Intrinsic value of Parsley Energy Cl A - PE

Previous Close

$24.39

  Intrinsic Value

$2.20

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

-72%

Previous close

$24.39

 
Intrinsic value

$2.20

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

-72%

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

We calculate the intrinsic value of PE 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 5.8

 

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, %
  72.18
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  458
  733
  1,132
  1,693
  2,457
  3,466
  4,765
  6,396
  8,398
  10,807
  13,650
  16,950
  20,723
  24,978
  29,719
  34,944
  40,649
  46,824
  53,460
  60,546
  68,072
  76,027
  84,404
  93,195
  102,398
  112,010
  122,034
  132,472
  143,332
  154,624
  166,361
Variable operating expenses, $m
 
  465
  719
  1,075
  1,560
  2,201
  3,026
  4,061
  5,333
  6,862
  8,668
  10,763
  13,159
  15,861
  18,872
  22,190
  25,812
  29,733
  33,947
  38,447
  43,226
  48,277
  53,596
  59,179
  65,023
  71,127
  77,491
  84,120
  91,016
  98,187
  105,639
Fixed operating expenses, $m
 
  180
  185
  190
  194
  199
  204
  209
  214
  220
  225
  231
  237
  243
  249
  255
  261
  268
  274
  281
  288
  296
  303
  311
  318
  326
  334
  343
  351
  360
  369
Total operating expenses, $m
  463
  645
  904
  1,265
  1,754
  2,400
  3,230
  4,270
  5,547
  7,082
  8,893
  10,994
  13,396
  16,104
  19,121
  22,445
  26,073
  30,001
  34,221
  38,728
  43,514
  48,573
  53,899
  59,490
  65,341
  71,453
  77,825
  84,463
  91,367
  98,547
  106,008
Operating income, $m
  -5
  87
  228
  428
  702
  1,066
  1,535
  2,125
  2,851
  3,725
  4,757
  5,956
  7,327
  8,874
  10,599
  12,500
  14,575
  16,823
  19,238
  21,818
  24,558
  27,454
  30,504
  33,706
  37,057
  40,557
  44,208
  48,009
  51,965
  56,078
  60,353
EBITDA, $m
  229
  461
  805
  1,291
  1,955
  2,833
  3,964
  5,385
  7,131
  9,232
  11,714
  14,595
  17,889
  21,605
  25,746
  30,310
  35,293
  40,687
  46,485
  52,676
  59,252
  66,203
  73,522
  81,204
  89,246
  97,645
  106,404
  115,526
  125,016
  134,885
  145,142
Interest expense (income), $m
  66
  83
  169
  294
  469
  707
  1,022
  1,427
  1,936
  2,561
  3,313
  4,200
  5,229
  6,406
  7,734
  9,213
  10,843
  12,623
  14,550
  16,620
  18,831
  21,179
  23,661
  26,275
  29,018
  31,889
  34,888
  38,015
  41,272
  44,660
  48,184
Earnings before tax, $m
  -106
  4
  59
  134
  233
  359
  513
  698
  915
  1,164
  1,444
  1,756
  2,098
  2,468
  2,865
  3,287
  3,732
  4,200
  4,689
  5,198
  5,727
  6,275
  6,843
  7,431
  8,039
  8,668
  9,320
  9,994
  10,693
  11,417
  12,169
Tax expense, $m
  -17
  1
  16
  36
  63
  97
  138
  188
  247
  314
  390
  474
  566
  666
  773
  887
  1,008
  1,134
  1,266
  1,403
  1,546
  1,694
  1,848
  2,006
  2,171
  2,340
  2,516
  2,698
  2,887
  3,083
  3,286
Net income, $m
  -74
  3
  43
  98
  170
  262
  374
  509
  668
  849
  1,054
  1,282
  1,532
  1,802
  2,091
  2,399
  2,724
  3,066
  3,423
  3,794
  4,180
  4,581
  4,995
  5,425
  5,869
  6,328
  6,803
  7,296
  7,806
  8,335
  8,883

