Intrinsic value of Pioneer Natural Resources - PXD

Previous Close

$155.93

  Intrinsic Value

$14.98

stock screener

  Rating & Target

str. sell

-90%

  Value-price divergence*

+12%

Previous close

$155.93

 
Intrinsic value

$14.98

 
Up/down potential

-90%

 
Rating

str. sell

 
Value-price divergence*

+12%

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

We calculate the intrinsic value of PXD 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 26.4

 

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, %
  25.75
  51.70
  47.03
  42.83
  39.04
  35.64
  32.58
  29.82
  27.34
  25.10
  23.09
  21.28
  19.65
  18.19
  16.87
  15.68
  14.62
  13.65
  12.79
  12.01
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
Revenue, $m
  3,951
  5,994
  8,812
  12,587
  17,501
  23,738
  31,471
  40,855
  52,024
  65,083
  80,113
  97,163
  116,261
  137,408
  160,589
  185,775
  212,927
  241,999
  272,946
  305,725
  340,298
  376,634
  414,711
  454,519
  496,057
  539,339
  584,388
  631,240
  679,944
  730,559
  783,157
Variable operating expenses, $m
 
  9,636
  14,155
  20,205
  28,083
  38,082
  50,479
  65,523
  83,427
  104,363
  128,457
  155,764
  186,379
  220,281
  257,443
  297,819
  341,346
  387,952
  437,564
  490,113
  545,538
  603,788
  664,830
  728,646
  795,237
  864,623
  936,841
  1,011,951
  1,090,029
  1,171,171
  1,255,491
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
  4,576
  9,636
  14,155
  20,205
  28,083
  38,082
  50,479
  65,523
  83,427
  104,363
  128,457
  155,764
  186,379
  220,281
  257,443
  297,819
  341,346
  387,952
  437,564
  490,113
  545,538
  603,788
  664,830
  728,646
  795,237
  864,623
  936,841
  1,011,951
  1,090,029
  1,171,171
  1,255,491
Operating income, $m
  -625
  -3,642
  -5,342
  -7,618
  -10,582
  -14,344
  -19,008
  -24,668
  -31,404
  -39,280
  -48,344
  -58,601
  -70,119
  -82,873
  -96,854
  -112,044
  -128,419
  -145,953
  -164,618
  -184,388
  -205,239
  -227,154
  -250,119
  -274,128
  -299,180
  -325,284
  -352,453
  -380,711
  -410,085
  -440,612
  -472,334
EBITDA, $m
  855
  -1,426
  -2,097
  -2,995
  -4,165
  -5,649
  -7,490
  -9,723
  -12,381
  -15,489
  -19,065
  -23,123
  -27,668
  -32,700
  -38,217
  -44,211
  -50,672
  -57,591
  -64,956
  -72,757
  -80,984
  -89,632
  -98,693
  -108,167
  -118,052
  -128,352
  -139,073
  -150,223
  -161,813
  -173,859
  -186,376
Interest expense (income), $m
  196
  155
  320
  547
  851
  1,247
  1,749
  2,371
  3,126
  4,025
  5,076
  6,286
  7,658
  9,195
  10,897
  12,763
  14,790
  16,975
  19,315
  21,805
  24,444
  27,226
  30,150
  33,215
  36,419
  39,762
  43,245
  46,871
  50,642
  54,562
  58,635
Earnings before tax, $m
  -959
  -3,798
  -5,663
  -8,166
  -11,433
  -15,591
  -20,757
  -27,039
  -34,530
  -43,305
  -53,421
  -64,886
  -77,777
  -92,068
  -107,751
  -124,807
  -143,209
  -162,928
  -183,933
  -206,193
  -229,683
  -254,380
  -280,269
  -307,342
  -335,599
  -365,046
  -395,699
  -427,582
  -460,726
  -495,173
  -530,969
Tax expense, $m
  -403
  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
  -556
  -3,798
  -5,663
  -8,166
  -11,433
  -15,591
  -20,757
  -27,039
  -34,530
  -43,305
  -53,421
  -64,886
  -77,777
  -92,068
  -107,751
  -124,807
  -143,209
  -162,928
  -183,933
  -206,193
  -229,683
  -254,380
  -280,269
  -307,342
  -335,599
  -365,046
  -395,699
  -427,582
  -460,726
  -495,173
  -530,969

