Intrinsic value of Devon Energy - DVN

Previous Close

$42.85

  Intrinsic Value

$0.93

stock screener

  Rating & Target

str. sell

-98%

Previous close

$42.85

 
Intrinsic value

$0.93

 
Up/down potential

-98%

 
Rating

str. sell

We calculate the intrinsic value of DVN 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -21.61
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
Revenue, $m
  10,304
  11,283
  12,304
  13,368
  14,475
  15,626
  16,822
  18,066
  19,358
  20,701
  22,096
  23,548
  25,058
  26,629
  28,265
  29,970
  31,746
  33,598
  35,530
  37,546
  39,652
  41,851
  44,150
  46,553
  49,066
  51,696
  54,448
  57,328
  60,345
  63,504
  66,814
Variable operating expenses, $m
 
  29,038
  31,630
  34,331
  37,141
  40,063
  43,100
  46,256
  49,536
  52,945
  56,489
  59,777
  63,610
  67,599
  71,752
  76,079
  80,587
  85,289
  90,193
  95,312
  100,657
  106,241
  112,076
  118,176
  124,556
  131,231
  138,217
  145,530
  153,187
  161,207
  169,609
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
  13,468
  29,038
  31,630
  34,331
  37,141
  40,063
  43,100
  46,256
  49,536
  52,945
  56,489
  59,777
  63,610
  67,599
  71,752
  76,079
  80,587
  85,289
  90,193
  95,312
  100,657
  106,241
  112,076
  118,176
  124,556
  131,231
  138,217
  145,530
  153,187
  161,207
  169,609
Operating income, $m
  -3,164
  -17,755
  -19,326
  -20,963
  -22,666
  -24,437
  -26,278
  -28,191
  -30,179
  -32,245
  -34,392
  -36,229
  -38,552
  -40,970
  -43,487
  -46,109
  -48,842
  -51,691
  -54,664
  -57,766
  -61,005
  -64,389
  -67,926
  -71,623
  -75,490
  -79,536
  -83,769
  -88,201
  -92,842
  -97,703
  -102,795
EBITDA, $m
  -1,372
  -15,790
  -17,218
  -18,707
  -20,256
  -21,867
  -23,541
  -25,281
  -27,090
  -28,969
  -30,922
  -32,954
  -35,067
  -37,266
  -39,555
  -41,940
  -44,426
  -47,017
  -49,721
  -52,543
  -55,490
  -58,568
  -61,784
  -65,147
  -68,665
  -72,344
  -76,195
  -80,227
  -84,448
  -88,869
  -93,501
Interest expense (income), $m
  566
  498
  591
  688
  789
  894
  1,003
  1,117
  1,235
  1,358
  1,486
  1,618
  1,756
  1,900
  2,049
  2,204
  2,366
  2,535
  2,711
  2,895
  3,087
  3,287
  3,496
  3,714
  3,943
  4,181
  4,431
  4,693
  4,967
  5,253
  5,553
Earnings before tax, $m
  -3,877
  -18,253
  -19,917
  -21,651
  -23,455
  -25,331
  -27,281
  -29,308
  -31,414
  -33,603
  -35,878
  -37,847
  -40,308
  -42,870
  -45,536
  -48,314
  -51,208
  -54,226
  -57,375
  -60,661
  -64,092
  -67,676
  -71,422
  -75,337
  -79,433
  -83,717
  -88,200
  -92,894
  -97,809
  -102,956
  -108,349
Tax expense, $m
  -173
  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
  -3,302
  -18,253
  -19,917
  -21,651
  -23,455
  -25,331
  -27,281
  -29,308
  -31,414
  -33,603
  -35,878
  -37,847
  -40,308
  -42,870
  -45,536
  -48,314
  -51,208
  -54,226
  -57,375
  -60,661
  -64,092
  -67,676
  -71,422
  -75,337
  -79,433
  -83,717
  -88,200
  -92,894
  -97,809
  -102,956
  -108,349

