Intrinsic value of EOG Resources - EOG

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$92.50

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$92.50

 
Intrinsic value

$6.03

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of 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 53.6

 

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
  27.70
  25.43
  23.39
  21.55
  19.89
  18.40
  17.06
  15.86
  14.77
  13.79
  12.92
  12.12
  11.41
  10.77
  10.19
  9.67
  9.21
  8.79
  8.41
  8.07
  7.76
  7.48
  7.24
  7.01
  6.81
  6.63
  6.47
  6.32
  6.19
  6.07
Revenue, $m
  7,445
  9,507
  11,925
  14,714
  17,884
  21,442
  25,389
  29,721
  34,434
  39,520
  44,972
  50,780
  56,936
  63,433
  70,265
  77,427
  84,917
  92,735
  100,882
  109,364
  118,185
  127,356
  136,887
  146,792
  157,085
  167,783
  178,907
  190,476
  202,514
  215,046
  228,097
Variable operating expenses, $m
 
  16,761
  21,024
  25,941
  31,530
  37,803
  44,760
  52,398
  60,707
  69,674
  79,285
  89,525
  100,378
  111,833
  123,877
  136,504
  149,709
  163,492
  177,855
  192,808
  208,361
  224,529
  241,332
  258,794
  276,940
  295,802
  315,412
  335,809
  357,032
  379,125
  402,135
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
  16,761
  21,024
  25,941
  31,530
  37,803
  44,760
  52,398
  60,707
  69,674
  79,285
  89,525
  100,378
  111,833
  123,877
  136,504
  149,709
  163,492
  177,855
  192,808
  208,361
  224,529
  241,332
  258,794
  276,940
  295,802
  315,412
  335,809
  357,032
  379,125
  402,135
Operating income, $m
  -1,225
  -7,254
  -9,099
  -11,227
  -13,646
  -16,360
  -19,371
  -22,677
  -26,273
  -30,154
  -34,313
  -38,745
  -43,442
  -48,399
  -53,612
  -59,077
  -64,792
  -70,757
  -76,973
  -83,444
  -90,175
  -97,173
  -104,445
  -112,002
  -119,856
  -128,019
  -136,506
  -145,333
  -154,518
  -164,080
  -174,038
EBITDA, $m
  2,328
  -2,701
  -3,388
  -4,181
  -5,082
  -6,093
  -7,214
  -8,445
  -9,784
  -11,229
  -12,778
  -14,429
  -16,178
  -18,024
  -19,965
  -22,000
  -24,129
  -26,350
  -28,665
  -31,075
  -33,582
  -36,187
  -38,896
  -41,710
  -44,634
  -47,674
  -50,835
  -54,122
  -57,543
  -61,104
  -64,812
Interest expense (income), $m
  252
  258
  417
  603
  817
  1,061
  1,335
  1,638
  1,972
  2,334
  2,725
  3,145
  3,591
  4,065
  4,564
  5,090
  5,641
  6,217
  6,818
  7,445
  8,097
  8,775
  9,481
  10,214
  10,976
  11,767
  12,590
  13,446
  14,335
  15,261
  16,225
Earnings before tax, $m
  -1,558
  -7,512
  -9,516
  -11,830
  -14,463
  -17,422
  -20,706
  -24,315
  -28,245
  -32,488
  -37,039
  -41,890
  -47,034
  -52,464
  -58,177
  -64,167
  -70,432
  -76,973
  -83,791
  -90,889
  -98,272
  -105,948
  -113,926
  -122,216
  -130,831
  -139,786
  -149,096
  -158,779
  -168,853
  -179,341
  -190,263
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
  -7,512
  -9,516
  -11,830
  -14,463
  -17,422
  -20,706
  -24,315
  -28,245
  -32,488
  -37,039
  -41,890
  -47,034
  -52,464
  -58,177
  -64,167
  -70,432
  -76,973
  -83,791
  -90,889
  -98,272
  -105,948
  -113,926
  -122,216
  -130,831
  -139,786
  -149,096
  -158,779
  -168,853
  -179,341
  -190,263

