Intrinsic value of EOG Resources - EOG

Previous Close

$84.98

  Intrinsic Value

$6.12

stock screener

  Rating & Target

str. sell

-93%

  Value-price divergence*

-104%

Previous close

$84.98

 
Intrinsic value

$6.12

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence*

-104%

*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 48.6

 

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, %
  -15.07
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  7,445
  11,912
  18,404
  27,523
  39,935
  56,342
  77,458
  103,971
  136,520
  175,668
  221,883
  275,529
  336,861
  406,030
  483,096
  568,035
  660,761
  761,141
  869,014
  984,203
  1,106,536
  1,235,854
  1,372,021
  1,514,934
  1,664,528
  1,820,780
  1,983,711
  2,153,390
  2,329,930
  2,513,491
  2,704,280
Variable operating expenses, $m
 
  21,001
  32,446
  48,523
  70,405
  99,331
  136,558
  183,301
  240,685
  309,703
  391,181
  485,758
  593,885
  715,831
  851,698
  1,001,445
  1,164,922
  1,341,892
  1,532,071
  1,735,150
  1,950,824
  2,178,811
  2,418,873
  2,670,829
  2,934,563
  3,210,035
  3,497,283
  3,796,426
  4,107,666
  4,431,285
  4,767,645
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
  21,001
  32,446
  48,523
  70,405
  99,331
  136,558
  183,301
  240,685
  309,703
  391,181
  485,758
  593,885
  715,831
  851,698
  1,001,445
  1,164,922
  1,341,892
  1,532,071
  1,735,150
  1,950,824
  2,178,811
  2,418,873
  2,670,829
  2,934,563
  3,210,035
  3,497,283
  3,796,426
  4,107,666
  4,431,285
  4,767,645
Operating income, $m
  -1,225
  -9,089
  -14,042
  -21,000
  -30,470
  -42,989
  -59,100
  -79,330
  -104,165
  -134,035
  -169,297
  -210,229
  -257,025
  -309,801
  -368,602
  -433,411
  -504,161
  -580,751
  -663,057
  -750,947
  -844,287
  -942,957
  -1,046,852
  -1,155,895
  -1,270,035
  -1,389,255
  -1,513,572
  -1,643,036
  -1,777,736
  -1,917,794
  -2,063,365
EBITDA, $m
  2,328
  -5,096
  -7,873
  -11,774
  -17,084
  -24,103
  -33,136
  -44,479
  -58,403
  -75,151
  -94,922
  -117,871
  -144,109
  -173,700
  -206,668
  -243,005
  -282,674
  -325,616
  -371,764
  -421,042
  -473,376
  -528,698
  -586,951
  -648,089
  -712,085
  -778,930
  -848,632
  -921,220
  -996,744
  -1,075,272
  -1,156,891
Interest expense (income), $m
  252
  258
  598
  1,092
  1,785
  2,729
  3,977
  5,583
  7,600
  10,076
  13,054
  16,569
  20,649
  25,314
  30,576
  36,438
  42,898
  49,951
  57,587
  65,792
  74,553
  83,858
  93,695
  104,052
  114,922
  126,301
  138,186
  150,579
  163,485
  176,914
  190,876
Earnings before tax, $m
  -1,558
  -9,347
  -14,640
  -22,092
  -32,256
  -45,718
  -63,078
  -84,913
  -111,765
  -144,111
  -182,351
  -226,798
  -277,674
  -335,115
  -399,178
  -469,848
  -547,059
  -630,702
  -720,644
  -816,739
  -918,841
  -1,026,815
  -1,140,547
  -1,259,947
  -1,384,957
  -1,515,556
  -1,651,758
  -1,793,616
  -1,941,222
  -2,094,708
  -2,254,241
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
  -9,347
  -14,640
  -22,092
  -32,256
  -45,718
  -63,078
  -84,913
  -111,765
  -144,111
  -182,351
  -226,798
  -277,674
  -335,115
  -399,178
  -469,848
  -547,059
  -630,702
  -720,644
  -816,739
  -918,841
  -1,026,815
  -1,140,547
  -1,259,947
  -1,384,957
  -1,515,556
  -1,651,758
  -1,793,616
  -1,941,222
  -2,094,708
  -2,254,241

