Intrinsic value of Carrizo Oil&Gas - CRZO

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$26.49

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$26.49

 
Intrinsic value

$0.09

 
Up/down potential

-100%

 
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 CRZO 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 1.8

 

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, %
  3.50
  45.50
  41.45
  37.81
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.27
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
  6.91
Revenue, $m
  444
  646
  914
  1,259
  1,694
  2,229
  2,873
  3,635
  4,521
  5,536
  6,681
  7,959
  9,368
  10,908
  12,576
  14,370
  16,287
  18,324
  20,478
  22,746
  25,128
  27,622
  30,227
  32,944
  35,773
  38,718
  41,779
  44,962
  48,269
  51,705
  55,277
Variable operating expenses, $m
 
  2,631
  3,721
  5,128
  6,898
  9,076
  11,700
  14,803
  18,411
  22,541
  27,205
  32,407
  38,147
  44,417
  51,211
  58,516
  66,321
  74,614
  83,385
  92,623
  102,321
  112,476
  123,084
  134,147
  145,669
  157,659
  170,126
  183,084
  196,549
  210,543
  225,086
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
  989
  2,631
  3,721
  5,128
  6,898
  9,076
  11,700
  14,803
  18,411
  22,541
  27,205
  32,407
  38,147
  44,417
  51,211
  58,516
  66,321
  74,614
  83,385
  92,623
  102,321
  112,476
  123,084
  134,147
  145,669
  157,659
  170,126
  183,084
  196,549
  210,543
  225,086
Operating income, $m
  -545
  -1,985
  -2,807
  -3,868
  -5,204
  -6,847
  -8,827
  -11,168
  -13,890
  -17,006
  -20,524
  -24,449
  -28,779
  -33,509
  -38,634
  -44,146
  -50,034
  -56,291
  -62,907
  -69,877
  -77,193
  -84,854
  -92,857
  -101,203
  -109,896
  -118,941
  -128,346
  -138,122
  -148,281
  -158,838
  -169,810
EBITDA, $m
  -331
  -1,674
  -2,368
  -3,264
  -4,391
  -5,777
  -7,447
  -9,422
  -11,719
  -14,348
  -17,316
  -20,627
  -24,280
  -28,272
  -32,596
  -37,246
  -42,214
  -47,492
  -53,075
  -58,955
  -65,128
  -71,591
  -78,343
  -85,385
  -92,719
  -100,350
  -108,285
  -116,533
  -125,104
  -134,011
  -143,268
Interest expense (income), $m
  75
  78
  109
  161
  228
  312
  416
  540
  688
  860
  1,056
  1,278
  1,526
  1,799
  2,098
  2,421
  2,769
  3,140
  3,535
  3,952
  4,392
  4,853
  5,337
  5,841
  6,368
  6,916
  7,487
  8,080
  8,697
  9,338
  10,004
Earnings before tax, $m
  -675
  -2,063
  -2,916
  -4,029
  -5,432
  -7,159
  -9,242
  -11,708
  -14,578
  -17,866
  -21,581
  -25,727
  -30,304
  -35,308
  -40,732
  -46,566
  -52,803
  -59,431
  -66,442
  -73,829
  -81,585
  -89,707
  -98,193
  -107,045
  -116,264
  -125,857
  -135,833
  -146,202
  -156,978
  -168,176
  -179,814
Tax expense, $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
  0
Net income, $m
  -675
  -2,063
  -2,916
  -4,029
  -5,432
  -7,159
  -9,242
  -11,708
  -14,578
  -17,866
  -21,581
  -25,727
  -30,304
  -35,308
  -40,732
  -46,566
  -52,803
  -59,431
  -66,442
  -73,829
  -81,585
  -89,707
  -98,193
  -107,045
  -116,264
  -125,857
  -135,833
  -146,202
  -156,978
  -168,176
  -179,814