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
  29,459
  35,608
  44,663
  55,108
  66,983
  80,308
  95,088
  111,314
  128,965
  148,015
  168,433
  190,186
  213,244
  237,577
  263,164
  289,989
  318,041
  347,321
  377,836
  409,601
  442,642
  476,990
  512,687
  549,782
  588,332
  628,401
  670,062
  713,393
  758,479
  805,414
  854,296
Adjusted assets (=assets-cash), $m
  27,859
  35,608
  44,663
  55,108
  66,983
  80,308
  95,088
  111,314
  128,965
  148,015
  168,433
  190,186
  213,244
  237,577
  263,164
  289,989
  318,041
  347,321
  377,836
  409,601
  442,642
  476,990
  512,687
  549,782
  588,332
  628,401
  670,062
  713,393
  758,479
  805,414
  854,296
Revenue / Adjusted assets
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
Average production assets, $m
  24,959
  31,868
  39,972
  49,321
  59,949
  71,875
  85,102
  99,624
  115,422
  132,471
  150,745
  170,214
  190,850
  212,628
  235,528
  259,535
  284,642
  310,847
  338,157
  366,587
  396,157
  426,898
  458,846
  492,046
  526,548
  562,409
  599,695
  638,475
  678,827
  720,833
  764,581
Working capital, $m
  1,528
  -86
  -107
  -132
  -161
  -193
  -228
  -267
  -310
  -356
  -405
  -457
  -512
  -571
  -632
  -697
  -764
  -835
  -908
  -984
  -1,064
  -1,146
  -1,232
  -1,321
  -1,414
  -1,510
  -1,610
  -1,714
  -1,823
  -1,935
  -2,053
Total debt, $m
  6,986
  11,271
  16,297
  22,094
  28,685
  36,080
  44,283
  53,288
  63,085
  73,658
  84,989
  97,062
  109,859
  123,364
  137,565
  152,453
  168,022
  184,272
  201,208
  218,838
  237,175
  256,238
  276,050
  296,638
  318,033
  340,272
  363,393
  387,442
  412,465
  438,514
  465,643
Total liabilities, $m
  15,478
  19,762
  24,788
  30,585
  37,176
  44,571
  52,774
  61,779
  71,576
  82,149
  93,480
  105,553
  118,350
  131,855
  146,056
  160,944
  176,513
  192,763
  209,699
  227,329
  245,666
  264,729
  284,541
  305,129
  326,524
  348,763
  371,884
  395,933
  420,956
  447,005
  474,134
Total equity, $m
  13,982
  15,845
  19,875
  24,523
  29,807
  35,737
  42,314
  49,535
  57,389
  65,867
  74,953
  84,633
  94,893
  105,722
  117,108
  129,045
  141,528
  154,558
  168,137
  182,273
  196,976
  212,260
  228,146
  244,653
  261,808
  279,639
  298,178
  317,460
  337,523
  358,409
  380,162
Total liabilities and equity, $m
  29,460
  35,607
  44,663
  55,108
  66,983
  80,308
  95,088
  111,314
  128,965
  148,016
  168,433
  190,186
  213,243
  237,577
  263,164
  289,989
  318,041
  347,321
  377,836
  409,602
  442,642
  476,989
  512,687
  549,782
  588,332
  628,402
  670,062
  713,393
  758,479
  805,414
  854,296
Debt-to-equity ratio
  0.500
  0.710
  0.820
  0.900
  0.960
  1.010
  1.050
  1.080
  1.100
  1.120
  1.130
  1.150
  1.160
  1.170
  1.170
  1.180
  1.190
  1.190
  1.200
  1.200
  1.200
  1.210
  1.210
  1.210
  1.210
  1.220
  1.220
  1.220
  1.220
  1.220
  1.220
Adjusted equity ratio
  0.444
  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
  -7,512
  -9,516
  -11,830
  -14,463
  -17,422
  -20,706
  -24,315
  -28,245
  -32,488
  -37,039
  -41,890
  -47,034
  -52,464
  -58,177
  -64,167
  -70,432
  -76,973
  -83,791
  -90,889
  -98,272
  -105,948
  -113,926
  -122,216
  -130,831
  -139,786
  -149,096
  -158,779
  -168,853
  -179,341
  -190,263
Depreciation, amort., depletion, $m
  3,553
  4,553
  5,710
  7,046
  8,564
  10,268
  12,157
  14,232
  16,489
  18,924
  21,535
  24,316
  27,264
  30,375
  33,647
  37,076
  40,663
  44,407
  48,308
  52,370
  56,594
  60,985
  65,549
  70,292
  75,221
  80,344
  85,671
  91,211
  96,975
  102,976
  109,226
Funds from operations, $m
  2,103
  -2,960
  -3,805
  -4,784
  -5,899
  -7,154
  -8,549
  -10,083
  -11,756
  -13,563
  -15,504
  -17,573
  -19,769
  -22,089
  -24,530
  -27,090
  -29,769
  -32,567
  -35,483
  -38,520
  -41,679
  -44,963
  -48,376
  -51,924
  -55,610
  -59,442
  -63,425
  -67,568
  -71,878
  -76,365
  -81,037
Change in working capital, $m
  -256
  -19
  -22
  -25
  -29
  -32
  -36
  -39
  -42
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -113
  -117
Cash from operations, $m
  2,359
  -2,193
  -3,784
  -4,759
  -5,871
  -7,122
  -8,513
