Intrinsic value of SM Energy - SM

Previous Close

$18.85

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$18.85

 
Intrinsic value

$5.69

 
Up/down potential

-70%

 
Rating

str. sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of SM 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 2.1

 

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, %
  -22.06
  58.00
  52.70
  47.93
  43.64
  39.77
  36.30
  33.17
  30.35
  27.81
  25.53
  23.48
  21.63
  19.97
  18.47
  17.12
  15.91
  14.82
  13.84
  12.96
  12.16
  11.44
  10.80
  10.22
  9.70
  9.23
  8.80
  8.42
  8.08
  7.77
  7.50
Revenue, $m
  1,180
  1,864
  2,847
  4,211
  6,049
  8,455
  11,524
  15,346
  20,004
  25,568
  32,096
  39,632
  48,206
  57,832
  68,514
  80,247
  93,016
  106,802
  121,582
  137,333
  154,032
  171,659
  190,197
  209,634
  229,963
  251,183
  273,299
  296,323
  320,271
  345,168
  371,043
Variable operating expenses, $m
 
  2,597
  3,966
  5,867
  8,427
  11,778
  16,053
  21,377
  27,865
  35,616
  44,710
  55,208
  67,150
  80,559
  95,440
  111,784
  129,571
  148,775
  169,364
  191,305
  214,567
  239,121
  264,944
  292,020
  320,338
  349,897
  380,705
  412,777
  446,138
  480,819
  516,863
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
  2,224
  2,597
  3,966
  5,867
  8,427
  11,778
  16,053
  21,377
  27,865
  35,616
  44,710
  55,208
  67,150
  80,559
  95,440
  111,784
  129,571
  148,775
  169,364
  191,305
  214,567
  239,121
  264,944
  292,020
  320,338
  349,897
  380,705
  412,777
  446,138
  480,819
  516,863
Operating income, $m
  -1,044
  -733
  -1,119
  -1,655
  -2,377
  -3,323
  -4,529
  -6,031
  -7,861
  -10,048
  -12,614
  -15,575
  -18,945
  -22,728
  -26,926
  -31,537
  -36,555
  -41,973
  -47,782
  -53,972
  -60,535
  -67,462
  -74,747
  -82,386
  -90,375
  -98,715
  -107,406
  -116,455
  -125,867
  -135,651
  -145,820
EBITDA, $m
  -253
  516
  788
  1,166
  1,674
  2,340
  3,190
  4,248
  5,537
  7,077
  8,884
  10,970
  13,343
  16,008
  18,965
  22,212
  25,747
  29,563
  33,654
  38,014
  42,636
  47,515
  52,646
  58,027
  63,654
  69,527
  75,649
  82,022
  88,651
  95,543
  102,705
Interest expense (income), $m
  130
  139
  247
  403
  619
  909
  1,290
  1,776
  2,381
  3,118
  3,999
  5,032
  6,225
  7,582
  9,105
  10,796
  12,653
  14,674
  16,856
  19,195
  21,688
  24,331
  27,121
  30,055
  33,131
  36,348
  39,707
  43,207
  46,851
  50,641
  54,582
Earnings before tax, $m
  -1,202
  -872
  -1,366
  -2,058
  -2,996
  -4,232
  -5,819
  -7,807
  -10,242
  -13,166
  -16,612
  -20,607
  -25,169
  -30,309
  -36,031
  -42,333
  -49,208
  -56,647
  -64,637
  -73,167
  -82,222
  -91,793
  -101,868
  -112,441
  -123,506
  -135,063
  -147,113
  -159,662
  -172,718
  -186,293
  -200,402
Tax expense, $m
  -444
  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
  -758
  -872
  -1,366
  -2,058
  -2,996
  -4,232
  -5,819
  -7,807
  -10,242
  -13,166
  -16,612
  -20,607
  -25,169
  -30,309
  -36,031
  -42,333
  -49,208
  -56,647
  -64,637
  -73,167
  -82,222
  -91,793
  -101,868
  -112,441
  -123,506
  -135,063
  -147,113
  -159,662
  -172,718
  -186,293
  -200,402