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  133
  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
  3,939
  6,107
  9,435
  14,110
  20,473
  28,884
  39,709
  53,300
  69,987
  90,056
  113,748
  141,249
  172,691
  208,151
  247,658
  291,202
  338,738
  390,198
  445,498
  504,550
  567,264
  633,559
  703,364
  776,628
  853,317
  933,420
  1,016,946
  1,103,932
  1,194,435
  1,288,537
  1,386,344
Adjusted assets (=assets-cash), $m
  3,806
  6,107
  9,435
  14,110
  20,473
  28,884
  39,709
  53,300
  69,987
  90,056
  113,748
  141,249
  172,691
  208,151
  247,658
  291,202
  338,738
  390,198
  445,498
  504,550
  567,264
  633,559
  703,364
  776,628
  853,317
  933,420
  1,016,946
  1,103,932
  1,194,435
  1,288,537
  1,386,344
Revenue / Adjusted assets
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
Average production assets, $m
  2,801
  4,482
  6,924
  10,355
  15,025
  21,198
  29,143
  39,118
  51,365
  66,094
  83,482
  103,666
  126,741
  152,766
  181,761
  213,719
  248,607
  286,374
  326,960
  370,299
  416,326
  464,981
  516,213
  569,983
  626,267
  685,055
  746,357
  810,198
  876,619
  945,683
  1,017,466
Working capital, $m
  -46
  -73
  -113
  -169
  -246
  -347
  -477
  -640
  -840
  -1,081
  -1,365
  -1,695
  -2,072
  -2,498
  -2,972
  -3,494
  -4,065
  -4,682
  -5,346
  -6,055
  -6,807
  -7,603
  -8,440
  -9,320
  -10,240
  -11,201
  -12,203
  -13,247
  -14,333
  -15,462
  -16,636
Total debt, $m
  1,109
  2,118
  3,675
  5,863
  8,841
  12,778
  17,844
  24,205
  32,014
  41,406
  52,494
  65,365
  80,079
  96,675
  115,164
  135,543
  157,789
  181,873
  207,753
  235,389
  264,740
  295,765
  328,434
  362,722
  398,613
  436,100
  475,191
  515,900
  558,255
  602,295
  648,069
Total liabilities, $m
  1,849
  2,858
  4,415
  6,603
  9,581
  13,518
  18,584
  24,945
  32,754
  42,146
  53,234
  66,105
  80,819
  97,415
  115,904
  136,283
  158,529
  182,613
  208,493
  236,129
  265,480
  296,505
  329,174
  363,462
  399,353
  436,840
  475,931
  516,640
  558,995
  603,035
  648,809
Total equity, $m
  2,090
  3,249
  5,019
  7,506
  10,891
  15,366
  21,125
  28,356
  37,233
  47,910
  60,514
  75,145
  91,872
  110,736
  131,754
  154,920
  180,209
  207,585
  237,005
  268,421
  301,784
  337,053
  374,190
  413,166
  453,965
  496,579
  541,015
  587,292
  635,439
  685,502
  737,535
Total liabilities and equity, $m
  3,939
  6,107
  9,434
  14,109
  20,472
  28,884
  39,709
  53,301
  69,987
  90,056
  113,748
  141,250
  172,691
  208,151
  247,658
  291,203
  338,738
  390,198
  445,498
  504,550
  567,264
  633,558
  703,364
  776,628
  853,318
  933,419
  1,016,946
  1,103,932
  1,194,434
  1,288,537
  1,386,344
Debt-to-equity ratio
  0.531
  0.650
  0.730
  0.780
  0.810
  0.830
  0.840
  0.850
  0.860
  0.860
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
Adjusted equity ratio
  0.514
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -74
  3
  43
  98
  170
  262
  374
  509
  668
  849
  1,054
  1,282
  1,532
  1,802
  2,091
  2,399
  2,724
  3,066
  3,423
  3,794
  4,180
  4,581
  4,995
  5,425
  5,869
  6,328
  6,803
  7,296
  7,806
  8,335
  8,883
Depreciation, amort., depletion, $m
  234
  373
  577
  863
  1,252
  1,767
  2,429
  3,260
  4,280
  5,508
  6,957
  8,639
  10,562
  12,730
  15,147
  17,810
  20,717
  23,864
  27,247
  30,858
  34,694
  38,748
  43,018
  47,499
  52,189
  57,088
  62,196
  67,516
  73,052
  78,807
  84,789
Funds from operations, $m
  173
  376
  620
  961
  1,422
  2,028
  2,803
  3,769
  4,948
  6,357
  8,011
  9,921
