Intrinsic value of Consol Energy - CNX

Previous Close

$14.25

  Intrinsic Value

$4.18

stock screener

  Rating & Target

str. sell

-71%

  Value-price divergence*

-29%

Previous close

$14.25

 
Intrinsic value

$4.18

 
Up/down potential

-71%

 
Rating

str. sell

 
Value-price divergence*

-29%

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

We calculate the intrinsic value of CNX 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 3.2

 

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, %
  -4.85
  53.10
  48.29
  43.96
  40.06
  36.56
  33.40
  30.56
  28.01
  25.71
  23.63
  21.77
  20.09
  18.58
  17.23
  16.00
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.27
Revenue, $m
  1,981
  3,033
  4,498
  6,475
  9,069
  12,384
  16,521
  21,570
  27,611
  34,708
  42,911
  52,254
  62,754
  74,416
  87,236
  101,197
  116,278
  132,456
  149,704
  167,998
  187,313
  207,633
  228,942
  251,234
  274,506
  298,763
  324,018
  350,288
  377,600
  405,986
  435,483
Variable operating expenses, $m
 
  4,270
  6,332
  9,116
  12,769
  17,437
  23,261
  30,370
  38,876
  48,869
  60,419
  73,573
  88,357
  104,778
  122,828
  142,485
  163,720
  186,498
  210,784
  236,541
  263,737
  292,347
  322,351
  353,737
  386,504
  420,658
  456,217
  493,206
  531,661
  571,628
  613,160
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
  2,325
  4,270
  6,332
  9,116
  12,769
  17,437
  23,261
  30,370
  38,876
  48,869
  60,419
  73,573
  88,357
  104,778
  122,828
  142,485
  163,720
  186,498
  210,784
  236,541
  263,737
  292,347
  322,351
  353,737
  386,504
  420,658
  456,217
  493,206
  531,661
  571,628
  613,160
Operating income, $m
  -344
  -1,237
  -1,835
  -2,642
  -3,700
  -5,053
  -6,740
  -8,800
  -11,265
  -14,161
  -17,508
  -21,320
  -25,604
  -30,362
  -35,592
  -41,288
  -47,442
  -54,042
  -61,079
  -68,543
  -76,424
  -84,714
  -93,408
  -102,503
  -111,998
  -121,895
  -132,199
  -142,918
  -154,061
  -165,642
  -177,677
EBITDA, $m
  255
  -321
  -476
  -686
  -961
  -1,312
  -1,750
  -2,285
  -2,925
  -3,677
  -4,546
  -5,536
  -6,648
  -7,884
  -9,242
  -10,721
  -12,319
  -14,033
  -15,860
  -17,798
  -19,845
  -21,997
  -24,255
  -26,617
  -29,082
  -31,652
  -34,328
  -37,111
  -40,004
  -43,011
  -46,136
Interest expense (income), $m
  187
  166
  319
  532
  819
  1,196
  1,678
  2,279
  3,013
  3,891
  4,922
  6,114
  7,472
  8,998
  10,693
  12,556
  14,585
  16,776
  19,127
  21,634
  24,293
  27,100
  30,053
  33,149
  36,389
  39,771
  43,296
  46,967
  50,784
  54,754
  58,879
Earnings before tax, $m
  -526
  -1,403
  -2,154
  -3,173
  -4,519
  -6,249
  -8,418
  -11,079
  -14,278
  -18,051
  -22,430
  -27,434
  -33,075
  -39,360
  -46,285
  -53,844
  -62,026
  -70,819
  -80,207
  -90,177
  -100,716
  -111,814
  -123,461
  -135,653
  -148,387
  -161,666
  -175,496
  -189,884
  -204,845
  -220,396
  -236,556
Tax expense, $m
  10
  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
  -848
  -1,403
  -2,154
  -3,173
  -4,519
  -6,249
  -8,418
  -11,079
  -14,278
  -18,051
  -22,430
  -27,434
  -33,075
  -39,360
  -46,285
  -53,844
  -62,026
  -70,819
  -80,207
  -90,177
  -100,716
  -111,814
  -123,461
  -135,653
  -148,387
  -161,666
  -175,496
  -189,884
  -204,845
  -220,396
  -236,556

