Intrinsic value of Cimarex Energy - XEC

Previous Close

$96.56

  Intrinsic Value

$3.75

stock screener

  Rating & Target

str. sell

-96%

  Value-price divergence*

-90%

Previous close

$96.56

 
Intrinsic value

$3.75

 
Up/down potential

-96%

 
Rating

str. sell

 
Value-price divergence*

-90%

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

We calculate the intrinsic value of XEC 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 9.2

 

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, %
  -13.49
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,257
  2,011
  3,107
  4,647
  6,743
  9,513
  13,078
  17,554
  23,050
  29,660
  37,462
  46,520
  56,875
  68,553
  81,565
  95,906
  111,562
  128,510
  146,723
  166,171
  186,826
  208,659
  231,650
  255,779
  281,036
  307,417
  334,926
  363,574
  393,381
  424,373
  456,586
Variable operating expenses, $m
 
  7,523
  11,589
  17,301
  25,075
  35,351
  48,576
  65,183
  85,569
  110,089
  139,035
  172,573
  210,987
  254,311
  302,580
  355,780
  413,858
  476,729
  544,293
  616,441
  693,062
  774,059
  859,345
  948,856
  1,042,552
  1,140,418
  1,242,467
  1,348,743
  1,459,316
  1,574,287
  1,693,785
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
  1,829
  7,523
  11,589
  17,301
  25,075
  35,351
  48,576
  65,183
  85,569
  110,089
  139,035
  172,573
  210,987
  254,311
  302,580
  355,780
  413,858
  476,729
  544,293
  616,441
  693,062
  774,059
  859,345
  948,856
  1,042,552
  1,140,418
  1,242,467
  1,348,743
  1,459,316
  1,574,287
  1,693,785
Operating income, $m
  -572
  -5,512
  -8,482
  -12,654
  -18,332
  -25,838
  -35,499
  -47,628
  -62,520
  -80,430
  -101,573
  -126,054
  -154,113
  -185,757
  -221,015
  -259,874
  -302,296
  -348,220
  -397,571
  -450,270
  -506,237
  -565,399
  -627,695
  -693,077
  -761,516
  -833,001
  -907,541
  -985,169
  -1,065,935
  -1,149,914
  -1,237,199
EBITDA, $m
  -180
  -5,024
  -7,762
  -11,608
  -16,842
  -23,762
  -32,667
  -43,848
  -57,576
  -74,086
  -93,576
  -116,201
  -142,066
  -171,238
  -203,739
  -239,561
  -278,667
  -321,001
  -366,495
  -415,075
  -466,667
  -521,205
  -578,632
  -638,903
  -701,993
  -767,890
  -836,604
  -908,164
  -982,617
  -1,060,032
  -1,140,494
Interest expense (income), $m
  80
  80
  149
  250
  393
  586
  842
  1,172
  1,585
  2,093
  2,704
  3,425
  4,262
  5,219
  6,298
  7,501
  8,826
  10,273
  11,839
  13,522
  15,319
  17,228
  19,245
  21,370
  23,600
  25,934
  28,372
  30,914
  33,561
  36,316
  39,180
Earnings before tax, $m
  -623
  -5,591
  -8,631
  -12,904
  -18,725
  -26,425
  -36,341
  -48,800
  -64,105
  -82,523
  -104,277
  -129,479
  -158,375
  -190,976
  -227,313
  -267,375
  -311,122
  -358,492
  -409,410
  -463,791
  -521,556
  -582,627
  -646,941
  -714,447
  -785,116
  -858,935
  -935,913
  -1,016,083
  -1,099,496
  -1,186,230
  -1,276,379
Tax expense, $m
  -214
  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
  -409
  -5,591
  -8,631
  -12,904
  -18,725
  -26,425
  -36,341
  -48,800
  -64,105
  -82,523
  -104,277
  -129,479
  -158,375
  -190,976
  -227,313
  -267,375
  -311,122
  -358,492
  -409,410
  -463,791
  -521,556
  -582,627
  -646,941
  -714,447
  -785,116
  -858,935
  -935,913
  -1,016,083
  -1,099,496
  -1,186,230
  -1,276,379