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,559
  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
  16,459
  21,104
  31,030
  44,319
  61,623
  83,586
  110,814
  143,857
  183,183
  229,167
  282,087
  342,124
  409,369
  483,831
  565,456
  654,139
  749,742
  852,108
  961,078
  1,076,498
  1,198,234
  1,326,176
  1,460,251
  1,600,419
  1,746,681
  1,899,081
  2,057,703
  2,222,676
  2,394,168
  2,572,391
  2,757,594
Adjusted assets (=assets-cash), $m
  13,900
  21,104
  31,030
  44,319
  61,623
  83,586
  110,814
  143,857
  183,183
  229,167
  282,087
  342,124
  409,369
  483,831
  565,456
  654,139
  749,742
  852,108
  961,078
  1,076,498
  1,198,234
  1,326,176
  1,460,251
  1,600,419
  1,746,681
  1,899,081
  2,057,703
  2,222,676
  2,394,168
  2,572,391
  2,757,594
Revenue / Adjusted assets
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
Average production assets, $m
  10,674
  16,195
  23,811
  34,009
  47,288
  64,141
  85,035
  110,391
  140,568
  175,855
  216,465
  262,535
  314,137
  371,276
  433,912
  501,965
  575,328
  653,881
  737,501
  826,070
  919,486
  1,017,665
  1,120,550
  1,228,110
  1,340,347
  1,457,294
  1,579,015
  1,705,610
  1,837,208
  1,973,970
  2,116,089
Working capital, $m
  1,732
  -521
  -767
  -1,095
  -1,523
  -2,065
  -2,738
  -3,554
  -4,526
  -5,662
  -6,970
  -8,453
  -10,115
  -11,954
  -13,971
  -16,162
  -18,525
  -21,054
  -23,746
  -26,598
  -29,606
  -32,767
  -36,080
  -39,543
  -43,157
  -46,922
  -50,842
  -54,918
  -59,155
  -63,559
  -68,135
Total debt, $m
  3,213
  5,621
  9,601
  14,930
  21,869
  30,676
  41,595
  54,845
  70,614
  89,054
  110,275
  134,350
  161,315
  191,174
  223,906
  259,468
  297,804
  338,853
  382,550
  428,834
  477,650
  528,955
  582,719
  638,926
  697,577
  758,689
  822,297
  888,451
  957,219
  1,028,687
  1,102,953
Total liabilities, $m
  6,055
  8,463
  12,443
  17,772
  24,711
  33,518
  44,437
  57,687
  73,456
  91,896
  113,117
  137,192
  164,157
  194,016
  226,748
  262,310
  300,646
  341,695
  385,392
  431,676
  480,492
  531,797
  585,561
  641,768
  700,419
  761,531
  825,139
  891,293
  960,061
  1,031,529
  1,105,795
Total equity, $m
  10,404
  12,642
  18,587
  26,547
  36,912
  50,068
  66,378
  86,170
  109,726
  137,271
  168,970
  204,933
  245,212
  289,815
  338,708
  391,829
  449,095
  510,413
  575,686
  644,822
  717,742
  794,380
  874,690
  958,651
  1,046,262
  1,137,549
  1,232,564
  1,331,383
  1,434,107
  1,540,862
  1,651,799
Total liabilities and equity, $m
  16,459
  21,105
  31,030
  44,319
  61,623
  83,586
  110,815
  143,857
  183,182
  229,167
  282,087
  342,125
  409,369
  483,831
  565,456
  654,139
  749,741
  852,108
  961,078
  1,076,498
  1,198,234
  1,326,177
  1,460,251
  1,600,419
  1,746,681
  1,899,080
  2,057,703
  2,222,676
  2,394,168
  2,572,391
  2,757,594
Debt-to-equity ratio
  0.309
  0.440
  0.520
  0.560
  0.590
  0.610
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
Adjusted equity ratio
  0.564
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -556
  -3,798
  -5,663
  -8,166
  -11,433
  -15,591
  -20,757
  -27,039
  -34,530
  -43,305
  -53,421
  -64,886
  -77,777
  -92,068
  -107,751
  -124,807
  -143,209
  -162,928
  -183,933
  -206,193
  -229,683
  -254,380
  -280,269
  -307,342
  -335,599
  -365,046
  -395,699
  -427,582
  -460,726
  -495,173
  -530,969
Depreciation, amort., depletion, $m
  1,480
  2,216
  3,245
  4,623
  6,417
  8,695
  11,518
  14,945
  19,023
  23,791
  29,279
  35,478
  42,451
  50,172
  58,637
  67,833
  77,747
  88,362
  99,662
  111,631
  124,255
  137,522
  151,426
  165,961
  181,128
  196,932
  213,380
  230,488
  248,271
  266,753
  285,958
Funds from operations, $m
  1,356
  -1,582
  -2,418
  -3,543
  -5,016
  -6,896
  -9,238
  -12,094
  -15,507
  -19,514
  -24,141
  -29,409
  -35,326
  -41,895