  12,093
  14,532
  17,238
  20,209
  23,442
  26,930
  30,669
  34,653
  38,874
  43,329
  48,013
  52,923
  58,058
  63,416
  69,000
  74,812
  80,857
  87,142
  93,672
Change in working capital, $m
  -55
  -27
  -40
  -56
  -76
  -101
  -130
  -163
  -200
  -241
  -284
  -330
  -377
  -426
  -474
  -523
  -570
  -618
  -664
  -709
  -753
  -796
  -838
  -879
  -920
  -961
  -1,002
  -1,044
  -1,086
  -1,129
  -1,174
Cash from operations, $m
  228
  404
  660
  1,017
  1,499
  2,129
  2,933
  3,932
  5,148
  6,598
  8,296
  10,251
  12,471
  14,958
  17,712
  20,732
  24,012
  27,548
  31,333
  35,361
  39,627
  44,125
  48,851
  53,802
  58,978
  64,377
  70,002
  75,856
  81,943
  88,271
  94,846
Maintenance CAPEX, $m
  0
  -233
  -373
  -577
  -863
  -1,252
  -1,767
  -2,429
  -3,260
  -4,280
  -5,508
  -6,957
  -8,639
  -10,562
  -12,730
  -15,147
  -17,810
  -20,717
  -23,864
  -27,247
  -30,858
  -34,694
  -38,748
  -43,018
  -47,499
  -52,189
  -57,088
  -62,196
  -67,516
  -73,052
  -78,807
New CAPEX, $m
  -1,380
  -1,681
  -2,443
  -3,431
  -4,670
  -6,173
  -7,945
  -9,975
  -12,246
  -14,729
  -17,388
  -20,184
  -23,076
  -26,025
  -28,995
  -31,958
  -34,888
  -37,767
  -40,586
  -43,339
  -46,027
  -48,655
  -51,232
  -53,770
  -56,284
  -58,789
  -61,302
  -63,840
  -66,422
  -69,064
  -71,783
Cash from investing activities, $m
  -1,885
  -1,914
  -2,816
  -4,008
  -5,533
  -7,425
  -9,712
  -12,404
  -15,506
  -19,009
  -22,896
  -27,141
  -31,715
  -36,587
  -41,725
  -47,105
  -52,698
  -58,484
  -64,450
  -70,586
  -76,885
  -83,349
  -89,980
  -96,788
  -103,783
  -110,978
  -118,390
  -126,036
  -133,938
  -142,116
  -150,590
Free cash flow, $m
  -1,657
  -1,511
  -2,156
  -2,991
  -4,034
  -5,296
  -6,778
  -8,472
  -10,358
  -12,412
  -14,600
  -16,890
  -19,244
  -21,629
  -24,014
  -26,373
  -28,685
  -30,937
  -33,118
  -35,225
  -37,258
  -39,224
  -41,129
  -42,985
  -44,804
  -46,600
  -48,388
  -50,181
  -51,995
  -53,845
  -55,744
Issuance/(repayment) of debt, $m
  536
  1,076
  1,558
  2,188
  2,978
  3,936
  5,066
  6,361
  7,809
  9,392
  11,088
  12,871
  14,715
  16,595
  18,490
  20,379
  22,247
  24,083
  25,881
  27,636
  29,350
  31,026
  32,669
  34,288
  35,890
  37,488
  39,090
  40,709
  42,355
  44,040
  45,774
Issuance/(repurchase) of shares, $m
  930
  1,222
  1,728
  2,389
  3,215
  4,213
  5,384
  6,721
  8,210
  9,827
  11,550
  13,349
  15,195
  17,063
  18,927
  20,766
  22,565
  24,311
  25,997
  27,621
  29,183
  30,688
  32,141
  33,552
  34,930
  36,286
  37,633
  38,981
  40,342
  41,728
  43,150
Cash from financing (excl. dividends), $m  
  1,447
  2,298
  3,286
  4,577
  6,193
  8,149
  10,450
  13,082
  16,019
  19,219
  22,638
  26,220
  29,910
  33,658
  37,417
  41,145
  44,812
  48,394
  51,878
  55,257
  58,533
  61,714
  64,810
  67,840
  70,820
  73,774
  76,723
  79,690
  82,697
  85,768
  88,924
Total cash flow (excl. dividends), $m
  -210
  787
  1,129
  1,586
  2,159
  2,853
  3,672
  4,611
  5,661
  6,808
  8,037
  9,330
  10,666
  12,029
  13,403
  14,772
  16,126
  17,457
  18,760
  20,033
  21,275
  22,490
  23,681
  24,854
  26,016
  27,174
  28,336
  29,509
  30,702
  31,923
  33,180
Retained Cash Flow (-), $m
  -826
  -1,225
  -1,771
  -2,487
  -3,385
  -4,475
  -5,759
  -7,231
  -8,877
  -10,677
  -12,604
  -14,631
  -16,727
  -18,865
  -21,018
  -23,165
  -25,289
  -27,377
  -29,420
  -31,416
  -33,364
  -35,269
  -37,137
  -38,977
  -40,799
  -42,614
  -44,436
  -46,276
  -48,148
  -50,063
  -52,033
Prev. year cash balance distribution, $m
 