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,959
  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
  25,913
  26,239
  28,614
  31,088
  33,662
  36,339
  39,121
  42,013
  45,018
  48,141
  51,387
  54,763
  58,274
  61,928
  65,733
  69,697
  73,827
  78,134
  82,627
  87,317
  92,213
  97,329
  102,674
  108,263
  114,108
  120,223
  126,622
  133,322
  140,337
  147,684
  155,381
Adjusted assets (=assets-cash), $m
  23,954
  26,239
  28,614
  31,088
  33,662
  36,339
  39,121
  42,013
  45,018
  48,141
  51,387
  54,763
  58,274
  61,928
  65,733
  69,697
  73,827
  78,134
  82,627
  87,317
  92,213
  97,329
  102,674
  108,263
  114,108
  120,223
  126,622
  133,322
  140,337
  147,684
  155,381
Revenue / Adjusted assets
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
Average production assets, $m
  17,629
  19,305
  21,052
  22,872
  24,766
  26,735
  28,783
  30,910
  33,121
  35,419
  37,807
  40,291
  42,874
  45,563
  48,362
  51,278
  54,317
  57,486
  60,791
  64,242
  67,844
  71,608
  75,540
  79,652
  83,953
  88,452
  93,160
  98,089
  103,250
  108,655
  114,319
Working capital, $m
  1,156
  -880
  -960
  -1,043
  -1,129
  -1,219
  -1,312
  -1,409
  -1,510
  -1,615
  -1,724
  -1,837
  -1,955
  -2,077
  -2,205
  -2,338
  -2,476
  -2,621
  -2,771
  -2,929
  -3,093
  -3,264
  -3,444
  -3,631
  -3,827
  -4,032
  -4,247
  -4,472
  -4,707
  -4,953
  -5,211
Total debt, $m
  10,154
  12,052
  14,032
  16,095
  18,242
  20,474
  22,795
  25,207
  27,713
  30,317
  33,025
  35,840
  38,769
  41,816
  44,990
  48,295
  51,740
  55,332
  59,079
  62,990
  67,074
  71,340
  75,798
  80,459
  85,334
  90,434
  95,771
  101,358
  107,209
  113,336
  119,756
Total liabilities, $m
  19,986
  21,884
  23,864
  25,927
  28,074
  30,306
  32,627
  35,039
  37,545
  40,149
  42,857
  45,672
  48,601
  51,648
  54,822
  58,127
  61,572
  65,164
  68,911
  72,822
  76,906
  81,172
  85,630
  90,291
  95,166
  100,266
  105,603
  111,190
  117,041
  123,168
  129,588
Total equity, $m
  5,927
  4,356
  4,750
  5,161
  5,588
  6,032
  6,494
  6,974
  7,473
  7,991
  8,530
  9,091
  9,674
  10,280
  10,912
  11,570
  12,255
  12,970
  13,716
  14,495
  15,307
  16,157
  17,044
  17,972
  18,942
  19,957
  21,019
  22,131
  23,296
  24,516
  25,793
Total liabilities and equity, $m
  25,913
  26,240
  28,614
  31,088
  33,662
  36,338
  39,121
  42,013
  45,018
  48,140
  51,387
  54,763
  58,275
  61,928
  65,734
  69,697
  73,827
  78,134
  82,627
  87,317
  92,213
  97,329
  102,674
  108,263
  114,108
  120,223
  126,622
  133,321
  140,337
  147,684
  155,381
Debt-to-equity ratio
  1.713
  2.770
  2.950
  3.120
  3.260
  3.390
  3.510
  3.610
  3.710
  3.790
  3.870
  3.940
  4.010
  4.070
  4.120
  4.170
  4.220
  4.270
  4.310
  4.350
  4.380
  4.420
  4.450
  4.480
  4.510
  4.530
  4.560
  4.580
  4.600
  4.620
  4.640
Adjusted equity ratio
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3,302
  -18,253
  -19,917
  -21,651
  -23,455
  -25,331
  -27,281
  -29,308
  -31,414
  -33,603
  -35,878
  -37,847
  -40,308
  -42,870
  -45,536
  -48,314
  -51,208
  -54,226
  -57,375
  -60,661
  -64,092
  -67,676
  -71,422
  -75,337
  -79,433
  -83,717
  -88,200
  -92,894
  -97,809
  -102,956
  -108,349
Depreciation, amort., depletion, $m
  1,792
  1,966
  2,108
  2,256
  2,410
  2,570
  2,736
  2,909
  3,089
  3,276
  3,470
  3,276
  3,486
  3,704
  3,932
  4,169
  4,416
  4,674
  4,942
  5,223
  5,516
  5,822
  6,142
  6,476
  6,825
  7,191
  7,574
  7,975
  8,394
  8,834
  9,294
Funds from operations, $m
  1,773
  -16,287
  -17,809
  -19,395
  -21,045
  -22,761