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  6,394
  10,078
  15,389
  22,765
  32,699
  45,704
  62,293
  82,953
  108,129
  138,204
  173,493
  214,229
  260,570
  312,603
  370,347
  433,768
  502,790
  577,308
  657,201
  742,342
  832,607
  927,887
  1,028,091
  1,133,155
  1,243,041
  1,357,744
  1,477,291
  1,601,744
  1,731,196
  1,865,775
  2,005,640
Adjusted assets (=assets-cash), $m
  6,385
  10,078
  15,389
  22,765
  32,699
  45,704
  62,293
  82,953
  108,129
  138,204
  173,493
  214,229
  260,570
  312,603
  370,347
  433,768
  502,790
  577,308
  657,201
  742,342
  832,607
  927,887
  1,028,091
  1,133,155
  1,243,041
  1,357,744
  1,477,291
  1,601,744
  1,731,196
  1,865,775
  2,005,640
Revenue / Adjusted assets
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
  0.185
Average production assets, $m
  3,952
  6,244
  9,534
  14,104
  20,259
  28,317
  38,594
  51,395
  66,993
  85,627
  107,490
  132,729
  161,440
  193,678
  229,454
  268,747
  311,511
  357,680
  407,179
  459,929
  515,854
  574,886
  636,969
  702,063
  770,145
  841,211
  915,278
  992,384
  1,072,588
  1,155,969
  1,242,624
Working capital, $m
  -190
  -315
  -481
  -712
  -1,022
  -1,429
  -1,948
  -2,594
  -3,381
  -4,321
  -5,424
  -6,698
  -8,147
  -9,774
  -11,579
  -13,562
  -15,720
  -18,050
  -20,547
  -23,209
  -26,031
  -29,010
  -32,143
  -35,428
  -38,864
  -42,450
  -46,188
  -50,079
  -54,126
  -58,333
  -62,706
Total debt, $m
  2,898
  5,148
  8,388
  12,887
  18,947
  26,880
  36,999
  49,602
  64,960
  83,306
  104,831
  129,680
  157,949
  189,689
  224,913
  263,599
  305,703
  351,159
  399,894
  451,829
  506,891
  565,012
  626,137
  690,225
  757,256
  827,225
  900,149
  976,065
  1,055,030
  1,137,123
  1,222,441
Total liabilities, $m
  3,896
  6,147
  9,387
  13,886
  19,946
  27,879
  37,998
  50,601
  65,959
  84,305
  105,830
  130,679
  158,948
  190,688
  225,912
  264,598
  306,702
  352,158
  400,893
  452,828
  507,890
  566,011
  627,136
  691,224
  758,255
  828,224
  901,148
  977,064
  1,056,029
  1,138,122
  1,223,440
Total equity, $m
  2,497
  3,930
  6,002
  8,878
  12,752
  17,825
  24,294
  32,352
  42,170
  53,900
  67,662
  83,549
  101,622
  121,915
  144,435
  169,169
  196,088
  225,150
  256,308
  289,513
  324,717
  361,876
  400,956
  441,930
  484,786
  529,520
  576,144
  624,680
  675,166
  727,652
  782,200
Total liabilities and equity, $m
  6,393
  10,077
  15,389
  22,764
  32,698
  45,704
  62,292
  82,953
  108,129
  138,205
  173,492
  214,228
  260,570
  312,603
  370,347
  433,767
  502,790
  577,308
  657,201
  742,341
  832,607
  927,887
  1,028,092
  1,133,154
  1,243,041
  1,357,744
  1,477,292
  1,601,744
  1,731,195
  1,865,774
  2,005,640
Debt-to-equity ratio
  1.161
  1.310
  1.400
  1.450
  1.490
  1.510
  1.520
  1.530
  1.540
  1.550
  1.550
  1.550
  1.550
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
  1.560
Adjusted equity ratio
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -758
  -872
  -1,366
  -2,058
  -2,996
  -4,232
  -5,819
  -7,807
  -10,242
  -13,166
  -16,612
  -20,607
  -25,169
  -30,309
  -36,031
  -42,333
  -49,208
  -56,647
  -64,637
  -73,167
  -82,222
  -91,793
  -101,868
  -112,441
  -123,506
  -135,063
  -147,113
  -159,662
  -172,718
  -186,293
  -200,402
Depreciation, amort., depletion, $m
  791
  1,249
  1,907
  2,821
  4,052
  5,663
  7,719
  10,279
  13,399
  17,125
  21,498
  26,546
  32,288
  38,736
  45,891
  53,749
  62,302
  71,536
  81,436
  91,986
  103,171
  114,977
  127,394
  140,413
  154,029
  168,242
  183,056
  198,477
  214,518
  231,194
  248,525
Funds from operations, $m
  498
  377
  541
  763
  1,056
  1,431
  1,900
  2,472
  3,156
  3,959