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4
  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
  1,626
  2,358
  3,335
  4,596
  6,183
  8,134
  10,487
  13,268
  16,501
  20,203
  24,384
  29,046
  34,190
  39,810
  45,899
  52,446
  59,442
  66,875
  74,736
  83,016
  91,708
  100,809
  110,317
  120,233
  130,560
  141,306
  152,479
  164,093
  176,163
  188,705
  201,739
Adjusted assets (=assets-cash), $m
  1,622
  2,358
  3,335
  4,596
  6,183
  8,134
  10,487
  13,268
  16,501
  20,203
  24,384
  29,046
  34,190
  39,810
  45,899
  52,446
  59,442
  66,875
  74,736
  83,016
  91,708
  100,809
  110,317
  120,233
  130,560
  141,306
  152,479
  164,093
  176,163
  188,705
  201,739
Revenue / Adjusted assets
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
Average production assets, $m
  1,343
  1,954
  2,764
  3,809
  5,124
  6,742
  8,692
  10,997
  13,677
  16,746
  20,210
  24,075
  28,338
  32,997
  38,043
  43,470
  49,269
  55,429
  61,945
  68,807
  76,012
  83,556
  91,436
  99,655
  108,215
  117,121
  126,383
  136,009
  146,012
  156,408
  167,212
Working capital, $m
  -139
  -208
  -294
  -405
  -545
  -718
  -925
  -1,171
  -1,456
  -1,782
  -2,151
  -2,563
  -3,017
  -3,512
  -4,050
  -4,627
  -5,244
  -5,900
  -6,594
  -7,324
  -8,091
  -8,894
  -9,733
  -10,608
  -11,519
  -12,467
  -13,453
  -14,478
  -15,542
  -16,649
  -17,799
Total debt, $m
  1,325
  1,844
  2,724
  3,858
  5,286
  7,043
  9,160
  11,663
  14,573
  17,905
  21,667
  25,863
  30,493
  35,551
  41,031
  46,924
  53,220
  59,910
  66,984
  74,436
  82,259
  90,450
  99,007
  107,931
  117,226
  126,897
  136,953
  147,406
  158,268
  169,556
  181,288
Total liabilities, $m
  1,603
  2,122
  3,002
  4,136
  5,564
  7,321
  9,438
  11,941
  14,851
  18,183
  21,945
  26,141
  30,771
  35,829
  41,309
  47,202
  53,498
  60,188
  67,262
  74,714
  82,537
  90,728
  99,285
  108,209
  117,504
  127,175
  137,231
  147,684
  158,546
  169,834
  181,566
Total equity, $m
  23
  236
  334
  460
  618
  813
  1,049
  1,327
  1,650
  2,020
  2,438
  2,905
  3,419
  3,981
  4,590
  5,245
  5,944
  6,688
  7,474
  8,302
  9,171
  10,081
  11,032
  12,023
  13,056
  14,131
  15,248
  16,409
  17,616
  18,870
  20,174
Total liabilities and equity, $m
  1,626
  2,358
  3,336
  4,596
  6,182
  8,134
  10,487
  13,268
  16,501
  20,203
  24,383
  29,046
  34,190
  39,810
  45,899
  52,447
  59,442
  66,876
  74,736
  83,016
  91,708
  100,809
  110,317
  120,232
  130,560
  141,306
  152,479
  164,093
  176,162
  188,704
  201,740
Debt-to-equity ratio
  57.609
  7.820
  8.170
  8.400
  8.550
  8.660
  8.730
  8.790
  8.830
  8.860
  8.890
  8.900
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
Adjusted equity ratio
  0.012
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -675
  -2,063
  -2,916
  -4,029
  -5,432
  -7,159
  -9,242
  -11,708
  -14,578
  -17,866
  -21,581
  -25,727
  -30,304
  -35,308
  -40,732
  -46,566
  -52,803
  -59,431
  -66,442
  -73,829
  -81,585
  -89,707
  -98,193
  -107,045
  -116,264
  -125,857
  -135,833
  -146,202
  -156,978
  -168,176
  -179,814
Depreciation, amort., depletion, $m
  214
  310
  439
  605
  813
  1,070
  1,380
  1,746
  2,171
  2,658
  3,208
  3,821
  4,498
  5,238
  6,039
  6,900
  7,820
  8,798
  9,832
  10,922
  12,065
  13,263
  14,514
  15,818
  17,177
  18,591
  20,061
  21,589
  23,177
  24,827
  26,542
Funds from operations, $m
  218
  -1,753
  -2,477
  -3,424
  -4,618
  -6,089
  -7,863
  -9,963
  -12,407
  -15,208
  -18,373
  -21,906
  -25,806
  -30,071
