Intrinsic value of SM Energy - SM

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$21.51

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$21.51

 
Intrinsic value

$5.45

 
Up/down potential

-75%

 
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 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 2.5

 

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
  15.70
  14.63
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
Revenue, $m
  1,180
  1,365
  1,565
  1,779
  2,007
  2,248
  2,502
  2,770
  3,050
  3,343
  3,648
  3,967
  4,299
  4,643
  5,002
  5,374
  5,762
  6,164
  6,582
  7,017
  7,469
  7,940
  8,430
  8,940
  9,472
  10,026
  10,605
  11,208
  11,838
  12,496
  13,184
Variable operating expenses, $m
 
  1,902
  2,180
  2,478
  2,795
  3,131
  3,486
  3,858
  4,248
  4,656
  5,082
  5,526
  5,988
  6,468
  6,968
  7,487
  8,026
  8,586
  9,169
  9,774
  10,404
  11,060
  11,743
  12,453
  13,194
  13,966
  14,772
  15,613
  16,491
  17,407
  18,366
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
  1,902
  2,180
  2,478
  2,795
  3,131
  3,486
  3,858
  4,248
  4,656
  5,082
  5,526
  5,988
  6,468
  6,968
  7,487
  8,026
  8,586
  9,169
  9,774
  10,404
  11,060
  11,743
  12,453
  13,194
  13,966
  14,772
  15,613
  16,491
  17,407
  18,366
Operating income, $m
  -1,044
  -537
  -615
  -699
  -789
  -883
  -983
  -1,088
  -1,199
  -1,314
  -1,434
  -1,559
  -1,689
  -1,825
  -1,966
  -2,112
  -2,264
  -2,422
  -2,587
  -2,758
  -2,935
  -3,120
  -3,313
  -3,513
  -3,722
  -3,940
  -4,168
  -4,405
  -4,652
  -4,911
  -5,181
EBITDA, $m
  -253
  378
  433
  492
  555
  622
  693
  767
  844
  925
  1,010
  1,098
  1,190
  1,285
  1,385
  1,488
  1,595
  1,706
  1,822
  1,942
  2,067
  2,198
  2,333
  2,475
  2,622
  2,775
  2,935
  3,102
  3,277
  3,459
  3,649
Interest expense (income), $m
  130
  139
  168
  200
  234
  270
  308
  348
  390
  435
  481
  529
  580
  632
  687
  744
  803
  864
  928
  994
  1,063
  1,134
  1,209
  1,286
  1,367
  1,451
  1,539
  1,630
  1,726
  1,826
  1,930
Earnings before tax, $m
  -1,202
  -676
  -783
  -899
  -1,022
  -1,153
  -1,291
  -1,437
  -1,589
  -1,748
  -1,915
  -2,089
  -2,269
  -2,457
  -2,653
  -2,856
  -3,067
  -3,286
  -3,514
  -3,751
  -3,998
  -4,254
  -4,522
  -4,800
  -5,089
  -5,391
  -5,706
  -6,035
  -6,378
  -6,737
  -7,111
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
  -676
  -783
  -899
  -1,022
  -1,153
  -1,291
  -1,437
  -1,589
  -1,748
  -1,915
  -2,089
  -2,269
  -2,457
  -2,653
  -2,856
  -3,067
  -3,286
  -3,514
  -3,751
  -3,998
  -4,254
  -4,522
  -4,800
  -5,089
  -5,391
  -5,706
  -6,035
  -6,378
  -6,737
  -7,111