  4,886
  5,938
  7,119
  8,426
  9,860
  11,417
  13,094
  14,889
  16,798
  18,819
  20,948
  23,184
  25,526
  27,972
  30,523
  33,179
  35,942
  38,815
  41,800
  44,901
  48,123
Change in working capital, $m
  -55
  -116
  -166
  -231
  -311
  -407
  -519
  -646
  -787
  -940
  -1,103
  -1,274
  -1,449
  -1,627
  -1,805
  -1,983
  -2,158
  -2,330
  -2,498
  -2,662
  -2,822
  -2,979
  -3,133
  -3,285
  -3,436
  -3,586
  -3,738
  -3,891
  -4,047
  -4,208
  -4,373
Cash from operations, $m
  553
  -222
  707
  994
  1,366
  1,838
  2,418
  3,118
  3,943
  4,899
  5,989
  7,212
  8,568
  10,053
  11,665
  13,399
  15,252
  17,219
  19,296
  21,481
  23,770
  26,163
  28,659
  31,257
  33,958
  36,765
  39,680
  42,706
  45,847
  49,109
  52,496
Maintenance CAPEX, $m
  0
  -790
  -1,249
  -1,907
  -2,821
  -4,052
  -5,663
  -7,719
  -10,279
  -13,399
  -17,125
  -21,498
  -26,546
  -32,288
  -38,736
  -45,891
  -53,749
  -62,302
  -71,536
  -81,436
  -91,986
  -103,171
  -114,977
  -127,394
  -140,413
  -154,029
  -168,242
  -183,056
  -198,477
  -214,518
  -231,194
New CAPEX, $m
  -630
  -2,292
  -3,291
  -4,570
  -6,155
  -8,058
  -10,278
  -12,800
  -15,598
  -18,634
  -21,863
  -25,239
  -28,712
  -32,238
  -35,776
  -39,293
  -42,764
  -46,169
  -49,499
  -52,750
  -55,925
  -59,032
  -62,083
  -65,094
  -68,082
  -71,066
  -74,067
  -77,106
  -80,204
  -83,380
  -86,656
Cash from investing activities, $m
  -1,871
  -3,082
  -4,540
  -6,477
  -8,976
  -12,110
  -15,941
  -20,519
  -25,877
  -32,033
  -38,988
  -46,737
  -55,258
  -64,526
  -74,512
  -85,184
  -96,513
  -108,471
  -121,035
  -134,186
  -147,911
  -162,203
  -177,060
  -192,488
  -208,495
  -225,095
  -242,309
  -260,162
  -278,681
  -297,898
  -317,850
Free cash flow, $m
  -1,318
  -3,305
  -3,832
  -5,483
  -7,609
  -10,272
  -13,523
  -17,401
  -21,934
  -27,133
  -33,000
  -39,525
  -46,690
  -54,473
  -62,847
  -71,785
  -81,261
  -91,252
  -101,739
  -112,705
  -124,140
  -136,040
  -148,402
  -161,231
  -174,536
  -188,330
  -202,630
  -217,456
  -232,833
  -248,789
  -265,354
Issuance/(repayment) of debt, $m
  426
  2,250
  3,240
  4,499
  6,060
  7,933
  10,119
  12,603
  15,357
  18,346
  21,526
  24,849
  28,269
  31,740
  35,224
  38,687
  42,103
  45,456
  48,735
  51,936
  55,062
  58,121
  61,125
  64,089
  67,030
  69,969
  72,924
  75,916
  78,966
  82,093
  85,318
Issuance/(repurchase) of shares, $m
  936
  2,487
  2,664
  3,860
  5,424
  7,411
  9,873
  12,856
  16,395
  20,516
  25,236
  30,563
  36,495
  43,025
  50,143
  57,832
  66,076
  74,858
  84,162
  93,974
  104,282
  115,078
  126,357
  138,117
  150,361
  163,095
  176,329
  190,077
  204,354
  219,182
  234,583
Cash from financing (excl. dividends), $m  
  1,335
  4,737
  5,904
  8,359
  11,484
  15,344
  19,992
  25,459
  31,752
  38,862
  46,762
  55,412
  64,764
  74,765
  85,367
  96,519
  108,179
  120,314
  132,897
  145,910
  159,344
  173,199
  187,482
  202,206
  217,391
  233,064
  249,253
  265,993
  283,320
  301,275
  319,901
Total cash flow (excl. dividends), $m
  17
  -1,054
  -593
  -984
  -1,549
  -2,339
  -3,404
  -4,799
  -6,576
  -8,787
  -11,474
  -14,676
  -18,421
  -22,733
  -27,623
  -33,098
  -39,158
  -45,796
  -53,004
  -60,769
  -69,079
  -77,919
  -87,277
  -97,142
  -107,505
  -118,361
  -129,706
  -141,540
  -153,868
  -166,696
  -180,036
Retained Cash Flow (-), $m
  -645
  -1,442
  -2,071
  -2,877
  -3,874
  -5,072
  -6,470
  -8,057
  -9,819
  -11,730
  -13,762
  -15,887
  -18,073
  -20,293
  -22,520
  -24,734
  -26,919
  -29,062
  -31,158
  -33,205
  -35,203
  -37,159
  -39,080
  -40,975
  -42,856
  -44,734
  -46,624
  -48,536
  -50,486
  -52,486
  -54,547
Prev. year cash balance distribution, $m
 