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
  44,283
  68,417
  102,317
  148,457
  209,451
  287,947
  386,509
  507,510
  653,042
  824,846
  1,024,271
  1,252,270
  1,509,406
  1,795,895
  2,111,654
  2,456,360
  2,829,521
  3,230,534
  3,658,747
  4,113,518
  4,594,253
  5,100,450
  5,631,725
  6,187,837
  6,768,698
  7,374,391
  8,005,167
  8,661,449
  9,343,834
  10,053,084
Adjusted assets (=assets-cash), $m
  27,699
  44,283
  68,417
  102,317
  148,457
  209,451
  287,947
  386,509
  507,510
  653,042
  824,846
  1,024,271
  1,252,270
  1,509,406
  1,795,895
  2,111,654
  2,456,360
  2,829,521
  3,230,534
  3,658,747
  4,113,518
  4,594,253
  5,100,450
  5,631,725
  6,187,837
  6,768,698
  7,374,391
  8,005,167
  8,661,449
  9,343,834
  10,053,084
Revenue / Adjusted assets
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
Average production assets, $m
  24,959
  39,929
  61,690
  92,258
  133,862
  188,859
  259,638
  348,510
  457,616
  588,841
  743,753
  923,573
  1,129,157
  1,361,013
  1,619,337
  1,904,053
  2,214,871
  2,551,345
  2,912,933
  3,299,049
  3,709,110
  4,142,583
  4,599,015
  5,078,059
  5,579,498
  6,103,254
  6,649,400
  7,218,163
  7,809,925
  8,425,223
  9,064,745
Working capital, $m
  1,358
  -381
  -589
  -881
  -1,278
  -1,803
  -2,479
  -3,327
  -4,369
  -5,621
  -7,100
  -8,817
  -10,780
  -12,993
  -15,459
  -18,177
  -21,144
  -24,357
  -27,808
  -31,494
  -35,409
  -39,547
  -43,905
  -48,478
  -53,265
  -58,265
  -63,479
  -68,908
  -74,558
  -80,432
  -86,537
Total debt, $m
  6,986
  16,157
  29,503
  48,250
  73,766
  107,495
  150,903
  205,408
  272,322
  352,801
  447,809
  558,091
  684,174
  826,371
  984,799
  1,159,414
  1,350,036
  1,556,394
  1,778,154
  2,014,956
  2,266,445
  2,532,291
  2,812,218
  3,106,013
  3,413,543
  3,734,759
  4,069,707
  4,418,526
  4,781,450
  5,158,809
  5,551,025
Total liabilities, $m
  15,318
  24,488
  37,834
  56,581
  82,097
  115,826
  159,234
  213,739
  280,653
  361,132
  456,140
  566,422
  692,505
  834,702
  993,130
  1,167,745
  1,358,367
  1,564,725
  1,786,485
  2,023,287
  2,274,776
  2,540,622
  2,820,549
  3,114,344
  3,421,874
  3,743,090
  4,078,038
  4,426,857
  4,789,781
  5,167,140
  5,559,356
Total equity, $m
  13,982
  19,794
  30,582
  45,736
  66,360
  93,625
  128,712
  172,769
  226,857
  291,910
  368,706
  457,849
  559,765
  674,704
  802,765
  943,909
  1,097,993
  1,264,796
  1,444,048
  1,635,460
  1,838,743
  2,053,631
  2,279,901
  2,517,381
  2,765,963
  3,025,608
  3,296,353
  3,578,310
  3,871,668
  4,176,694
  4,493,729
Total liabilities and equity, $m
  29,300
  44,282
  68,416
  102,317
  148,457
  209,451
  287,946
  386,508
  507,510
  653,042
  824,846
  1,024,271
  1,252,270
  1,509,406
  1,795,895
  2,111,654
  2,456,360
  2,829,521
  3,230,533
  3,658,747
  4,113,519
  4,594,253
  5,100,450
  5,631,725
  6,187,837
  6,768,698
  7,374,391
  8,005,167
  8,661,449
  9,343,834
  10,053,085
Debt-to-equity ratio
  0.500
  0.820
  0.960
  1.050
  1.110
  1.150
  1.170
  1.190
  1.200
  1.210
  1.210
  1.220
  1.220
  1.220
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.230
  1.240
  1.240
Adjusted equity ratio
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,097
  -9,347
  -14,640
  -22,092
  -32,256
  -45,718
  -63,078
  -84,913
  -111,765
  -144,111
  -182,351
  -226,798
  -277,674
  -335,115
  -399,178
  -469,848
  -547,059
  -630,702
  -720,644
  -816,739
  -918,841
  -1,026,815
  -1,140,547
  -1,259,947
  -1,384,957
  -1,515,556
  -1,651,758
  -1,793,616
  -1,941,222
  -2,094,708
  -2,254,241
Depreciation, amort., depletion, $m
  3,553
  3,993
  6,169
  9,226
  13,386
  18,886
  25,964
  34,851
  45,762
  58,884
  74,375
  92,357
  112,916
  136,101
  161,934
  190,405
  221,487
  255,135
  291,293
  329,905
  370,911
  414,258
  459,901
  507,806
  557,950
  610,325
  664,940
  721,816
  780,992
  842,522
  906,475
Funds from operations, $m
  2,103
  -5,354
  -8,471
  -12,866
  -18,869
  -26,833
  -37,114
  -50,062
  -66,003
  -85,227
  -107,975
  -134,440
  -164,758
  -199,014
