Intrinsic value of Noble Energy - NBL

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$32.57

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$32.57

 
Intrinsic value

$5.39

 
Up/down potential

-83%

 
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 NBL 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 14.0

 

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, %
  9.68
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
  5.59
Revenue, $m
  3,491
  4,105
  4,776
  5,503
  6,283
  7,117
  8,002
  8,938
  9,923
  10,958
  12,041
  13,172
  14,351
  15,579
  16,857
  18,186
  19,567
  21,002
  22,494
  24,044
  25,655
  27,331
  29,074
  30,889
  32,778
  34,747
  36,798
  38,938
  41,170
  43,500
  45,933
Variable operating expenses, $m
 
  7,295
  8,487
  9,778
  11,165
  12,646
  14,219
  15,883
  17,634
  19,472
  21,396
  23,406
  25,502
  27,684
  29,955
  32,316
  34,771
  37,321
  39,971
  42,726
  45,589
  48,567
  51,665
  54,889
  58,247
  61,745
  65,390
  69,192
  73,159
  77,299
  81,623
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
  4,787
  7,295
  8,487
  9,778
  11,165
  12,646
  14,219
  15,883
  17,634
  19,472
  21,396
  23,406
  25,502
  27,684
  29,955
  32,316
  34,771
  37,321
  39,971
  42,726
  45,589
  48,567
  51,665
  54,889
  58,247
  61,745
  65,390
  69,192
  73,159
  77,299
  81,623
Operating income, $m
  -1,296
  -3,190
  -3,711
  -4,275
  -4,882
  -5,530
  -6,218
  -6,945
  -7,710
  -8,514
  -9,356
  -10,234
  -11,151
  -12,105
  -13,098
  -14,131
  -15,204
  -16,319
  -17,478
  -18,682
  -19,934
  -21,236
  -22,591
  -24,001
  -25,469
  -26,998
  -28,592
  -30,255
  -31,989
  -33,799
  -35,690
EBITDA, $m
  1,158
  -297
  -346
  -399
  -455
  -515
  -580
  -647
  -719
  -794
  -872
  -954
  -1,039
  -1,128
  -1,221
  -1,317
  -1,417
  -1,521
  -1,629
  -1,742
  -1,858
  -1,980
  -2,106
  -2,237
  -2,374
  -2,517
  -2,665
  -2,820
  -2,982
  -3,151
  -3,327
Interest expense (income), $m
  0
  245
  317
  396
  481
  572
  669
  773
  882
  998
  1,119
  1,245
  1,377
  1,515
  1,659
  1,808
  1,964
  2,125
  2,293
  2,468
  2,649
  2,837
  3,033
  3,237
  3,449
  3,670
  3,900
  4,140
  4,390
  4,651
  4,924
Earnings before tax, $m
  -1,772
  -3,435
  -4,028
  -4,671
  -5,363
  -6,102
  -6,887
  -7,718
  -8,593
  -9,512
  -10,474
  -11,480
  -12,528
  -13,620
  -14,757
  -15,939
  -17,167
  -18,444
  -19,771
  -21,150
  -22,583
  -24,073
  -25,624
  -27,238
  -28,918
  -30,668
  -32,492
  -34,395
  -36,379
  -38,451
  -40,614
Tax expense, $m
  -787
  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
  -998
  -3,435
  -4,028
  -4,671
  -5,363
  -6,102
  -6,887
  -7,718
  -8,593
  -9,512
  -10,474
  -11,480
  -12,528
  -13,620
  -14,757
  -15,939
  -17,167
  -18,444
  -19,771
  -21,150
  -22,583
  -24,073
  -25,624
  -27,238
  -28,918
  -30,668
  -32,492
  -34,395
  -36,379
  -38,451
  -40,614