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  60
  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
  9,184
  13,977
  20,726
  29,837
  41,791
  57,070
  76,132
  99,400
  127,238
  159,945
  197,748
  240,801
  289,188
  342,933
  402,008
  466,344
  535,845
  610,398
  689,882
  774,182
  863,195
  956,833
  1,055,033
  1,157,759
  1,265,003
  1,376,788
  1,493,170
  1,614,232
  1,740,094
  1,870,902
  2,006,834
Adjusted assets (=assets-cash), $m
  9,124
  13,977
  20,726
  29,837
  41,791
  57,070
  76,132
  99,400
  127,238
  159,945
  197,748
  240,801
  289,188
  342,933
  402,008
  466,344
  535,845
  610,398
  689,882
  774,182
  863,195
  956,833
  1,055,033
  1,157,759
  1,265,003
  1,376,788
  1,493,170
  1,614,232
  1,740,094
  1,870,902
  2,006,834
Revenue / Adjusted assets
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
Average production assets, $m
  8,437
  12,917
  19,155
  27,576
  38,624
  52,744
  70,362
  91,866
  117,594
  147,822
  182,759
  222,549
  267,268
  316,940
  371,537
  430,997
  495,230
  564,131
  637,591
  715,502
  797,767
  884,308
  975,065
  1,070,004
  1,169,120
  1,272,432
  1,379,992
  1,491,879
  1,608,200
  1,729,094
  1,854,722
Working capital, $m
  -314
  -15
  -22
  -32
  -45
  -62
  -83
  -108
  -138
  -174
  -215
  -261
  -314
  -372
  -436
  -506
  -581
  -662
  -749
  -840
  -937
  -1,038
  -1,145
  -1,256
  -1,373
  -1,494
  -1,620
  -1,751
  -1,888
  -2,030
  -2,177
Total debt, $m
  3,126
  5,902
  9,844
  15,165
  22,146
  31,069
  42,201
  55,790
  72,047
  91,148
  113,225
  138,368
  166,626
  198,013
  232,513
  270,085
  310,674
  354,212
  400,631
  449,863
  501,846
  556,530
  613,879
  673,871
  736,502
  801,784
  869,751
  940,452
  1,013,955
  1,090,347
  1,169,731
Total liabilities, $m
  5,386
  8,162
  12,104
  17,425
  24,406
  33,329
  44,461
  58,050
  74,307
  93,408
  115,485
  140,628
  168,886
  200,273
  234,773
  272,345
  312,934
  356,472
  402,891
  452,123
  504,106
  558,790
  616,139
  676,131
  738,762
  804,044
  872,011
  942,712
  1,016,215
  1,092,607
  1,171,991
Total equity, $m
  3,798
  5,814
  8,622
  12,412
  17,385
  23,741
  31,671
  41,350
  52,931
  66,537
  82,263
  100,173
  120,302
  142,660
  167,235
  193,999
  222,912
  253,925
  286,991
  322,060
  359,089
  398,042
  438,894
  481,628
  526,241
  572,744
  621,159
  671,521
  723,879
  778,295
  834,843
Total liabilities and equity, $m
  9,184
  13,976
  20,726
  29,837
  41,791
  57,070
  76,132
  99,400
  127,238
  159,945
  197,748
  240,801
  289,188
  342,933
  402,008
  466,344
  535,846
  610,397
  689,882
  774,183
  863,195
  956,832
  1,055,033
  1,157,759
  1,265,003
  1,376,788
  1,493,170
  1,614,233
  1,740,094
  1,870,902
  2,006,834
Debt-to-equity ratio
  0.823
  1.020
  1.140
  1.220
  1.270
  1.310
  1.330
  1.350
  1.360
  1.370
  1.380
  1.380
  1.390
  1.390
  1.390
  1.390
  1.390
  1.390
  1.400
  1.400
  1.400
  1.400
  1.400
  1.400
  1.400
  1.400
  1.400
  1.400
  1.400
  1.400
  1.400
Adjusted equity ratio
  0.410
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -848
  -1,403
  -2,154
  -3,173
  -4,519
  -6,249
  -8,418
  -11,079
  -14,278
  -18,051
  -22,430
  -27,434
  -33,075
  -39,360
  -46,285
  -53,844
  -62,026
  -70,819
  -80,207
  -90,177
  -100,716
  -111,814
  -123,461
  -135,653
  -148,387
  -161,666
  -175,496
  -189,884
  -204,845
  -220,396
  -236,556
Depreciation, amort., depletion, $m
  599
  916
  1,359
  1,956
  2,739
  3,741
  4,990
  6,515
  8,340
  10,484
  12,962
  15,784
  18,955
  22,478
  26,350
  30,567
  35,123
  40,009
  45,219
  50,745
  56,579
  62,717
  69,154
  75,887
  82,916
  90,243
  97,872
  105,807
  114,057
  122,631
  131,541
Funds from operations, $m
  378
  -487
  -795
  -1,218