  -237,244
  -279,443
  -325,572
  -375,568
  -429,351
  -486,834
  -547,930
  -612,557
  -680,645
  -752,141
  -827,008
  -905,231
  -986,818
  -1,071,799
  -1,160,229
  -1,252,185
  -1,347,767
Change in working capital, $m
  -256
  -143
  -208
  -292
  -397
  -525
  -676
  -848
  -1,042
  -1,253
  -1,479
  -1,717
  -1,963
  -2,213
  -2,466
  -2,718
  -2,967
  -3,212
  -3,452
  -3,686
  -3,915
  -4,138
  -4,357
  -4,573
  -4,787
  -5,000
  -5,214
  -5,430
  -5,649
  -5,874
  -6,105
Cash from operations, $m
  2,359
  -5,211
  -8,263
  -12,574
  -18,472
  -26,308
  -36,438
  -49,214
  -64,962
  -83,974
  -106,497
  -132,724
  -162,796
  -196,801
  -234,778
  -276,725
  -322,605
  -372,355
  -425,899
  -483,148
  -544,015
  -608,419
  -676,288
  -747,568
  -822,221
  -900,231
  -981,604
  -1,066,370
  -1,154,580
  -1,246,311
  -1,341,662
Maintenance CAPEX, $m
  0
  -2,496
  -3,993
  -6,169
  -9,226
  -13,386
  -18,886
  -25,964
  -34,851
  -45,762
  -58,884
  -74,375
  -92,357
  -112,916
  -136,101
  -161,934
  -190,405
  -221,487
  -255,135
  -291,293
  -329,905
  -370,911
  -414,258
  -459,901
  -507,806
  -557,950
  -610,325
  -664,940
  -721,816
  -780,992
  -842,522
New CAPEX, $m
  -2,583
  -14,970
  -21,761
  -30,568
  -41,604
  -54,998
  -70,779
  -88,872
  -109,106
  -131,225
  -154,913
  -179,820
  -205,584
  -231,857
  -258,324
  -284,716
  -310,818
  -336,475
  -361,588
  -386,115
  -410,061
  -433,473
  -456,432
  -479,044
  -501,439
  -523,756
  -546,146
  -568,763
  -591,762
  -615,298
  -639,523
Cash from investing activities, $m
  -1,253
  -17,466
  -25,754
  -36,737
  -50,830
  -68,384
  -89,665
  -114,836
  -143,957
  -176,987
  -213,797
  -254,195
  -297,941
  -344,773
  -394,425
  -446,650
  -501,223
  -557,962
  -616,723
  -677,408
  -739,966
  -804,384
  -870,690
  -938,945
  -1,009,245
  -1,081,706
  -1,156,471
  -1,233,703
  -1,313,578
  -1,396,290
  -1,482,045
Free cash flow, $m
  1,106
  -22,677
  -34,018
  -49,311
  -69,302
  -94,691
  -126,103
  -164,050
  -208,919
  -260,960
  -320,293
  -386,918
  -460,736
  -541,573
  -629,203
  -723,374
  -823,828
  -930,317
  -1,042,621
  -1,160,556
  -1,283,981
  -1,412,803
  -1,546,978
  -1,686,514
  -1,831,465
  -1,981,937
  -2,138,075
  -2,300,072
  -2,468,158
  -2,642,602
  -2,823,706
Issuance/(repayment) of debt, $m
  161
  9,178
  13,346
  18,747
  25,515
  33,730
  43,408
  54,505
  66,914
  80,479
  95,007
  110,282
  126,083
  142,196
  158,429
  174,614
  190,623
  206,358
  221,760
  236,802
  251,488
  265,847
  279,927
  293,795
  307,530
  321,217
  334,948
  348,819
  362,924
  377,359
  392,215
Issuance/(repurchase) of shares, $m
  -59
  16,752
  25,428
  37,245
  52,880
  72,983
  98,165
  128,970
  165,853
  209,164
  259,147
  315,941
  379,589
  450,055
  527,238
  610,992
  701,143
  797,505
  899,896
  1,008,150
  1,122,123
  1,241,704
  1,366,817
  1,497,427
  1,633,539
  1,775,201
  1,922,502
  2,075,572
  2,234,580
  2,399,733
  2,571,276
Cash from financing (excl. dividends), $m  
  130
  25,930
  38,774
  55,992
  78,395
  106,713
  141,573
  183,475
  232,767
  289,643
  354,154
  426,223
  505,672
  592,251
  685,667
  785,606
  891,766
  1,003,863
  1,121,656
  1,244,952
  1,373,611
  1,507,551
  1,646,744
  1,791,222
  1,941,069
  2,096,418
  2,257,450
  2,424,391
  2,597,504
  2,777,092
  2,963,491
Total cash flow (excl. dividends), $m
  1,254
  3,253
  4,757
  6,681
  9,094
  12,021
  15,471
  19,425
  23,848
  28,683
  33,860
  39,305
  44,936
  50,679
  56,464
  62,232
  67,938
  73,546
  79,035
  84,396
  89,630
  94,748
  99,766
  104,708
  109,603
  114,481
  119,375
  124,319
  129,346
  134,490
  139,785
Retained Cash Flow (-), $m
  -1,039
  -16,752
  -25,428
  -37,245
  -52,880
  -72,983
  -98,165
  -128,970
  -165,853
  -209,164
  -259,147
  -315,941
  -379,589
  -450,055
  -527,238
  -610,992
  -701,143
  -797,505
  -899,896
  -1,008,150
  -1,122,123
  -1,241,704
  -1,366,817
  -1,497,427
  -1,633,539
  -1,775,201
  -1,922,502
  -2,075,572
  -2,234,580
  -2,399,733
  -2,571,276
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
 