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,180
  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
  21,011
  23,326
  27,138
  31,264
  35,699
  40,435
  45,466
  50,783
  56,383
  62,260
  68,413
  74,839
  81,540
  88,519
  95,780
  103,329
  111,176
  119,331
  127,805
  136,612
  145,768
  155,290
  165,195
  175,505
  186,240
  197,424
  209,081
  221,237
  233,920
  247,158
  260,983
Adjusted assets (=assets-cash), $m
  19,831
  23,326
  27,138
  31,264
  35,699
  40,435
  45,466
  50,783
  56,383
  62,260
  68,413
  74,839
  81,540
  88,519
  95,780
  103,329
  111,176
  119,331
  127,805
  136,612
  145,768
  155,290
  165,195
  175,505
  186,240
  197,424
  209,081
  221,237
  233,920
  247,158
  260,983
Revenue / Adjusted assets
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
Average production assets, $m
  19,924
  23,430
  27,258
  31,403
  35,857
  40,615
  45,667
  51,008
  56,633
  62,536
  68,716
  75,171
  81,901
  88,911
  96,204
  103,787
  111,669
  119,860
  128,372
  137,218
  146,414
  155,978
  165,927
  176,282
  187,065
  198,299
  210,007
  222,217
  234,956
  248,253
  262,139
Working capital, $m
  477
  -751
  -874
  -1,007
  -1,150
  -1,302
  -1,464
  -1,636
  -1,816
  -2,005
  -2,203
  -2,410
  -2,626
  -2,851
  -3,085
  -3,328
  -3,581
  -3,843
  -4,116
  -4,400
  -4,695
  -5,002
  -5,321
  -5,653
  -5,998
  -6,359
  -6,734
  -7,126
  -7,534
  -7,960
  -8,406
Total debt, $m
  7,074
  9,067
  11,308
  13,734
  16,342
  19,127
  22,085
  25,212
  28,504
  31,960
  35,578
  39,356
  43,296
  47,400
  51,669
  56,109
  60,723
  65,518
  70,500
  75,679
  81,063
  86,661
  92,486
  98,548
  104,860
  111,436
  118,290
  125,438
  132,896
  140,680
  148,809
Total liabilities, $m
  11,723
  13,716
  15,957
  18,383
  20,991
  23,776
  26,734
  29,861
  33,153
  36,609
  40,227
  44,005
  47,945
  52,049
  56,318
  60,758
  65,372
  70,167
  75,149
  80,328
  85,712
  91,310
  97,135
  103,197
  109,509
  116,085
  122,939
  130,087
  137,545
  145,329
  153,458
Total equity, $m
  9,288
  9,610
  11,181
  12,881
  14,708
  16,659
  18,732
  20,923
  23,230
  25,651
  28,186
  30,834
  33,594
  36,470
  39,461
  42,572
  45,805
  49,164
  52,656
  56,284
  60,057
  63,979
  68,060
  72,308
  76,731
  81,339
  86,141
  91,150
  96,375
  101,829
  107,525
Total liabilities and equity, $m
  21,011
  23,326
  27,138
  31,264
  35,699
  40,435
  45,466
  50,784
  56,383
  62,260
  68,413
  74,839
  81,539
  88,519
  95,779
  103,330
  111,177
  119,331
  127,805
  136,612
  145,769
  155,289
  165,195
  175,505
  186,240
  197,424
  209,080
  221,237
  233,920
  247,158
  260,983
Debt-to-equity ratio
  0.762
  0.940
  1.010
  1.070
  1.110
  1.150
  1.180
  1.200
  1.230
  1.250
  1.260
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.330
  1.340
  1.340
  1.350
  1.350
  1.360
  1.360
  1.370
  1.370
  1.370
  1.380
  1.380
  1.380
  1.380
Adjusted equity ratio
  0.409
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -998
  -3,435
  -4,028
  -4,671
  -5,363
  -6,102
  -6,887
  -7,718
  -8,593
  -9,512
  -10,474
  -11,480
  -12,528
  -13,620
  -14,757
  -15,939
  -17,167
  -18,444
  -19,771
  -21,150
  -22,583
  -24,073
  -25,624
  -27,238
  -28,918
  -30,668
  -32,492
  -34,395
  -36,379
  -38,451
  -40,614
Depreciation, amort., depletion, $m
  2,454
  2,893
  3,365
  3,877
  4,427
  5,014
  5,638
  6,297
  6,992
  7,721
  8,483
  9,280
  10,111
  10,977
  11,877
  12,813
  13,786
  14,798
  15,848
  16,940
  18,076
  19,257
  20,485
  21,763
  23,094
  24,481
  25,927
  27,434
  29,007
  30,649
  32,363
Funds from operations, $m
  891
  -543