  -1,780
  -2,508
  -3,428
  -4,564
  -5,938
  -7,568
  -9,468
  -11,650
  -14,120
  -16,882
  -19,935
  -23,277
  -26,904
  -30,809
  -34,988
  -39,432
  -44,137
  -49,097
  -54,308
  -59,766
  -65,471
  -71,423
  -77,624
  -84,077
  -90,789
  -97,765
  -105,015
Change in working capital, $m
  -91
  -5
  -7
  -10
  -13
  -17
  -21
  -25
  -30
  -35
  -41
  -47
  -53
  -58
  -64
  -70
  -75
  -81
  -86
  -91
  -97
  -102
  -107
  -111
  -116
  -121
  -126
  -131
  -137
  -142
  -147
Cash from operations, $m
  469
  -482
  -788
  -1,208
  -1,767
  -2,491
  -3,407
  -4,539
  -5,908
  -7,532
  -9,427
  -11,603
  -14,068
  -16,823
  -19,871
  -23,207
  -26,828
  -30,728
  -34,901
  -39,341
  -44,041
  -48,995
  -54,201
  -59,655
  -65,355
  -71,302
  -77,498
  -83,946
  -90,652
  -97,623
  -104,868
Maintenance CAPEX, $m
  0
  -598
  -916
  -1,359
  -1,956
  -2,739
  -3,741
  -4,990
  -6,515
  -8,340
  -10,484
  -12,962
  -15,784
  -18,955
  -22,478
  -26,350
  -30,567
  -35,123
  -40,009
  -45,219
  -50,745
  -56,579
  -62,717
  -69,154
  -75,887
  -82,916
  -90,243
  -97,872
  -105,807
  -114,057
  -122,631
New CAPEX, $m
  -227
  -4,481
  -6,238
  -8,421
  -11,048
  -14,120
  -17,618
  -21,504
  -25,728
  -30,228
  -34,938
  -39,789
  -44,720
  -49,671
  -54,597
  -59,460
  -64,233
  -68,901
  -73,460
  -77,911
  -82,266
  -86,540
  -90,757
  -94,940
  -99,115
  -103,312
  -107,560
  -111,887
  -116,322
  -120,893
  -125,629
Cash from investing activities, $m
  487
  -5,079
  -7,154
  -9,780
  -13,004
  -16,859
  -21,359
  -26,494
  -32,243
  -38,568
  -45,422
  -52,751
  -60,504
  -68,626
  -77,075
  -85,810
  -94,800
  -104,024
  -113,469
  -123,130
  -133,011
  -143,119
  -153,474
  -164,094
  -175,002
  -186,228
  -197,803
  -209,759
  -222,129
  -234,950
  -248,260
Free cash flow, $m
  956
  -5,561
  -7,942
  -10,987
  -14,771
  -19,351
  -24,766
  -31,033
  -38,151
  -46,100
  -54,849
  -64,354
  -74,571
  -85,450
  -96,946
  -109,017
  -121,628
  -134,753
  -148,370
  -162,471
  -177,051
  -192,115
  -207,675
  -223,748
  -240,357
  -257,530
  -275,301
  -293,704
  -312,781
  -332,573
  -353,127
Issuance/(repayment) of debt, $m
  -960
  2,836
  3,942
  5,321
  6,981
  8,922
  11,133
  13,588
  16,257
  19,101
  22,077
  25,143
  28,258
  31,387
  34,500
  37,572
  40,589
  43,539
  46,419
  49,231
  51,983
  54,685
  57,349
  59,992
  62,631
  65,283
  67,967
  70,701
  73,503
  76,392
  79,384
Issuance/(repurchase) of shares, $m
  0
  3,419
  4,961
  6,964
  9,492
  12,604
  16,348
  20,759
  25,858
  31,658
  38,156
  45,344
  53,204
  61,718
  70,860
  80,608
  90,939
  101,832
  113,272
  125,246
  137,746
  150,767
  164,312
  178,387
  193,001
  208,169
  223,910
  240,246
  257,204
  274,812
  293,103
Cash from financing (excl. dividends), $m  
  -967
  6,255
  8,903
  12,285
  16,473
  21,526
  27,481
  34,347
  42,115
  50,759
  60,233
  70,487
  81,462
  93,105
  105,360
  118,180
  131,528
  145,371
  159,691
  174,477
  189,729
  205,452
  221,661
  238,379
  255,632
  273,452
  291,877
  310,947
  330,707
  351,204
  372,487
Total cash flow (excl. dividends), $m
  -10
  695
  961
  1,298
  1,703
  2,176
  2,715
  3,314
  3,965
  4,658
  5,384
  6,132
  6,892
  7,655
  8,414
  9,163
  9,899
  10,618
  11,321
  12,007
  12,678
  13,337
  13,986
  14,631
  15,275
  15,921
  16,576
  17,243
  17,926
  18,631
  19,361
Retained Cash Flow (-), $m
  904
  -3,419
  -4,961
  -6,964
  -9,492
  -12,604
  -16,348
  -20,759
  -25,858
  -31,658
  -38,156
  -45,344
  -53,204
  -61,718
  -70,860
  -80,608
  -90,939
  -101,832
  -113,272
  -125,246
  -137,746
  -150,767
  -164,312
  -178,387
  -193,001
  -208,169
  -223,910
  -240,246
  -257,204
  -274,812
  -293,103
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
 