  9
  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, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
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
  45.3
  24.9
  14.0
  8.1
  4.8
  2.8
  1.7
  1.1
  0.7
  0.4
  0.3
  0.2
  0.1
  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

SM Energy Company, an independent energy company, engages in the acquisition, exploration, development, and production of crude oil and condensate, natural gas, and natural gas liquids in onshore North America. It primarily has operations in the South Texas and Gulf Coast, Rocky Mountain, and Permian regions. As of December 31, 2016, the company had 395.8 million barrels of oil equivalent of estimated proved reserves; and working interests in 841 net productive oil wells and 704 net productive gas wells. The company was formerly known as St. Mary Land & Exploration Company and changed its name to SM Energy Company in May 2010. SM Energy Company was founded in 1908 and is headquartered in Denver, Colorado.

FINANCIAL RATIOS  of  SM Energy (SM)

Valuation Ratios
P/E Ratio -2.8
Price to Sales 1.8
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 3.8
Price to Free Cash Flow -27.2
Growth Rates
Sales Growth Rate -22.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -57.8%
Cap. Spend. - 3 Yr. Gr. Rate -16.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 116.1%
Total Debt to Equity 116.1%
Interest Coverage -8
Management Effectiveness
Return On Assets -11.3%
Ret/ On Assets - 3 Yr. Avg. -1.5%
Return On Total Capital -15.5%
Ret/ On T. Cap. - 3 Yr. Avg. -2.8%
Return On Equity -34.9%
Return On Equity - 3 Yr. Avg. -7.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 49.4%
Gross Margin - 3 Yr. Avg. 57.7%
EBITDA Margin -23.8%
EBITDA Margin - 3 Yr. Avg. 24.6%
Operating Margin -88.5%
Oper. Margin - 3 Yr. Avg. -27.2%
Pre-Tax Margin -101.9%
Pre-Tax Margin - 3 Yr. Avg. -35.8%
Net Profit Margin -64.2%
Net Profit Margin - 3 Yr. Avg. -22.5%
Effective Tax Rate 36.9%
Eff/ Tax Rate - 3 Yr. Avg. 37.5%
Payout Ratio -1.1%