  -34,693
  -39,666
  -44,982
  -50,632
  -56,609
  -62,907
  -69,520
  -76,444
  -83,680
  -91,226
  -99,087
  -107,267
  -115,772
  -124,614
  -133,801
  -143,349
  -153,272
Change in working capital, $m
  -55
  -65
  -86
  -111
  -140
  -172
  -208
  -245
  -285
  -327
  -369
  -411
  -454
  -496
  -537
  -578
  -617
  -656
  -694
  -731
  -767
  -803
  -839
  -875
  -911
  -948
  -986
  -1,025
  -1,065
  -1,107
  -1,150
Cash from operations, $m
  273
  -1,726
  -2,391
  -3,313
  -4,478
  -5,916
  -7,655
  -9,717
  -12,122
  -14,881
  -18,004
  -21,494
  -25,353
  -29,575
  -34,156
  -39,089
  -44,365
  -49,976
  -55,916
  -62,176
  -68,753
  -75,641
  -82,841
  -90,351
  -98,176
  -106,319
  -114,787
  -123,589
  -132,736
  -142,243
  -152,122
Maintenance CAPEX, $m
  0
  -213
  -310
  -439
  -605
  -813
  -1,070
  -1,380
  -1,746
  -2,171
  -2,658
  -3,208
  -3,821
  -4,498
  -5,238
  -6,039
  -6,900
  -7,820
  -8,798
  -9,832
  -10,922
  -12,065
  -13,263
  -14,514
  -15,818
  -17,177
  -18,591
  -20,061
  -21,589
  -23,177
  -24,827
New CAPEX, $m
  -481
  -611
  -810
  -1,045
  -1,315
  -1,618
  -1,950
  -2,305
  -2,680
  -3,068
  -3,465
  -3,865
  -4,263
  -4,658
  -5,047
  -5,427
  -5,798
  -6,161
  -6,515
  -6,863
  -7,205
  -7,543
  -7,881
  -8,219
  -8,560
  -8,907
  -9,261
  -9,626
  -10,004
  -10,395
  -10,804
Cash from investing activities, $m
  -620
  -824
  -1,120
  -1,484
  -1,920
  -2,431
  -3,020
  -3,685
  -4,426
  -5,239
  -6,123
  -7,073
  -8,084
  -9,156
  -10,285
  -11,466
  -12,698
  -13,981
  -15,313
  -16,695
  -18,127
  -19,608
  -21,144
  -22,733
  -24,378
  -26,084
  -27,852
  -29,687
  -31,593
  -33,572
  -35,631
Free cash flow, $m
  -347
  -2,550
  -3,511
  -4,797
  -6,398
  -8,348
  -10,675
  -13,402
  -16,547
  -20,120
  -24,127
  -28,567
  -33,437
  -38,731
  -44,440
  -50,554
  -57,063
  -63,958
  -71,229
  -78,872
  -86,879
  -95,250
  -103,984
  -113,084
  -122,554
  -132,402
  -142,639
  -153,276
  -164,329
  -175,815
  -187,753
Issuance/(repayment) of debt, $m
  87
  519
  880
  1,135
  1,428
  1,757
  2,117
  2,503
  2,910
  3,332
  3,762
  4,196
  4,629
  5,058
  5,480
  5,893
  6,296
  6,690
  7,075
  7,452
  7,823
  8,191
  8,557
  8,924
  9,295
  9,671
  10,056
  10,453
  10,862
  11,288
  11,731
Issuance/(repurchase) of shares, $m
  224
  2,244
  2,729
  3,788
  5,129
  6,786
  8,793
  11,177
  13,960
  17,159
  20,783
  24,837
  29,322
  34,235
  39,569
  45,316
  51,467
  58,011
  64,941
  72,248
  79,925
  87,969
  96,378
  105,151
  114,292
  123,805
  133,700
  143,985
  154,673
  165,781
  177,325
Cash from financing (excl. dividends), $m  
  308
  2,763
  3,609
  4,923
  6,557
  8,543
  10,910
  13,680
  16,870
  20,491
  24,545
  29,033
  33,951
  39,293
  45,049
  51,209
  57,763
  64,701
  72,016
  79,700
  87,748
  96,160
  104,935
  114,075
  123,587
  133,476
  143,756
  154,438
  165,535
  177,069
  189,056
Total cash flow (excl. dividends), $m
  -39
  -2,031
  -2,632
  -3,662
  -4,970
  -6,591
  -8,558
  -10,899
  -13,637
  -16,788
  -20,364
  -24,371
  -28,808
  -33,673
  -38,960
  -44,661
  -50,767
  -57,268
  -64,155
  -71,420
  -79,056
  -87,059
  -95,427
  -104,160
  -113,259
  -122,731
  -132,582
  -142,823
  -153,466
  -164,527
  -176,021
Retained Cash Flow (-), $m
  421
  -217
  -98
  -126
  -159
  -195
  -235
  -278
  -323
  -370
  -418
  -466
  -514
  -562
  -609
  -655
  -700
  -743
  -786
  -828
  -869
  -910
  -951
  -992
  -1,033
  -1,075
  -1,117
  -1,161
  -1,207
  -1,254
  -1,303
Prev. year cash balance distribution, $m
 
