Intrinsic value of EXCO Resources - XCO

Previous Close

$1.03

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-32%

Previous close

$1.03

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-32%

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

We calculate the intrinsic value of XCO 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 0.3

 

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, %
  -23.88
  37.50
  34.25
  31.33
  28.69
  26.32
  24.19
  22.27
  20.54
  18.99
  17.59
  16.33
  15.20
  14.18
  13.26
  12.43
  11.69
  11.02
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
Revenue, $m
  271
  373
  500
  657
  845
  1,068
  1,326
  1,622
  1,955
  2,326
  2,735
  3,182
  3,666
  4,186
  4,741
  5,330
  5,953
  6,609
  7,298
  8,019
  8,772
  9,557
  10,375
  11,226
  12,111
  13,030
  13,986
  14,978
  16,010
  17,083
  18,199
Variable operating expenses, $m
 
  1,566
  2,096
  2,748
  3,532
  4,457
  5,531
  6,759
  8,145
  9,688
  11,390
  13,231
  15,242
  17,403
  19,711
  22,162
  24,753
  27,481
  30,345
  33,342
  36,473
  39,738
  43,138
  46,675
  50,354
  54,177
  58,150
  62,278
  66,569
  71,030
  75,669
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
  372
  1,566
  2,096
  2,748
  3,532
  4,457
  5,531
  6,759
  8,145
  9,688
  11,390
  13,231
  15,242
  17,403
  19,711
  22,162
  24,753
  27,481
  30,345
  33,342
  36,473
  39,738
  43,138
  46,675
  50,354
  54,177
  58,150
  62,278
  66,569
  71,030
  75,669
Operating income, $m
  -101
  -1,193
  -1,596
  -2,091
  -2,686
  -3,389
  -4,205
  -5,138
  -6,190
  -7,362
  -8,654
  -10,049
  -11,576
  -13,217
  -14,970
  -16,832
  -18,800
  -20,872
  -23,047
  -25,323
  -27,701
  -30,181
  -32,763
  -35,450
  -38,243
  -41,147
  -44,164
  -47,300
  -50,559
  -53,946
  -57,470
EBITDA, $m
  -25
  -1,115
  -1,497
  -1,966
  -2,530
  -3,197
  -3,970
  -4,854
  -5,851
  -6,962
  -8,187
  -9,524
  -10,972
  -12,528
  -14,189
  -15,953
  -17,818
  -19,782
  -21,844
  -24,002
  -26,255
  -28,606
  -31,053
  -33,600
  -36,247
  -38,999
  -41,859
  -44,831
  -47,920
  -51,131
  -54,470
Interest expense (income), $m
  68
  67
  30
  45
  62
  83
  108
  137
  170
  207
  249
  295
  345
  399
  457
  519
  585
  655
  729
  806
  886
  971
  1,059
  1,150
  1,245
  1,344
  1,447
  1,554
  1,665
  1,781
  1,901
Earnings before tax, $m
  -222
  -1,260
  -1,626
  -2,135
  -2,748
  -3,472
  -4,313
  -5,275
  -6,360
  -7,570
  -8,903
  -10,344
  -11,921
  -13,616
  -15,427
  -17,351
  -19,385
  -21,527
  -23,775
  -26,129
  -28,587
  -31,151
  -33,821
  -36,600
  -39,489
  -42,491
  -45,611
  -48,854
  -52,224
  -55,727
  -59,371
Tax expense, $m
  3
  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
  -225
  -1,260
  -1,626
  -2,135
  -2,748
  -3,472
  -4,313
  -5,275
  -6,360
  -7,570
  -8,903
  -10,344
  -11,921
  -13,616
  -15,427
  -17,351
  -19,385
  -21,527
  -23,775
  -26,129
  -28,587
  -31,151
  -33,821
  -36,600
  -39,489
  -42,491
  -45,611
  -48,854
  -52,224
  -55,727
  -59,371