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  653
  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
  4,238
  5,730
  8,853
  13,239
  19,209
  27,102
  37,259
  50,012
  65,669
  84,500
  106,730
  132,535
  162,037
  195,309
  232,379
  273,236
  317,839
  366,124
  418,013
  473,422
  532,267
  594,471
  659,970
  728,714
  800,672
  875,832
  954,205
  1,035,824
  1,120,744
  1,209,040
  1,300,814
Adjusted assets (=assets-cash), $m
  3,585
  5,730
  8,853
  13,239
  19,209
  27,102
  37,259
  50,012
  65,669
  84,500
  106,730
  132,535
  162,037
  195,309
  232,379
  273,236
  317,839
  366,124
  418,013
  473,422
  532,267
  594,471
  659,970
  728,714
  800,672
  875,832
  954,205
  1,035,824
  1,120,744
  1,209,040
  1,300,814
Revenue / Adjusted assets
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
Average production assets, $m
  2,663
  4,260
  6,581
  9,842
  14,281
  20,148
  27,699
  37,180
  48,820
  62,819
  79,345
  98,529
  120,461
  145,196
  172,755
  203,129
  236,288
  272,183
  310,759
  351,950
  395,697
  441,940
  490,634
  541,739
  595,234
  651,109
  709,374
  770,050
  833,181
  898,822
  967,048
Working capital, $m
  447
  -201
  -311
  -465
  -674
  -951
  -1,308
  -1,755
  -2,305
  -2,966
  -3,746
  -4,652
  -5,687
  -6,855
  -8,157
  -9,591
  -11,156
  -12,851
  -14,672
  -16,617
  -18,683
  -20,866
  -23,165
  -25,578
  -28,104
  -30,742
  -33,493
  -36,357
  -39,338
  -42,437
  -45,659
Total debt, $m
  1,500
  2,812
  4,723
  7,407
  11,061
  15,891
  22,107
  29,912
  39,494
  51,019
  64,624
  80,416
  98,472
  118,834
  141,521
  166,526
  193,823
  223,373
  255,129
  289,039
  325,052
  363,121
  403,207
  445,278
  489,316
  535,314
  583,279
  633,230
  685,200
  739,238
  795,403
Total liabilities, $m
  2,195
  3,507
  5,418
  8,102
  11,756
  16,586
  22,802
  30,607
  40,189
  51,714
  65,319
  81,111
  99,167
  119,529
  142,216
  167,221
  194,518
  224,068
  255,824
  289,734
  325,747
  363,816
  403,902
  445,973
  490,011
  536,009
  583,974
  633,925
  685,895
  739,933
  796,098
Total equity, $m
  2,043
  2,223
  3,435
  5,137
  7,453
  10,515
  14,456
  19,405
  25,480
  32,786
  41,411
  51,424
  62,870
  75,780
  90,163
  106,016
  123,322
  142,056
  162,189
  183,688
  206,519
  230,655
  256,068
  282,741
  310,661
  339,823
  370,232
  401,900
  434,849
  469,108
  504,716
Total liabilities and equity, $m
  4,238
  5,730
  8,853
  13,239
  19,209
  27,101
  37,258
  50,012
  65,669
  84,500
  106,730
  132,535
  162,037
  195,309
  232,379
  273,237
  317,840
  366,124
  418,013
  473,422
  532,266
  594,471
  659,970
  728,714
  800,672
  875,832
  954,206
  1,035,825
  1,120,744
  1,209,041
  1,300,814
Debt-to-equity ratio
  0.734
  1.260
  1.370
  1.440
  1.480
  1.510
  1.530
  1.540
  1.550
  1.560
  1.560
  1.560
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.580
  1.580
  1.580
  1.580
  1.580
  1.580
  1.580
Adjusted equity ratio
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -409
  -5,591
  -8,631
  -12,904
  -18,725
  -26,425
  -36,341
  -48,800
  -64,105
  -82,523
  -104,277
  -129,479
  -158,375
  -190,976
  -227,313
  -267,375
  -311,122
  -358,492
  -409,410
  -463,791
  -521,556
  -582,627
  -646,941
  -714,447
  -785,116
  -858,935
  -935,913
  -1,016,083
  -1,099,496
  -1,186,230
  -1,276,379
Depreciation, amort., depletion, $m
  392
  488
  720
  1,046
  1,490
  2,077
  2,832
  3,780
  4,944
  6,344
  7,997
  9,853
  12,046
  14,520
  17,275
  20,313
  23,629
  27,218
  31,076
  35,195
  39,570
  44,194
  49,063
  54,174
  59,523
  65,111
  70,937
  77,005
  83,318
  89,882
  96,705
Funds from operations, $m
  573
  -5,103
  -7,911
  -11,858
  -17,235
  -24,348
  -33,509
  -45,020
  -59,161
  -76,179
  -96,280
  -119,626
  -146,329
  -176,457
  -210,037
