Intrinsic value of Concho Resources - CXO

Previous Close

$147.86

  Intrinsic Value

$14.91

stock screener

  Rating & Target

str. sell

-90%

Previous close

$147.86

 
Intrinsic value

$14.91

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of CXO 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 2017), $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 22.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  58.20
  52.88
  48.09
  43.78
  39.90
  36.41
  33.27
  30.45
  27.90
  25.61
  23.55
  21.69
  20.03
  18.52
  17.17
  15.95
  14.86
  13.87
  12.99
  12.19
  11.47
  10.82
  10.24
  9.72
  9.24
  8.82
  8.44
  8.09
  7.78
  7.51
Revenue, $m
  4,091
  6,254
  9,262
  13,318
  18,632
  25,416
  33,873
  44,186
  56,514
  70,988
  87,706
  106,733
  128,107
  151,835
  177,906
  206,288
  236,939
  269,807
  304,842
  341,992
  381,211
  422,462
  465,718
  510,963
  558,194
  607,422
  658,672
  711,983
  767,405
  825,005
Variable operating expenses, $m
  8,344
  12,755
  18,888
  27,157
  37,993
  51,827
  69,070
  90,098
  115,235
  144,747
  178,831
  217,628
  261,209
  309,591
  362,750
  420,621
  483,117
  550,136
  621,571
  697,319
  777,287
  861,398
  949,596
  1,041,851
  1,138,155
  1,238,531
  1,343,030
  1,451,729
  1,564,734
  1,682,180
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
  8,344
  12,755
  18,888
  27,157
  37,993
  51,827
  69,070
  90,098
  115,235
  144,747
  178,831
  217,628
  261,209
  309,591
  362,750
  420,621
  483,117
  550,136
  621,571
  697,319
  777,287
  861,398
  949,596
  1,041,851
  1,138,155
  1,238,531
  1,343,030
  1,451,729
  1,564,734
  1,682,180
Operating income, $m
  -4,253
  -6,501
  -9,626
  -13,839
  -19,361
  -26,410
  -35,197
  -45,912
  -58,721
  -73,759
  -91,126
  -110,895
  -133,102
  -157,756
  -184,844
  -214,332
  -246,178
  -280,329
  -316,729
  -355,328
  -396,076
  -438,936
  -483,878
  -530,888
  -579,961
  -631,109
  -684,357
  -739,746
  -797,329
  -857,175
EBITDA, $m
  -2,321
  -3,549
  -5,255
  -7,556
  -10,572
  -14,421
  -19,219
  -25,071
  -32,066
  -40,278
  -49,764
  -60,560
  -72,687
  -86,151
  -100,943
  -117,047
  -134,438
  -153,087
  -172,966
  -194,044
  -216,297
  -239,703
  -264,246
  -289,918
  -316,716
  -344,648
  -373,727
  -403,975
  -435,421
  -468,103
Interest expense (income), $m
  232
  167
  319
  537
  840
  1,249
  1,785
  2,469
  3,321
  4,361
  5,604
  7,063
  8,749
  10,667
  12,822
  15,214
  17,843
  20,704
  23,794
  27,108
  30,640
  34,386
  38,340
  42,499
  46,860
  51,421
  56,183
  61,146
  66,313
  71,688
  77,276
Earnings before tax, $m
  -4,420
  -6,820
  -10,163
  -14,680
  -20,610
  -28,195
  -37,666
  -49,233
  -63,082
  -79,363
  -98,189
  -119,644
  -143,769
  -170,578
  -200,058
  -232,175
  -266,882
  -304,123
  -343,837
  -385,968
  -430,462
  -477,276
  -526,377
  -577,747
  -631,382
  -687,292
  -745,503
  -806,059
  -869,017
  -934,451
Tax expense, $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
Net income, $m
  -4,420
  -6,820
  -10,163
  -14,680
  -20,610
  -28,195
  -37,666
  -49,233
  -63,082
  -79,363
  -98,189
  -119,644
  -143,769
  -170,578
  -200,058
  -232,175
  -266,882
  -304,123
  -343,837
  -385,968
  -430,462
  -477,276
  -526,377
  -577,747
  -631,382
  -687,292
  -745,503
  -806,059
  -869,017
  -934,451

