Intrinsic value of Jones Energy Cl A - JONE

Previous Close

$1.15

  Intrinsic Value

$1.61

stock screener

  Rating & Target

buy

+40%

  Value-price divergence*

-42%

Previous close

$1.15

 
Intrinsic value

$1.61

 
Up/down potential

+40%

 
Rating

buy

 
Value-price divergence*

-42%

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

We calculate the intrinsic value of JONE 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 0.1

 

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, %
  -35.03
  57.70
  52.43
  47.69
  43.42
  39.58
  36.12
  33.01
  30.21
  27.69
  25.42
  23.38
  21.54
  19.88
  18.40
  17.06
  15.85
  14.77
  13.79
  12.91
  12.12
  11.41
  10.77
  10.19
  9.67
  9.20
  8.78
  8.40
  8.06
  7.76
  7.48
Revenue, $m
  128
  202
  308
  454
  652
  910
  1,238
  1,647
  2,144
  2,738
  3,434
  4,237
  5,149
  6,173
  7,309
  8,555
  9,911
  11,375
  12,943
  14,614
  16,385
  18,254
  20,219
  22,280
  24,434
  26,683
  29,027
  31,466
  34,004
  36,642
  39,384
Variable operating expenses, $m
 
  312
  476
  703
  1,008
  1,407
  1,915
  2,548
  3,317
  4,236
  5,312
  6,554
  7,966
  9,550
  11,306
  13,235
  15,333
  17,596
  20,023
  22,608
  25,348
  28,239
  31,279
  34,467
  37,800
  41,279
  44,904
  48,678
  52,604
  56,685
  60,927
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
  133
  312
  476
  703
  1,008
  1,407
  1,915
  2,548
  3,317
  4,236
  5,312
  6,554
  7,966
  9,550
  11,306
  13,235
  15,333
  17,596
  20,023
  22,608
  25,348
  28,239
  31,279
  34,467
  37,800
  41,279
  44,904
  48,678
  52,604
  56,685
  60,927
Operating income, $m
  -5
  -110
  -168
  -249
  -356
  -498
  -677
  -901
  -1,173
  -1,498
  -1,878
  -2,317
  -2,817
  -3,377
  -3,998
  -4,680
  -5,421
  -6,222
  -7,080
  -7,994
  -8,963
  -9,985
  -11,060
  -12,187
  -13,366
  -14,596
  -15,878
  -17,212
  -18,600
  -20,043
  -21,543
EBITDA, $m
  149
  132
  202
  298
  427
  596
  811
  1,079
  1,405
  1,794
  2,250
  2,775
  3,373
  4,044
  4,788
  5,604
  6,493
  7,451
  8,479
  9,573
  10,734
  11,958
  13,245
  14,595
  16,007
  17,480
  19,015
  20,613
  22,276
  24,004
  25,800
Interest expense (income), $m
  54
  50
  104
  182
  290
  434
  624
  865
  1,165
  1,530
  1,966
  2,477
  3,066
  3,736
  4,487
  5,321
  6,236
  7,231
  8,305
  9,456
  10,683
  11,983
  13,355
  14,797
  16,309
  17,891
  19,541
  21,262
  23,052
  24,915
  26,851
Earnings before tax, $m
  -109
  -160
  -273
  -431
  -646
  -932
  -1,301
  -1,766
  -2,338
  -3,028
  -3,844
  -4,794
  -5,882
  -7,112
  -8,485
  -10,000
  -11,657
  -13,453
  -15,385
  -17,450
  -19,645
  -21,968
  -24,414
  -26,984
  -29,675
  -32,486
  -35,419
  -38,474
  -41,653
  -44,958
  -48,394
Tax expense, $m
  -24
  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
  -43
  -160
  -273
  -431
  -646
  -932
  -1,301
  -1,766
  -2,338
  -3,028
  -3,844
  -4,794
  -5,882
  -7,112
  -8,485
  -10,000
  -11,657
  -13,453
  -15,385
  -17,450
  -19,645
  -21,968
  -24,414
  -26,984
  -29,675
  -32,486
  -35,419
  -38,474
  -41,653
  -44,958
  -48,394

