Intrinsic value of Helmerich&Payne - HP

Previous Close

$56.61

  Intrinsic Value

$18.47

stock screener

  Rating & Target

str. sell

-67%

Previous close

$56.61

 
Intrinsic value

$18.47

 
Up/down potential

-67%

 
Rating

str. sell

We calculate the intrinsic value of HP 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 6.2

 

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, %
  -48.64
  36.30
  33.17
  30.35
  27.82
  25.54
  23.48
  21.63
  19.97
  18.47
  17.13
  15.91
  14.82
  13.84
  12.96
  12.16
  11.44
  10.80
  10.22
  9.70
  9.23
  8.81
  8.42
  8.08
  7.77
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
Revenue, $m
  1,624
  2,214
  2,948
  3,842
  4,911
  6,166
  7,613
  9,260
  11,110
  13,162
  15,416
  17,870
  20,518
  23,358
  26,384
  29,593
  32,979
  36,541
  40,276
  44,182
  48,259
  52,508
  56,932
  61,533
  66,317
  71,288
  76,455
  81,824
  87,404
  93,206
  99,240
Variable operating expenses, $m
 
  1,209
  1,609
  2,098
  2,682
  3,366
  4,157
  5,056
  6,066
  7,187
  8,417
  9,757
  11,203
  12,753
  14,406
  16,158
  18,007
  19,951
  21,991
  24,123
  26,349
  28,669
  31,085
  33,597
  36,209
  38,923
  41,744
  44,676
  47,723
  50,890
  54,185
Fixed operating expenses, $m
 
  802
  822
  842
  863
  885
  907
  930
  953
  977
  1,001
  1,026
  1,052
  1,078
  1,105
  1,133
  1,161
  1,190
  1,220
  1,250
  1,281
  1,313
  1,346
  1,380
  1,414
  1,450
  1,486
  1,523
  1,561
  1,600
  1,640
Total operating expenses, $m
  1,650
  2,011
  2,431
  2,940
  3,545
  4,251
  5,064
  5,986
  7,019
  8,164
  9,418
  10,783
  12,255
  13,831
  15,511
  17,291
  19,168
  21,141
  23,211
  25,373
  27,630
  29,982
  32,431
  34,977
  37,623
  40,373
  43,230
  46,199
  49,284
  52,490
  55,825
Operating income, $m
  -26
  203
  517
  902
  1,367
  1,914
  2,550
  3,275
  4,091
  4,999
  5,998
  7,087
  8,264
  9,527
  10,874
  12,303
  13,812
  15,400
  17,065
  18,808
  20,628
  22,525
  24,501
  26,556
  28,693
  30,915
  33,224
  35,625
  38,120
  40,715
  43,415
EBITDA, $m
  573
  905
  1,451
  2,120
  2,922
  3,868
  4,961
  6,208
  7,611
  9,169
  10,882
  12,748
  14,764
  16,926
  19,232
  21,677
  24,260
  26,976
  29,825
  32,805
  35,916
  39,160
  42,537
  46,050
  49,703
  53,499
  57,445
  61,546
  65,810
  70,243
  74,854
Interest expense (income), $m
  28
  27
  72
  129
  198
  280
  376
  488
  614
  757
  915
  1,088
  1,277
  1,480
  1,699
  1,932
  2,178
  2,439
  2,713
  3,000
  3,301
  3,614
  3,941
  4,281
  4,635
  5,003
  5,386
  5,783
  6,196
  6,625
  7,072
Earnings before tax, $m
  -73
  176
  444
  773
  1,169
  1,634
  2,173
  2,787
  3,477
  4,242
  5,083
  5,999
  6,987
  8,046
  9,175
  10,371
  11,633
  12,961
  14,353
  15,808
  17,327
  18,911
  20,560
  22,275
  24,058
  25,912
  27,839
  29,842
  31,924
  34,090
  36,343
Tax expense, $m
  -20
  48
  120
  209
  316
  441
  587
  752
  939
  1,145
  1,373
  1,620
  1,886
  2,172
  2,477
  2,800
  3,141
  3,499
  3,875
  4,268
  4,678
  5,106
  5,551
  6,014
  6,496
  6,996
  7,516
  8,057
  8,620
  9,204
  9,813
Net income, $m
  -57
  129
  324
  565
  853
  1,193
  1,586
  2,034
  2,538
  3,097
  3,711
  4,379
  5,100
  5,874
  6,697
  7,571
  8,492
  9,461
  10,477
  11,540
  12,649
  13,805
  15,009
  16,261
  17,562
  18,916
  20,322
  21,784
  23,305
  24,886
  26,531

