.200
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  2.210
  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
  -514
  -571
  -653
  -766
  -920
  -1,121
  -1,380
  -1,704
  -2,100
  -2,575
  -3,134
  -3,781
  -4,517
  -5,344
  -6,263
  -7,272
  -8,369
  -9,554
  -10,824
  -12,177
  -13,610
  -15,122
  -16,711
  -18,376
  -20,117
  -21,933
  -23,825
  -25,793
  -27,839
  -29,966
Depreciation, amort., depletion, $m
  1,710
  2,037
  2,986
  4,252
  5,897
  7,980
  10,555
  13,675
  17,380
  21,706
  26,676
  32,308
  38,607
  45,575
  53,206
  61,489
  70,413
  79,961
  90,120
  100,875
  112,215
  124,128
  136,610
  149,655
  163,266
  177,446
  192,204
  207,551
  223,505
  240,084
  257,313
Funds from operations, $m
  964
  1,523
  2,415
  3,600
  5,131
  7,060
  9,434
  12,295
  15,677
  19,606
  24,101
  29,173
  34,826
  41,058
  47,861
  55,227
  63,141
  71,592
  80,566
  90,051
  100,038
  110,519
  121,488
  132,944
  144,890
  157,329
  170,271
  183,727
  197,712
  212,244
  227,347
Change in working capital, $m
  -162
  -17
  -24
  -32
  -41
  -52
  -64
  -78
  -93
  -108
  -124
  -141
  -157
  -174
  -191
  -207
  -223
  -239
  -254
  -269
  -283
  -298
  -312
  -326
  -340
  -354
  -369
  -383
  -399
  -414
  -430
Cash from operations, $m
  1,126
  1,540
  2,439
  3,631
  5,172
  7,112
  9,499
  12,373
  15,769
  19,714
  24,225
  29,314
  34,984
  41,232
  48,052
  55,433
  63,364
  71,830
  80,820
  90,320
  100,321
  110,816
  121,800
  133,270
  145,230
  157,683
  170,639
  184,110
  198,110
  212,659
  227,777
Maintenance CAPEX, $m
  0
  -1,347
  -2,037
  -2,986
  -4,252
  -5,897
  -7,980
  -10,555
  -13,675
  -17,380
  -21,706
  -26,676
  -32,308
  -38,607
  -45,575
  -53,206
  -61,489
  -70,413
  -79,961
  -90,120
  -100,875
  -112,215
  -124,128
  -136,610
  -149,655
  -163,266
  -177,446
  -192,204
  -207,551
  -223,505
  -240,084
New CAPEX, $m
  -1,165
  -6,897
  -9,488
  -12,666
  -16,448
  -20,824
  -25,759
  -31,194
  -37,055
  -43,256
  -49,704
  -56,311
  -62,993
  -69,679
  -76,308
  -82,836
  -89,234
  -95,486
  -101,590
  -107,553
  -113,393
  -119,137
  -124,813
  -130,457
  -136,107
  -141,800
  -147,576
  -153,475
  -159,535
  -165,793
  -172,286
Cash from investing activities, $m
  -533
  -8,244
  -11,525
  -15,652
  -20,700
  -26,721
  -33,739
  -41,749
  -50,730
  -60,636
  -71,410
  -82,987
  -95,301
  -108,286
  -121,883
  -136,042
  -150,723
  -165,899
  -181,551
  -197,673
  -214,268
  -231,352
  -248,941
  -267,067
  -285,762
  -305,066
  -325,022
  -345,679
  -367,086
  -389,298
  -412,370
Free cash flow, $m
  593
  -6,704
  -9,086
  -12,021
  -15,528
  -19,609
  -24,240
  -29,377
  -34,961
  -40,922
  -47,185
  -53,674
  -60,317
  -67,054
  -73,830
  -80,608
  -87,359
  -94,068
  -100,731
  -107,353
  -113,947
  -120,535
  -127,142
  -133,797
  -140,532
  -147,383
  -154,383
  -161,569
  -168,976
  -176,639
  -184,593
Issuance/(repayment) of debt, $m
  -550
  4,816
  6,672
  8,907
  11,567
  14,644
  18,114
  21,936
  26,058
  30,418
  34,953
  39,599
  44,298
  49,000
  53,661
  58,252
  62,751
  67,148
  71,440
  75,633
  79,741
  83,779
  87,771
  91,740
  95,713
  99,717
  103,779
  107,927
  112,188
  116,589
  121,155
Issuance/(repurchase) of shares, $m
  -9
  2,693
  3,582
  4,673
  5,987
  7,530
  9,298
  11,282
  13,466
  15,830
  18,352
  21,008
  23,776
  26,634
  29,566
  32,556
  35,596
  38,678
  41,801
  44,963
  48,170
  51,426
  54,740
  58,121
  61,579
  65,127
  68,777
  72,541
  76,432
  80,465
  84,653
Cash from financing (excl. dividends), $m  
  -588
  7,509
  10,254
  13,580
  17,554
  22,174
  27,412
  33,218
  39,524
  46,248
  53,305
  60,607
  68,074
  75,634
  83,227
  90,808
  98,347
  105,826
  113,241
  120,596
  127,911
  135,205
  142,511
  149,861
  157,292
  164,844
  172,556
  180,468
  188,620
  197,054
  205,808
Total cash flow (excl. dividends), $m
  5
  805
  1,168
  1,560
  2,025
  2,564
  3,172
  3,841
  4,563
  5,327
  6,121
  6,934
  7,757
  8,580
  9,397
  10,200
  10,988
  11,758
  12,510
  13,244
  13,963
  14,670
  15,369
  16,065
  16,760
  17,461
  18,173
  18,899
  19,645
  20,416
  21,215
Retained Cash Flow (-), $m
  367
  -2,693
  -3,582
  -4,673
  -5,987
  -7,530
  -9,298
  -11,282
  -13,466
  -15,830
  -18,352
  -21,008
  -23,776
  -26,634
  -29,566
  -32,556
  -35,596
  -38,678
  -41,801
  -44,963
  -48,170
  -51,426
  -54,740
  -58,121
  -61,579
  -65,127
  -68,777
  -72,541
  -76,432
  -80,465
  -84,653
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
 
