Intrinsic value of Apache - APA

Previous Close

$41.53

  Intrinsic Value

$4.09

stock screener

  Rating & Target

str. sell

-90%

  Value-price divergence*

+3%

Previous close

$41.53

 
Intrinsic value

$4.09

 
Up/down potential

-90%

 
Rating

str. sell

 
Value-price divergence*

+3%

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

We calculate the intrinsic value of APA 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 15.8

 

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, %
  -19.29
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  5,333
  5,488
  5,658
  5,845
  6,048
  6,267
  6,502
  6,755
  7,025
  7,313
  7,619
  7,944
  8,289
  8,654
  9,041
  9,449
  9,881
  10,336
  10,817
  11,324
  11,858
  12,420
  13,013
  13,637
  14,293
  14,984
  15,710
  16,475
  17,278
  18,123
  19,011
Variable operating expenses, $m
 
  15,596
  16,081
  16,611
  17,188
  17,810
  18,480
  19,198
  19,965
  20,783
  21,653
  22,577
  23,557
  24,595
  25,693
  26,855
  28,081
  29,376
  30,742
  32,182
  33,700
  35,299
  36,983
  38,755
  40,621
  42,584
  44,649
  46,821
  49,105
  51,506
  54,030
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
  7,015
  15,596
  16,081
  16,611
  17,188
  17,810
  18,480
  19,198
  19,965
  20,783
  21,653
  22,577
  23,557
  24,595
  25,693
  26,855
  28,081
  29,376
  30,742
  32,182
  33,700
  35,299
  36,983
  38,755
  40,621
  42,584
  44,649
  46,821
  49,105
  51,506
  54,030
Operating income, $m
  -1,682
  -10,108
  -10,423
  -10,766
  -11,140
  -11,543
  -11,978
  -12,443
  -12,940
  -13,470
  -14,034
  -14,633
  -15,268
  -15,941
  -16,653
  -17,405
  -18,200
  -19,040
  -19,925
  -20,858
  -21,842
  -22,878
  -23,970
  -25,119
  -26,328
  -27,600
  -28,939
  -30,346
  -31,826
  -33,383
  -35,019
EBITDA, $m
  936
  -7,420
  -7,651
  -7,903
  -8,177
  -8,474
  -8,792
  -9,134
  -9,499
  -9,888
  -10,302
  -10,741
  -11,208
  -11,701
  -12,224
  -12,777
  -13,360
  -13,976
  -14,626
  -15,311
  -16,033
  -16,794
  -17,595
  -18,439
  -19,326
  -20,260
  -21,243
  -22,276
  -23,362
  -24,505
  -25,706
Interest expense (income), $m
  413
  410
  433
  459
  486
  516
  548
  582
  619
  659
  701
  746
  794
  844
  898
  955
  1,015
  1,078
  1,145
  1,215
  1,289
  1,368
  1,450
  1,537
  1,629
  1,725
  1,826
  1,933
  2,045
  2,163
  2,287
Earnings before tax, $m
  -1,682
  -10,518
  -10,856
  -11,225
  -11,626
  -12,059
  -12,525
  -13,025
  -13,559
  -14,129
  -14,735
  -15,379
  -16,062
  -16,785
  -17,551
  -18,360
  -19,215
  -20,117
  -21,069
  -22,073
  -23,131
  -24,246
  -25,420
  -26,656
  -27,957
  -29,325
  -30,765
  -32,279
  -33,871
  -35,546
  -37,306
Tax expense, $m
  -442
  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
  -1,405
  -10,518
  -10,856
  -11,225
  -11,626
  -12,059
  -12,525
  -13,025
  -13,559
  -14,129
  -14,735
  -15,379
  -16,062
  -16,785
  -17,551
  -18,360
  -19,215
  -20,117
  -21,069
  -22,073
  -23,131
  -24,246
  -25,420
  -26,656
  -27,957
  -29,325
  -30,765
  -32,279
  -33,871
  -35,546
  -37,306