  -49,114
  -56,974
  -65,462
  -74,566
  -84,271
  -94,562
  -105,428
  -116,858
  -128,844
  -141,382
  -154,471
  -168,114
  -182,318
  -197,094
  -212,455
  -228,420
  -245,011
Change in working capital, $m
  -142
  -178
  -245
  -328
  -428
  -543
  -673
  -816
  -972
  -1,136
  -1,308
  -1,483
  -1,661
  -1,840
  -2,017
  -2,191
  -2,362
  -2,529
  -2,692
  -2,852
  -3,008
  -3,161
  -3,313
  -3,463
  -3,614
  -3,765
  -3,919
  -4,076
  -4,237
  -4,404
  -4,576
Cash from operations, $m
  1,498
  -932
  -2,172
  -3,214
  -4,588
  -6,353
  -8,565
  -11,277
  -14,535
  -18,377
  -22,834
  -27,925
  -33,664
  -40,056
  -47,097
  -54,782
  -63,100
  -72,037
  -81,578
  -91,710
  -102,420
  -113,696
  -125,531
  -137,918
  -150,857
  -164,349
  -178,399
  -193,018
  -208,218
  -224,017
  -240,435
Maintenance CAPEX, $m
  0
  -1,442
  -2,188
  -3,218
  -4,596
  -6,390
  -8,668
  -11,491
  -14,918
  -18,996
  -23,764
  -29,252
  -35,478
  -42,451
  -50,172
  -58,637
  -67,833
  -77,747
  -88,362
  -99,662
  -111,631
  -124,255
  -137,522
  -151,426
  -165,961
  -181,128
  -196,932
  -213,380
  -230,488
  -248,271
  -266,753
New CAPEX, $m
  -2,060
  -5,521
  -7,616
  -10,198
  -13,279
  -16,853
  -20,894
  -25,356
  -30,177
  -35,287
  -40,609
  -46,071
  -51,601
  -57,140
  -62,636
  -68,053
  -73,363
  -78,553
  -83,620
  -88,570
  -93,416
  -98,179
  -102,885
  -107,560
  -112,237
  -116,947
  -121,722
  -126,595
  -131,598
  -136,762
  -142,119
Cash from investing activities, $m
  -3,820
  -6,963
  -9,804
  -13,416
  -17,875
  -23,243
  -29,562
  -36,847
  -45,095
  -54,283
  -64,373
  -75,323
  -87,079
  -99,591
  -112,808
  -126,690
  -141,196
  -156,300
  -171,982
  -188,232
  -205,047
  -222,434
  -240,407
  -258,986
  -278,198
  -298,075
  -318,654
  -339,975
  -362,086
  -385,033
  -408,872
Free cash flow, $m
  -2,322
  -7,895
  -11,977
  -16,630
  -22,463
  -29,597
  -38,127
  -48,125
  -59,630
  -72,660
  -87,207
  -103,248
  -120,743
  -139,646
  -159,906
  -181,472
  -204,296
  -228,337
  -253,560
  -279,942
  -307,467
  -336,131
  -365,938
  -396,904
  -429,055
  -462,423
  -497,052
  -532,993
  -570,304
  -609,051
  -649,307
Issuance/(repayment) of debt, $m
  -455
  2,893
  3,980
  5,329
  6,939
  8,807
  10,919
  13,250
  15,770
  18,440
  21,221
  24,075
  26,965
  29,859
  32,732
  35,562
  38,337
  41,049
  43,697
  46,283
  48,816
  51,305
  53,764
  56,207
  58,651
  61,112
  63,608
  66,154
  68,769
  71,467
  74,266
Issuance/(repurchase) of shares, $m
  2,516
  7,240
  13,943
  19,261
  25,889
  33,945
  43,519
  54,667
  67,416
  81,765
  97,686
  115,135
  134,058
  154,390
  176,068
  199,031
  223,225
  248,605
  275,136
  302,795
  331,571
  361,463
  392,485
  424,658
  458,015
  492,598
  528,459
  565,657
  604,259
  644,339
  685,977
Cash from financing (excl. dividends), $m  
  2,062
  10,133
  17,923
  24,590
  32,828
  42,752
  54,438
  67,917
  83,186
  100,205
  118,907
  139,210
  161,023
  184,249
  208,800
  234,593
  261,562
  289,654
  318,833
  349,078
  380,387
  412,768
  446,249
  480,865
  516,666
  553,710
  592,067
  631,811
  673,028
  715,806
  760,243
Total cash flow (excl. dividends), $m
  -260
  -5,003
  -7,997
  -11,301
  -15,524
  -20,790
  -27,209
  -34,874
  -43,861
  -54,220
  -65,986
  -79,173
  -93,778
  -109,787
  -127,174
  -145,910
  -165,959
  -187,287
  -209,863
  -233,659
  -258,651
  -284,825
  -312,174
  -340,697
  -370,404
  -401,311
  -433,445
  -466,839
  -501,535
  -537,583
  -575,040
Retained Cash Flow (-), $m
  -2,036
  -4,312
  -5,945
  -7,960
  -10,365
  -13,155
  -16,310
  -19,793
  -23,556
  -27,544
  -31,699
  -35,962
  -40,279
  -44,603
  -48,893
  -53,121
  -57,266
  -61,318
  -65,273
  -69,137
  -72,920
  -76,638
  -80,311
  -83,960
  -87,611
  -91,287
  -95,015
  -98,819
  -102,724
  -106,755
  -110,936
Prev. year cash balance distribution, $m
 