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  21,761
  33,268
  49,267
  70,838
  99,106
  135,194
  180,177
  235,032
  300,608
  377,596
  466,519
  567,729
  681,418
  807,635
  946,310
  1,097,278
  1,260,312
  1,435,146
  1,621,501
  1,819,105
  2,027,718
  2,247,139
  2,477,223
  2,717,888
  2,969,118
  3,230,970
  3,503,577
  3,787,141
  4,081,940
  4,388,322
Adjusted assets (=assets-cash), $m
  21,761
  33,268
  49,267
  70,838
  99,106
  135,194
  180,177
  235,032
  300,608
  377,596
  466,519
  567,729
  681,418
  807,635
  946,310
  1,097,278
  1,260,312
  1,435,146
  1,621,501
  1,819,105
  2,027,718
  2,247,139
  2,477,223
  2,717,888
  2,969,118
  3,230,970
  3,503,577
  3,787,141
  4,081,940
  4,388,322
Revenue / Adjusted assets
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
Average production assets, $m
  19,293
  29,496
  43,681
  62,806
  87,868
  119,864
  159,746
  208,381
  266,521
  334,780
  413,619
  503,353
  604,150
  716,056
  839,006
  972,856
  1,117,403
  1,272,412
  1,437,635
  1,612,833
  1,797,791
  1,992,332
  2,196,326
  2,409,701
  2,632,443
  2,864,604
  3,106,299
  3,357,710
  3,619,081
  3,890,722
Working capital, $m
  -335
  -513
  -760
  -1,092
  -1,528
  -2,084
  -2,778
  -3,623
  -4,634
  -5,821
  -7,192
  -8,752
  -10,505
  -12,451
  -14,588
  -16,916
  -19,429
  -22,124
  -24,997
  -28,043
  -31,259
  -34,642
  -38,189
  -41,899
  -45,772
  -49,809
  -54,011
  -58,383
  -62,927
  -67,650
Total debt, $m
  5,905
  9,944
  15,560
  23,131
  33,053
  45,720
  61,509
  80,763
  103,780
  130,803
  162,015
  197,540
  237,445
  281,747
  330,422
  383,412
  440,637
  502,003
  567,414
  636,773
  709,996
  787,013
  867,772
  952,246
  1,040,427
  1,132,338
  1,228,023
  1,327,554
  1,431,028
  1,538,568
Total liabilities, $m
  7,638
  11,677
  17,293
  24,864
  34,786
  47,453
  63,242
  82,496
  105,513
  132,536
  163,748
  199,273
  239,178
  283,480
  332,155
  385,145
  442,370
  503,736
  569,147
  638,506
  711,729
  788,746
  869,505
  953,979
  1,042,160
  1,134,071
  1,229,756
  1,329,287
  1,432,761
  1,540,301
Total equity, $m
  14,123
  21,591
  31,975
  45,974
  64,320
  87,741
  116,935
  152,536
  195,095
  245,060
  302,771
  368,456
  442,240
  524,155
  614,155
  712,134
  817,943
  931,410
  1,052,354
  1,180,599
  1,315,989
  1,458,393
  1,607,718
  1,763,909
  1,926,957
  2,096,900
  2,273,821
  2,457,855
  2,649,179
  2,848,021
Total liabilities and equity, $m
  21,761
  33,268
  49,268
  70,838
  99,106
  135,194
  180,177
  235,032
  300,608
  377,596
  466,519
  567,729
  681,418
  807,635
  946,310
  1,097,279
  1,260,313
  1,435,146
  1,621,501
  1,819,105
  2,027,718
  2,247,139
  2,477,223
  2,717,888
  2,969,117
  3,230,971
  3,503,577
  3,787,142
  4,081,940
  4,388,322
Debt-to-equity ratio
  0.420
  0.460
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.530
  0.530
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
Adjusted equity ratio
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4,420
  -6,820
  -10,163
  -14,680
  -20,610
  -28,195
  -37,666
  -49,233
  -63,082
  -79,363
  -98,189
  -119,644
  -143,769
  -170,578
  -200,058
  -232,175
  -266,882
  -304,123
  -343,837
  -385,968
  -430,462
  -477,276
  -526,377
  -577,747
  -631,382
  -687,292
  -745,503
  -806,059
  -869,017
  -934,451
Depreciation, amort., depletion, $m
  1,932
  2,952
  4,371
  6,283
  8,789
  11,989
  15,977
  20,841
  26,655
  33,481
  41,362
  50,335
  60,415
  71,606
  83,901
  97,286
  111,740
  127,241
  143,764
  161,283
  179,779