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  950
  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
  6,832
  8,020
  10,680
  13,922
  17,795
  22,339
  27,584
  33,552
  40,253
  47,689
  55,856
  64,745
  74,341
  84,630
  95,595
  107,220
  119,491
  132,396
  145,926
  160,078
  174,850
  190,247
  206,275
  222,946
  240,278
  258,291
  277,010
  296,462
  316,681
  337,703
  359,567
Adjusted assets (=assets-cash), $m
  5,882
  8,020
  10,680
  13,922
  17,795
  22,339
  27,584
  33,552
  40,253
  47,689
  55,856
  64,745
  74,341
  84,630
  95,595
  107,220
  119,491
  132,396
  145,926
  160,078
  174,850
  190,247
  206,275
  222,946
  240,278
  258,291
  277,010
  296,462
  316,681
  337,703
  359,567
Revenue / Adjusted assets
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
Average production assets, $m
  2,573
  3,506
  4,669
  6,086
  7,780
  9,766
  12,059
  14,668
  17,598
  20,849
  24,419
  28,305
  32,501
  36,999
  41,793
  46,875
  52,239
  57,881
  63,797
  69,984
  76,442
  83,173
  90,180
  97,469
  105,046
  112,921
  121,104
  129,609
  138,448
  147,638
  157,197
Working capital, $m
  1,243
  398
  531
  692
  884
  1,110
  1,370
  1,667
  2,000
  2,369
  2,775
  3,217
  3,693
  4,204
  4,749
  5,327
  5,936
  6,577
  7,250
  7,953
  8,687
  9,451
  10,248
  11,076
  11,937
  12,832
  13,762
  14,728
  15,733
  16,777
  17,863
Total debt, $m
  492
  1,317
  2,344
  3,595
  5,090
  6,844
  8,869
  11,172
  13,759
  16,629
  19,781
  23,213
  26,917
  30,888
  35,121
  39,608
  44,344
  49,326
  54,549
  60,011
  65,713
  71,656
  77,843
  84,278
  90,968
  97,921
  105,147
  112,655
  120,460
  128,574
  137,014
Total liabilities, $m
  2,271
  3,096
  4,123
  5,374
  6,869
  8,623
  10,648
  12,951
  15,538
  18,408
  21,560
  24,992
  28,696
  32,667
  36,900
  41,387
  46,123
  51,105
  56,328
  61,790
  67,492
  73,435
  79,622
  86,057
  92,747
  99,700
  106,926
  114,434
  122,239
  130,353
  138,793
Total equity, $m
  4,561
  4,924
  6,558
  8,548
  10,926
  13,716
  16,937
  20,601
  24,715
  29,281
  34,296
  39,753
  45,646
  51,963
  58,695
  65,833
  73,367
  81,291
  89,599
  98,288
  107,358
  116,811
  126,653
  136,889
  147,531
  158,591
  170,084
  182,028
  194,442
  207,350
  220,774
Total liabilities and equity, $m
  6,832
  8,020
  10,681
  13,922
  17,795
  22,339
  27,585
  33,552
  40,253
  47,689
  55,856
  64,745
  74,342
  84,630
  95,595
  107,220
  119,490
  132,396
  145,927
  160,078
  174,850
  190,246
  206,275
  222,946
  240,278
  258,291
  277,010
  296,462
  316,681
  337,703
  359,567
Debt-to-equity ratio
  0.108
  0.270
  0.360
  0.420
  0.470
  0.500
  0.520
  0.540
  0.560
  0.570
  0.580
  0.580
  0.590
  0.590
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
Adjusted equity ratio
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614
  0.614