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
  7,380
  8,459
  9,616
  10,846
  12,150
  13,525
  14,971
  16,485
  18,069
  19,722
  21,443
  23,236
  25,100
  27,037
  29,051
  31,143
  33,318
  35,579
  37,929
  40,374
  42,917
  45,566
  48,324
  51,199
  54,196
  57,322
  60,584
  63,990
  67,548
  71,266
Adjusted assets (=assets-cash), $m
  6,385
  7,380
  8,459
  9,616
  10,846
  12,150
  13,525
  14,971
  16,485
  18,069
  19,722
  21,443
  23,236
  25,100
  27,037
  29,051
  31,143
  33,318
  35,579
  37,929
  40,374
  42,917
  45,566
  48,324
  51,199
  54,196
  57,322
  60,584
  63,990
  67,548
  71,266
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
  4,572
  5,241
  5,957
  6,720
  7,528
  8,380
  9,275
  10,214
  11,195
  12,219
  13,286
  14,396
  15,551
  16,751
  17,999
  19,295
  20,643
  22,043
  23,499
  25,014
  26,590
  28,231
  29,940
  31,721
  33,578
  35,514
  37,536
  39,646
  41,850
  44,154
Working capital, $m
  -190
  -231
  -264
  -301
  -339
  -380
  -423
  -468
  -515
  -565
  -617
  -670
  -726
  -785
  -845
  -908
  -974
  -1,042
  -1,112
  -1,186
  -1,262
  -1,342
  -1,425
  -1,511
  -1,601
  -1,694
  -1,792
  -1,894
  -2,001
  -2,112
  -2,228
Total debt, $m
  2,898
  3,503
  4,161
  4,867
  5,617
  6,413
  7,251
  8,133
  9,057
  10,023
  11,031
  12,081
  13,175
  14,312
  15,494
  16,722
  17,998
  19,325
  20,704
  22,138
  23,629
  25,181
  26,796
  28,479
  30,232
  32,060
  33,967
  35,957
  38,035
  40,205
  42,473
Total liabilities, $m
  3,896
  4,502
  5,160
  5,866
  6,616
  7,412
  8,250
  9,132
  10,056
  11,022
  12,030
  13,080
  14,174
  15,311
  16,493
  17,721
  18,997
  20,324
  21,703
  23,137
  24,628
  26,180
  27,795
  29,478
  31,231
  33,059
  34,966
  36,956
  39,034
  41,204
  43,472
Total equity, $m
  2,497
  2,878
  3,299
  3,750
  4,230
  4,739
  5,275
  5,839
  6,429
  7,047
  7,691
  8,363
  9,062
  9,789
  10,545
  11,330
  12,146
  12,994
  13,876
  14,792
  15,746
  16,738
  17,771
  18,846
  19,967
  21,136
  22,355
  23,628
  24,956
  26,344
  27,794
Total liabilities and equity, $m
  6,393
  7,380
  8,459
  9,616
  10,846
  12,151
  13,525
  14,971
  16,485
  18,069
  19,721
  21,443
  23,236
  25,100
  27,038
  29,051
  31,143
  33,318
  35,579
  37,929
  40,374
  42,918
  45,566
  48,324
  51,198
  54,195
  57,321
  60,584
  63,990
  67,548
  71,266
Debt-to-equity ratio
  1.161
  1.220
  1.260
  1.300
  1.330
  1.350
  1.370
  1.390
  1.410
  1.420
  1.430
  1.440
  1.450
  1.460
  1.470
  1.480
  1.480
  1.490
  1.490
  1.500
  1.500
  1.500
  1.510
  1.510
  1.510
  1.520
  1.520
  1.520
  1.520
  1.530
  1.530
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
  -676
  -783
  -899
  -1,022
  -1,153
  -1,291
  -1,437
  -1,589
  -1,748
  -1,915
  -2,089
  -2,269
  -2,457
  -2,653
  -2,856
  -3,067
  -3,286
  -3,514
  -3,751
  -3,998
  -4,254
  -4,522
  -4,800
  -5,089
  -5,391
  -5,706
  -6,035
  -6,378
  -6,737
  -7,111
Depreciation, amort., depletion, $m
  791
  914
  1,048
  1,191
  1,344
  1,506
  1,676
  1,855
  2,043
  2,239
  2,444
  2,657
  2,879
  3,110
  3,350
  3,600
  3,859
  4,129
  4,409
  4,700
  5,003
  5,318
  5,646
  5,988
  6,344
  6,716
  7,103
  7,507
  7,929
  8,370
  8,831
Funds from operations, $m
  498
  239
  265
  293
  322
  353
  385
  419
  454
  491
  529
  569
  610
  653
  698
  744
  792
  842
  894
  948
  1,005
  1,064
  1,125
  1,188
  1,255
  1,324
  1,396
  1,472
  1,551
  1,633
  1,720
Change in working capital, $m
  -55
  -31
  -34
  -36
  -38
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -65
  -68
  -71
  -73
  -76
  -80
  -83
  -86
  -90
  -94
  -98
  -102
  -106
  -111
  -116
Cash from operations, $m