  -247,062
  -287,493
  -331,274
  -378,334
  -428,596
  -481,986
  -538,433
  -597,877
  -660,273
  -725,592
  -793,824
  -864,976
  -939,078
  -1,016,178
  -1,096,347
  -1,179,674
Change in working capital, $m
  -26
  -75
  -110
  -154
  -210
  -277
  -357
  -448
  -550
  -661
  -780
  -906
  -1,036
  -1,168
  -1,301
  -1,434
  -1,566
  -1,695
  -1,821
  -1,945
  -2,065
  -2,183
  -2,299
  -2,413
  -2,526
  -2,638
  -2,751
  -2,865
  -2,981
  -3,099
  -3,221
Cash from operations, $m
  599
  -5,028
  -7,801
  -11,704
  -17,025
  -24,071
  -33,152
  -44,572
  -58,611
  -75,518
  -95,500
  -118,720
  -145,293
  -175,289
  -208,736
  -245,628
  -285,927
  -329,579
  -376,512
  -426,652
  -479,921
  -536,250
  -595,578
  -657,860
  -723,067
  -791,185
  -862,225
  -936,213
  -1,013,198
  -1,093,248
  -1,176,453
Maintenance CAPEX, $m
  0
  -266
  -426
  -658
  -984
  -1,428
  -2,015
  -2,770
  -3,718
  -4,882
  -6,282
  -7,935
  -9,853
  -12,046
  -14,520
  -17,275
  -20,313
  -23,629
  -27,218
  -31,076
  -35,195
  -39,570
  -44,194
  -49,063
  -54,174
  -59,523
  -65,111
  -70,937
  -77,005
  -83,318
  -89,882
New CAPEX, $m
  -700
  -1,597
  -2,322
  -3,261
  -4,438
  -5,867
  -7,551
  -9,481
  -11,640
  -13,999
  -16,526
  -19,184
  -21,932
  -24,735
  -27,559
  -30,374
  -33,159
  -35,896
  -38,575
  -41,192
  -43,746
  -46,244
  -48,693
  -51,106
  -53,495
  -55,876
  -58,264
  -60,677
  -63,131
  -65,641
  -68,226
Cash from investing activities, $m
  -692
  -1,863
  -2,748
  -3,919
  -5,422
  -7,295
  -9,566
  -12,251
  -15,358
  -18,881
  -22,808
  -27,119
  -31,785
  -36,781
  -42,079
  -47,649
  -53,472
  -59,525
  -65,793
  -72,268
  -78,941
  -85,814
  -92,887
  -100,169
  -107,669
  -115,399
  -123,375
  -131,614
  -140,136
  -148,959
  -158,108
Free cash flow, $m
  -93
  -6,891
  -10,549
  -15,623
  -22,448
  -31,366
  -42,718
  -56,823
  -73,969
  -94,399
  -118,309
  -145,838
  -177,078
  -212,070
  -250,815
  -293,277
  -339,399
  -389,104
  -442,306
  -498,919
  -558,862
  -622,063
  -688,465
  -758,029
  -830,735
  -906,584
  -985,600
  -1,067,827
  -1,153,333
  -1,242,208
  -1,334,561
Issuance/(repayment) of debt, $m
  0
  1,312
  1,911
  2,685
  3,654
  4,830
  6,216
  7,805
  9,582
  11,525
  13,605
  15,792
  18,055
  20,362
  22,687
  25,005
  27,297
  29,550
  31,756
  33,910
  36,013
  38,069
  40,085
  42,071
  44,038
  45,998
  47,964
  49,951
  51,971
  54,038
  56,165
Issuance/(repurchase) of shares, $m
  5
  6,424
  9,842
  14,606
  21,041
  29,487
  40,282
  53,748
  70,180
  89,829
  112,902
  139,491
  169,821
  203,886
  241,696
  283,227
  328,428
  377,227
  429,542
  485,290
  544,388
  606,762
  672,354
  741,120
  813,035
  888,097
  966,322
  1,047,751
  1,132,445
  1,220,489
  1,311,987
Cash from financing (excl. dividends), $m  
  5
  7,736
  11,753
  17,291
  24,695
  34,317
  46,498
  61,553
  79,762
  101,354
  126,507
  155,283
  187,876
  224,248
  264,383
  308,232
  355,725
  406,777
  461,298
  519,200
  580,401
  644,831
  712,439
  783,191
  857,073
  934,095
  1,014,286
  1,097,702
  1,184,416
  1,274,527
  1,368,152
Total cash flow (excl. dividends), $m
  -89
  845
  1,205
  1,668
  2,247
  2,951
  3,780
  4,730
  5,793
  6,955
  8,199
  9,445
  10,798
  12,178
  13,569
  14,955
  16,326
  17,673
  18,993
  20,281
  21,539
  22,768
  23,974
  25,162
  26,338
  27,510
  28,686
  29,874
  31,082
  32,319
  33,591
Retained Cash Flow (-), $m
  415
  -6,424
  -9,842
  -14,606
  -21,041
  -29,487
  -40,282
  -53,748
  -70,180
  -89,829
  -112,902
  -139,491
  -169,821
  -203,886
  -241,696
  -283,227
  -328,428
  -377,227
  -429,542
  -485,290
  -544,388
  -606,762
  -672,354
  -741,120
  -813,035
  -888,097
  -966,322
  -1,047,751
  -1,132,445
  -1,220,489
  -1,311,987
Prev. year cash balance distribution, $m
 