SM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SM stock intrinsic value calculation we used $1180 million for the last fiscal year's total revenue generated by SM Energy. The default revenue input number comes from 2016 income statement of SM 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 SM stock valuation model: a) initial revenue growth rate of 58% 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 8.2%, whose default value for SM is calculated based on our internal credit rating of SM 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 SM 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 SM stock the variable cost ratio is equal to 139.3%.

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 SM 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 4.8% for SM Energy.

Corporate tax rate of 27% is the nominal tax rate for SM 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 SM 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 SM are equal to 334.9%.

Life of production assets of 5 years is the average useful life of capital assets used in SM 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 SM is equal to -16.9%. 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 - $2497 million for SM 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 109.794 million for SM 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 SM Energy at the current share price and the inputted number of shares is $2.1 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
APC Anadarko Petro 51.84 prem.  prem.
MTDR Matador Resour 23.89 prem.  prem.
DVN Devon Energy 35.82 prem.  prem.
EOG EOG Resources 91.22 prem.  prem.
QEP QEP Resources 10.53 prem.  prem.

COMPANY NEWS

▶ ETFs with exposure to SM Energy Co. : May 22, 2017   [May-22-17 02:11PM  Capital Cube]
▶ US Refinery Demand Impacts Crude Oil Inventories   [May-18-17 09:44AM  Market Realist]
▶ SM Energy Announces Update On Divestiture Process   [May-16-17 08:00AM  PR Newswire]
▶ US Crude Oil Production: A Thorn for Crude Oil Bulls?   [May-11-17 10:02AM  Market Realist]
▶ EIA Downgraded US and Brent Crude Oil Price Forecasts   [May-10-17 10:12AM  Market Realist]
▶ ETFs with exposure to SM Energy Co. : May 8, 2017   [May-08-17 05:14PM  Capital Cube]
▶ SM Energy tops Street 1Q forecasts   [May-02-17 05:56PM  Associated Press]
▶ US Gasoline Inventories Rose for the Second Time in 10 Weeks   [Apr-27-17 08:58AM  Market Realist]
▶ US Refinery Demand Is near Record Levels   [Apr-20-17 09:53AM  Market Realist]
▶ EIA Downgraded Crude Oil Price Forecasts for 2017 and 2018   [Apr-17-17 10:37AM  Market Realist]
▶ Will Crude Oil Prices Hit a New High?   [Apr-11-17 12:06PM  Market Realist]
▶ Why US Crude Oil Output Hit a High from January 2016   [Apr-06-17 07:40AM  Market Realist]
▶ Why the Permian M&A Boom May Not End Well   [Apr-04-17 08:18AM  TheStreet.com]
▶ This Week in Energy: SM, BP, Tesla, and More   [Mar-18-17 11:55AM  Insider Monkey]
▶ US Distillate Inventories Fell for the Fifth Straight Week   [Mar-16-17 07:35AM  Market Realist]
▶ FPA Capital Funds Best and Worst Performers From Q4   [Feb-08-17 12:34PM  at Insider Monkey]
▶ Oil and Gas Stock Roundup: Strategy Updates Stole the Show   [Feb-04-17 10:00AM  at Motley Fool]
▶ Why SM Energy Co's Stock Is Stumbling Today   [Jan-31-17 03:50PM  at Motley Fool]
▶ SM Energy Announces Upcoming Events   [Jan-26-17 06:30AM  PR Newswire]
▶ Five Potential Oil & Gas Takeover Targets In 2017   [Jan-03-17 07:34PM  at Forbes]
▶ [$$] KKR to Buy SM Energy's South Texas Assets for $800 Million   [09:20AM  at The Wall Street Journal]
Stock chart of SM Financial statements of SM Annual reports of SM
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.