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  35
  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
  1,887
  2,925
  4,459
  6,586
  9,445
  13,183
  17,945
  23,868
  31,078
  39,682
  49,767
  61,401
  74,625
  89,464
  105,921
  123,987
  143,639
  164,848
  187,579
  211,796
  237,463
  264,551
  293,033
  322,892
  354,119
  386,711
  420,677
  456,035
  492,811
  531,044
  570,778
Adjusted assets (=assets-cash), $m
  1,852
  2,925
  4,459
  6,586
  9,445
  13,183
  17,945
  23,868
  31,078
  39,682
  49,767
  61,401
  74,625
  89,464
  105,921
  123,987
  143,639
  164,848
  187,579
  211,796
  237,463
  264,551
  293,033
  322,892
  354,119
  386,711
  420,677
  456,035
  492,811
  531,044
  570,778
Revenue / Adjusted assets
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
Average production assets, $m
  1,693
  2,669
  4,069
  6,009
  8,618
  12,028
  16,373
  21,777
  28,355
  36,205
  45,407
  56,021
  68,087
  81,625
  96,641
  113,124
  131,055
  150,405
  171,145
  193,239
  216,658
  241,373
  267,360
  294,603
  323,093
  352,830
  383,820
  416,080
  449,635
  484,518
  520,770
Working capital, $m
  -9
  -20
  -31
  -45
  -65
  -91
  -124
  -165
  -214
  -274
  -343
  -424
  -515
  -617
  -731
  -856
  -991
  -1,137
  -1,294
  -1,461
  -1,638
  -1,825
  -2,022
  -2,228
  -2,443
  -2,668
  -2,903
  -3,147
  -3,400
  -3,664
  -3,938
Total debt, $m
  724
  1,511
  2,637
  4,198
  6,297
  9,040
  12,536
  16,883
  22,175
  28,490
  35,893
  44,432
  54,139
  65,030
  77,110
  90,370
  104,795
  120,363
  137,047
  154,822
  173,662
  193,544
  214,450
  236,367
  259,287
  283,210
  308,141
  334,093
  361,088
  389,150
  418,315
Total liabilities, $m
  1,360
  2,147
  3,273
  4,834
  6,933
  9,676
  13,172
  17,519
  22,811
  29,126
  36,529
  45,068
  54,775
  65,666
  77,746
  91,006
  105,431
  120,999
  137,683
  155,458
  174,298
  194,180
  215,086
  237,003
  259,923
  283,846
  308,777
  334,729
  361,724
  389,786
  418,951
Total equity, $m
  527
  778
  1,186
  1,752
  2,512
  3,507
  4,773
  6,349
  8,267
  10,555
  13,238
  16,333
  19,850
  23,797
  28,175
  32,981
  38,208
  43,850
  49,896
  56,338
  63,165
  70,370
  77,947
  85,889
  94,196
  102,865
  111,900
  121,305
  131,088
  141,258
  151,827
Total liabilities and equity, $m
  1,887
  2,925
  4,459
  6,586
  9,445
  13,183
  17,945
  23,868
  31,078
  39,681
  49,767
  61,401
  74,625
  89,463
  105,921
  123,987
  143,639
  164,849
  187,579
  211,796
  237,463
  264,550
  293,033
  322,892
  354,119
  386,711
  420,677
  456,034
  492,812
  531,044
  570,778
Debt-to-equity ratio
  1.374
  1.940
  2.220
  2.400
  2.510
  2.580
  2.630
  2.660
  2.680
  2.700
  2.710
  2.720
  2.730
  2.730
  2.740
  2.740
  2.740
  2.740
  2.750
  2.750
  2.750
  2.750
  2.750
  2.750
  2.750
  2.750
  2.750
  2.750
  2.750
  2.750
  2.760
Adjusted equity ratio
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -43
  -160
  -273
  -431
  -646
  -932
  -1,301
  -1,766
  -2,338
  -3,028
  -3,844
  -4,794
  -5,882
  -7,112
  -8,485
  -10,000
  -11,657
  -13,453
  -15,385
  -17,450
  -19,645
  -21,968
  -24,414
  -26,984
  -29,675
  -32,486
  -35,419
  -38,474
  -41,653
  -44,958
  -48,394
Depreciation, amort., depletion, $m
  154
  243
  370
  546
  783
  1,093
  1,488
  1,980
  2,578
  3,291
  4,128
  5,093
  6,190
  7,420
  8,786
  10,284
  11,914
  13,673
  15,559
  17,567
  19,696
  21,943
  24,305
  26,782
  29,372
  32,075
  34,893