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
  661
  909
  1,220
  1,602
  2,062
  2,605
  3,235
  3,956
  4,768
  5,674
  6,672
  7,761
  8,941
  10,209
  11,562
  13,000
  14,520
  16,121
  17,800
  19,559
  21,395
  23,311
  25,305
  27,380
  29,538
  31,780
  34,111
  36,533
  39,050
  41,667
  44,388
Adjusted assets (=assets-cash), $m
  652
  909
  1,220
  1,602
  2,062
  2,605
  3,235
  3,956
  4,768
  5,674
  6,672
  7,761
  8,941
  10,209
  11,562
  13,000
  14,520
  16,121
  17,800
  19,559
  21,395
  23,311
  25,305
  27,380
  29,538
  31,780
  34,111
  36,533
  39,050
  41,667
  44,388
Revenue / Adjusted assets
  0.416
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
Average production assets, $m
  447
  614
  824
  1,083
  1,393
  1,760
  2,186
  2,673
  3,222
  3,834
  4,508
  5,244
  6,041
  6,898
  7,813
  8,784
  9,811
  10,892
  12,027
  13,215
  14,456
  15,750
  17,098
  18,500
  19,958
  21,473
  23,048
  24,684
  26,385
  28,153
  29,992
Working capital, $m
  -147
  -37
  -50
  -66
  -85
  -107
  -133
  -162
  -195
  -233
  -274
  -318
  -367
  -419
  -474
  -533
  -595
  -661
  -730
  -802
  -877
  -956
  -1,038
  -1,123
  -1,211
  -1,303
  -1,399
  -1,498
  -1,601
  -1,708
  -1,820
Total debt, $m
  1,309
  594
  874
  1,218
  1,632
  2,120
  2,688
  3,336
  4,067
  4,882
  5,781
  6,761
  7,823
  8,964
  10,182
  11,476
  12,844
  14,285
  15,796
  17,379
  19,032
  20,755
  22,551
  24,418
  26,360
  28,378
  30,476
  32,656
  34,921
  37,276
  39,725
Total liabilities, $m
  1,533
  818
  1,098
  1,442
  1,856
  2,344
  2,912
  3,560
  4,291
  5,106
  6,005
  6,985
  8,047
  9,188
  10,406
  11,700
  13,068
  14,509
  16,020
  17,603
  19,256
  20,979
  22,775
  24,642
  26,584
  28,602
  30,700
  32,880
  35,145
  37,500
  39,949
Total equity, $m
  -872
  91
  122
  160
  206
  260
  324
  396
  477
  567
  667
  776
  894
  1,021
  1,156
  1,300
  1,452
  1,612
  1,780
  1,956
  2,140
  2,331
  2,531
  2,738
  2,954
  3,178
  3,411
  3,653
  3,905
  4,167
  4,439
Total liabilities and equity, $m
  661
  909
  1,220
  1,602
  2,062
  2,604
  3,236
  3,956
  4,768
  5,673
  6,672
  7,761
  8,941
  10,209
  11,562
  13,000
  14,520
  16,121
  17,800
  19,559
  21,396
  23,310
  25,306
  27,380
  29,538
  31,780
  34,111
  36,533
  39,050
  41,667
  44,388
Debt-to-equity ratio
  -1.501
  6.540
  7.160
  7.600
  7.910
  8.140
  8.310
  8.430
  8.530
  8.610
  8.660
  8.710
  8.750
  8.780
  8.810
  8.830
  8.850
  8.860
  8.870
  8.890
  8.900
  8.900
  8.910
  8.920
  8.920
  8.930
  8.930
  8.940
  8.940
  8.950
  8.950
Adjusted equity ratio
  -1.351
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -225
  -1,260
  -1,626
  -2,135
  -2,748
  -3,472
  -4,313
  -5,275
  -6,360
  -7,570
  -8,903
  -10,344
  -11,921
  -13,616
  -15,427
  -17,351
  -19,385
  -21,527
  -23,775
  -26,129
  -28,587
  -31,151
  -33,821
  -36,600
  -39,489
  -42,491
  -45,611
  -48,854
  -52,224
  -55,727
  -59,371
Depreciation, amort., depletion, $m
  76
  78
  99
  125
  156
  192
  235
  284
  338
  400
  467
  524
  604
  690
  781
  878
  981
  1,089
  1,203
  1,322
  1,446
  1,575
  1,710
  1,850
  1,996
  2,147
  2,305
  2,468
  2,639
  2,815
  2,999
Funds from operations, $m
  -37
  -1,182
  -1,528
  -2,011
  -2,593
  -3,280
  -4,078
  -4,991
  -6,021
  -7,170
  -8,436
  -9,819
  -11,317
  -12,927