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,377
  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
  22,519
  21,776
  22,454
  23,194
  23,999
  24,868
  25,803
  26,806
  27,877
  29,018
  30,233
  31,524
  32,892
  34,342
  35,875
  37,497
  39,209
  41,017
  42,925
  44,935
  47,055
  49,287
  51,638
  54,114
  56,719
  59,459
  62,343
  65,375
  68,564
  71,917
  75,442
Adjusted assets (=assets-cash), $m
  21,142
  21,776
  22,454
  23,194
  23,999
  24,868
  25,803
  26,806
  27,877
  29,018
  30,233
  31,524
  32,892
  34,342
  35,875
  37,497
  39,209
  41,017
  42,925
  44,935
  47,055
  49,287
  51,638
  54,114
  56,719
  59,459
  62,343
  65,375
  68,564
  71,917
  75,442
Revenue / Adjusted assets
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
  0.252
Average production assets, $m
  19,853
  20,431
  21,066
  21,761
  22,516
  23,331
  24,209
  25,149
  26,154
  27,225
  28,365
  29,575
  30,859
  32,219
  33,658
  35,179
  36,786
  38,482
  40,272
  42,158
  44,147
  46,241
  48,447
  50,769
  53,213
  55,785
  58,490
  61,335
  64,327
  67,472
  70,779
Working capital, $m
  1,398
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
Total debt, $m
  8,544
  9,031
  9,552
  10,123
  10,742
  11,412
  12,132
  12,903
  13,728
  14,607
  15,543
  16,536
  17,590
  18,706
  19,887
  21,135
  22,454
  23,846
  25,315
  26,863
  28,495
  30,214
  32,025
  33,930
  35,936
  38,047
  40,267
  42,602
  45,058
  47,639
  50,353
Total liabilities, $m
  16,281
  16,768
  17,289
  17,860
  18,479
  19,149
  19,869
  20,640
  21,465
  22,344
  23,280
  24,273
  25,327
  26,443
  27,624
  28,872
  30,191
  31,583
  33,052
  34,600
  36,232
  37,951
  39,762
  41,667
  43,673
  45,784
  48,004
  50,339
  52,795
  55,376
  58,090
Total equity, $m
  6,238
  5,009
  5,164
  5,335
  5,520
  5,720
  5,935
  6,165
  6,412
  6,674
  6,954
  7,250
  7,565
  7,899
  8,251
  8,624
  9,018
  9,434
  9,873
  10,335
  10,823
  11,336
  11,877
  12,446
  13,045
  13,676
  14,339
  15,036
  15,770
  16,541
  17,352
Total liabilities and equity, $m
  22,519
  21,777
  22,453
  23,195
  23,999
  24,869
  25,804
  26,805
  27,877
  29,018
  30,234
  31,523
  32,892
  34,342
  35,875
  37,496
  39,209
  41,017
  42,925
  44,935
  47,055
  49,287
  51,639
  54,113
  56,718
  59,460
  62,343
  65,375
  68,565
  71,917
  75,442
Debt-to-equity ratio
  1.370
  1.800
  1.850
  1.900
  1.950
  2.000
  2.040
  2.090
  2.140
  2.190
  2.240
  2.280
  2.330
  2.370
  2.410
  2.450
  2.490
  2.530
  2.560
  2.600
  2.630
  2.670
  2.700
  2.730
  2.750
  2.780
  2.810
  2.830
  2.860
  2.880
  2.900
Adjusted equity ratio
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,405
  -10,518
  -10,856
  -11,225
  -11,626
  -12,059
  -12,525
  -13,025
  -13,559
  -14,129
  -14,735
  -15,379
  -16,062
  -16,785
  -17,551
  -18,360
  -19,215
  -20,117
  -21,069
  -22,073
  -23,131
  -24,246
  -25,420
  -26,656
  -27,957
  -29,325
  -30,765
  -32,279
  -33,871
  -35,546
  -37,306
Depreciation, amort., depletion, $m
  2,618
  2,688
  2,772
  2,863
  2,963
  3,070
  3,185
  3,309
  3,441
  3,582
  3,732
  3,891
  4,060
  4,239
  4,429
  4,629
  4,840
  5,063
  5,299
  5,547
  5,809
  6,084
  6,375
  6,680
  7,002
  7,340
  7,696
  8,070
  8,464
  8,878
  9,313
Funds from operations, $m
  2,583
  -7,830
  -8,084
  -8,362
  -8,663
  -8,989