  37,825
  40,876
  44,047
  47,343
Funds from operations, $m
  41
  82
  97
  116
  137
  161
  187
  214
  240
  264
  284
  299
  307
  308
  301
  284
  257
  220
  174
  117
  51
  -25
  -109
  -202
  -303
  -411
  -526
  -648
  -777
  -911
  -1,051
Change in working capital, $m
  15
  -7
  -11
  -15
  -20
  -26
  -33
  -41
  -50
  -59
  -70
  -80
  -91
  -102
  -114
  -125
  -136
  -146
  -157
  -167
  -177
  -187
  -197
  -206
  -215
  -225
  -234
  -244
  -254
  -264
  -274
Cash from operations, $m
  26
  90
  108
  130
  157
  187
  220
  255
  290
  323
  353
  379
  399
  411
  414
  408
  393
  367
  331
  284
  228
  162
  87
  4
  -87
  -186
  -292
  -404
  -523
  -647
  -777
Maintenance CAPEX, $m
  0
  -154
  -243
  -370
  -546
  -783
  -1,093
  -1,488
  -1,980
  -2,578
  -3,291
  -4,128
  -5,093
  -6,190
  -7,420
  -8,786
  -10,284
  -11,914
  -13,673
  -15,559
  -17,567
  -19,696
  -21,943
  -24,305
  -26,782
  -29,372
  -32,075
  -34,893
  -37,825
  -40,876
  -44,047
New CAPEX, $m
  -265
  -977
  -1,399
  -1,940
  -2,609
  -3,411
  -4,344
  -5,404
  -6,578
  -7,850
  -9,202
  -10,614
  -12,066
  -13,538
  -15,016
  -16,483
  -17,931
  -19,351
  -20,739
  -22,095
  -23,419
  -24,714
  -25,987
  -27,243
  -28,490
  -29,737
  -30,990
  -32,260
  -33,555
  -34,883
  -36,253
Cash from investing activities, $m
  -131
  -1,131
  -1,642
  -2,310
  -3,155
  -4,194
  -5,437
  -6,892
  -8,558
  -10,428
  -12,493
  -14,742
  -17,159
  -19,728
  -22,436
  -25,269
  -28,215
  -31,265
  -34,412
  -37,654
  -40,986
  -44,410
  -47,930
  -51,548
  -55,272
  -59,109
  -63,065
  -67,153
  -71,380
  -75,759
  -80,300
Free cash flow, $m
  -105
  -1,041
  -1,534
  -2,180
  -2,998
  -4,007
  -5,218
  -6,638
  -8,268
  -10,105
  -12,140
  -14,363
  -16,760
  -19,317
  -22,022
  -24,860
  -27,822
  -30,898
  -34,082
  -37,369
  -40,758
  -44,248
  -47,843
  -51,545
  -55,360
  -59,295
  -63,358
  -67,557
  -71,903
  -76,406
  -81,077
Issuance/(repayment) of debt, $m
  -17
  787
  1,126
  1,561
  2,099
  2,744
  3,495
  4,348
  5,292
  6,315
  7,403
  8,539
  9,707
  10,891
  12,080
  13,260
  14,425
  15,567
  16,684
  17,775
  18,840
  19,882
  20,906
  21,917
  22,920
  23,923
  24,931
  25,953
  26,994
  28,063
  29,165
Issuance/(repurchase) of shares, $m
  153
  447
  681
  996
  1,407
  1,926
  2,568
  3,341
  4,256
  5,316
  6,527
  7,889
  9,400
  11,059
  12,863
  14,806
  16,885
  19,094
  21,431
  23,892
  26,473
  29,173
  31,991
  34,927
  37,981
  41,156
  44,454
  47,879
  51,435
  55,128
  58,963
Cash from financing (excl. dividends), $m  
  120
  1,234
  1,807
  2,557
  3,506
  4,670
  6,063
  7,689
  9,548
  11,631
  13,930
  16,428
  19,107
  21,950
  24,943
  28,066
  31,310
  34,661
  38,115
  41,667
  45,313
  49,055
  52,897
  56,844
  60,901
  65,079
  69,385
  73,832
  78,429
  83,191
  88,128
Total cash flow (excl. dividends), $m
  15
  193
  272
  377
  507
  663
  845
  1,051
  1,279
  1,527
  1,790
  2,064
  2,347
  2,633
  2,920
  3,206
  3,487
  3,764
  4,034
  4,297
  4,555
  4,807
  5,054
  5,299
  5,541
  5,784
  6,028
  6,275
  6,526
  6,785
  7,051
Retained Cash Flow (-), $m
  -127
  -447
  -681
  -996
  -1,407
  -1,926
  -2,568
  -3,341
  -4,256
  -5,316
  -6,527
  -7,889
  -9,400
  -11,059
  -12,863
  -14,806
  -16,885
  -19,094
  -21,431
  -23,892
  -26,473
  -29,173
  -31,991
  -34,927
  -37,981
  -41,156
  -44,454
  -47,879
  -51,435
  -55,128
  -58,963
Prev. year cash balance distribution, $m
 
