Intrinsic value of EOG Resources - EOG

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$87.79

  Intrinsic Value

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  Value-price divergence*

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$87.79

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

We calculate the intrinsic value of EOG 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 50.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -15.07
  31.70
  29.03
  26.63
  24.46
  22.52
  20.77
  19.19
  17.77
  16.49
  15.34
  14.31
  13.38
  12.54
  11.79
  11.11
  10.50
  9.95
  9.45
  9.01
  8.61
  8.25
  7.92
  7.63
  7.37
  7.13
  6.92
  6.73
  6.55
  6.40
  6.26
Revenue, $m
  7,445
  9,935
  12,820
  16,233
  20,205
  24,754
  29,895
  35,631
  41,963
  48,884
  56,385
  64,454
  73,077
  82,241
  91,935
  102,147
  112,870
  124,098
  135,828
  148,063
  160,807
  174,067
  187,856
  202,188
  217,082
  232,559
  248,645
  265,366
  282,755
  300,844
  319,669
Variable operating expenses, $m
 
  17,566
  22,665
  28,700
  35,722
  43,765
  52,854
  62,996
  74,191
  86,428
  99,689
  113,954
  129,200
  145,403
  162,541
  180,596
  199,554
  219,405
  240,145
  261,776
  284,306
  307,750
  332,129
  357,468
  383,801
  411,165
  439,604
  469,168
  499,911
  531,892
  565,175
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
  8,670
  17,566
  22,665
  28,700
  35,722
  43,765
  52,854
  62,996
  74,191
  86,428
  99,689
  113,954
  129,200
  145,403
  162,541
  180,596
  199,554
  219,405
  240,145
  261,776
  284,306
  307,750
  332,129
  357,468
  383,801
  411,165
  439,604
  469,168
  499,911
  531,892
  565,175
Operating income, $m
  -1,225
  -7,630
  -9,846
  -12,467
  -15,517
  -19,011
  -22,959
  -27,365
  -32,228
  -37,543
  -43,304
  -49,501
  -56,123
  -63,161
  -70,606
  -78,449
  -86,684
  -95,307
  -104,316
  -113,713
  -123,500
  -133,683
  -144,273
  -155,280
  -166,719
  -178,605
  -190,959
  -203,801
  -217,156
  -231,048
  -245,506
EBITDA, $m
  2,328
  -2,935
  -3,787
  -4,796
  -5,969
  -7,313
  -8,832
  -10,527
  -12,397
  -14,442
  -16,658
  -19,041
  -21,589
  -24,296
  -27,160
  -30,177
  -33,345
  -36,662
  -40,128
  -43,742
  -47,507
  -51,424
  -55,498
  -59,732
  -64,132
  -68,705
  -73,457
  -78,397
  -83,534
  -88,878
  -94,439
Interest expense (income), $m
  252
  258
  439
  657
  916
  1,217
  1,562
  1,951
  2,386
  2,866
  3,390
  3,958
  4,570
  5,223
  5,918
  6,652
  7,426
  8,239
  9,089
  9,978
  10,905
  11,871
  12,876
  13,921
  15,007
  16,135
  17,308
  18,527
  19,794
  21,112
  22,482
Earnings before tax, $m
  -1,558
  -7,889
  -10,284
  -13,124
  -16,433
  -20,228
  -24,521
  -29,316
  -34,614
  -40,409
  -46,694
  -53,459
  -60,693
  -68,385
  -76,524
  -85,101
  -94,110
  -103,546
  -113,406
  -123,691
  -134,405
  -145,554
  -157,149
  -169,201
  -181,725
  -194,741
  -208,267
  -222,328
  -236,950
  -252,159
  -267,988
Tax expense, $m
  -461
  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
  -1,097
  -7,889
  -10,284
  -13,124
  -16,433
  -20,228
  -24,521
  -29,316
  -34,614
  -40,409
  -46,694
  -53,459
  -60,693
  -68,385
  -76,524
  -85,101
  -94,110
  -103,546
  -113,406
  -123,691
  -134,405
  -145,554
  -157,149
  -169,201
  -181,725
  -194,741
  -208,267
  -222,328
  -236,950
  -252,159
  -267,988