  2,074
  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, %
 
  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
 
  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
  74.5
  51.9
  36.8
  26.6
  19.5
  14.5
  11.0
  8.4
  6.5
  5.1
  4.0
  3.2
  2.5
  2.0
  1.7
  1.4
  1.1
  0.9
  0.8
  0.6
  0.5
  0.4
  0.4
  0.3
  0.3
  0.2
  0.2
  0.2
  0.1
  0.1

Pioneer Natural Resources Company operates as an independent oil and gas exploration and production company in the United States. The company explores for, develops, and produces oil, liquefied natural gas (NGL), and gas. It has operations primarily in the Permian Basin in West Texas, the Eagle Ford Shale play in South Texas, the Raton field in southeast Colorado, and the West Panhandle field in the Texas Panhandle. As of December 31, 2016, the company had proved undeveloped reserves and proved developed reserves of approximately 37 million Bbls of oil, 10 million Bbls of NGLs, and 136 billion cubic feet of gas; and owned interests in eight gas processing plants and nine treating facilities. Pioneer Natural Resources Company was founded in 1997 and is headquartered in Irving, Texas.

FINANCIAL RATIOS  of  Pioneer Natural Resources (PXD)

Valuation Ratios
P/E Ratio -47.6
Price to Sales 6.7
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 17.7
Price to Free Cash Flow -47.1
Growth Rates
Sales Growth Rate 25.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.9%
Cap. Spend. - 3 Yr. Gr. Rate -6.5%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 26.2%
Total Debt to Equity 30.9%
Interest Coverage -4
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital -4.3%
Ret/ On T. Cap. - 3 Yr. Avg. 0.8%
Return On Equity -5.9%
Return On Equity - 3 Yr. Avg. 1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 41.4%
Gross Margin - 3 Yr. Avg. 48.2%
EBITDA Margin 18.1%
EBITDA Margin - 3 Yr. Avg. 39.7%
Operating Margin -15.8%
Oper. Margin - 3 Yr. Avg. -17.6%
Pre-Tax Margin -24.3%
Pre-Tax Margin - 3 Yr. Avg. -0.2%
Net Profit Margin -14.1%
Net Profit Margin - 3 Yr. Avg. -0.4%
Effective Tax Rate 42%
Eff/ Tax Rate - 3 Yr. Avg. 37.9%
Payout Ratio -2.3%

PXD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PXD stock intrinsic value calculation we used $3951 million for the last fiscal year's total revenue generated by Pioneer Natural Resources. The default revenue input number comes from 2016 income statement of Pioneer Natural Resources. 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 PXD stock valuation model: a) initial revenue growth rate of 51.7% 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 4.3%, whose default value for PXD is calculated based on our internal credit rating of Pioneer Natural Resources, 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 Pioneer Natural Resources.
    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 PXD stock the variable cost ratio is equal to 161%.

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 PXD 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 5.7% for Pioneer Natural Resources.

Corporate tax rate of 27% is the nominal tax rate for Pioneer Natural Resources. 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 PXD 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 PXD are equal to 270.2%.

Life of production assets of 7.4 years is the average useful life of capital assets used in Pioneer Natural Resources 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 PXD is equal to -8.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $10404 million for Pioneer Natural Resources - 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 169.13 million for Pioneer Natural Resources 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 Pioneer Natural Resources at the current share price and the inputted number of shares is $26.4 billion.

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Stock chart of PXD Financial statements of PXD Annual reports of PXD
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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