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -57
  129
  324
  565
  853
  1,193
  1,586
  2,034
  2,538
  3,097
  3,711
  4,379
  5,100
  5,874
  6,697
  7,571
  8,492
  9,461
  10,477
  11,540
  12,649
  13,805
  15,009
  16,261
  17,562
  18,916
  20,322
  21,784
  23,305
  24,886
  26,531
Depreciation, amort., depletion, $m
  599
  701
  934
  1,217
  1,556
  1,953
  2,412
  2,934
  3,520
  4,170
  4,884
  5,661
  6,500
  7,400
  8,359
  9,375
  10,448
  11,576
  12,759
  13,997
  15,288
  16,635
  18,036
  19,494
  21,009
  22,584
  24,221
  25,922
  27,690
  29,528
  31,439
Funds from operations, $m
  848
  830
  1,258
  1,782
  2,409
  3,146
  3,998
  4,968
  6,057
  7,267
  8,595
  10,040
  11,601
  13,273
  15,056
  16,946
  18,940
  21,038
  23,237
  25,537
  27,937
  30,440
  33,045
  35,754
  38,572
  41,500
  44,543
  47,706
  50,994
  54,413
  57,970
Change in working capital, $m
  94
  106
  132
  161
  192
  226
  261
  296
  333
  369
  406
  442
  477
  511
  545
  578
  610
  641
  672
  703
  734
  765
  796
  828
  861
  895
  930
  966
  1,004
  1,044
  1,086
Cash from operations, $m
  754
  724
  1,126
  1,621
  2,217
  2,921
  3,738
  4,672
  5,725
  6,897
  8,189
  9,599
  11,124
  12,762
  14,511
  16,368
  18,331
  20,397
  22,565
  24,834
  27,204
  29,675
  32,248
  34,926
  37,711
  40,605
  43,613
  46,740
  49,990
  53,369
  56,884
Maintenance CAPEX, $m
  0
  -515
  -701
  -934
  -1,217
  -1,556
  -1,953
  -2,412
  -2,934
  -3,520
  -4,170
  -4,884
  -5,661
  -6,500
  -7,400
  -8,359
  -9,375
  -10,448
  -11,576
  -12,759
  -13,997
  -15,288
  -16,635
  -18,036
  -19,494
  -21,009
  -22,584
  -24,221
  -25,922
  -27,690
  -29,528
New CAPEX, $m
  -257
  -934
  -1,163
  -1,417
  -1,693
  -1,987
  -2,293
  -2,609
  -2,929
  -3,251
  -3,571
  -3,886
  -4,196
  -4,498
  -4,794
  -5,082
  -5,365
  -5,642
  -5,915
  -6,187
  -6,458
  -6,731
  -7,007
  -7,289
  -7,577
  -7,875
  -8,183
  -8,504
  -8,839
  -9,190
  -9,559
Cash from investing activities, $m
  -234
  -1,449
  -1,864
  -2,351
  -2,910
  -3,543
  -4,246
  -5,021
  -5,863
  -6,771
  -7,741
  -8,770
  -9,857
  -10,998
  -12,194
  -13,441
  -14,740
  -16,090
  -17,491
  -18,946
  -20,455
  -22,019
  -23,642
  -25,325
  -27,071
  -28,884
  -30,767
  -32,725
  -34,761
  -36,880
  -39,087
Free cash flow, $m
  520
  -724
  -738
  -730
  -694
  -622
  -509
  -349
  -139
  127
  449
  829
  1,267
  1,764
  2,318
  2,927
  3,591
  4,307
  5,073
  5,887
  6,749
  7,655
  8,607
  9,601
  10,640
  11,721
  12,846
  14,015
  15,229
  16,489
  17,798
Issuance/(repayment) of debt, $m
  -40
  825
  1,027
  1,251
  1,495
  1,754
  2,025
  2,304
  2,586
  2,870
  3,153
  3,431
  3,704
  3,972
  4,232
  4,487
  4,736
  4,981
  5,223
  5,463
  5,702
  5,943
  6,187
  6,435
  6,690
  6,953
  7,225
  7,509
  7,805
  8,114
  8,439
Issuance/(repurchase) of shares, $m
  1
  1,185
  1,309
  1,426
  1,525
  1,597
  1,634
  1,630
  1,576
  1,469
  1,304
  1,079
  792
  444
  35
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -43
  2,010
  2,336
  2,677
  3,020
  3,351
  3,659
  3,934
  4,162
  4,339
  4,457
  4,510
  4,496
  4,416
  4,267
  4,487
  4,736
  4,981
  5,223
  5,463
  5,702
  5,943
  6,187
  6,435
  6,690
  6,953
  7,225
  7,509
  7,805
  8,114
  8,439
Total cash flow (excl. dividends), $m
  476
  1,285
  1,598
  1,947
  2,326
  2,729
  3,150
  3,584
  4,024
  4,466
  4,905
  5,338
  5,763
  6,179
  6,585
  7,415
  8,328
  9,288
  10,296
  11,350
  12,451
  13,598
  14,793
  16,037
  17,330
  18,674
  20,071
  21,523
  23,033
  24,603
  26,237
Retained Cash Flow (-), $m
  335
  -1,313
  -1,633
  -1,990
  -2,378
  -2,790
  -3,221
  -3,664
  -4,114
  -4,566
  -5,015
  -5,458
  -5,892
  -6,317
  -6,732
  -7,138
  -7,534
  -7,924
  -8,308
  -8,689
  -9,070
  -9,453
  -9,841
  -10,236
  -10,642
  -11,060
  -11,493
  -11,944
  -12,414
  -12,907
  -13,424
Prev. year cash balance distribution, $m
 