  -14,646
  -16,473
  -18,404
  -20,438
  -22,572
  -24,807
  -27,142
  -29,576
  -32,112
  -34,750
  -37,493
  -40,344
  -43,307
  -46,386
  -49,586
  -52,912
  -56,372
Change in working capital, $m
  -37
  -10
  -13
  -16
  -19
  -22
  -26
  -30
  -33
  -37
  -41
  -45
  -48
  -52
  -56
  -59
  -62
  -66
  -69
  -72
  -75
  -79
  -82
  -85
  -88
  -92
  -96
  -99
  -103
  -107
  -112
Cash from operations, $m
  0
  -1,172
  -1,515
  -1,995
  -2,574
  -3,258
  -4,052
  -4,962
  -5,988
  -7,133
  -8,395
  -9,774
  -11,268
  -12,875
  -14,591
  -16,414
  -18,341
  -20,372
  -22,503
  -24,735
  -27,066
  -29,498
  -32,030
  -34,665
  -37,404
  -40,252
  -43,211
  -46,286
  -49,482
  -52,805
  -56,260
Maintenance CAPEX, $m
  0
  -45
  -61
  -82
  -108
  -139
  -176
  -219
  -267
  -322
  -383
  -451
  -524
  -604
  -690
  -781
  -878
  -981
  -1,089
  -1,203
  -1,322
  -1,446
  -1,575
  -1,710
  -1,850
  -1,996
  -2,147
  -2,305
  -2,468
  -2,639
  -2,815
New CAPEX, $m
  -80
  -168
  -210
  -258
  -311
  -367
  -426
  -487
  -549
  -612
  -674
  -736
  -797
  -857
  -915
  -971
  -1,027
  -1,081
  -1,135
  -1,188
  -1,241
  -1,294
  -1,348
  -1,402
  -1,458
  -1,515
  -1,575
  -1,636
  -1,701
  -1,768
  -1,839
Cash from investing activities, $m
  -55
  -213
  -271
  -340
  -419
  -506
  -602
  -706
  -816
  -934
  -1,057
  -1,187
  -1,321
  -1,461
  -1,605
  -1,752
  -1,905
  -2,062
  -2,224
  -2,391
  -2,563
  -2,740
  -2,923
  -3,112
  -3,308
  -3,511
  -3,722
  -3,941
  -4,169
  -4,407
  -4,654
Free cash flow, $m
  -55
  -1,384
  -1,787
  -2,336
  -2,993
  -3,764
  -4,654
  -5,667
  -6,804
  -8,067
  -9,453
  -10,961
  -12,590
  -14,335
  -16,195
  -18,166
  -20,247
  -22,434
  -24,728
  -27,126
  -29,629
  -32,237
  -34,953
  -37,777
  -40,712
  -43,763
  -46,933
  -50,227
  -53,652
  -57,211
  -60,914
Issuance/(repayment) of debt, $m
  57
  -715
  280
  344
  414
  489
  567
  648
  731
  815
  898
  981
  1,062
  1,141
  1,218
  1,294
  1,368
  1,440
  1,512
  1,583
  1,653
  1,724
  1,795
  1,868
  1,942
  2,018
  2,097
  2,180
  2,265
  2,355
  2,449
Issuance/(repurchase) of shares, $m
  0
  2,223
  1,657
  2,174
  2,794
  3,526
  4,376
  5,347
  6,441
  7,660
  9,003
  10,453
  12,039
  13,743
  15,563
  17,495
  19,537
  21,687
  23,943
  26,305
  28,771
  31,343
  34,021
  36,807
  39,704
  42,715
  45,845
  49,096
  52,476
  55,989
  59,643
Cash from financing (excl. dividends), $m  
  52
  1,508
  1,937
  2,518
  3,208
  4,015
  4,943
  5,995
  7,172
  8,475
  9,901
  11,434
  13,101
  14,884
  16,781
  18,789
  20,905
  23,127
  25,455
  27,888
  30,424
  33,067
  35,816
  38,675
  41,646
  44,733
  47,942
  51,276
  54,741
  58,344
  62,092
Total cash flow (excl. dividends), $m
  -3
  123
  151
  182
  215
  251
  289
  328
  368
  408
  448
  472
  511
  549
  586
  622
  658
  693
  727
  761
  795
  829
  863
  898
  934
  971
  1,009
  1,048
  1,090
  1,133
  1,178
Retained Cash Flow (-), $m
  210
  -2,223
  -1,657
  -2,174
  -2,794
  -3,526
  -4,376
  -5,347
  -6,441
  -7,660
  -9,003
  -10,453
  -12,039
  -13,743
  -15,563
  -17,495
  -19,537
  -21,687
  -23,943
  -26,305
  -28,771
  -31,343
  -34,021
  -36,807
  -39,704
  -42,715
  -45,845
  -49,096
  -52,476
  -55,989
  -59,643
Prev. year cash balance 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
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
 