  -663
  -794
  -936
  -1,087
  -1,249
  -1,420
  -1,601
  -1,791
  -1,991
  -2,199
  -2,417
  -2,644
  -2,880
  -3,126
  -3,381
  -3,647
  -3,922
  -4,209
  -4,507
  -4,817
  -5,139
  -5,474
  -5,823
  -6,187
  -6,566
  -6,960
  -7,372
  -7,802
  -8,251
Change in working capital, $m
  -460
  -112
  -123
  -133
  -143
  -153
  -162
  -171
  -180
  -189
  -198
  -207
  -216
  -225
  -234
  -243
  -253
  -263
  -273
  -284
  -295
  -307
  -319
  -332
  -346
  -360
  -375
  -392
  -408
  -426
  -445
Cash from operations, $m
  1,351
  -1,806
  -541
  -661
  -793
  -935
  -1,087
  -1,249
  -1,421
  -1,602
  -1,793
  -1,992
  -2,201
  -2,419
  -2,646
  -2,883
  -3,128
  -3,384
  -3,649
  -3,925
  -4,212
  -4,510
  -4,820
  -5,142
  -5,478
  -5,827
  -6,190
  -6,569
  -6,964
  -7,376
  -7,806
Maintenance CAPEX, $m
  0
  -2,460
  -2,893
  -3,365
  -3,877
  -4,427
  -5,014
  -5,638
  -6,297
  -6,992
  -7,721
  -8,483
  -9,280
  -10,111
  -10,977
  -11,877
  -12,813
  -13,786
  -14,798
  -15,848
  -16,940
  -18,076
  -19,257
  -20,485
  -21,763
  -23,094
  -24,481
  -25,927
  -27,434
  -29,007
  -30,649
New CAPEX, $m
  -1,541
  -3,506
  -3,828
  -4,145
  -4,455
  -4,757
  -5,053
  -5,341
  -5,624
  -5,903
  -6,180
  -6,455
  -6,731
  -7,010
  -7,293
  -7,583
  -7,882
  -8,191
  -8,512
  -8,846
  -9,196
  -9,564
  -9,949
  -10,355
  -10,783
  -11,233
  -11,709
  -12,210
  -12,739
  -13,297
  -13,886
Cash from investing activities, $m
  -431
  -5,966
  -6,721
  -7,510
  -8,332
  -9,184
  -10,067
  -10,979
  -11,921
  -12,895
  -13,901
  -14,938
  -16,011
  -17,121
  -18,270
  -19,460
  -20,695
  -21,977
  -23,310
  -24,694
  -26,136
  -27,640
  -29,206
  -30,840
  -32,546
  -34,327
  -36,190
  -38,137
  -40,173
  -42,304
  -44,535
Free cash flow, $m
  920
  -7,772
  -7,261
  -8,171
  -9,124
  -10,119
  -11,154
  -12,228
  -13,343
  -14,497
  -15,693
  -16,930
  -18,212
  -19,540
  -20,916
  -22,343
  -23,823
  -25,361
  -26,959
  -28,620
  -30,349
  -32,150
  -34,026
  -35,982
  -38,024
  -40,154
  -42,380
  -44,706
  -47,137
  -49,680
  -52,340
Issuance/(repayment) of debt, $m
  -587
  2,056
  2,241
  2,426
  2,608
  2,785
  2,958
  3,127
  3,293
  3,456
  3,618
  3,779
  3,940
  4,103
  4,269
  4,439
  4,614
  4,795
  4,983
  5,179
  5,384
  5,599
  5,824
  6,062
  6,312
  6,576
  6,854
  7,148
  7,457
  7,784
  8,129
Issuance/(repurchase) of shares, $m
  0
  6,038
  6,591
  7,445
  8,344
  9,285
  10,268
  11,292
  12,357
  13,463
  14,610
  15,799
  17,033
  18,312
  19,638
  21,014
  22,442
  23,926
  25,467
  27,070
  28,738
  30,474
  32,283
  34,168
  36,134
  38,186
  40,328
  42,566
  44,905
  47,350
  49,907
Cash from financing (excl. dividends), $m  
  -596
  8,094
  8,832
  9,871
  10,952
  12,070
  13,226
  14,419
  15,650
  16,919
  18,228
  19,578
  20,973
  22,415
  23,907
  25,453
  27,056
  28,721
  30,450
  32,249
  34,122
  36,073
  38,107
  40,230
  42,446
  44,762
  47,182
  49,714
  52,362
  55,134
  58,036
Total cash flow (excl. dividends), $m
  324
  -5,716
  -5,020
  -5,745
  -6,517
  -7,334
  -8,196
  -9,101
  -10,050
  -11,041
  -12,075
  -13,152
  -14,272
  -15,436
  -16,646
  -17,904
  -19,209
  -20,566
  -21,976
  -23,441
  -24,965
  -26,551
  -28,201
  -29,920
  -31,711
  -33,578
  -35,526
  -37,558
  -39,680
  -41,896
  -44,211
Retained Cash Flow (-), $m
  1,082
  -1,439
  -1,570
  -1,700
  -1,827
  -1,951
  -2,072
  -2,191
  -2,307
  -2,421
  -2,535
  -2,648
  -2,761
  -2,875
  -2,992
  -3,111
  -3,233
  -3,360
  -3,491
  -3,629
  -3,772
  -3,923
  -4,081
  -4,248
  -4,423
  -4,608
  -4,803
  -5,008
  -5,225
  -5,454
  -5,696
Prev. year cash balance distribution, $m
 