  653
  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
 
  -4,927
  -8,637
  -12,939
  -18,794
  -26,536
  -36,502
  -49,018
  -64,387
  -82,875
  -104,704
  -130,046
  -159,023
  -191,708
  -228,128
  -268,273
  -312,102
  -359,553
  -410,550
  -465,009
  -522,849
  -583,994
  -648,380
  -715,958
  -786,697
  -860,586
  -937,635
  -1,017,876
  -1,101,363
  -1,188,170
  -1,278,395
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
 
  -4,723
  -7,907
  -11,260
  -15,475
  -20,569
  -26,491
  -33,116
  -40,243
  -47,607
  -54,892
  -61,757
  -67,861
  -72,891
  -76,586
  -78,760
  -79,312
  -78,233
  -75,607
  -71,598
  -66,438
  -60,404
  -53,799
  -46,925
  -40,068
  -33,478
  -27,356
  -21,847
  -17,040
  -12,970
  -9,626
Current shareholders' claim on cash, %
  100
  49.3
  24.8
  12.7
  6.7
  3.5
  1.9
  1.0
  0.6
  0.3
  0.2
  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
  0.0
  0.0
  0.0

Cimarex Energy Co. operates as an independent oil and gas exploration and production company primarily in Oklahoma, Texas, and New Mexico. As of December 31, 2016, it had a total proved oil and gas reserves of 2.89 trillion cubic feet equivalent (Tcfe) consisting of 1.47 trillion cubic feet of natural gas, 0.64 Tcfe of oil, and 0.78 Tcfe of natural gas liquids primarily located in the Mid-Continent and Permian Basin regions. The company also owned interests in 3,094 net productive oil and gas wells. Cimarex Energy Co. was founded in 2002 and is headquartered in Denver, Colorado.

