Intrinsic value of Cabot Oil&Gas - COG

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$22.96

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$22.96

 
Intrinsic value

$1.42

 
Up/down potential

-94%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of COG 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 10.4

 

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, %
  -14.81
  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
  1,156
  1,850
  2,858
  4,274
  6,201
  8,748
  12,027
  16,144
  21,198
  27,276
  34,452
  42,782
  52,305
  63,045
  75,011
  88,200
  102,598
  118,184
  134,933
  152,819
  171,814
  191,894
  213,036
  235,227
  258,455
  282,716
  308,015
  334,361
  361,773
  390,275
  419,899
Variable operating expenses, $m
 
  1,974
  3,049
  4,560
  6,616
  9,335
  12,833
  17,225
  22,618
  29,104
  36,761
  45,648
  55,809
  67,269
  80,037
  94,109
  109,472
  126,102
  143,974
  163,058
  183,326
  204,750
  227,310
  250,987
  275,771
  301,658
  328,652
  356,763
  386,012
  416,423
  448,032
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
  1,727
  1,974
  3,049
  4,560
  6,616
  9,335
  12,833
  17,225
  22,618
  29,104
  36,761
  45,648
  55,809
  67,269
  80,037
  94,109
  109,472
  126,102
  143,974
  163,058
  183,326
  204,750
  227,310
  250,987
  275,771
  301,658
  328,652
  356,763
  386,012
  416,423
  448,032
Operating income, $m
  -571
  -124
  -191
  -286
  -415
  -586
  -806
  -1,082
  -1,420
  -1,828
  -2,308
  -2,866
  -3,504
  -4,224
  -5,026
  -5,909
  -6,874
  -7,918
  -9,041
  -10,239
  -11,512
  -12,857
  -14,273
  -15,760
  -17,316
  -18,942
  -20,637
  -22,402
  -24,239
  -26,148
  -28,133
EBITDA, $m
  19
  822
  1,271
  1,900
  2,757
  3,890
  5,348
  7,179
  9,426
  12,129
  15,320
  19,024
  23,258
  28,034
  33,355
  39,220
  45,622
  52,552
  60,000
  67,954
  76,400
  85,329
  94,730
  104,598
  114,926
  125,714
  136,964
  148,679
  160,868
  173,542
  186,715
Interest expense (income), $m
  87
  75
  150
  259
  413
  621
  898
  1,253
  1,699
  2,247
  2,906
  3,684
  4,586
  5,619
  6,783
  8,080
  9,509
  11,070
  12,759
  14,575
  16,513
  18,572
  20,748
  23,040
  25,445
  27,963
  30,592
  33,334
  36,190
  39,161
  42,250
Earnings before tax, $m
  -660
  -198
  -341
  -545
  -828
  -1,208
  -1,703
  -2,335
  -3,119
  -4,074
  -5,214
  -6,550
  -8,091
  -9,843
  -11,808
  -13,989
  -16,383
  -18,988
  -21,800
  -24,813
  -28,025
  -31,429
  -35,022
  -38,800
  -42,762
  -46,905
  -51,229
  -55,737
  -60,429
  -65,310
  -70,384
Tax expense, $m
  -243
  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
  -417
  -198
  -341
  -545
  -828
  -1,208
  -1,703
  -2,335
  -3,119
  -4,074
  -5,214
  -6,550
  -8,091
  -9,843
  -11,808
  -13,989
  -16,383
  -18,988
  -21,800
  -24,813
  -28,025
  -31,429
  -35,022
  -38,800
  -42,762
  -46,905
  -51,229
  -55,737
  -60,429
  -65,310
  -70,384