  950
  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
 
  922
  -36
  -44
  -52
  -61
  -70
  -80
  -90
  -100
  -110
  -119
  -129
  -138
  -147
  277
  793
  1,365
  1,988
  2,661
  3,381
  4,145
  4,952
  5,800
  6,688
  7,614
  8,578
  9,579
  10,619
  11,696
  12,813
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  884
  -33
  -38
  -43
  -47
  -51
  -54
  -56
  -57
  -57
  -57
  -55
  -53
  -49
  81
  202
  297
  366
  410
  430
  429
  411
  380
  341
  296
  250
  206
  164
  128
  96
Current shareholders' claim on cash, %
  100
  80.4
  67.2
  57.9
  51.1
  46.1
  42.4
  39.5
  37.4
  35.8
  34.7
  33.9
  33.4
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2
  33.2

Helmerich & Payne, Inc. is engaged in contract drilling of oil and gas wells for others. The Company operates in the contract drilling industry. The Company's contract drilling business consists of three segments: U.S. Land, Offshore and International Land. The Company is also engaged in the ownership, development and operation of commercial real estate and the research and development of rotary steerable technology. Its real estate investments are located within Tulsa, Oklahoma, and include a shopping center containing approximately 441,000 leasable square feet, multi-tenant industrial warehouse properties containing approximately one million leasable square feet and approximately 210 acres of undeveloped real estate. The Company provides drilling rigs, equipment, personnel and camps on a contract basis. The Company's subsidiaries include Helmerich & Payne International Drilling Co. and Helmerich & Payne de Venezuela, C.A.

FINANCIAL RATIOS  of  Helmerich&Payne (HP)

Valuation Ratios
P/E Ratio -107.3
Price to Sales 3.8
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 8.1
Price to Free Cash Flow 12.3
Growth Rates
Sales Growth Rate -48.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -77.3%
Cap. Spend. - 3 Yr. Gr. Rate -20.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 10.8%
Total Debt to Equity 10.8%
Interest Coverage -2
Management Effectiveness
Return On Assets -0.5%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital -1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 7.2%
Return On Equity -1.2%
Return On Equity - 3 Yr. Avg. 7.5%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 44.6%
Gross Margin - 3 Yr. Avg. 45.6%
EBITDA Margin 34.1%
EBITDA Margin - 3 Yr. Avg. 39.5%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. 16%
Pre-Tax Margin -4.5%
Pre-Tax Margin - 3 Yr. Avg. 15.3%
Net Profit Margin -3.5%
Net Profit Margin - 3 Yr. Avg. 9.6%
Effective Tax Rate 27.4%
Eff/ Tax Rate - 3 Yr. Avg. 33.1%
Payout Ratio -526.3%

HP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HP stock intrinsic value calculation we used $1624 million for the last fiscal year's total revenue generated by Helmerich&Payne. The default revenue input number comes from 2016 income statement of Helmerich&Payne. 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 HP stock valuation model: a) initial revenue growth rate of 36.3% 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 4.3%, whose default value for HP is calculated based on our internal credit rating of Helmerich&Payne, 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 Helmerich&Payne.
    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 HP stock the variable cost ratio is equal to 54.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $782 million in the base year in the intrinsic value calculation for HP 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 5.5% for Helmerich&Payne.

Corporate tax rate of 27% is the nominal tax rate for Helmerich&Payne. 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 HP 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 HP are equal to 158.4%.

Life of production assets of 4.3 years is the average useful life of capital assets used in Helmerich&Payne 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 HP is equal to 18%. 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 - $4561 million for Helmerich&Payne - 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 108.654 million for Helmerich&Payne 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 Helmerich&Payne at the current share price and the inputted number of shares is $6.2 billion.

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COMPANY NEWS

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▶ Why You Should Hold Helmerich & Payne (HP) Now   [Oct-06-17 04:51PM  Zacks]
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▶ 7 Things You Didn't Know About Helmerich & Payne, Inc.   [Aug-28-17 08:16AM  Motley Fool]
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▶ What Weatherford Has to Do with Crude as of August 11   [Aug-15-17 07:37AM  Market Realist]
▶ Helmerich & Payne reports 3Q loss   [Jul-27-17 10:29PM  Associated Press]
▶ Meg Whitman Steps Down From HP Board   [Jul-26-17 04:28PM  TheStreet.com]
▶ The Biggest Loser: Helmerich & Payne Slumps 5.5%   [Jul-21-17 05:39PM  Barrons.com]
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Financial statements of HP
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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