  -11,906
  -20,671
  -30,564
  -43,786
  -60,962
  -82,694
  -109,545
  -142,005
  -180,481
  -225,286
  -276,636
  -334,653
  -399,377
  -470,775
  -548,760
  -633,205
  -723,959
  -820,861
  -923,754
  -1,032,493
  -1,146,956
  -1,267,051
  -1,392,718
  -1,523,936
  -1,660,720
  -1,803,127
  -1,951,254
  -2,105,234
  -2,265,243
  -2,431,491
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
 
  -11,361
  -18,735
  -26,183
  -35,269
  -45,912
  -57,882
  -70,807
  -84,183
  -97,415
  -109,854
  -120,858
  -129,839
  -136,317
  -139,956
  -140,589
  -138,228
  -133,057
  -125,411
  -115,745
  -104,592
  -92,522
  -80,097
  -67,833
  -56,171
  -45,455
  -35,923
  -27,705
  -20,835
  -15,264
  -10,884
Current shareholders' claim on cash, %
  100
  72.0
  52.5
  38.9
  29.2
  22.2
  17.0
  13.2
  10.3
  8.2
  6.5
  5.2
  4.2
  3.4
  2.8
  2.3
  1.9
  1.6
  1.3
  1.1
  0.9
  0.8
  0.6
  0.5
  0.4
  0.4
  0.3
  0.3
  0.2
  0.2
  0.2

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 -44.7
Price to Sales 6.6
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 20.8
Price to Free Cash Flow -218.8
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 $7445 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 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.8%, 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 176.3%.

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 335.2%.

Life of production assets of 10 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 -3.2%. 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 - $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 $48.6 billion.

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Stock chart of EOG Financial statements 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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