  35
  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
 
  -219
  -408
  -619
  -899
  -1,263
  -1,723
  -2,290
  -2,976
  -3,790
  -4,737
  -5,824
  -7,053
  -8,426
  -9,942
  -11,600
  -13,397
  -15,331
  -17,397
  -19,594
  -21,918
  -24,366
  -26,936
  -29,628
  -32,440
  -35,372
  -38,427
  -41,604
  -44,909
  -48,343
  -51,912
Discount rate, %
 
  10.20
  10.71
  11.25
  11.81
  12.40
  13.02
  13.67
  14.35
  15.07
  15.82
  16.61
  17.45
  18.32
  19.23
  20.20
  21.21
  22.27
  23.38
  24.55
  25.77
  27.06
  28.42
  29.84
  31.33
  32.90
  34.54
  36.27
  38.08
  39.99
  41.98
PV of cash for distribution, $m
 
  -198
  -333
  -449
  -575
  -704
  -827
  -934
  -1,018
  -1,071
  -1,090
  -1,074
  -1,024
  -946
  -847
  -735
  -618
  -503
  -396
  -303
  -223
  -159
  -110
  -73
  -47
  -29
  -17
  -10
  -5
  -3
  -1
Current shareholders' claim on cash, %
  100
  43.5
  19.4
  8.8
  4.1
  2.0
  1.0
  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

Jones Energy, Inc., an independent oil and gas company, engages in the acquisition, exploration, development, and production of oil and natural gas properties in the mid-continent region of the United States. The company owns leasehold interests in oil and natural gas producing properties, as well as in undeveloped acreage located in the Anadarko and Arkoma basins in Texas and Oklahoma. As of December 31, 2015, its total estimated proved reserves included 101.7 million barrels of oil equivalent. The company was founded in 1988 and is headquartered in Austin, Texas.