  -2,724
  -4,000
  -5,666
  -7,789
  -10,428
  -13,633
  -17,445
  -21,893
  -26,999
  -32,772
  -39,212
  -46,313
  -54,063
  -62,446
  -71,445
  -81,040
  -91,214
  -101,952
  -113,239
  -125,068
  -137,431
  -150,326
  -163,756
  -177,726
  -192,248
  -207,334
  -223,004
  -239,278
  -256,181
  -273,743
Discount rate, %
 
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
 
  -2,530
  -3,424
  -4,437
  -5,536
  -6,667
  -7,768
  -8,772
  -9,614
  -10,238
  -10,603
  -10,689
  -10,494
  -10,038
  -9,358
  -8,504
  -7,532
  -6,502
  -5,468
  -4,479
  -3,572
  -2,771
  -2,090
  -1,531
  -1,089
  -751
  -502
  -324
  -202
  -122
  -71
Current shareholders' claim on cash, %
  100
  48.7
  24.3
  12.5
  6.6
  3.6
  2.0
  1.1
  0.6
  0.4
  0.2
  0.1
  0.1
  0.1
  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
  0.0
  0.0

CONSOL Energy Inc., together with its subsidiaries, operates as an integrated energy company in the United States and internationally. The company primarily operates through two divisions, Exploration and Production (E&P), and Pennsylvania (PA) Mining Operations. The E&P division produces pipeline quality natural gas primarily to gas wholesalers. This division owns rights to extract natural gas in Pennsylvania, West Virginia, and Ohio from approximately 413,000 net Marcellus Shale acres; and 683,000 net acres of Utica Shale, as well as owns rights to extract coalbed methane (CBM) in Virginia from approximately 268,000 net CBM acres, which cover a portion of its coal reserves in Central Appalachia. It also owns rights to extract natural gas from shallow oil and gas positions in Illinois, Indiana, Kentucky, Pennsylvania, West Virginia, Virginia, and New York from approximately 766,000 net acres; 95,000 net acres of Chattanooga Shale; and 503,000 net acres of Huron Shale potential in Kentucky, West Virginia, and Virginia, as well as provides midstream gas services. The PA Mining Operations division engages in mining, preparation, and marketing of thermal coal primarily to power generators; and metallurgical coal. The company also provides energy services, including coal terminal services, water services, and land resource management services. CONSOL Energy Inc. was founded in 1864 and is headquartered in Canonsburg, Pennsylvania.

FINANCIAL RATIOS  of  Consol Energy (CNX)

Valuation Ratios
P/E Ratio -3.9
Price to Sales 1.7
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 7
Price to Free Cash Flow 13.5
Growth Rates
Sales Growth Rate -4.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -76.9%
Cap. Spend. - 3 Yr. Gr. Rate -31.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 72.7%
Total Debt to Equity 82.3%
Interest Coverage -2
Management Effectiveness
Return On Assets -6.5%
Ret/ On Assets - 3 Yr. Avg. -1.7%
Return On Total Capital -11%
Ret/ On T. Cap. - 3 Yr. Avg. -4.5%
Return On Equity -20%
Return On Equity - 3 Yr. Avg. -8.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 33.1%
Gross Margin - 3 Yr. Avg. 42.3%
EBITDA Margin 13.1%
EBITDA Margin - 3 Yr. Avg. 19.9%
Operating Margin -17.4%
Oper. Margin - 3 Yr. Avg. -17.4%
Pre-Tax Margin -26.6%
Pre-Tax Margin - 3 Yr. Avg. -14.4%
Net Profit Margin -42.8%
Net Profit Margin - 3 Yr. Avg. -18.4%
Effective Tax Rate -1.9%
Eff/ Tax Rate - 3 Yr. Avg. 11%
Payout Ratio -0.2%

CNX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNX stock intrinsic value calculation we used $1981 million for the last fiscal year's total revenue generated by Consol Energy. The default revenue input number comes from 2016 income statement of Consol Energy. 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 CNX stock valuation model: a) initial revenue growth rate of 53.1% 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 7.7%, whose default value for CNX is calculated based on our internal credit rating of Consol Energy, 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 Consol Energy.
    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 CNX stock the variable cost ratio is equal to 140.8%.

