Intrinsic value of Denbury Resources - DNR

Previous Close

$1.46

  Intrinsic Value

$0.29

stock screener

  Rating & Target

str. sell

-80%

  Value-price divergence*

-34%

Previous close

$1.46

 
Intrinsic value

$0.29

 
Up/down potential

-80%

 
Rating

str. sell

 
Value-price divergence*

-34%

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

We calculate the intrinsic value of DNR 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 0.6

 

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, %
  -22.42
  41.00
  37.40
  34.16
  31.24
  28.62
  26.26
  24.13
  22.22
  20.50
  18.95
  17.55
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.00
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.58
  7.33
  7.09
  6.88
  6.70
Revenue, $m
  976
  1,376
  1,891
  2,537
  3,329
  4,282
  5,407
  6,711
  8,202
  9,884
  11,756
  13,820
  16,072
  18,510
  21,129
  23,926
  26,895
  30,034
  33,339
  36,808
  40,438
  44,230
  48,184
  52,301
  56,585
  61,039
  65,668
  70,479
  75,479
  80,675
  86,076
Variable operating expenses, $m
 
  8,283
  11,381
  15,269
  20,039
  25,774
  32,542
  40,395
  49,371
  59,490
  70,762
  83,182
  96,738
  111,411
  127,177
  144,009
  161,884
  180,777
  200,669
  221,546
  243,397
  266,220
  290,017
  314,800
  340,584
  367,393
  395,258
  424,215
  454,306
  485,580
  518,093
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
  2,243
  8,283
  11,381
  15,269
  20,039
  25,774
  32,542
  40,395
  49,371
  59,490
  70,762
  83,182
  96,738
  111,411
  127,177
  144,009
  161,884
  180,777
  200,669
  221,546
  243,397
  266,220
  290,017
  314,800
  340,584
  367,393
  395,258
  424,215
  454,306
  485,580
  518,093
Operating income, $m
  -1,267
  -6,907
  -9,490
  -12,732
  -16,710
  -21,492
  -27,136
  -33,684
  -41,168
  -49,606
  -59,005
  -69,362
  -80,666
  -92,901
  -106,047
  -120,083
  -134,988
  -150,743
  -167,330
  -184,738
  -202,959
  -221,990
  -241,834
  -262,499
  -283,999
  -306,354
  -329,590
  -353,735
  -378,827
  -404,906
  -432,017
EBITDA, $m
  -421
  -6,247
  -8,583
  -11,515
  -15,113
  -19,438
  -24,542
  -30,464
  -37,233
  -44,864
  -53,365
  -62,731
  -72,955
  -84,020
  -95,910
  -108,604
  -122,084
  -136,332
  -151,334
  -167,078
  -183,557
  -200,768
  -218,715
  -237,405
  -256,850
  -277,068
  -298,082
  -319,919
  -342,613
  -366,198
  -390,717
Interest expense (income), $m
  131
  126
  192
  276
  382
  512
  669
  853
  1,067
  1,312
  1,588
  1,895
  2,234
  2,604
  3,004
  3,434
  3,893
  4,380
  4,895
  5,438
  6,007
  6,603
  7,225
  7,874
  8,550
  9,253
  9,984
  10,744
  11,534
  12,354
  13,207
Earnings before tax, $m
  -1,520
  -7,033
  -9,682
  -13,008
  -17,092
  -22,005
  -27,804
  -34,537
  -42,235
  -50,918
  -60,593
  -71,258
  -82,900
  -95,505
  -109,051
  -123,517
  -138,881
  -155,123
  -172,225
  -190,176
  -208,966
  -228,593
  -249,059
  -270,373
  -292,549
  -315,608
  -339,574
  -364,479
  -390,361
  -417,260
  -445,224
Tax expense, $m
  -544
  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
  -976
  -7,033
  -9,682
  -13,008
  -17,092
  -22,005
  -27,804
  -34,537
  -42,235
  -50,918
  -60,593
  -71,258
  -82,900
  -95,505
  -109,051
  -123,517
  -138,881
  -155,123
  -172,225
  -190,176
  -208,966
  -228,593
  -249,059
  -270,373
  -292,549
  -315,608
  -339,574
  -364,479
  -390,361
  -417,260
  -445,224