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  499
  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
  5,123
  7,398
  11,431
  17,094
  24,803
  34,994
  48,108
  64,575
  84,791
  109,106
  137,809
  171,128
  209,220
  252,180
  300,045
  352,800
  410,391
  472,736
  539,734
  611,277
  687,256
  767,574
  852,146
  940,907
  1,033,818
  1,130,864
  1,232,059
  1,337,445
  1,447,091
  1,561,099
  1,679,596
Adjusted assets (=assets-cash), $m
  4,624
  7,398
  11,431
  17,094
  24,803
  34,994
  48,108
  64,575
  84,791
  109,106
  137,809
  171,128
  209,220
  252,180
  300,045
  352,800
  410,391
  472,736
  539,734
  611,277
  687,256
  767,574
  852,146
  940,907
  1,033,818
  1,130,864
  1,232,059
  1,337,445
  1,447,091
  1,561,099
  1,679,596
Revenue / Adjusted assets
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
Average production assets, $m
  4,614
  7,382
  11,405
  17,056
  24,747
  34,915
  48,000
  64,430
  84,600
  108,860
  137,499
  170,743
  208,749
  251,613
  299,370
  352,006
  409,467
  471,672
  538,519
  609,901
  685,710
  765,847
  850,228
  938,790
  1,031,492
  1,128,320
  1,229,287
  1,334,435
  1,443,835
  1,557,587
  1,675,816
Working capital, $m
  458
  -65
  -100
  -150
  -217
  -306
  -421
  -565
  -742
  -955
  -1,206
  -1,497
  -1,831
  -2,207
  -2,625
  -3,087
  -3,591
  -4,136
  -4,723
  -5,349
  -6,013
  -6,716
  -7,456
  -8,233
  -9,046
  -9,895
  -10,781
  -11,703
  -12,662
  -13,660
  -14,696
Total debt, $m
  1,521
  3,057
  5,287
  8,419
  12,682
  18,317
  25,570
  34,676
  45,855
  59,301
  75,174
  93,600
  114,665
  138,422
  164,891
  194,064
  225,912
  260,389
  297,439
  337,002
  379,019
  423,435
  470,203
  519,288
  570,668
  624,334
  680,295
  738,573
  799,208
  862,254
  927,782
Total liabilities, $m
  2,555
  4,091
  6,321
  9,453
  13,716
  19,351
  26,604
  35,710
  46,889
  60,335
  76,208
  94,634
  115,699
  139,456
  165,925
  195,098
  226,946
  261,423
  298,473
  338,036
  380,053
  424,469
  471,237
  520,322
  571,702
  625,368
  681,329
  739,607
  800,242
  863,288
  928,816
Total equity, $m
  2,568
  3,307
  5,109
  7,641
  11,087
  15,642
  21,504
  28,865
  37,902
  48,770
  61,601
  76,494
  93,521
  112,725
  134,120
  157,701
  183,445
  211,313
  241,261
  273,241
  307,204
  343,106
  380,909
  420,586
  462,117
  505,496
  550,730
  597,838
  646,850
  697,811
  750,779
Total liabilities and equity, $m
  5,123
  7,398
  11,430
  17,094
  24,803
  34,993
  48,108
  64,575
  84,791
  109,105
  137,809
  171,128
  209,220
  252,181
  300,045
  352,799
  410,391
  472,736
  539,734
  611,277
  687,257
  767,575
  852,146
  940,908
  1,033,819
  1,130,864
  1,232,059
  1,337,445
  1,447,092
  1,561,099
  1,679,595
Debt-to-equity ratio
  0.592
  0.920
  1.030
  1.100
  1.140
  1.170
  1.190
  1.200
  1.210
  1.220
  1.220
  1.220
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
Adjusted equity ratio
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -417
  -198
  -341
  -545
  -828
  -1,208
  -1,703
  -2,335
  -3,119
  -4,074
  -5,214
  -6,550
  -8,091
  -9,843
  -11,808
  -13,989
  -16,383
  -18,988
  -21,800
  -24,813
  -28,025
  -31,429
  -35,022
  -38,800
  -42,762
  -46,905
  -51,229
  -55,737
  -60,429
  -65,310
  -70,384
Depreciation, amort., depletion, $m
  590
  946
  1,462
  2,187
  3,173
  4,476
  6,154
  8,260
  10,846
  13,956
  17,628
  21,890
  26,763
  32,258
  38,381
  45,129
  52,496
  60,471
  69,041
  78,192
  87,912
  98,186
  109,004
  120,358
  132,243
  144,656
  157,601
  171,081
  185,107
  199,691
  214,848
Funds from operations, $m
  324
  748
  1,121
  1,641
  2,345
  3,269
  4,450
  5,926
  7,727
  9,882