  -10,044
  -11,713
  -13,518
  -15,455
  -17,521
  -19,714
  -22,030
  -24,468
  -27,026
  -29,702
  -32,496
  -35,410
  -38,443
  -41,599
  -44,880
  -48,291
  -51,835
  -55,517
  -59,345
  -63,325
  -67,464
  -71,770
  -76,252
  -80,920
Maintenance CAPEX, $m
  0
  -3,566
  -4,553
  -5,710
  -7,046
  -8,564
  -10,268
  -12,157
  -14,232
  -16,489
  -18,924
  -21,535
  -24,316
  -27,264
  -30,375
  -33,647
  -37,076
  -40,663
  -44,407
  -48,308
  -52,370
  -56,594
  -60,985
  -65,549
  -70,292
  -75,221
  -80,344
  -85,671
  -91,211
  -96,975
  -102,976
New CAPEX, $m
  -2,583
  -6,909
  -8,104
  -9,348
  -10,628
  -11,926
  -13,228
  -14,522
  -15,798
  -17,050
  -18,274
  -19,469
  -20,636
  -21,778
  -22,900
  -24,007
  -25,107
  -26,205
  -27,310
  -28,429
  -29,570
  -30,741
  -31,948
  -33,200
  -34,502
  -35,862
  -37,286
  -38,780
  -40,352
  -42,006
  -43,749
Cash from investing activities, $m
  -1,253
  -10,475
  -12,657
  -15,058
  -17,674
  -20,490
  -23,496
  -26,679
  -30,030
  -33,539
  -37,198
  -41,004
  -44,952
  -49,042
  -53,275
  -57,654
  -62,183
  -66,868
  -71,717
  -76,737
  -81,940
  -87,335
  -92,933
  -98,749
  -104,794
  -111,083
  -117,630
  -124,451
  -131,563
  -138,981
  -146,725
Free cash flow, $m
  1,106
  -12,668
  -16,440
  -19,817
  -23,544
  -27,612
  -32,009
  -36,724
  -41,743
  -47,056
  -52,653
  -58,525
  -64,666
  -71,073
  -77,744
  -84,680
  -91,885
  -99,365
  -107,127
  -115,181
  -123,539
  -132,215
  -141,224
  -150,584
  -160,311
  -170,428
  -180,955
  -191,915
  -203,332
  -215,233
  -227,645
Issuance/(repayment) of debt, $m
  161
  4,292
  5,026
  5,797
  6,591
  7,396
  8,203
  9,005
  9,797
  10,573
  11,332
  12,073
  12,797
  13,505
  14,201
  14,888
  15,569
  16,250
  16,936
  17,630
  18,337
  19,063
  19,812
  20,588
  21,395
  22,239
  23,122
  24,049
  25,023
  26,049
  27,130
Issuance/(repurchase) of shares, $m
  -59
  10,239
  15,444
  18,668
  22,238
  26,146
  30,383
  34,939
  39,801
  44,961
  50,407
  56,132
  62,130
  68,396
  74,929
  81,729
  88,799
  96,144
  103,770
  111,687
  119,905
  128,437
  137,298
  146,503
  156,071
  166,020
  176,372
  187,148
  198,373
  210,070
  222,267
Cash from financing (excl. dividends), $m  
  130
  14,531
  20,470
  24,465
  28,829
  33,542
  38,586
  43,944
  49,598
  55,534
  61,739
  68,205
  74,927
  81,901
  89,130
  96,617
  104,368
  112,394
  120,706
  129,317
  138,242
  147,500
  157,110
  167,091
  177,466
  188,259
  199,494
  211,197
  223,396
  236,119
  249,397
Total cash flow (excl. dividends), $m
  1,254
  -8,376
  -11,415
  -14,020
  -16,954
  -20,216
  -23,806
  -27,718
  -31,947
  -36,483
  -41,321
  -46,452
  -51,869
  -57,568
  -63,543
  -69,792
  -76,316
  -83,114
  -90,191
  -97,551
  -105,202
  -113,152
  -121,412
  -129,996
  -138,916
  -148,189
  -157,833
  -167,866
  -178,309
  -189,184
  -200,515
Retained Cash Flow (-), $m
  -1,039
  -3,456
  -4,029
  -4,648
  -5,284
  -5,930
  -6,577
  -7,220
  -7,855
  -8,477
  -9,086
  -9,680
  -10,260
  -10,828
  -11,386
  -11,937
  -12,483
  -13,030
  -13,579
  -14,136
  -14,703
  -15,285
  -15,885
  -16,507
  -17,155
  -17,831
  -18,539
  -19,282
  -20,063
  -20,886
  -21,753
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
  82.3
  65.6
  52.7
  42.6
  34.7
  28.4
  23.3
  19.3
  16.0
  13.4
  11.2
  9.4
  7.9
  6.7
  5.6
  4.8
  4.1
  3.5
  2.9
  2.5
  2.1
  1.8
  1.6
  1.3
  1.2
  1.0
  0.9
  0.7
  0.6
  0.5

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 -48.6
Price to Sales 7.2
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 22.6
Price to Free Cash Flow -238.1
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 0.2
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 48.7%
Gross Margin - 3 Yr. Avg. 52.9%
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 27.7% 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 176.3%.

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 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 579.395 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 $53.6 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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