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,600
  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
  29,299
  36,662
  47,305
  59,901
  74,556
  91,344
  110,312
  131,481
  154,846
  180,385
  208,064
  237,837
  269,656
  303,474
  339,243
  376,927
  416,494
  457,925
  501,212
  546,359
  593,383
  642,313
  693,194
  746,080
  801,040
  858,152
  917,508
  979,212
  1,043,376
  1,110,124
  1,179,591
Adjusted assets (=assets-cash), $m
  27,699
  36,662
  47,305
  59,901
  74,556
  91,344
  110,312
  131,481
  154,846
  180,385
  208,064
  237,837
  269,656
  303,474
  339,243
  376,927
  416,494
  457,925
  501,212
  546,359
  593,383
  642,313
  693,194
  746,080
  801,040
  858,152
  917,508
  979,212
  1,043,376
  1,110,124
  1,179,591
Revenue / Adjusted assets
  0.269
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
  0.271
Average production assets, $m
  24,959
  32,866
  42,408
  53,699
  66,837
  81,887
  98,892
  117,868
  138,814
  161,709
  186,522
  213,213
  241,738
  272,054
  304,121
  337,903
  373,374
  410,515
  449,320
  489,793
  531,948
  575,813
  621,426
  668,837
  718,106
  769,306
  822,517
  877,832
  935,353
  995,191
  1,057,466
Working capital, $m
  1,358
  -89
  -115
  -146
  -182
  -223
  -269
  -321
  -378
  -440
  -507
  -580
  -658
  -740
  -827
  -919
  -1,016
  -1,117
  -1,222
  -1,333
  -1,447
  -1,567
  -1,691
  -1,820
  -1,954
  -2,093
  -2,238
  -2,388
  -2,545
  -2,708
  -2,877
Total debt, $m
  6,986
  11,857
  17,763
  24,754
  32,887
  42,205
  52,732
  64,481
  77,448
  91,623
  106,984
  123,508
  141,168
  159,937
  179,789
  200,703
  222,663
  245,657
  269,682
  294,738
  320,836
  347,993
  376,232
  405,584
  436,086
  467,783
  500,726
  534,972
  570,583
  607,628
  646,182
Total liabilities, $m
  15,318
  20,348
  26,254
  33,245
  41,378
  50,696
  61,223
  72,972
  85,939
  100,114
  115,475
  131,999
  149,659
  168,428
  188,280
  209,194
  231,154
  254,148
  278,173
  303,229
  329,327
  356,484
  384,723
  414,075
  444,577
  476,274
  509,217
  543,463
  579,074
  616,119
  654,673
Total equity, $m
  13,982
  16,315
  21,051
  26,656
  33,177
  40,648
  49,089
  58,509
  68,906
  80,271
  92,588
  105,837
  119,997
  135,046
  150,963
  167,733
  185,340
  203,777
  223,039
  243,130
  264,055
  285,829
  308,471
  332,006
  356,463
  381,878
  408,291
  435,749
  464,302
  494,005
  524,918
Total liabilities and equity, $m
  29,300
  36,663
  47,305
  59,901
  74,555
  91,344
  110,312
  131,481
  154,845
  180,385
  208,063
  237,836
  269,656
  303,474
  339,243
  376,927
  416,494
  457,925
  501,212
  546,359
  593,382
  642,313
  693,194
  746,081
  801,040
  858,152
  917,508
  979,212
  1,043,376
  1,110,124
  1,179,591
Debt-to-equity ratio
  0.500
  0.730
  0.840
  0.930
  0.990
  1.040
  1.070
  1.100
  1.120
  1.140
  1.160
  1.170
  1.180
  1.180
  1.190
  1.200
  1.200
  1.210
  1.210
  1.210
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
  1.230
  1.230
  1.230
  1.230
  1.230
Adjusted equity ratio
  0.447
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,097
  -7,889
  -10,284
  -13,124
  -16,433
  -20,228
  -24,521
  -29,316
  -34,614
  -40,409
  -46,694
  -53,459
  -60,693
  -68,385
  -76,524
  -85,101
  -94,110
  -103,546
  -113,406
  -123,691
  -134,405
  -145,554
  -157,149
  -169,201
  -181,725
  -194,741
  -208,267
  -222,328
  -236,950
  -252,159
  -267,988
Depreciation, amort., depletion, $m
  3,553
  4,695
  6,058
  7,671
  9,548
  11,698
  14,127
  16,838
  19,831
  23,101
  26,646
  30,459
  34,534
  38,865
  43,446
  48,272
  53,339
  58,645
  64,189
  69,970
  75,993
  82,259
  88,775
  95,548
  102,587
  109,901
  117,502
  125,405
  133,622
  142,170
  151,067
Funds from operations, $m
  2,103
  -3,193
  -4,226
  -5,453
  -6,885
  -8,530
  -10,393