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  4,275
  6,036
  8,293
  11,126
  14,602
  18,782
  23,713
  29,436
  35,976
  43,350
  51,563
  60,614
  70,492
  81,184
  92,672
  104,938
  117,963
  131,730
  146,225
  161,437
  177,360
  193,991
  211,332
  229,390
  248,179
  267,715
  288,019
  309,119
  331,047
  353,836
  377,528
Adjusted assets (=assets-cash), $m
  4,273
  6,036
  8,293
  11,126
  14,602
  18,782
  23,713
  29,436
  35,976
  43,350
  51,563
  60,614
  70,492
  81,184
  92,672
  104,938
  117,963
  131,730
  146,225
  161,437
  177,360
  193,991
  211,332
  229,390
  248,179
  267,715
  288,019
  309,119
  331,047
  353,836
  377,528
Revenue / Adjusted assets
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
Average production assets, $m
  4,683
  6,603
  9,072
  12,171
  15,974
  20,546
  25,941
  32,201
  39,355
  47,422
  56,407
  66,308
  77,114
  88,811
  101,378
  114,796
  129,044
  144,105
  159,962
  176,603
  194,022
  212,215
  231,185
  250,940
  271,494
  292,865
  315,077
  338,159
  362,146
  387,077
  412,994
Working capital, $m
  -253
  -138
  -189
  -254
  -333
  -428
  -541
  -671
  -820
  -988
  -1,176
  -1,382
  -1,607
  -1,851
  -2,113
  -2,393
  -2,690
  -3,003
  -3,334
  -3,681
  -4,044
  -4,423
  -4,818
  -5,230
  -5,658
  -6,104
  -6,567
  -7,048
  -7,548
  -8,067
  -8,608
Total debt, $m
  2,993
  4,564
  6,575
  9,099
  12,197
  15,920
  20,314
  25,413
  31,240
  37,810
  45,129
  53,193
  61,994
  71,521
  81,757
  92,685
  104,291
  116,557
  129,473
  143,027
  157,214
  172,032
  187,483
  203,573
  220,313
  237,720
  255,811
  274,611
  294,148
  314,454
  335,563
Total liabilities, $m
  3,806
  5,378
  7,389
  9,913
  13,011
  16,734
  21,128
  26,227
  32,054
  38,624
  45,943
  54,007
  62,808
  72,335
  82,571
  93,499
  105,105
  117,371
  130,287
  143,841
  158,028
  172,846
  188,297
  204,387
  221,127
  238,534
  256,625
  275,425
  294,962
  315,268
  336,377
Total equity, $m
  468
  658
  904
  1,213
  1,592
  2,047
  2,585
  3,208
  3,921
  4,725
  5,620
  6,607
  7,684
  8,849
  10,101
  11,438
  12,858
  14,359
  15,939
  17,597
  19,332
  21,145
  23,035
  25,004
  27,052
  29,181
  31,394
  33,694
  36,084
  38,568
  41,151
Total liabilities and equity, $m
  4,274
  6,036
  8,293
  11,126
  14,603
  18,781
  23,713
  29,435
  35,975
  43,349
  51,563
  60,614
  70,492
  81,184
  92,672
  104,937
  117,963
  131,730
  146,226
  161,438
  177,360
  193,991
  211,332
  229,391
  248,179
  267,715
  288,019
  309,119
  331,046
  353,836
  377,528
Debt-to-equity ratio
  6.395
  6.940
  7.270
  7.500
  7.660
  7.780
  7.860
  7.920
  7.970
  8.000
  8.030
  8.050
  8.070
  8.080
  8.090
  8.100
  8.110
  8.120
  8.120
  8.130
  8.130
  8.140
  8.140
  8.140
  8.140
  8.150
  8.150
  8.150
  8.150
  8.150
  8.150
Adjusted equity ratio
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109
  0.109