  -2,099
  -1,506
  -1,992
  -2,579
  -3,275
  -4,087
  -5,018
  -6,073
  -7,252
  -8,555
  -9,981
  -11,528
  -13,194
  -14,977
  -16,872
  -18,879
  -20,994
  -23,216
  -25,543
  -27,976
  -30,514
  -33,157
  -35,909
  -38,770
  -41,745
  -44,836
  -48,048
  -51,386
  -54,856
  -58,465
Discount rate, %
 
  15.70
  16.49
  17.31
  18.17
  19.08
  20.04
  21.04
  22.09
  23.20
  24.36
  25.57
  26.85
  28.19
  29.60
  31.08
  32.64
  34.27
  35.98
  37.78
  39.67
  41.66
  43.74
  45.93
  48.22
  50.63
  53.17
  55.82
  58.62
  61.55
  64.62
PV of cash for distribution, $m
 
  -1,814
  -1,110
  -1,234
  -1,322
  -1,368
  -1,366
  -1,319
  -1,230
  -1,109
  -967
  -815
  -664
  -522
  -397
  -291
  -206
  -140
  -92
  -58
  -35
  -20
  -11
  -6
  -3
  -1
  -1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  2.6
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

EXCO Resources, Inc., an independent oil and natural gas company, engages in the acquisition, exploration, exploitation, development, and production of onshore oil and natural gas properties with a focus on shale resource plays in the United States. The company holds interests in approximately 83,800 net acres located in the Haynesville and Bossier shales of East Texas and North Louisiana; approximately 65,800 net acres situated in the Eagle Ford shale of South Texas; and approximately 137,400 net acres of prospective area located in the Marcellus shale of the Appalachian basin. As of December 31, 2015, it had proved reserves of approximately 907.3 billion cubic feet equivalent of oil and gas; and operated 6,380 gross wells. The company was founded in 1955 and is based in Dallas, Texas.

FINANCIAL RATIOS  of  EXCO Resources (XCO)

Valuation Ratios
P/E Ratio -1.3
Price to Sales 1.1
Price to Book -0.3
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -3.6
Growth Rates
Sales Growth Rate -23.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -75.4%
Cap. Spend. - 3 Yr. Gr. Rate -42.7%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity -144.4%
Total Debt to Equity -150.1%
Interest Coverage -2
Management Effectiveness
Return On Assets -19.3%
Ret/ On Assets - 3 Yr. Avg. -25.4%
Return On Total Capital -39.3%
Ret/ On T. Cap. - 3 Yr. Avg. -41.1%
Return On Equity 29.3%
Return On Equity - 3 Yr. Avg. 544.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 72.7%
Gross Margin - 3 Yr. Avg. 74.9%
EBITDA Margin -28.8%
EBITDA Margin - 3 Yr. Avg. -67.3%
Operating Margin -37.3%
Oper. Margin - 3 Yr. Avg. -113.6%
Pre-Tax Margin -81.9%
Pre-Tax Margin - 3 Yr. Avg. -133.1%
Net Profit Margin -83%
Net Profit Margin - 3 Yr. Avg. -133.5%
Effective Tax Rate -1.4%
Eff/ Tax Rate - 3 Yr. Avg. -0.5%
Payout Ratio 0%

XCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XCO stock intrinsic value calculation we used $271 million for the last fiscal year's total revenue generated by EXCO Resources. The default revenue input number comes from 2016 income statement of EXCO 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 XCO stock valuation model: a) initial revenue growth rate of 37.5% 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 15.7%, whose default value for XCO is calculated based on our internal credit rating of EXCO 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 EXCO 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 XCO stock the variable cost ratio is equal to 421.8%.

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 XCO 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 5.1% for EXCO Resources.

Corporate tax rate of 27% is the nominal tax rate for EXCO 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 XCO 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 XCO are equal to 164.8%.

Life of production assets of 10 years is the average useful life of capital assets used in EXCO 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 XCO 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 - $-872 million for EXCO 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 271.751 million for EXCO 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 EXCO Resources at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Exco posts 2Q profit   [Aug-08-17 06:05PM  Associated Press]
▶ Can EXCO Resources (XCO) Q2 Earnings Surprise?   [Jul-27-17 02:35PM  Zacks]
▶ US Weather: Bullish or Bearish for Natural Gas Futures?   [Jul-14-17 12:35PM  Market Realist]
▶ Top 4 Oil and Gas Penny Stocks as of July 2017   [Jul-12-17 04:37PM  Investopedia]
▶ Natural Gas Futures Could Maintain Bullish Momentum   [Jun-30-17 08:15AM  Market Realist]
▶ After-Hours Buzz: KBH, CAMP & more   [Jun-27-17 05:40PM  CNBC]
▶ Weather Could Rescue Natural Gas Bulls Next Week   [Jun-23-17 01:05PM  Market Realist]
▶ EIA Downgrades US Natural Gas Price Forecasts   [Jun-19-17 09:07AM  Market Realist]
▶ ETFs with exposure to EXCO Resources, Inc. : June 5, 2017   [Jun-05-17 02:56PM  Capital Cube]
▶ ETFs with exposure to EXCO Resources, Inc. : May 26, 2017   [May-26-17 01:31PM  Capital Cube]
▶ ETFs with exposure to EXCO Resources, Inc. : May 15, 2017   [May-15-17 04:57PM  Capital Cube]
▶ Lower Rise in US Natural Gas Inventories Boosted Prices   [May-12-17 04:05PM  Market Realist]
▶ Exco posts 1Q profit   [May-09-17 06:16PM  Associated Press]
▶ Why Weekly US Natural Gas Consumption Rose in Early May 2017   [May-08-17 07:36AM  Market Realist]
▶ ETFs with exposure to EXCO Resources, Inc. : May 5, 2017   [May-05-17 04:43PM  Capital Cube]
▶ EIA Downgraded US Natural Gas Consumption Estimates   [Apr-17-17 10:24AM  Market Realist]
▶ Chou Income Fund 4th Quarter Message to Shareholders   [Mar-24-17 01:58PM  GuruFocus.com]
▶ Exco reports 4Q loss   [07:20AM  Associated Press]
▶ [$$] Exco Resources Nears Deal to Stave Off Bankruptcy   [02:49PM  at The Wall Street Journal]
▶ Five Penny Stocks to Buy Now   [Mar-07-17 12:19PM  at Insider Monkey]
▶ Exco Found Non-Compliant by NYSE   [08:50AM  at Investopedia]
▶ EXCO gets NYSE notice, considers reverse share split   [Jan-20-17 04:37PM  at bizjournals.com]
▶ Here's Why Natural Gas Stocks Cooled Off in December   [Jan-10-17 04:12PM  at Motley Fool]
▶ How FRP Holdings Inc (FRPH) Stacks Up Against Its Peers   [Dec-19-16 06:00AM  at Insider Monkey]
▶ Here is What Hedge Funds Think About EXCO Resources Inc (XCO)   [Dec-12-16 12:57PM  at Insider Monkey]
Stock chart of XCO Financial statements of XCO
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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