  -12,478
  -14,783
  -17,307
  -20,048
  -23,000
  -26,159
  -29,520
  -33,078
  -36,829
  -40,771
  -44,901
  -49,217
  -53,720
  -58,412
  -63,295
  -68,374
  -73,653
  -79,139
  -84,840
  -90,765
  -96,924
  -103,328
  -109,989
  -116,922
Change in working capital, $m
  -256
  -22
  -26
  -31
  -36
  -41
  -46
  -52
  -57
  -62
  -68
  -73
  -78
  -82
  -87
  -92
  -97
  -101
  -106
  -110
  -115
  -119
  -124
  -129
  -134
  -139
  -145
  -150
  -156
  -163
  -169
Cash from operations, $m
  2,359
  -2,424
  -4,200
  -5,422
  -6,849
  -8,489
  -10,347
  -12,426
  -14,726
  -17,245
  -19,980
  -22,927
  -26,081
  -29,437
  -32,991
  -36,737
  -40,675
  -44,799
  -49,111
  -53,610
  -58,298
  -63,176
  -68,250
  -73,524
  -79,005
  -84,701
  -90,620
  -96,773
  -103,171
  -109,827
  -116,752
Maintenance CAPEX, $m
  0
  -3,566
  -4,695
  -6,058
  -7,671
  -9,548
  -11,698
  -14,127
  -16,838
  -19,831
  -23,101
  -26,646
  -30,459
  -34,534
  -38,865
  -43,446
  -48,272
  -53,339
  -58,645
  -64,189
  -69,970
  -75,993
  -82,259
  -88,775
  -95,548
  -102,587
  -109,901
  -117,502
  -125,405
  -133,622
  -142,170
New CAPEX, $m
  -2,583
  -7,907
  -9,541
  -11,292
  -13,137
  -15,050
  -17,005
  -18,977
  -20,946
  -22,895
  -24,813
  -26,691
  -28,525
  -30,316
  -32,066
  -33,782
  -35,471
  -37,142
  -38,805
  -40,473
  -42,155
  -43,865
  -45,613
  -47,411
  -49,269
  -51,199
  -53,211
  -55,315
  -57,521
  -59,838
  -62,275
Cash from investing activities, $m
  -1,253
  -11,473
  -14,236
  -17,350
  -20,808
  -24,598
  -28,703
  -33,104
  -37,784
  -42,726
  -47,914
  -53,337
  -58,984
  -64,850
  -70,931
  -77,228
  -83,743
  -90,481
  -97,450
  -104,662
  -112,125
  -119,858
  -127,872
  -136,186
  -144,817
  -153,786
  -163,112
  -172,817
  -182,926
  -193,460
  -204,445
Free cash flow, $m
  1,106
  -13,897
  -18,436
  -22,772
  -27,658
  -33,087
  -39,050
  -45,530
  -52,510
  -59,971
  -67,895
  -76,264
  -85,065
  -94,287
  -103,922
  -113,965
  -124,417
  -135,280
  -146,562
  -158,272
  -170,423
  -183,034
  -196,122
  -209,710
  -223,822
  -238,486
  -253,732
  -269,591
  -286,097
  -303,286
  -321,197
Issuance/(repayment) of debt, $m
  161
  4,878
  5,907
  6,991
  8,133
  9,318
  10,528
  11,748
  12,967
  14,174
  15,362
  16,524
  17,660
  18,769
  19,852
  20,914
  21,960
  22,994
  24,024
  25,056
  26,098
  27,157
  28,239
  29,352
  30,502
  31,697
  32,943
  34,245
  35,611
  37,045
  38,554
Issuance/(repurchase) of shares, $m
  -59
  11,352
  17,266
  21,387
  26,046
  31,241
  36,963
  43,202
  49,940
  57,162
  64,850
  72,989
  81,565
  90,567
  99,987
  109,820
  120,065
  130,723
  141,800
  153,305
  165,251
  177,651
  190,525
  203,892
  217,777
  232,204
  247,203
  262,803
  279,039
  295,944
  313,556
Cash from financing (excl. dividends), $m  
  130
  16,230
  23,173
  28,378
  34,179
  40,559
  47,491
  54,950
  62,907
  71,336
  80,212
  89,513
  99,225
  109,336
  119,839
  130,734
  142,025
  153,717
  165,824
  178,361
  191,349
  204,808
  218,764
  233,244
  248,279
  263,901
  280,146
  297,048
  314,650
  332,989
  352,110
Total cash flow (excl. dividends), $m
  1,254
  -9,019
  -12,530
  -15,782
  -19,525
  -23,770
  -28,522
  -33,782
  -39,543
  -45,797
  -52,533
  -59,740
  -67,406
  -75,519
  -84,070
  -93,051
  -102,457
  -112,286
  -122,537
  -133,215
  -144,325
  -155,877
  -167,883
  -180,358
  -193,320
  -206,789
  -220,789
  -235,345
  -250,486
  -266,241
  -282,643
Retained Cash Flow (-), $m
  -1,039
  -3,926
  -4,736
  -5,605
  -6,521
  -7,471
  -8,441
  -9,420
  -10,397
  -11,365
  -12,317
  -13,249
  -14,160
  -15,049
  -15,918
  -16,769
  -17,607
  -18,437
  -19,263
  -20,090
  -20,926
  -21,774
  -22,642
  -23,534
  -24,457
  -25,415
  -26,414
  -27,458
  -28,553
  -29,703
  -30,913
Prev. year cash balance distribution, $m
 