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 CNX 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 Consol Energy.

Corporate tax rate of 27% is the nominal tax rate for Consol Energy. 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 CNX 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 CNX are equal to 425.9%.

Life of production assets of 14.1 years is the average useful life of capital assets used in Consol Energy 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 CNX is equal to -0.5%. 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 - $3798 million for Consol Energy - 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 227.414 million for Consol Energy 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 Consol Energy at the current share price and the inputted number of shares is $3.2 billion.

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COMPANY NEWS

▶ Whats behind Union Pacifics Rise in Freight Volumes?   [Aug-08-17 10:38AM  Market Realist]
▶ Consol tops Street 2Q forecasts   [Aug-01-17 10:57PM  Associated Press]
▶ Consol plans to add 3rd rig in 2018   [11:40AM  American City Business Journals]
▶ Inside the Solid Rise of NSCs 2Q17 Coal Revenues   [Jul-31-17 04:35PM  Market Realist]
▶ ETFs with exposure to CONSOL Energy, Inc. : July 24, 2017   [Jul-24-17 02:59PM  Capital Cube]
▶ Behind Kansas City Southerns Carloads in Week 27   [Jul-18-17 09:07AM  Market Realist]
▶ What Really Pushed CSXs Freight Volumes in Week 27?   [Jul-17-17 10:42AM  Market Realist]
▶ ETFs with exposure to CONSOL Energy, Inc. : July 14, 2017   [Jul-14-17 01:36PM  Capital Cube]
▶ Consol files plans to spin off coal operations and rename gas company   [Jul-13-17 03:35PM  American City Business Journals]
▶ [$$] Consol Energy Files to Spinoff Coal-Mining Business   [08:30AM  The Wall Street Journal]
▶ Behind Norfolk Southerns Freight Volumes in Week 26   [Jul-10-17 04:35PM  Market Realist]
▶ Southwestern Energy: A Natural Gas Company   [09:09AM  Market Realist]
▶ Behind Union Pacifics Carloads in Week 25   [Jul-05-17 09:07AM  Market Realist]
▶ Inside CSXs Week 25 Railcar Freight Volumes   [Jul-04-17 05:35PM  Market Realist]
▶ Inside Union Pacifics Freight Volumes in Week 24   [Jun-27-17 10:37AM  Market Realist]
▶ Union Pacific: How Far Coal Pushed Volumes in Week 23   [Jun-21-17 09:07AM  Market Realist]
▶ CSX: Behind Its Carloads Volume in Week 23   [07:36AM  Market Realist]
▶ Southwestern Energys Stock Price Forecast for the Week   [May-30-17 12:35PM  Market Realist]
▶ Behind the Rise in Norfolk Southerns Carloads in Week 19   [May-23-17 06:06PM  Market Realist]
▶ ETFs with exposure to CONSOL Energy, Inc. : May 19, 2017   [May-19-17 01:45PM  Capital Cube]
▶ United Mine Workers president charged with trespassing after Consol HQ rally   [May-17-17 02:49PM  American City Business Journals]
▶ Decoding Carloads of Union Pacific in Week 18   [May-15-17 10:38AM  Market Realist]
▶ Why CSXs Carloads Fell in Week 17 of 2017   [May-09-17 09:07AM  Market Realist]
▶ Why Coal Matters for Norfolk Southern   [May-08-17 05:05PM  Market Realist]
▶ Consol reports 1Q loss   [06:59AM  Associated Press]
▶ Did Norfolk Southerns Coal Carloads Push Volumes in Week 16?   [Apr-28-17 05:06PM  Market Realist]
▶ Union Pacific: Behind the Freight Volume Rise in Week 15   [Apr-21-17 02:35PM  Market Realist]
▶ Union Pacific: Unloading Freight Volumes in Week 14 of 2017   [Apr-18-17 05:35PM  Market Realist]
Stock chart of CNX Financial statements of CNX
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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