  -9,340
  -9,716
  -10,118
  -10,547
  -11,003
  -11,487
  -12,001
  -12,546
  -13,122
  -13,731
  -14,375
  -15,054
  -15,771
  -16,526
  -17,323
  -18,162
  -19,045
  -19,976
  -20,955
  -21,985
  -23,069
  -24,209
  -25,407
  -26,668
  -27,993
Change in working capital, $m
  153
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
Cash from operations, $m
  2,430
  -7,831
  -8,085
  -8,362
  -8,664
  -8,990
  -9,341
  -9,717
  -10,119
  -10,548
  -11,004
  -11,489
  -12,003
  -12,547
  -13,123
  -13,733
  -14,376
  -15,056
  -15,773
  -16,528
  -17,325
  -18,164
  -19,048
  -19,978
  -20,957
  -21,988
  -23,072
  -24,212
  -25,411
  -26,671
  -27,996
Maintenance CAPEX, $m
  0
  -2,612
  -2,688
  -2,772
  -2,863
  -2,963
  -3,070
  -3,185
  -3,309
  -3,441
  -3,582
  -3,732
  -3,891
  -4,060
  -4,239
  -4,429
  -4,629
  -4,840
  -5,063
  -5,299
  -5,547
  -5,809
  -6,084
  -6,375
  -6,680
  -7,002
  -7,340
  -7,696
  -8,070
  -8,464
  -8,878
New CAPEX, $m
  -1,768
  -578
  -635
  -695
  -755
  -816
  -877
  -940
  -1,005
  -1,071
  -1,140
  -1,211
  -1,284
  -1,360
  -1,439
  -1,521
  -1,607
  -1,696
  -1,789
  -1,887
  -1,988
  -2,095
  -2,206
  -2,322
  -2,444
  -2,572
  -2,705
  -2,845
  -2,992
  -3,146
  -3,307
Cash from investing activities, $m
  -1,660
  -3,190
  -3,323
  -3,467
  -3,618
  -3,779
  -3,947
  -4,125
  -4,314
  -4,512
  -4,722
  -4,943
  -5,175
  -5,420
  -5,678
  -5,950
  -6,236
  -6,536
  -6,852
  -7,186
  -7,535
  -7,904
  -8,290
  -8,697
  -9,124
  -9,574
  -10,045
  -10,541
  -11,062
  -11,610
  -12,185
Free cash flow, $m
  770
  -11,021
  -11,409
  -11,829
  -12,282
  -12,768
  -13,288
  -13,843
  -14,433
  -15,060
  -15,726
  -16,431
  -17,178
  -17,968
  -18,802
  -19,683
  -20,612
  -21,592
  -22,625
  -23,714
  -24,860
  -26,067
  -27,338
  -28,675
  -30,082
  -31,561
  -33,117
  -34,753
  -36,473
  -38,281
  -40,181
Issuance/(repayment) of debt, $m
  -181
  487
  521
  570
  620
  669
  720
  772
  825
  879
  935
  994
  1,054
  1,116
  1,181
  1,248
  1,319
  1,392
  1,469
  1,548
  1,632
  1,719
  1,810
  1,906
  2,006
  2,111
  2,220
  2,335
  2,455
  2,582
  2,714
Issuance/(repurchase) of shares, $m
  0
  10,666
  11,012
  11,395
  11,811
  12,259
  12,740
  13,256
  13,806
  14,391
  15,014
  15,676
  16,376
  17,118
  17,903
  18,733
  19,609
  20,533
  21,508
  22,536
  23,619
  24,760
  25,961
  27,225
  28,556
  29,955
  31,428
  32,976
  34,605
  36,317
  38,116
Cash from financing (excl. dividends), $m  
  -481
  11,153
  11,533
  11,965
  12,431
  12,928
  13,460
  14,028
  14,631
  15,270
  15,949
  16,670
  17,430
  18,234
  19,084
  19,981
  20,928
  21,925
  22,977
  24,084
  25,251
  26,479
  27,771
  29,131
  30,562
  32,066
  33,648
  35,311
  37,060
  38,899
  40,830
Total cash flow (excl. dividends), $m
  289
  132
  125
  136
  148
  160
  172
  185
  197
  210
  224
  238
  252
  267
  283
  299
  316
  333
  351
  370
  390
  411
  433
  456
  480
  505
  531
  559
  588
  618
  649
Retained Cash Flow (-), $m
  1,650
  -10,666
  -11,012
  -11,395
  -11,811
  -12,259
  -12,740
  -13,256
  -13,806
  -14,391
  -15,014
  -15,676
  -16,376
  -17,118
  -17,903
  -18,733
  -19,609
  -20,533
  -21,508
  -22,536
  -23,619
  -24,760
  -25,961
  -27,225
  -28,556
  -29,955
  -31,428
  -32,976
  -34,605
  -36,317
  -38,116
Prev. year cash balance distribution, $m
 
