Intrinsic value of EV Energy Partners - EVEP

Previous Close

$0.58

  Intrinsic Value

$3.73

stock screener

  Rating & Target

str. buy

+543%

  Value-price divergence*

+54%

Previous close

$0.58

 
Intrinsic value

$3.73

 
Up/down potential

+543%

 
Rating

str. buy

 
Value-price divergence*

+54%

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

We calculate the intrinsic value of EVEP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.0

 

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, %
  3.93
  50.00
  45.50
  41.45
  37.81
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.27
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
Revenue, $m
  185
  278
  404
  571
  787
  1,059
  1,393
  1,796
  2,272
  2,826
  3,460
  4,176
  4,974
  5,855
  6,817
  7,860
  8,981
  10,179
  11,452
  12,798
  14,216
  15,705
  17,264
  18,892
  20,590
  22,358
  24,199
  26,112
  28,101
  30,168
  32,316
Variable operating expenses, $m
 
  688
  1,002
  1,417
  1,953
  2,627
  3,456
  4,455
  5,637
  7,011
  8,584
  10,360
  12,341
  14,526
  16,914
  19,501
  22,283
  25,255
  28,413
  31,753
  35,271
  38,964
  42,831
  46,870
  51,083
  55,471
  60,037
  64,784
  69,719
  74,846
  80,175
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
  354
  688
  1,002
  1,417
  1,953
  2,627
  3,456
  4,455
  5,637
  7,011
  8,584
  10,360
  12,341
  14,526
  16,914
  19,501
  22,283
  25,255
  28,413
  31,753
  35,271
  38,964
  42,831
  46,870
  51,083
  55,471
  60,037
  64,784
  69,719
  74,846
  80,175
Operating income, $m
  -169
  -411
  -598
  -846
  -1,166
  -1,568
  -2,063
  -2,660
  -3,365
  -4,185
  -5,124
  -6,184
  -7,367
  -8,671
  -10,097
  -11,641
  -13,302
  -15,076
  -16,961
  -18,955
  -21,055
  -23,259
  -25,567
  -27,979
  -30,494
  -33,113
  -35,838
  -38,672
  -41,618
  -44,679
  -47,859
EBITDA, $m
  -50
  -232
  -338
  -478
  -658
  -886
  -1,165
  -1,502
  -1,901
  -2,364
  -2,895
  -3,494
  -4,162
  -4,899
  -5,704
  -6,576
  -7,514
  -8,517
  -9,582
  -10,708
  -11,894
  -13,140
  -14,444
  -15,806
  -17,227
  -18,706
  -20,246
  -21,847
  -23,511
  -25,240
  -27,037
Interest expense (income), $m
  40
  38
  64
  99
  147
  208
  285
  380
  494
  629
  785
  965
  1,168
  1,394
  1,644
  1,916
  2,212
  2,529
  2,869
  3,229
  3,611
  4,012
  4,434
  4,875
  5,337
  5,818
  6,319
  6,840
  7,382
  7,945
  8,531
Earnings before tax, $m
  -245
  -449
  -662
  -945
  -1,312
  -1,776
  -2,348
  -3,039
  -3,859
  -4,814
  -5,909
  -7,149
  -8,535
  -10,065
  -11,740
  -13,557
  -15,513
  -17,605
  -19,830
  -22,184
  -24,665
  -27,271
  -30,001
  -32,854
  -35,830
  -38,930
  -42,157
  -45,512
  -48,999
  -52,624
  -56,390
Tax expense, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -243
  -449
  -662
  -945
  -1,312
  -1,776
  -2,348
  -3,039
  -3,859
  -4,814
  -5,909
  -7,149
  -8,535
  -10,065
  -11,740
  -13,557
  -15,513
  -17,605
  -19,830
  -22,184
  -24,665
  -27,271
  -30,001
  -32,854
  -35,830
  -38,930
  -42,157
  -45,512
  -48,999
  -52,624
  -56,390