  12,414
  15,340
  18,672
  22,415
  26,572
  31,140
  36,113
  41,483
  47,241
  53,379
  59,887
  66,757
  73,982
  81,558
  89,481
  97,752
  106,372
  115,345
  124,678
  134,381
  144,465
Change in working capital, $m
  -68
  -24
  -35
  -50
  -67
  -89
  -115
  -144
  -177
  -213
  -251
  -292
  -333
  -376
  -419
  -462
  -504
  -546
  -586
  -626
  -665
  -703
  -740
  -777
  -813
  -849
  -885
  -922
  -959
  -998
  -1,037
Cash from operations, $m
  392
  409
  1,156
  1,691
  2,412
  3,358
  4,565
  6,070
  7,904
  10,095
  12,665
  15,632
  19,005
  22,791
  26,991
  31,602
  36,617
  42,028
  47,828
  54,005
  60,552
  67,460
  74,722
  82,334
  90,294
  98,601
  107,257
  116,267
  125,638
  135,379
  145,501
Maintenance CAPEX, $m
  0
  -591
  -946
  -1,462
  -2,187
  -3,173
  -4,476
  -6,154
  -8,260
  -10,846
  -13,956
  -17,628
  -21,890
  -26,763
  -32,258
  -38,381
  -45,129
  -52,496
  -60,471
  -69,041
  -78,192
  -87,912
  -98,186
  -109,004
  -120,358
  -132,243
  -144,656
  -157,601
  -171,081
  -185,107
  -199,691
New CAPEX, $m
  -375
  -2,768
  -4,023
  -5,651
  -7,691
  -10,168
  -13,085
  -16,430
  -20,171
  -24,260
  -28,639
  -33,244
  -38,007
  -42,864
  -47,757
  -52,636
  -57,461
  -62,205
  -66,847
  -71,382
  -75,809
  -80,137
  -84,381
  -88,562
  -92,702
  -96,828
  -100,967
  -105,148
  -109,400
  -113,751
  -118,230
Cash from investing activities, $m
  -353
  -3,359
  -4,969
  -7,113
  -9,878
  -13,341
  -17,561
  -22,584
  -28,431
  -35,106
  -42,595
  -50,872
  -59,897
  -69,627
  -80,015
  -91,017
  -102,590
  -114,701
  -127,318
  -140,423
  -154,001
  -168,049
  -182,567
  -197,566
  -213,060
  -229,071
  -245,623
  -262,749
  -280,481
  -298,858
  -317,921
Free cash flow, $m
  39
  -2,951
  -3,813
  -5,422
  -7,466
  -9,982
  -12,996
  -16,514
  -20,527
  -25,011
  -29,930
  -35,240
  -40,891
  -46,835
  -53,024
  -59,415
  -65,974
  -72,672
  -79,491
  -86,418
  -93,450
  -100,589
  -107,845
  -115,231
  -122,766
  -130,469
  -138,366
  -146,482
  -154,844
  -163,480
  -172,419
Issuance/(repayment) of debt, $m
  -497
  1,536
  2,230
  3,132
  4,263
  5,635
  7,252
  9,106
  11,179
  13,446
  15,873
  18,425
  21,065
  23,757
  26,469
  29,173
  31,848
  34,477
  37,050
  39,563
  42,017
  44,416
  46,768
  49,085
  51,380
  53,667
  55,961
  58,278
  60,635
  63,046
  65,528
Issuance/(repurchase) of shares, $m
  995
  2,154
  3,386
  4,822
  6,649
  8,902
  11,606
  14,769
  18,384
  22,434
  26,888
  31,708
  36,854
  42,281
  47,950
  53,823
  59,869
  66,064
  72,389
  78,834
  85,396
  92,075
  98,880
  105,822
  112,917
  120,183
  127,640
  135,311
  143,221
  151,395
  159,858
Cash from financing (excl. dividends), $m  
  495
  3,690
  5,616
  7,954
  10,912
  14,537
  18,858
  23,875
  29,563
  35,880
  42,761
  50,133
  57,919
  66,038
  74,419
  82,996
  91,717
  100,541
  109,439
  118,397
  127,413
  136,491
  145,648
  154,907
  164,297
  173,850
  183,601
  193,589
  203,856
  214,441
  225,386
Total cash flow (excl. dividends), $m
  534
  -1,415
  -1,584
  -2,290
  -3,203
  -4,347
  -5,744
  -7,408
  -9,348
  -11,565
  -14,057
  -16,815
  -19,826
  -23,078
  -26,555
  -30,242
  -34,126
  -38,195
  -42,441
  -46,855
  -51,433
  -56,173
  -61,077
  -66,146
  -71,386
  -76,803
  -82,406
  -88,204
  -94,209
  -100,433
  -106,890
Retained Cash Flow (-), $m
  -559
  -1,238
  -1,802
  -2,532
  -3,446
  -4,555
  -5,862
  -7,361
  -9,037
  -10,869
  -12,831
  -14,893
  -17,027
  -19,203
  -21,395
  -23,581
  -25,743
  -27,868
  -29,948
  -31,980
  -33,963
  -35,902
  -37,804
  -39,676
  -41,531
  -43,380
  -45,234
  -47,107
  -49,012
  -50,961
  -52,968
Prev. year cash balance distribution, $m
 