  4
  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, %
 
  12.40
  13.02
  13.67
  14.35
  15.07
  15.83
  16.62
  17.45
  18.32
  19.24
  20.20
  21.21
  22.27
  23.38
  24.55
  25.78
  27.07
  28.42
  29.84
  31.33
  32.90
  34.55
  36.27
  38.09
  39.99
  41.99
  44.09
  46.29
  48.61
  51.04
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
  7.8
  3.6
  1.7
  0.8
  0.4
  0.2
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Carrizo Oil & Gas, Inc., together with its subsidiaries, engages in the exploration, development, and production of oil and gas primarily in the United States. The company holds interests in oil and gas plays, including Eagle Ford Shale in Texas; the Delaware Basin in West Texas; the Utica Shale in Ohio; the Niobrara Formation in Colorado; and the Marcellus Shale in Pennsylvania. As of December 31, 2015, it had proved oil and gas reserves of 170.6 million barrels of oil equivalent; and operated 474 gross productive oil and gas wells. The company was founded in 1993 and is based in Houston, Texas.

FINANCIAL RATIOS  of  Carrizo Oil&Gas (CRZO)

Valuation Ratios
P/E Ratio -2.6
Price to Sales 3.9
Price to Book 75
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow -8.3
Growth Rates
Sales Growth Rate 3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.8%
Cap. Spend. - 3 Yr. Gr. Rate -9.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 5760.9%
Total Debt to Equity 5760.9%
Interest Coverage -8
Management Effectiveness
Return On Assets -33%
Ret/ On Assets - 3 Yr. Avg. -22.3%
Return On Total Capital -44.6%
Ret/ On T. Cap. - 3 Yr. Avg. -29.9%
Return On Equity -289.1%
Return On Equity - 3 Yr. Avg. -138.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 72.1%
Gross Margin - 3 Yr. Avg. 76.3%
EBITDA Margin -86.9%
EBITDA Margin - 3 Yr. Avg. -67.9%
Operating Margin -122.7%
Oper. Margin - 3 Yr. Avg. -133.8%
Pre-Tax Margin -152%
Pre-Tax Margin - 3 Yr. Avg. -135.2%
Net Profit Margin -152%
Net Profit Margin - 3 Yr. Avg. -129.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 15.8%
Payout Ratio 0%

CRZO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRZO stock intrinsic value calculation we used $444 million for the last fiscal year's total revenue generated by Carrizo Oil&Gas. The default revenue input number comes from 2016 income statement of Carrizo 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 CRZO stock valuation model: a) initial revenue growth rate of 45.5% 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 12.4%, whose default value for CRZO is calculated based on our internal credit rating of Carrizo 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 Carrizo 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 CRZO stock the variable cost ratio is equal to 407.2%.

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 CRZO 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 5.9% for Carrizo Oil&Gas.

Corporate tax rate of 27% is the nominal tax rate for Carrizo 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 CRZO 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 CRZO are equal to 302.5%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Carrizo 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 CRZO is equal to -32.2%. 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 - $23 million for Carrizo 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 67.69 million for Carrizo 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 Carrizo Oil&Gas at the current share price and the inputted number of shares is $1.8 billion.


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Stock chart of CRZO Financial statements of CRZO
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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