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -976
  -7,033
  -9,682
  -13,008
  -17,092
  -22,005
  -27,804
  -34,537
  -42,235
  -50,918
  -60,593
  -71,258
  -82,900
  -95,505
  -109,051
  -123,517
  -138,881
  -155,123
  -172,225
  -190,176
  -208,966
  -228,593
  -249,059
  -270,373
  -292,549
  -315,608
  -339,574
  -364,479
  -390,361
  -417,260
  -445,224
Depreciation, amort., depletion, $m
  846
  660
  907
  1,217
  1,597
  2,055
  2,594
  3,220
  3,936
  4,742
  5,641
  6,631
  7,711
  8,881
  10,138
  11,480
  12,904
  14,410
  15,996
  17,660
  19,402
  21,221
  23,119
  25,094
  27,149
  29,286
  31,508
  33,816
  36,215
  38,708
  41,299
Funds from operations, $m
  174
  -6,372
  -8,775
  -11,791
  -15,495
  -19,950
  -25,210
  -31,317
  -38,300
  -46,176
  -54,953
  -64,627
  -75,189
  -86,624
  -98,913
  -112,038
  -125,977
  -140,712
  -156,229
  -172,516
  -189,564
  -207,371
  -225,940
  -245,279
  -265,400
  -286,321
  -308,066
  -330,663
  -354,146
  -378,552
  -403,925
Change in working capital, $m
  -45
  -40
  -51
  -65
  -79
  -95
  -112
  -130
  -149
  -168
  -187
  -206
  -225
  -244
  -262
  -280
  -297
  -314
  -330
  -347
  -363
  -379
  -395
  -412
  -428
  -445
  -463
  -481
  -500
  -520
  -540
Cash from operations, $m
  219
  -6,332
  -8,723
  -11,726
  -15,415
  -19,855
  -25,098
  -31,187
  -38,151
  -46,008
  -54,765
  -64,420
  -74,964
  -86,380
  -98,652
  -111,758
  -125,680
  -140,398
  -155,899
  -172,169
  -189,201
  -206,992
  -225,545
  -244,867
  -264,971
  -285,876
  -307,603
  -330,182
  -353,646
  -378,033
  -403,384
Maintenance CAPEX, $m
  0
  -468
  -660
  -907
  -1,217
  -1,597
  -2,055
  -2,594
  -3,220
  -3,936
  -4,742
  -5,641
  -6,631
  -7,711
  -8,881
  -10,138
  -11,480
  -12,904
  -14,410
  -15,996
  -17,660
  -19,402
  -21,221
  -23,119
  -25,094
  -27,149
  -29,286
  -31,508
  -33,816
  -36,215
  -38,708
New CAPEX, $m
  -253
  -1,920
  -2,469
  -3,099
  -3,803
  -4,572
  -5,395
  -6,260
  -7,155
  -8,067
  -8,985
  -9,901
  -10,806
  -11,696
  -12,567
  -13,418
  -14,249
  -15,061
  -15,857
  -16,641
  -17,419
  -18,193
  -18,970
  -19,755
  -20,554
  -21,371
  -22,212
  -23,083
  -23,987
  -24,930
  -25,917
Cash from investing activities, $m
  -205
  -2,388
  -3,129
  -4,006
  -5,020
  -6,169
  -7,450
  -8,854
  -10,375
  -12,003
  -13,727
  -15,542
  -17,437
  -19,407
  -21,448
  -23,556
  -25,729
  -27,965
  -30,267
  -32,637
  -35,079
  -37,595
  -40,191
  -42,874
  -45,648
  -48,520
  -51,498
  -54,591
  -57,803
  -61,145
  -64,625
Free cash flow, $m
  14
  -8,721
  -11,853
  -15,733
  -20,435
  -26,024
  -32,547
  -40,041
  -48,525
  -58,010
  -68,493
  -79,962
  -92,401
  -105,788
  -120,100
  -135,314
  -151,408
  -168,363
  -186,166
  -204,806
  -224,280
  -244,587
  -265,737
  -287,741
  -310,619
  -334,396
  -359,102
  -384,773
  -411,449
  -439,178
  -468,009
Issuance/(repayment) of debt, $m
  20
  1,571
  2,011
  2,524
  3,097
  3,724
  4,394
  5,099
  5,827
  6,570
  7,318
  8,064
  8,802
  9,526
  10,236
  10,929
  11,605
  12,267
  12,915
  13,554
  14,187
  14,818
  15,451
  16,090
  16,741
  17,406
  18,091
  18,800
  19,537
  20,305
  21,109
Issuance/(repurchase) of shares, $m
  0
  7,223
  9,928
  13,317
  17,471
  22,460
  28,342
  35,161
  42,948
  51,722
  61,489
  72,244
  83,977
  96,670
  110,303
  124,854
  140,301
  156,623
  173,805
  191,834
  210,702
  230,406
  250,949
  272,341
  294,597
  317,737
  341,787
  366,779
  392,751
  419,744
  447,806
Cash from financing (excl. dividends), $m  
  -15
  8,794
  11,939
  15,841
  20,568
  26,184
  32,736
  40,260
  48,775
  58,292
  68,807
  80,308
  92,779
  106,196
  120,539
  135,783
  151,906
  168,890
  186,720
  205,388
  224,889
  245,224
  266,400
  288,431
  311,338
  335,143
  359,878
  385,579
  412,288
  440,049
  468,915
Total cash flow (excl. dividends), $m
  -1
  73
  86
  108
  133
  160
  189
  219
  250
  282
  314
  346
  378
  409
  439
  469
  498
  527
  554
  582
  609
  636
  663
  691
  719
  747
  777
  807
  839
  872
  906
Retained Cash Flow (-), $m
  781
  -7,223
  -9,928
  -13,317
  -17,471
  -22,460
  -28,342
  -35,161
  -42,948
  -51,722
  -61,489
  -72,244
  -83,977
  -96,670
  -110,303
  -124,854
  -140,301
  -156,623
  -173,805
  -191,834
  -210,702
  -230,406
  -250,949
  -272,341
  -294,597
  -317,737
  -341,787
  -366,779
  -392,751
  -419,744
  -447,806
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
 