  -1,873
  -2,414
  -3,113
  -3,962
  -4,965
  -6,126
  -7,440
  -8,903
  -10,504
  -12,232
  -14,074
  -16,019
  -18,054
  -20,169
  -22,356
  -24,608
  -26,920
  -29,291
  -31,719
  -34,207
  -36,756
  -39,370
  -42,056
  -44,819
  -47,666
  -50,604
  -53,642
  -56,787
  -60,050
  -63,438
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
 
  -1,720
  -2,019
  -2,351
  -2,676
  -2,971
  -3,212
  -3,381
  -3,464
  -3,455
  -3,356
  -3,175
  -2,926
  -2,627
  -2,298
  -1,959
  -1,627
  -1,316
  -1,036
  -794
  -592
  -428
  -301
  -205
  -136
  -87
  -54
  -32
  -18
  -10
  -5
Current shareholders' claim on cash, %
  100
  81.3
  67.5
  57.2
  49.2
  42.8
  37.7
  33.6
  30.1
  27.3
  24.8
  22.8
  21.0
  19.4
  18.1
  16.9
  15.8
  14.9
  14.0
  13.3
  12.6
  11.9
  11.4
  10.8
  10.3
  9.9
  9.4
  9.1
  8.7
  8.3
  8.0

Continental Resources, Inc. explores for, develops, and produces crude oil and natural gas properties in the north, south, and east regions of the United States. The company sells its crude oil and natural gas production to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies. As of December 31, 2016, its estimated proved reserves were 1,275 million barrels of crude oil equivalent (MMBoe) with estimated proved developed reserves of 519 MMBoe. Continental Resources, Inc. was founded in 1967 and is based in Oklahoma City, Oklahoma.

FINANCIAL RATIOS  of  Continental Resources (CLR)

Valuation Ratios
P/E Ratio -29.4
Price to Sales 5.9
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow -301.6
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 51.2% 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 10 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 372.867 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 $11.7 billion.

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Stock chart of CLR Financial statements of CLR Annual reports 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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