  553
  -444
  299
  329
  360
  393
  428
  464
  501
  540
  580
  622
  666
  711
  758
  807
  858
  910
  965
  1,022
  1,081
  1,143
  1,207
  1,275
  1,345
  1,418
  1,494
  1,574
  1,657
  1,745
  1,836
Maintenance CAPEX, $m
  0
  -790
  -914
  -1,048
  -1,191
  -1,344
  -1,506
  -1,676
  -1,855
  -2,043
  -2,239
  -2,444
  -2,657
  -2,879
  -3,110
  -3,350
  -3,600
  -3,859
  -4,129
  -4,409
  -4,700
  -5,003
  -5,318
  -5,646
  -5,988
  -6,344
  -6,716
  -7,103
  -7,507
  -7,929
  -8,370
New CAPEX, $m
  -630
  -621
  -669
  -716
  -763
  -808
  -852
  -896
  -938
  -981
  -1,024
  -1,067
  -1,110
  -1,155
  -1,200
  -1,248
  -1,296
  -1,347
  -1,400
  -1,456
  -1,515
  -1,576
  -1,641
  -1,709
  -1,781
  -1,857
  -1,937
  -2,021
  -2,110
  -2,204
  -2,303
Cash from investing activities, $m
  -1,871
  -1,411
  -1,583
  -1,764
  -1,954
  -2,152
  -2,358
  -2,572
  -2,793
  -3,024
  -3,263
  -3,511
  -3,767
  -4,034
  -4,310
  -4,598
  -4,896
  -5,206
  -5,529
  -5,865
  -6,215
  -6,579
  -6,959
  -7,355
  -7,769
  -8,201
  -8,653
  -9,124
  -9,617
  -10,133
  -10,673
Free cash flow, $m
  -1,318
  -1,855
  -1,285
  -1,436
  -1,594
  -1,758
  -1,930
  -2,108
  -2,292
  -2,484
  -2,682
  -2,888
  -3,102
  -3,323
  -3,553
  -3,791
  -4,039
  -4,296
  -4,564
  -4,843
  -5,133
  -5,436
  -5,751
  -6,081
  -6,424
  -6,783
  -7,158
  -7,550
  -7,960
  -8,389
  -8,838
Issuance/(repayment) of debt, $m
  426
  605
  659
  705
  751
  795
  839
  882
  924
  966
  1,008
  1,050
  1,093
  1,137
  1,182
  1,228
  1,276
  1,327
  1,379
  1,434
  1,491
  1,552
  1,615
  1,683
  1,753
  1,828
  1,907
  1,990
  2,078
  2,170
  2,268
Issuance/(repurchase) of shares, $m
  936
  1,632
  1,047
  1,181
  1,323
  1,472
  1,627
  1,790
  1,959
  2,135
  2,319
  2,509
  2,707
  2,913
  3,126
  3,348
  3,578
  3,818
  4,067
  4,326
  4,595
  4,876
  5,169
  5,474
  5,792
  6,124
  6,470
  6,832
  7,211
  7,606
  8,020
Cash from financing (excl. dividends), $m  
  1,335
  2,237
  1,706
  1,886
  2,074
  2,267
  2,466
  2,672
  2,883
  3,101
  3,327
  3,559
  3,800
  4,050
  4,308
  4,576
  4,854
  5,145
  5,446
  5,760
  6,086
  6,428
  6,784
  7,157
  7,545
  7,952
  8,377
  8,822
  9,289
  9,776
  10,288
Total cash flow (excl. dividends), $m
  17
  -1,251
  -626
  -730
  -843
  -963
  -1,091
  -1,226
  -1,368
  -1,518
  -1,674
  -1,838
  -2,008
  -2,186
  -2,371
  -2,563
  -2,762
  -2,970
  -3,185
  -3,409
  -3,642
  -3,884
  -4,136
  -4,398
  -4,671
  -4,955
  -5,251
  -5,560
  -5,882
  -6,219
  -6,570
Retained Cash Flow (-), $m
  -645
  -390
  -421
  -451
  -480
  -508
  -536
  -564
  -591
  -618
  -644
  -672
  -699
  -727
  -756
  -785
  -816
  -848
  -882
  -917
  -953
  -992
  -1,033
  -1,076
  -1,121
  -1,169
  -1,219
  -1,272
  -1,328
  -1,388
  -1,450
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
  60.1
  43.9
  32.2
  23.7
  17.5
  13.0
  9.7
  7.2
  5.4
  4.0
  3.0
  2.3
  1.7
  1.3
  1.0
  0.7
  0.6
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  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 -3.2
Price to Sales 2
Price to Book 1
Price to Tangible Book
Price to Cash Flow 4.3
Price to Free Cash Flow -31.1
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 15.7% 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 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 114.488 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 $2.5 billion.


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COMPANY NEWS

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▶ 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
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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