  66
  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
 
  -371
  -642
  -901
  -1,226
  -1,621
  -2,087
  -2,620
  -3,216
  -3,869
  -4,567
  -5,301
  -6,061
  -6,835
  -7,615
  -8,394
  -9,163
  -9,919
  -10,660
  -11,383
  -12,089
  -12,779
  -13,456
  -14,122
  -14,783
  -15,441
  -16,101
  -16,767
  -17,445
  -18,139
  -18,853
Discount rate, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
 
  -350
  -568
  -744
  -938
  -1,140
  -1,340
  -1,525
  -1,682
  -1,801
  -1,875
  -1,901
  -1,877
  -1,807
  -1,698
  -1,558
  -1,397
  -1,224
  -1,048
  -878
  -718
  -574
  -449
  -342
  -255
  -185
  -131
  -91
  -61
  -40
  -25
Current shareholders' claim on cash, %
  100
  82.1
  68.9
  58.8
  51.0
  44.7
  39.7
  35.6
  32.3
  29.5
  27.1
  25.1
  23.4
  21.9
  20.7
  19.6
  18.6
  17.7
  17.0
  16.3
  15.7
  15.1
  14.6
  14.1
  13.7
  13.3
  13.0
  12.7
  12.4
  12.1
  11.8

Parsley Energy, Inc., an independent oil and natural gas company, engages in the acquisition, development, production, exploration, and sale of crude oil and natural gas properties in the Permian Basin located in West Texas and Southeastern New Mexico. As of December 31, 2015, its acreage position consisted of 110,967 net acres, including 84,441 net acres in the Midland Basin and 26,526 net acres in the Delaware Basin; and estimated proved oil and natural gas reserves were 123.8 MMBoe. The company was founded in 2008 and is headquartered in Austin, Texas.

FINANCIAL RATIOS  of  Parsley Energy Cl A (PE)

Valuation Ratios
P/E Ratio -68.4
Price to Sales 11.1
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 22.2
Price to Free Cash Flow -4.4
Growth Rates
Sales Growth Rate 72.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1368.1%
Cap. Spend. - 3 Yr. Gr. Rate 44.8%
Financial Strength
Quick Ratio 2
Current Ratio 0.3
LT Debt to Equity 49.9%
Total Debt to Equity 53.1%
Interest Coverage -1
Management Effectiveness
Return On Assets -0.6%
Ret/ On Assets - 3 Yr. Avg. 0.5%
Return On Total Capital -3%
Ret/ On T. Cap. - 3 Yr. Avg. -1.2%
Return On Equity -4.4%
Return On Equity - 3 Yr. Avg. -1.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 81%
Gross Margin - 3 Yr. Avg. 77.4%
EBITDA Margin 42.4%
EBITDA Margin - 3 Yr. Avg. 53.3%
Operating Margin -1.1%
Oper. Margin - 3 Yr. Avg. -4.1%
Pre-Tax Margin -23.1%
Pre-Tax Margin - 3 Yr. Avg. -9.6%
Net Profit Margin -16.2%
Net Profit Margin - 3 Yr. Avg. -9.1%
Effective Tax Rate 16%
Eff/ Tax Rate - 3 Yr. Avg. 26.5%
Payout Ratio 0%