FINANCIAL RATIOS  of  Jones Energy Cl A (JONE)

Valuation Ratios
P/E Ratio -2.5
Price to Sales 0.8
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 4.1
Price to Free Cash Flow -0.4
Growth Rates
Sales Growth Rate -35%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.1%
Cap. Spend. - 3 Yr. Gr. Rate -6.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 137.4%
Total Debt to Equity 137.4%
Interest Coverage -1
Management Effectiveness
Return On Assets -0%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital -3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 0.2%
Return On Equity -9.3%
Return On Equity - 3 Yr. Avg. 3.7%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 68%
Gross Margin - 3 Yr. Avg. 75%
EBITDA Margin 77.3%
EBITDA Margin - 3 Yr. Avg. 108.2%
Operating Margin -3.9%
Oper. Margin - 3 Yr. Avg. -9.9%
Pre-Tax Margin -85.2%
Pre-Tax Margin - 3 Yr. Avg. -8.4%
Net Profit Margin -33.6%
Net Profit Margin - 3 Yr. Avg. -7.9%
Effective Tax Rate 22%
Eff/ Tax Rate - 3 Yr. Avg. 19.1%
Payout Ratio -4.7%

JONE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the JONE stock intrinsic value calculation we used $128 million for the last fiscal year's total revenue generated by Jones Energy Cl A. The default revenue input number comes from 2016 income statement of Jones Energy Cl A. 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 JONE stock valuation model: a) initial revenue growth rate of 57.7% 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 10.2%, whose default value for JONE is calculated based on our internal credit rating of Jones Energy Cl A, 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 Jones Energy Cl A.
    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 JONE stock the variable cost ratio is equal to 154.7%.

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 JONE 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 6.9% for Jones Energy Cl A.

Corporate tax rate of 27% is the nominal tax rate for Jones Energy Cl A. 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 JONE 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 JONE are equal to 1322.3%.

Life of production assets of 11 years is the average useful life of capital assets used in Jones Energy Cl A 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 JONE is equal to -10%. 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 - $527 million for Jones Energy Cl A - 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 81.734 million for Jones Energy Cl A 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 Jones Energy Cl A at the current share price and the inputted number of shares is $0.1 billion.

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NGL NGL Energy Par 9.30 17.98  buy

COMPANY NEWS

▶ E&P Midcap Earnings: The Good, The Bad & The Not So Ugly   [Aug-08-17 02:38PM  Barrons.com]
▶ ETFs with exposure to Jones Energy, Inc. : May 22, 2017   [May-22-17 01:49PM  Capital Cube]
▶ ETFs with exposure to Jones Energy, Inc. : May 11, 2017   [May-11-17 04:58PM  Capital Cube]
▶ Jones Energy reports 1Q loss   [May-04-17 05:03AM  Associated Press]
▶ ETFs with exposure to Jones Energy, Inc. : April 25, 2017   [Apr-25-17 03:37PM  Capital Cube]
▶ ETFs with exposure to Jones Energy, Inc. : April 12, 2017   [Apr-12-17 01:12PM  Capital Cube]
▶ ETFs with exposure to Jones Energy, Inc. : March 30, 2017   [Mar-29-17 08:32PM  Capital Cube]
▶ Jones Energy reports 4Q loss   [Mar-08-17 07:34PM  Associated Press]
▶ Continental Resources to Sell Oklahoma Oil and Gas Assets   [Feb-23-17 08:36AM  TheStreet.com]
▶ Oil and Gas Stock Roundup: Not Everyone Is Optimistic   [Feb-18-17 10:00AM  Motley Fool]
▶ Heres What Smart Money Think about Jones Energy Inc (JONE)   [Dec-12-16 05:45PM  at Insider Monkey]
▶ Why Jones Energy Inc's Shares Popped As Much As 17% Today   [Oct-05-16 01:13PM  at Motley Fool]
Stock chart of JONE Financial statements of JONE
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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