  -7,150
  -9,842
  -13,209
  -17,338
  -22,300
  -28,153
  -34,942
  -42,698
  -51,440
  -61,174
  -71,898
  -83,599
  -96,261
  -109,864
  -124,385
  -139,803
  -156,097
  -173,251
  -191,252
  -210,092
  -229,769
  -250,286
  -271,651
  -293,878
  -316,990
  -341,010
  -365,972
  -391,912
  -418,872
  -446,900
Discount rate, %
 
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.18
  22.23
  23.35
  24.51
  25.74
  27.03
  28.38
  29.80
  31.29
  32.85
  34.49
  36.22
  38.03
  39.93
  41.93
  44.02
  46.22
  48.53
  50.96
  53.51
PV of cash for distribution, $m
 
  -6,327
  -7,619
  -8,838
  -9,896
  -10,709
  -11,208
  -11,353
  -11,137
  -10,583
  -9,743
  -8,693
  -7,514
  -6,292
  -5,103
  -4,006
  -3,042
  -2,234
  -1,585
  -1,085
  -716
  -456
  -279
  -164
  -93
  -50
  -26
  -13
  -6
  -3
  -1
Current shareholders' claim on cash, %
  100
  7.5
  0.6
  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
  0.0
  0.0
  0.0
  0.0
  0.0

Denbury Resources Inc. operates as an independent oil and natural gas company in the United States. The company primarily focuses on enhanced oil recovery utilizing carbon dioxide. It holds properties located in Mississippi, Texas, Louisiana, and Alabama in the Gulf Coast region; and in Montana, North Dakota, and Wyoming in the Rocky Mountain region. As of December 31, 2015, the company had 288.6 million barrels of oil equivalent of estimated proved oil and natural gas reserves. Denbury Resources Inc. was founded in 1951 and is headquartered in Plano, Texas.

FINANCIAL RATIOS  of  Denbury Resources (DNR)

Valuation Ratios
P/E Ratio -0.6
Price to Sales 0.6
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 2.7
Price to Free Cash Flow -17.1
Growth Rates
Sales Growth Rate -22.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -55%
Cap. Spend. - 3 Yr. Gr. Rate -27.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 621.8%
Total Debt to Equity 639.5%
Interest Coverage -11
Management Effectiveness
Return On Assets -17.6%
Ret/ On Assets - 3 Yr. Avg. -19.2%
Return On Total Capital -24.4%
Ret/ On T. Cap. - 3 Yr. Avg. -26.8%
Return On Equity -113.7%
Return On Equity - 3 Yr. Avg. -76.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 99.6%
Gross Margin - 3 Yr. Avg. 99.4%
EBITDA Margin -55.6%
EBITDA Margin - 3 Yr. Avg. -143.5%
Operating Margin -129.8%
Oper. Margin - 3 Yr. Avg. -201.7%
Pre-Tax Margin -155.7%
Pre-Tax Margin - 3 Yr. Avg. -205.5%
Net Profit Margin -100%
Net Profit Margin - 3 Yr. Avg. -140.8%
Effective Tax Rate 35.8%
Eff/ Tax Rate - 3 Yr. Avg. 34.8%
Payout Ratio 0%

DNR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DNR stock intrinsic value calculation we used $976 million for the last fiscal year's total revenue generated by Denbury Resources. The default revenue input number comes from 2016 income statement of Denbury 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 DNR stock valuation model: a) initial revenue growth rate of 41% 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 13%, whose default value for DNR is calculated based on our internal credit rating of Denbury 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 Denbury 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 DNR stock the variable cost ratio is equal to 601.9%.

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 DNR 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 4.2% for Denbury Resources.

Corporate tax rate of 27% is the nominal tax rate for Denbury 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 DNR 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 DNR are equal to 479.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Denbury 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 DNR is equal to -10%. 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 - $468 million for Denbury 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 398.551 million for Denbury 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 Denbury Resources at the current share price and the inputted number of shares is $0.6 billion.

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Stock chart of DNR Financial statements of DNR Annual reports of DNR
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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