  1,593
  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, %
 
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
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
  79.7
  61.5
  47.9
  37.7
  29.8
  23.8
  19.1
  15.4
  12.5
  10.2
  8.4
  6.9
  5.7
  4.7
  3.9
  3.3
  2.7
  2.3
  1.9
  1.6
  1.4
  1.1
  1.0
  0.8
  0.7
  0.6
  0.5
  0.4
  0.4
  0.3

EOG Resources, Inc., together with its subsidiaries, explores for, develops, produces, and markets crude oil and natural gas. The company’s principal producing areas are located in New Mexico, North Dakota, Texas, Utah, and Wyoming in the United States; and Canada, the Republic of Trinidad and Tobago, the United Kingdom, and the People's Republic of China. As of December 31, 2016, it had total estimated net proved reserves of 2,147 million barrels of oil equivalent, including 1,178 million barrels (MMBbl) crude oil and condensate reserves; 416 MMBbl of natural gas liquid reserves; and 3,318 billion cubic feet of natural gas reserves. EOG Resources, Inc. was founded in 1985 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  EOG Resources (EOG)

Valuation Ratios
P/E Ratio -46.2
Price to Sales 6.8
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 21.5
Price to Free Cash Flow -226
Growth Rates
Sales Growth Rate -15.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -48.5%
Cap. Spend. - 3 Yr. Gr. Rate -18.2%
Financial Strength
Quick Ratio 229
Current Ratio 0.1
LT Debt to Equity 49.9%
Total Debt to Equity 50%
Interest Coverage -5
Management Effectiveness
Return On Assets -3.3%
Ret/ On Assets - 3 Yr. Avg. -2.7%
Return On Total Capital -5.4%
Ret/ On T. Cap. - 3 Yr. Avg. -4.5%
Return On Equity -8.1%
Return On Equity - 3 Yr. Avg. -6.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 48.4%
Gross Margin - 3 Yr. Avg. 52.6%
EBITDA Margin 30.2%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin -16.5%
Oper. Margin - 3 Yr. Avg. -20.9%
Pre-Tax Margin -20.9%
Pre-Tax Margin - 3 Yr. Avg. -23.8%
Net Profit Margin -14.7%
Net Profit Margin - 3 Yr. Avg. -16.6%
Effective Tax Rate 29.6%
Eff/ Tax Rate - 3 Yr. Avg. 35.3%
Payout Ratio -34%

EOG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EOG stock intrinsic value calculation we used $7544 million for the last fiscal year's total revenue generated by EOG Resources. The default revenue input number comes from 2016 income statement of EOG 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 EOG stock valuation model: a) initial revenue growth rate of 31.7% 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 4.8%, whose default value for EOG is calculated based on our internal credit rating of EOG 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 EOG 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 EOG stock the variable cost ratio is equal to 176.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for EOG 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 3.7% for EOG Resources.

Corporate tax rate of 27% is the nominal tax rate for EOG 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 EOG 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 EOG are equal to 330.8%.

Life of production assets of 7 years is the average useful life of capital assets used in EOG 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 EOG is equal to -0.9%. 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 - $13982 million for EOG 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 571.314 million for EOG 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 EOG Resources at the current share price and the inputted number of shares is $50.2 billion.


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Stock chart of EOG Financial statements of EOG Annual reports of EOG
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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