FINANCIAL RATIOS  of  Cimarex Energy (XEC)

Valuation Ratios
P/E Ratio -22.5
Price to Sales 7.3
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 15.3
Price to Free Cash Flow -90.9
Growth Rates
Sales Growth Rate -13.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.5%
Cap. Spend. - 3 Yr. Gr. Rate -14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 73.4%
Total Debt to Equity 73.4%
Interest Coverage -7
Management Effectiveness
Return On Assets -8%
Ret/ On Assets - 3 Yr. Avg. -12.8%
Return On Total Capital -10.9%
Ret/ On T. Cap. - 3 Yr. Avg. -17.7%
Return On Equity -18.2%
Return On Equity - 3 Yr. Avg. -26.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 63.9%
Gross Margin - 3 Yr. Avg. 68.2%
EBITDA Margin -12%
EBITDA Margin - 3 Yr. Avg. -55.2%
Operating Margin -45.5%
Oper. Margin - 3 Yr. Avg. -95.5%
Pre-Tax Margin -49.6%
Pre-Tax Margin - 3 Yr. Avg. -98%
Net Profit Margin -32.5%
Net Profit Margin - 3 Yr. Avg. -62.8%
Effective Tax Rate 34.3%
Eff/ Tax Rate - 3 Yr. Avg. 35.9%
Payout Ratio -9.3%

XEC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XEC stock intrinsic value calculation we used $1257 million for the last fiscal year's total revenue generated by Cimarex Energy. The default revenue input number comes from 2016 income statement of Cimarex 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 XEC stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for XEC is calculated based on our internal credit rating of Cimarex 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 Cimarex 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 XEC stock the variable cost ratio is equal to 375.9%.

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 XEC 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 5.3% for Cimarex Energy.

Corporate tax rate of 27% is the nominal tax rate for Cimarex 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 XEC 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 XEC are equal to 211.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Cimarex 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 XEC 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 - $2043 million for Cimarex 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 94.901 million for Cimarex 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 Cimarex Energy at the current share price and the inputted number of shares is $9.2 billion.

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COMPANY NEWS

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▶ ETFs with exposure to Cimarex Energy Co. : May 31, 2017   [May-31-17 12:52PM  Capital Cube]
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▶ Halliburton to Raise Prices 10% This Year   [May-18-17 02:45PM  TheStreet.com]
▶ Cimarex Warms Up With the Weather   [02:51PM  TheStreet.com]
▶ Cimarex Energy Declares 8 Cent Quarterly Dividend   [May-12-17 12:38PM  TheStreet.com]
▶ Textron Surges on Takeover Talk   [May-11-17 04:02PM  TheStreet.com]
▶ Occidental Petroleum to Test Texas Supertanker This Month   [May-10-17 03:59PM  TheStreet.com]
▶ Cimarex beats Street 1Q forecasts   [08:36AM  Associated Press]
▶ Will US Natural Gas Futures Test 2016 High?   [08:51AM  Market Realist]
▶ Short Interest Trends in Whiting Petroleum Stock   [May-03-17 04:05PM  Market Realist]
▶ Are Hedge Funds Turning Bullish on US Natural Gas?   [Apr-28-17 10:39AM  Market Realist]
▶ US Natural Gas Price Forecasts for May 2017 and Beyond   [Apr-21-17 01:05PM  Market Realist]
▶ Short Interest Trends in Whiting Petroleum Stock   [Apr-20-17 09:07AM  Market Realist]
▶ Higher US Natural Gas Price Forecasts for 2017 and 2018   [Apr-17-17 12:05PM  Market Realist]
▶ Why Oil Markets Are Not Recovering Much Faster   [Apr-16-17 04:00PM  Oilprice.com]
Stock chart of XEC Financial statements of XEC
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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