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,607
  2,392
  3,481
  4,923
  6,785
  9,127
  12,009
  15,481
  19,587
  24,361
  29,826
  35,997
  42,880
  50,474
  58,771
  67,760
  77,426
  87,754
  98,727
  110,332
  122,555
  135,388
  148,824
  162,860
  177,498
  192,745
  208,609
  225,104
  242,250
  260,068
  278,583
Adjusted assets (=assets-cash), $m
  1,601
  2,392
  3,481
  4,923
  6,785
  9,127
  12,009
  15,481
  19,587
  24,361
  29,826
  35,997
  42,880
  50,474
  58,771
  67,760
  77,426
  87,754
  98,727
  110,332
  122,555
  135,388
  148,824
  162,860
  177,498
  192,745
  208,609
  225,104
  242,250
  260,068
  278,583
Revenue / Adjusted assets
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
Average production assets, $m
  1,645
  2,468
  3,590
  5,078
  6,998
  9,414
  12,387
  15,968
  20,204
  25,128
  30,765
  37,130
  44,230
  52,063
  60,621
  69,893
  79,863
  90,516
  101,834
  113,804
  126,412
  139,649
  153,508
  167,986
  183,085
  198,811
  215,174
  232,189
  249,874
  268,252
  287,351
Working capital, $m
  -7
  -19
  -28
  -40
  -55
  -74
  -98
  -126
  -159
  -198
  -242
  -292
  -348
  -410
  -477
  -550
  -629
  -713
  -802
  -896
  -995
  -1,099
  -1,208
  -1,322
  -1,441
  -1,565
  -1,694
  -1,828
  -1,967
  -2,112
  -2,262
Total debt, $m
  607
  1,026
  1,603
  2,367
  3,354
  4,595
  6,123
  7,963
  10,139
  12,669
  15,566
  18,837
  22,485
  26,509
  30,907
  35,671
  40,794
  46,268
  52,083
  58,234
  64,712
  71,514
  78,635
  86,074
  93,832
  101,913
  110,321
  119,063
  128,150
  137,594
  147,407
Total liabilities, $m
  848
  1,268
  1,845
  2,609
  3,596
  4,837
  6,365
  8,205
  10,381
  12,911
  15,808
  19,079
  22,727
  26,751
  31,149
  35,913
  41,036
  46,510
  52,325
  58,476
  64,954
  71,756
  78,877
  86,316
  94,074
  102,155
  110,563
  119,305
  128,392
  137,836
  147,649
Total equity, $m
  758
  1,124
  1,636
  2,314
  3,189
  4,290
  5,644
  7,276
  9,206
  11,450
  14,018
  16,919
  20,154
  23,723
  27,623
  31,847
  36,390
  41,244
  46,402
  51,856
  57,601
  63,632
  69,947
  76,544
  83,424
  90,590
  98,046
  105,799
  113,857
  122,232
  130,934
Total liabilities and equity, $m
  1,606
  2,392
  3,481
  4,923
  6,785
  9,127
  12,009
  15,481
  19,587
  24,361
  29,826
  35,998
  42,881
  50,474
  58,772
  67,760
  77,426
  87,754
  98,727
  110,332
  122,555
  135,388
  148,824
  162,860
  177,498
  192,745
  208,609
  225,104
  242,249
  260,068
  278,583
Debt-to-equity ratio
  0.801
  0.910
  0.980
  1.020
  1.050
  1.070
  1.080
  1.090
  1.100
  1.110
  1.110
  1.110
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.130
  1.130
  1.130
  1.130
  1.130
Adjusted equity ratio
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -243
  -449
  -662
  -945
  -1,312
  -1,776
  -2,348
  -3,039
  -3,859
  -4,814
  -5,909
  -7,149
  -8,535
  -10,065
  -11,740
  -13,557
  -15,513
  -17,605
  -19,830
  -22,184
  -24,665
  -27,271
  -30,001
  -32,854
  -35,830
  -38,930
  -42,157
  -45,512
  -48,999
  -52,624
  -56,390
Depreciation, amort., depletion, $m
  119
  179
  260
  368
  507
  682
  898
  1,157
  1,464
  1,821
  2,229
  2,691
  3,205
  3,773
  4,393
  5,065
  5,787
  6,559
  7,379
  8,247
  9,160
  10,119
  11,124
  12,173
  13,267
  14,407
  15,592
  16,825
  18,107
  19,439
  20,823
Funds from operations, $m
  4
  -270
  -401
  -577
  -805
  -1,094
  -1,450
  -1,882
  -2,395