PE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PE stock intrinsic value calculation we used $458 million for the last fiscal year's total revenue generated by Parsley Energy Cl A. The default revenue input number comes from 2016 income statement of Parsley 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 PE stock valuation model: a) initial revenue growth rate of 60% 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%, whose default value for PE is calculated based on our internal credit rating of Parsley 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 Parsley 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 PE stock the variable cost ratio is equal to 63.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $176 million in the base year in the intrinsic value calculation for PE 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 8% for Parsley Energy Cl A.

Corporate tax rate of 27% is the nominal tax rate for Parsley 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 PE 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 PE are equal to 611.6%.

Life of production assets of 12 years is the average useful life of capital assets used in Parsley 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 PE 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 - $2090 million for Parsley 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 237.795 million for Parsley 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 Parsley Energy Cl A at the current share price and the inputted number of shares is $5.8 billion.

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COMPANY NEWS

▶ Parsley Energy misses Street 2Q forecasts   [Aug-02-17 10:51PM  Associated Press]
▶ This Could Be The Biggest Winner Of The Oil Price Rebound   [Aug-01-17 07:30PM  Oilprice.com]
▶ Whats Analysts Current Read on ConocoPhillips?   [Jul-12-17 09:08AM  Market Realist]
▶ Core Laboratories N.V.: The Bear Case From a Bull   [Jul-10-17 11:33AM  Motley Fool]
▶ ETFs with exposure to Parsley Energy, Inc. : July 3, 2017   [Jul-03-17 03:41PM  Capital Cube]
▶ Encanas Stock Price Forecast Using Implied Volatility   [Jun-20-17 07:35AM  Market Realist]
▶ Top Losers in the Energy Sector from June 5June 9   [Jun-13-17 07:38AM  Market Realist]
▶ Apple Downgraded As iPhone Buzz Wears Off; Adobe Cut, Parsley Upgraded   [Jun-12-17 04:05PM  Investor's Business Daily]
▶ 3 Monster Stocks in the Making   [Jun-10-17 12:00PM  Motley Fool]
▶ ETFs with exposure to Parsley Energy, Inc. : June 9, 2017   [Jun-09-17 01:50PM  Capital Cube]
▶ 3 Energy Stocks for Savvy Investors   [Jun-07-17 12:05PM  Motley Fool]
▶ ETFs with exposure to Parsley Energy, Inc. : May 30, 2017   [May-30-17 12:38PM  Capital Cube]
▶ U.S. Shale In No Hurry To Hedge, Bet On Higher Oil Prices   [May-17-17 06:00PM  Oilprice.com]
▶ Parsley Energy to Participate in Upcoming Conferences   [May-15-17 04:45PM  PR Newswire]
▶ Are Shale Drillers Making an $84 Billion Mistake?   [May-14-17 11:00AM  Motley Fool]
▶ Parsley Energy tops Street 1Q forecasts   [04:50PM  Associated Press]
▶ Parsley Energy Increases Credit Facility to $1.4 Billion   [May-01-17 09:00AM  PR Newswire]
▶ How Will Marathon Oil Benefit from Its Hedging Activities?   [Apr-19-17 10:35AM  Market Realist]
▶ Optimism for energy stocks   [Apr-04-17 02:35PM  CNBC Videos]
▶ Why the Permian M&A Boom May Not End Well   [08:18AM  TheStreet.com]
▶ UBS Says Buy the Energy Sector Pullback Now: 6 Top Picks   [Mar-31-17 10:05AM  24/7 Wall St.]
▶ Marathon Oil Joins Dow Stocks Exxon, Chevron Ramping Up Permian Buys   [Mar-21-17 04:49PM  Investor's Business Daily]
▶ How Encana Can Benefit from Its Hedging Activities   [Mar-17-17 10:36AM  Market Realist]
▶ Parsley Energy to Participate in Upcoming Conferences   [Feb-28-17 05:00PM  PR Newswire]
Stock chart of PE Financial statements of PE
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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