  -24,545
  -26,398
  -28,325
  -30,327
  -32,408
  -34,572
  -36,823
  -39,165
  -41,604
  -44,145
  -46,792
  -49,553
  -52,432
  -55,438
  -58,576
  -61,854
  -65,280
  -68,862
  -72,607
  -76,526
  -80,627
  -84,919
  -89,414
  -94,122
  -99,054
Change in working capital, $m
  27
  -76
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -113
  -118
  -123
  -128
  -133
  -139
  -144
  -151
  -157
  -164
  -172
  -179
  -187
  -196
  -205
  -215
  -225
  -235
  -246
  -258
Cash from operations, $m
  1,746
  -16,211
  -17,729
  -19,312
  -20,958
  -22,671
  -24,451
  -26,301
  -28,224
  -30,222
  -32,299
  -34,459
  -36,705
  -39,043
  -41,477
  -44,012
  -46,654
  -49,408
  -52,282
  -55,281
  -58,412
  -61,683
  -65,101
  -68,674
  -72,411
  -76,321
  -80,412
  -84,695
  -89,179
  -93,876
  -98,796
Maintenance CAPEX, $m
  0
  -1,433
  -1,570
  -1,712
  -1,860
  -2,013
  -2,174
  -2,340
  -2,513
  -2,693
  -2,880
  -3,074
  -3,276
  -3,486
  -3,704
  -3,932
  -4,169
  -4,416
  -4,674
  -4,942
  -5,223
  -5,516
  -5,822
  -6,142
  -6,476
  -6,825
  -7,191
  -7,574
  -7,975
  -8,394
  -8,834
New CAPEX, $m
  -2,330
  -1,676
  -1,747
  -1,820
  -1,894
  -1,970
  -2,047
  -2,127
  -2,211
  -2,298
  -2,388
  -2,484
  -2,583
  -2,689
  -2,799
  -2,916
  -3,039
  -3,169
  -3,306
  -3,450
  -3,603
  -3,763
  -3,933
  -4,112
  -4,300
  -4,499
  -4,708
  -4,929
  -5,161
  -5,406
  -5,663
Cash from investing activities, $m
  -872
  -3,109
  -3,317
  -3,532
  -3,754
  -3,983
  -4,221
  -4,467
  -4,724
  -4,991
  -5,268
  -5,558
  -5,859
  -6,175
  -6,503
  -6,848
  -7,208
  -7,585
  -7,980
  -8,392
  -8,826
  -9,279
  -9,755
  -10,254
  -10,776
  -11,324
  -11,899
  -12,503
  -13,136
  -13,800
  -14,497
Free cash flow, $m
  874
  -19,320
  -21,046
  -22,843
  -24,712
  -26,654
  -28,672
  -30,769
  -32,948
  -35,212
  -37,567
  -40,016
  -42,564
  -45,217
  -47,980
  -50,859
  -53,862
  -56,993
  -60,261
  -63,673
  -67,237
  -70,962
  -74,855
  -78,927
  -83,187
  -87,645
  -92,311
  -97,197
  -102,315
  -107,676
  -113,293
Issuance/(repayment) of debt, $m
  -3,155
  1,898
  1,980
  2,063
  2,147
  2,233
  2,321
  2,412
  2,506
  2,605
  2,707
  2,815
  2,929
  3,048
  3,173
  3,305
  3,445
  3,592
  3,747
  3,911
  4,084
  4,266
  4,458
  4,661
  4,875
  5,100
  5,337
  5,587
  5,850
  6,128
  6,419
Issuance/(repurchase) of shares, $m
  2,361
  18,641
  20,311
  22,061
  23,882
  25,775
  27,743
  29,788
  31,913
  34,121
  36,417
  38,408
  40,891
  43,476
  46,168
  48,971
  51,894
  54,941
  58,121
  61,439
  64,905
  68,525
  72,309
  76,265
  80,403
  84,732
  89,263
  94,006
  98,973
  104,176
  109,626
Cash from financing (excl. dividends), $m  
  -943
  20,539
  22,291
  24,124
  26,029
  28,008
  30,064
  32,200
  34,419
  36,726
  39,124
  41,223
  43,820
  46,524
  49,341
  52,276
  55,339
  58,533
  61,868
  65,350
  68,989
  72,791
  76,767
  80,926
  85,278
  89,832
  94,600
  99,593
  104,823
  110,304
  116,045
Total cash flow (excl. dividends), $m
  -130
  1,218
  1,246
  1,281
  1,317
  1,354
  1,392
  1,431
  1,471
  1,513
  1,557
  1,207
  1,256
  1,307
  1,361
  1,417
  1,477
  1,540
  1,607
  1,677
  1,751
  1,829
  1,912
  1,999
  2,090
  2,187
  2,289
  2,396
  2,509
  2,628
  2,753
Retained Cash Flow (-), $m
  1,122
  -18,641
  -20,311
  -22,061
  -23,882
  -25,775
  -27,743
  -29,788
  -31,913
  -34,121
  -36,417
  -38,408
  -40,891
  -43,476
  -46,168
  -48,971
  -51,894
  -54,941
  -58,121
  -61,439
  -64,905
  -68,525
  -72,309
  -76,265
  -80,403
  -84,732
  -89,263
  -94,006
  -98,973
  -104,176
  -109,626
Prev. year cash balance distribution, $m
 