  499
  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
 
  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
Discount rate, %
 
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for 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
Current shareholders' claim on cash, %
  100
  79.5
  63.4
  51.4
  42.3
  35.2
  29.8
  25.4
  22.0
  19.2
  16.9
  14.9
  13.4
  12.0
  10.9
  9.9
  9.0
  8.3
  7.6
  7.1
  6.6
  6.1
  5.7
  5.3
  5.0
  4.7
  4.4
  4.2
  3.9
  3.7
  3.5

Cabot Oil & Gas Corporation, an independent oil and gas company, develops, exploits, explores for, produces, and markets natural gas, oil, and natural gas liquids in the United States. The company primarily focuses on the Marcellus Shale in northeast Pennsylvania with approximately 200,000 net acres in the dry gas window of the play; and the Eagle Ford Shale in south Texas with approximately 85,500 net acres in the oil window of the play. It also transports, stores, gathers, and purchases natural gas for resale. The company sells its natural gas to industrial customers, local distribution companies, and gas marketers through gathering systems and pipelines, as well as to intrastate pipelines, natural gas processors, and marketing companies. As of December 31, 2015, it had proved reserves of approximately 8,190 billion cubic feet of natural gas equivalent. The company was founded in 1989 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Cabot Oil&Gas (COG)

Valuation Ratios
P/E Ratio -25.6
Price to Sales 9.2
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 27.2
Price to Free Cash Flow 628.2
Growth Rates
Sales Growth Rate -14.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60.8%
Cap. Spend. - 3 Yr. Gr. Rate -20.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 59.2%
Total Debt to Equity 59.2%
Interest Coverage -7
Management Effectiveness
Return On Assets -7%
Ret/ On Assets - 3 Yr. Avg. -1.2%
Return On Total Capital -10.3%
Ret/ On T. Cap. - 3 Yr. Avg. -3.4%
Return On Equity -18.2%
Return On Equity - 3 Yr. Avg. -6.3%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 52.6%
Gross Margin - 3 Yr. Avg. 61.9%
EBITDA Margin 1.5%
EBITDA Margin - 3 Yr. Avg. 22.3%
Operating Margin -49.4%
Oper. Margin - 3 Yr. Avg. -17.1%
Pre-Tax Margin -57.1%
Pre-Tax Margin - 3 Yr. Avg. -23.1%
Net Profit Margin -36.1%
Net Profit Margin - 3 Yr. Avg. -13.2%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. -49.7%
Payout Ratio -8.6%

COG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the COG stock intrinsic value calculation we used $1156 million for the last fiscal year's total revenue generated by Cabot Oil&Gas. The default revenue input number comes from 2016 income statement of Cabot Oil&Gas. 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 COG 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 4.9%, whose default value for COG is calculated based on our internal credit rating of Cabot Oil&Gas, 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 Cabot Oil&Gas.
    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 COG stock the variable cost ratio is equal to 106.7%.

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 COG 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 4.9% for Cabot Oil&Gas.

Corporate tax rate of 27% is the nominal tax rate for Cabot Oil&Gas. 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 COG 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 COG are equal to 399.1%.

Life of production assets of 7.8 years is the average useful life of capital assets used in Cabot Oil&Gas 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 COG is equal to -3.5%. 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 - $2568 million for Cabot Oil&Gas - 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 451.204 million for Cabot Oil&Gas 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 Cabot Oil&Gas at the current share price and the inputted number of shares is $10.4 billion.


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Stock chart of COG Financial statements of COG Annual reports of COG
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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