  -2,993
  -3,680
  -4,459
  -5,329
  -6,293
  -7,347
  -8,492
  -9,726
  -11,046
  -12,450
  -13,937
  -15,505
  -17,152
  -18,877
  -20,681
  -22,563
  -24,524
  -26,564
  -28,687
  -30,893
  -33,185
  -35,568
Change in working capital, $m
  -30
  -6
  -9
  -12
  -15
  -19
  -23
  -28
  -33
  -39
  -44
  -50
  -56
  -62
  -67
  -73
  -78
  -84
  -89
  -94
  -99
  -104
  -109
  -114
  -119
  -124
  -129
  -134
  -139
  -145
  -150
Cash from operations, $m
  34
  -263
  -393
  -565
  -790
  -1,075
  -1,427
  -1,854
  -2,361
  -2,954
  -3,636
  -4,409
  -5,274
  -6,231
  -7,280
  -8,419
  -9,647
  -10,962
  -12,361
  -13,843
  -15,405
  -17,048
  -18,768
  -20,567
  -22,444
  -24,400
  -26,436
  -28,553
  -30,753
  -33,041
  -35,417
Maintenance CAPEX, $m
  0
  -119
  -179
  -260
  -368
  -507
  -682
  -898
  -1,157
  -1,464
  -1,821
  -2,229
  -2,691
  -3,205
  -3,773
  -4,393
  -5,065
  -5,787
  -6,559
  -7,379
  -8,247
  -9,160
  -10,119
  -11,124
  -12,173
  -13,267
  -14,407
  -15,592
  -16,825
  -18,107
  -19,439
New CAPEX, $m
  -15
  -823
  -1,123
  -1,488
  -1,920
  -2,416
  -2,972
  -3,582
  -4,235
  -4,924
  -5,637
  -6,365
  -7,100
  -7,833
  -8,558
  -9,272
  -9,970
  -10,653
  -11,319
  -11,970
  -12,608
  -13,237
  -13,859
  -14,478
  -15,099
  -15,726
  -16,363
  -17,015
  -17,685
  -18,378
  -19,098
Cash from investing activities, $m
  -10
  -942
  -1,302
  -1,748
  -2,288
  -2,923
  -3,654
  -4,480
  -5,392
  -6,388
  -7,458
  -8,594
  -9,791
  -11,038
  -12,331
  -13,665
  -15,035
  -16,440
  -17,878
  -19,349
  -20,855
  -22,397
  -23,978
  -25,602
  -27,272
  -28,993
  -30,770
  -32,607
  -34,510
  -36,485
  -38,537
Free cash flow, $m
  24
  -1,205
  -1,694
  -2,314
  -3,078
  -3,998
  -5,082
  -6,333
  -7,754
  -9,342
  -11,094
  -13,003
  -15,064
  -17,269
  -19,611
  -22,084
  -24,682
  -27,402
  -30,239
  -33,192
  -36,260
  -39,445
  -42,746
  -46,169
  -49,716
  -53,393
  -57,205
  -61,160
  -65,264
  -69,526
  -73,954
Issuance/(repayment) of debt, $m
  -35
  419
  577
  765
  986
  1,241
  1,527
  1,840
  2,176
  2,530
  2,897
  3,271
  3,648
  4,025
  4,397
  4,764
  5,123
  5,474
  5,816
  6,150
  6,478
  6,801
  7,121
  7,439
  7,758
  8,080
  8,408
  8,743
  9,087
  9,443
  9,813
Issuance/(repurchase) of shares, $m
  0
  821
  1,173
  1,623
  2,187
  2,877
  3,702
  4,671
  5,789
  7,057
  8,478
  10,050
  11,770
  13,634
  15,640
  17,782
  20,056
  22,459
  24,987
  27,638
  30,410
  33,303
  36,316
  39,451
  42,710
  46,096
  49,613
  53,265
  57,058
  60,998
  65,093
Cash from financing (excl. dividends), $m  
  -35
  1,240
  1,750
  2,388
  3,173
  4,118
  5,229
  6,511
  7,965
  9,587
  11,375
  13,321
  15,418
  17,659
  20,037
  22,546
  25,179
  27,933
  30,803
  33,788
  36,888
  40,104
  43,437
  46,890
  50,468
  54,176
  58,021
  62,008
  66,145
  70,441
  74,906
Total cash flow (excl. dividends), $m
  -11
  35
  56
  74
  96
  120
  148
  178
  211
  245
  281
  317
  354
  390
  426
  462
  497
  531
  564
  596
  628
  660
  690
  721
  752
  784
  815
  848
  881
  916
  952
Retained Cash Flow (-), $m
  241
  -821
  -1,173
  -1,623
  -2,187
  -2,877
  -3,702
  -4,671
  -5,789
  -7,057
  -8,478
  -10,050
  -11,770
  -13,634
  -15,640
  -17,782
  -20,056
  -22,459
  -24,987
  -27,638
  -30,410
  -33,303
  -36,316
  -39,451
  -42,710
  -46,096
  -49,613
  -53,265
  -57,058
  -60,998
  -65,093
Prev. year cash balance distribution, $m
 