  1,959
  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
 
  -15,463
  -19,066
  -20,780
  -22,565
  -24,421
  -26,351
  -28,357
  -30,442
  -32,608
  -34,859
  -37,201
  -39,636
  -42,169
  -44,807
  -47,554
  -50,417
  -53,401
  -56,514
  -59,762
  -63,154
  -66,696
  -70,397
  -74,266
  -78,312
  -82,545
  -86,974
  -91,610
  -96,464
  -101,548
  -106,874
Discount rate, %
 
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
 
  -14,318
  -16,225
  -16,126
  -15,833
  -15,355
  -14,705
  -13,901
  -12,967
  -11,931
  -10,820
  -9,669
  -8,507
  -7,364
  -6,267
  -5,240
  -4,301
  -3,461
  -2,729
  -2,106
  -1,589
  -1,171
  -842
  -589
  -402
  -266
  -171
  -106
  -64
  -37
  -21
Current shareholders' claim on cash, %
  100
  44.9
  20.3
  9.2
  4.2
  1.9
  0.9
  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

Devon Energy Corporation is an independent energy company. The Company also controls EnLink Midstream Partners, L.P. (EnLink). The Company's segments include U.S., Canada and EnLink. The Company is engaged primarily in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs). The Company's operations are concentrated in various North American onshore areas in the United States and Canada. The Company's U.S. and Canada segments are primarily engaged in oil and gas exploration and production activities. EnLink is a master limited partnership (MLP) with a midstream business and operations located across the United States. EnLink focuses on providing gathering, transmission, processing, storage, fractionation and marketing to upstream oil and natural gas producers. The Company's properties include Barnett Shale, Delaware Basin, Eagle Ford, Heavy Oil, Rockies Oil and STACK.

FINANCIAL RATIOS  of  Devon Energy (DVN)

Valuation Ratios
P/E Ratio -6.8
Price to Sales 2.2
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow -38.4
Growth Rates
Sales Growth Rate -21.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -56.1%
Cap. Spend. - 3 Yr. Gr. Rate -19.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 171.3%
Total Debt to Equity 171.3%
Interest Coverage -6
Management Effectiveness
Return On Assets -10%
Ret/ On Assets - 3 Yr. Avg. -13.8%
Return On Total Capital -18.3%
Ret/ On T. Cap. - 3 Yr. Avg. -22.7%
Return On Equity -50.9%
Return On Equity - 3 Yr. Avg. -48.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 83.3%
Gross Margin - 3 Yr. Avg. 84%
EBITDA Margin -14.7%
EBITDA Margin - 3 Yr. Avg. -36.2%
Operating Margin -30.7%
Oper. Margin - 3 Yr. Avg. -54.9%
Pre-Tax Margin -37.6%
Pre-Tax Margin - 3 Yr. Avg. -59.6%
Net Profit Margin -32%
Net Profit Margin - 3 Yr. Avg. -44.6%
Effective Tax Rate 4.5%
Eff/ Tax Rate - 3 Yr. Avg. 30.4%
Payout Ratio -6.7%