  1,377
  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
 
  -9,157
  -10,887
  -11,259
  -11,663
  -12,099
  -12,568
  -13,071
  -13,608
  -14,181
  -14,791
  -15,438
  -16,124
  -16,851
  -17,621
  -18,434
  -19,293
  -20,200
  -21,157
  -22,165
  -23,228
  -24,348
  -25,528
  -26,769
  -28,076
  -29,450
  -30,897
  -32,418
  -34,017
  -35,699
  -37,467
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  -8,558
  -9,447
  -9,008
  -8,540
  -8,043
  -7,521
  -6,978
  -6,418
  -5,848
  -5,275
  -4,707
  -4,151
  -3,615
  -3,106
  -2,631
  -2,194
  -1,801
  -1,453
  -1,151
  -894
  -680
  -507
  -369
  -262
  -182
  -122
  -80
  -51
  -32
  -19
Current shareholders' claim on cash, %
  100
  53.6
  28.7
  15.4
  8.2
  4.4
  2.3
  1.2
  0.7
  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

Apache Corporation is an independent energy company. The Company explores for, develops, and produces natural gas, crude oil and natural gas liquids. The Company’s production segments include: the United States, Egypt and the United Kingdom North Sea. It also pursues exploration interests in Suriname. In North America, the Company has three onshore regions: The Permian region, The Midcontinent/Gulf Coast region. The Permian region located in West Texas and New Mexico includes the Permian sub-basins, the Midland Basin, Central Basin Platform/Northwest Shelf and Delaware Basin. The Midcontinent/Gulf Coast region includes the Granite Wash, Tonkawa, Canyon Lime, Marmaton, and Cleveland formations of the West Anadarko Basin, the Woodford-SCOOP and Stack plays located in Central Oklahoma, and the Eagle Ford shale in South East Texas.

FINANCIAL RATIOS  of  Apache (APA)

Valuation Ratios
P/E Ratio -11.2
Price to Sales 3
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow 23.8
Growth Rates
Sales Growth Rate -19.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60.2%
Cap. Spend. - 3 Yr. Gr. Rate -28%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 137%
Total Debt to Equity 137%
Interest Coverage -3
Management Effectiveness
Return On Assets -4.6%
Ret/ On Assets - 3 Yr. Avg. -12.6%
Return On Total Capital -9%
Ret/ On T. Cap. - 3 Yr. Avg. -20.3%
Return On Equity -19.9%
Return On Equity - 3 Yr. Avg. -33.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 72%
Gross Margin - 3 Yr. Avg. 75.5%
EBITDA Margin 25.3%
EBITDA Margin - 3 Yr. Avg. -15.6%
Operating Margin -31.5%
Oper. Margin - 3 Yr. Avg. -79.2%
Pre-Tax Margin -31.5%
Pre-Tax Margin - 3 Yr. Avg. -79.2%
Net Profit Margin -26.3%
Net Profit Margin - 3 Yr. Avg. -75.1%
Effective Tax Rate 26.3%
Eff/ Tax Rate - 3 Yr. Avg. 3.7%
Payout Ratio -27%

APA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APA stock intrinsic value calculation we used $5333 million for the last fiscal year's total revenue generated by Apache. The default revenue input number comes from 2016 income statement of Apache. 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 APA stock valuation model: a) initial revenue growth rate of 2.9% 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 7%, whose default value for APA is calculated based on our internal credit rating of Apache, 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 Apache.
    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 APA stock the variable cost ratio is equal to 284.2%.

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 APA 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 Apache.

Corporate tax rate of 27% is the nominal tax rate for Apache. 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 APA 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 APA are equal to 372.3%.

Life of production assets of 7.6 years is the average useful life of capital assets used in Apache 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 APA is equal to 0.4%. 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 - $6238 million for Apache - 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 381.178 million for Apache 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 Apache at the current share price and the inputted number of shares is $15.8 billion.

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Financial statements of APA
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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