  6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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
 
  -780
  -1,117
  -1,549
  -2,092
  -2,757
  -3,554
  -4,493
  -5,578
  -6,812
  -8,197
  -9,733
  -11,416
  -13,244
  -15,214
  -17,320
  -19,559
  -21,928
  -24,423
  -27,042
  -29,782
  -32,643
  -35,625
  -38,730
  -41,958
  -45,313
  -48,797
  -52,417
  -56,177
  -60,082
  -64,141
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  -720
  -945
  -1,191
  -1,449
  -1,705
  -1,943
  -2,147
  -2,305
  -2,405
  -2,441
  -2,412
  -2,321
  -2,176
  -1,987
  -1,768
  -1,532
  -1,293
  -1,063
  -850
  -661
  -500
  -367
  -261
  -180
  -120
  -78
  -49
  -29
  -17
  -10
Current shareholders' claim on cash, %
  100
  39.1
  15.7
  6.5
  2.8
  1.2
  0.5
  0.2
  0.1
  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

EV Energy Partners, L.P. engages in the acquisition, development, and production of oil and natural gas properties in the United States. Its properties are located in the Barnett Shale; the Appalachian Basin; the San Juan Basin; Michigan; Central Texas; the Mid–Continent areas in Oklahoma, Texas, Arkansas, Kansas, and Louisiana; the Monroe Field in Northern Louisiana; and the Permian Basin. As of December 31, 2015, the company had estimated net proved reserves of 22.0 million barrels of oil; 747.0 billion cubic feet of natural gas; and 36.3 million barrels of natural gas liquids. EV Energy GP, L.P. serves as the general partner of EV Energy Partners, L.P. EV Energy Partners, L.P. was founded in 2006 and is based in Houston, Texas.

FINANCIAL RATIOS  of  EV Energy Partners (EVEP)

Valuation Ratios
P/E Ratio -0.1
Price to Sales 0.2
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0.8
Price to Free Cash Flow 1.5
Growth Rates
Sales Growth Rate 3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -95.3%
Cap. Spend. - 3 Yr. Gr. Rate -37.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 80.1%
Total Debt to Equity 80.1%
Interest Coverage -5
Management Effectiveness
Return On Assets -11.5%
Ret/ On Assets - 3 Yr. Avg. -0.1%
Return On Total Capital -15.9%
Ret/ On T. Cap. - 3 Yr. Avg. -2.8%
Return On Equity -27.7%
Return On Equity - 3 Yr. Avg. -4.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 39.5%
Gross Margin - 3 Yr. Avg. 47.7%
EBITDA Margin -46.5%
EBITDA Margin - 3 Yr. Avg. -13.3%
Operating Margin -91.4%
Oper. Margin - 3 Yr. Avg. -82.4%
Pre-Tax Margin -132.4%
Pre-Tax Margin - 3 Yr. Avg. -86.1%
Net Profit Margin -131.4%
Net Profit Margin - 3 Yr. Avg. -27.1%
Effective Tax Rate 0.8%
Eff/ Tax Rate - 3 Yr. Avg. 2%
Payout Ratio -1.6%

EVEP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EVEP stock intrinsic value calculation we used $185 million for the last fiscal year's total revenue generated by EV Energy Partners. The default revenue input number comes from 2016 income statement of EV Energy Partners. 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 EVEP stock valuation model: a) initial revenue growth rate of 50% 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 8.3%, whose default value for EVEP is calculated based on our internal credit rating of EV Energy Partners, 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 EV Energy Partners.
    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 EVEP stock the variable cost ratio is equal to 248.1%.

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 EVEP 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 6.2% for EV Energy Partners.

Corporate tax rate of 27% is the nominal tax rate for EV Energy Partners. 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 EVEP 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 EVEP are equal to 889.2%.

Life of production assets of 13.8 years is the average useful life of capital assets used in EV Energy Partners 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 EVEP is equal to -7%. 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 - $758 million for EV Energy Partners - 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 50.806 million for EV Energy Partners 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 EV Energy Partners at the current share price and the inputted number of shares is $0.0 billion.

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Stock chart of EVEP Financial statements of EVEP Annual reports of EVEP
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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