DVN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DVN stock intrinsic value calculation we used $10304 million for the last fiscal year's total revenue generated by Devon Energy. The default revenue input number comes from 2016 income statement of Devon 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 DVN stock valuation model: a) initial revenue growth rate of 9.5% 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 8%, whose default value for DVN is calculated based on our internal credit rating of Devon 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 Devon 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 DVN stock the variable cost ratio is equal to 257.7%.

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 DVN 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 Devon Energy.

Corporate tax rate of 27% is the nominal tax rate for Devon 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 DVN 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 DVN are equal to 171.1%.

Life of production assets of 12.3 years is the average useful life of capital assets used in Devon 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 DVN is equal to -7.8%. 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 - $5927 million for Devon 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 530.193 million for Devon 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 Devon Energy at the current share price and the inputted number of shares is $22.7 billion.

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BBL BHP Billiton A 44.68 4.67  str.sell
COP ConocoPhillips 59.75 7.28  str.sell
XOM Exxon Mobil 87.15 22.27  str.sell
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COMPANY NEWS

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▶ Trade of the Day: Devon Energy Corp (DVN)   [Jan-05-18 09:11AM  InvestorPlace]
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▶ Devon Energy Earns Relative Strength Rating Upgrade   [Dec-26-17 03:00AM  Investor's Business Daily]
▶ Analyzing Wall Street Targets for COP, MRO, MUR, DVN and EQT   [Dec-22-17 10:32AM  Market Realist]
▶ Is Devons Rising Capex Affecting Normalized Free Cash Flow?   [Dec-21-17 05:30PM  Market Realist]
▶ Southwestern Energys Possible Trading Range Forecast   [Dec-19-17 04:10PM  Market Realist]
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▶ Heres how oil, industrial metals could trade in 2018   [Dec-11-17 11:57AM  MarketWatch]
▶ Don't Look for Much of a Rebound From Devon Energy   [Nov-28-17 09:46AM  TheStreet.com]
▶ 5 Energy Stocks Crumbling Under OPEC Uncertainty   [Nov-27-17 03:05PM  InvestorPlace]
▶ How Did DVNs Dividend Cut Affect Its Dividend Yield?   [Nov-21-17 10:30AM  Market Realist]
▶ Analyzing Devon Energy, a Low Dividend Grower   [09:00AM  Market Realist]
▶ Should You Buy Devon Energy Corporation (DVN) Now?   [Nov-15-17 05:47PM  Simply Wall St.]
▶ What Analysts Think of Devon Energy after 3Q17 Earnings   [Nov-07-17 07:31AM  Market Realist]
▶ Devon Energy CEO on New Technology and Fracking   [Nov-06-17 03:02PM  Bloomberg Video]
▶ Whats Causing Devon Energys Revenues to Trend Upwards?   [Nov-03-17 04:40PM  Market Realist]
▶ Top 4 Oil Stocks for November 2017   [01:45PM  Investopedia]
▶ Why Devon Energy Rose on November 1   [10:32AM  Market Realist]
▶ Devon Energy tops Street 3Q forecasts   [04:29PM  Associated Press]
▶ Devon Energy 3Q Profit Beats Estimates   [Oct-30-17 08:00PM  Rigzone.com]
▶ What to Expect from Occidental Petroleums 3Q17 Revenues   [Oct-27-17 04:05PM  Market Realist]
▶ Will Devon Energys Cash Flow Rise in 3Q17?   [07:37AM  Market Realist]
▶ Understanding Devon Energys Production Guidance for 3Q17   [Oct-26-17 05:25PM  Market Realist]
Financial statements of DVN
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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