  1,117
  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, %
 
  6.20
  6.51
  6.84
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.04
  20.00
  21.00
  22.05
  23.15
  24.30
  25.52
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
  67.2
  46.2
  32.1
  22.4
  15.8
  11.2
  8.0
  5.8
  4.2
  3.0
  2.2
  1.6
  1.2
  0.9
  0.6
  0.5
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Noble Energy, Inc., an independent energy company, engages in the acquisition, exploration, and production of crude oil, natural gas, and natural gas liquids worldwide. Its principal projects are located in DJ Basin, Eagle Ford Shale, Permian Basin, and Marcellus Shale, the United States; deepwater Gulf of Mexico; offshore Eastern Mediterranean; and offshore West Africa. As of December 31, 2016, the company had approximately 1,437 million barrels oil equivalent of total proved reserves. Noble Energy, Inc. was founded in 1932 and is based in Houston, Texas.

FINANCIAL RATIOS  of  Noble Energy (NBL)

Valuation Ratios
P/E Ratio -14.1
Price to Sales 4
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow -73.8
Growth Rates
Sales Growth Rate 9.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -48.3%
Cap. Spend. - 3 Yr. Gr. Rate -17.1%
Financial Strength
Quick Ratio 19
Current Ratio 0
LT Debt to Equity 75.5%
Total Debt to Equity 76.2%
Interest Coverage 0
Management Effectiveness
Return On Assets -4.4%
Ret/ On Assets - 3 Yr. Avg. -2.4%
Return On Total Capital -5.7%
Ret/ On T. Cap. - 3 Yr. Avg. -3.9%
Return On Equity -10.2%
Return On Equity - 3 Yr. Avg. -7.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 86.7%
Gross Margin - 3 Yr. Avg. 91.5%
EBITDA Margin 19.5%
EBITDA Margin - 3 Yr. Avg. 32.2%
Operating Margin -37.1%
Oper. Margin - 3 Yr. Avg. -32.3%
Pre-Tax Margin -50.8%
Pre-Tax Margin - 3 Yr. Avg. -29%
Net Profit Margin -28.6%
Net Profit Margin - 3 Yr. Avg. -27.2%
Effective Tax Rate 44.4%
Eff/ Tax Rate - 3 Yr. Avg. 21.1%
Payout Ratio -17.2%

NBL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NBL stock intrinsic value calculation we used $3491 million for the last fiscal year's total revenue generated by Noble Energy. The default revenue input number comes from 2016 income statement of Noble Energy. 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 NBL stock valuation model: a) initial revenue growth rate of 17.6% 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 6.2%, whose default value for NBL is calculated based on our internal credit rating of Noble Energy, 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 Noble Energy.
    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 NBL stock the variable cost ratio is equal to 177.7%.

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 NBL 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 3.5% for Noble Energy.

Corporate tax rate of 27% is the nominal tax rate for Noble Energy. 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 NBL 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 NBL are equal to 570.7%.

Life of production assets of 8.1 years is the average useful life of capital assets used in Noble Energy 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 NBL is equal to -18.3%. 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 - $9288 million for Noble Energy - 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 430.984 million for Noble Energy 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 Noble Energy at the current share price and the inputted number of shares is $14.0 billion.


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Stock chart of NBL Financial statements of NBL
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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