  199,233
  219,633
  240,970
  263,244
  286,460
  310,630
  335,771
  361,908
  389,072
Funds from operations, $m
  -2,488
  -3,868
  -5,792
  -8,397
  -11,821
  -16,206
  -21,688
  -28,392
  -36,427
  -45,882
  -56,827
  -69,309
  -83,354
  -98,973
  -116,157
  -134,890
  -155,142
  -176,882
  -200,074
  -224,685
  -250,683
  -278,043
  -306,745
  -336,777
  -368,138
  -400,831
  -434,873
  -470,288
  -507,109
  -545,379
Change in working capital, $m
  -123
  -177
  -247
  -333
  -436
  -556
  -693
  -846
  -1,011
  -1,187
  -1,371
  -1,560
  -1,753
  -1,946
  -2,138
  -2,327
  -2,513
  -2,695
  -2,873
  -3,046
  -3,216
  -3,383
  -3,547
  -3,710
  -3,873
  -4,037
  -4,203
  -4,371
  -4,545
  -4,723
Cash from operations, $m
  -2,364
  -3,690
  -5,546
  -8,064
  -11,385
  -15,650
  -20,995
  -27,547
  -35,416
  -44,696
  -55,456
  -67,748
  -81,601
  -97,027
  -114,020
  -132,562
  -152,629
  -174,186
  -197,201
  -221,638
  -247,467
  -274,660
  -303,198
  -333,067
  -364,265
  -396,795
  -430,671
  -465,917
  -502,565
  -540,655
Maintenance CAPEX, $m
  -1,220
  -1,929
  -2,950
  -4,368
  -6,281
  -8,787
  -11,986
  -15,975
  -20,838
  -26,652
  -33,478
  -41,362
  -50,335
  -60,415
  -71,606
  -83,901
  -97,286
  -111,740
  -127,241
  -143,764
  -161,283
  -179,779
  -199,233
  -219,633
  -240,970
  -263,244
  -286,460
  -310,630
  -335,771
  -361,908
New CAPEX, $m
  -7,097
  -10,202
  -14,185
  -19,125
  -25,062
  -31,996
  -39,882
  -48,635
  -58,140
  -68,258
  -78,840
  -89,734
  -100,798
  -111,905
  -122,950
  -133,850
  -144,548
  -155,009
  -165,223
  -175,198
  -184,958
  -194,541
  -203,994
  -213,375
  -222,743
  -232,161
  -241,695
  -251,410
  -261,371
  -271,641
Cash from investing activities, $m
  -8,317
  -12,131
  -17,135
  -23,493
  -31,343
  -40,783
  -51,868
  -64,610
  -78,978
  -94,910
  -112,318
  -131,096
  -151,133
  -172,320
  -194,556
  -217,751
  -241,834
  -266,749
  -292,464
  -318,962
  -346,241
  -374,320
  -403,227
  -433,008
  -463,713
  -495,405
  -528,155
  -562,040
  -597,142
  -633,549
Free cash flow, $m
  -10,681
  -15,822
  -22,680
  -31,557
  -42,728
  -56,433
  -72,863
  -92,157
  -114,395
  -139,606
  -167,774
  -198,844
  -232,734
  -269,347
  -308,575
  -350,313
  -394,462
  -440,936
  -489,665
  -540,600
  -593,708
  -648,980
  -706,425
  -766,075
  -827,977
  -892,200
  -958,826
  -1,027,957
  -1,099,707
  -1,174,204
Issuance/(repayment) of debt, $m
  2,821
  4,039
  5,616
  7,571
  9,922
  12,667
  15,789
  19,254
  23,017
  27,023
  31,212
  35,525
  39,905
  44,302
  48,675
  52,990
  57,225
  61,367
  65,410
  69,359
  73,223
  77,017
  80,760
  84,473
  88,182
  91,910
  95,685
  99,531
  103,474
  107,540
Issuance/(repurchase) of shares, $m
  9,628
  14,288
  20,547
  28,679
  38,956
  51,616
  66,859
  84,834
  105,641
  129,328
  155,900
  185,329
  217,553
  252,493
  290,058
  330,154
  372,692
  417,590
  464,781
  514,213
  565,852
  619,680
  675,702
  733,938
  794,430
  857,234
  922,425
  990,092
  1,060,342
  1,133,293
Cash from financing (excl. dividends), $m  
  12,449
  18,327
  26,163
  36,250
  48,878
  64,283
  82,648
  104,088
  128,658
  156,351
  187,112
  220,854
  257,458
  296,795
  338,733
  383,144
  429,917
  478,957
  530,191
  583,572
  639,075
  696,697
  756,462
  818,411
  882,612
  949,144
  1,018,110
  1,089,623
  1,163,816
  1,240,833
Total cash flow (excl. dividends), $m
  1,768
  2,505
  3,482
  4,694
  6,150
  7,851
  9,785
  11,932
  14,263
  16,745
  19,338
  22,010
  24,724
  27,448
  30,157
  32,831
  35,455
  38,021
  40,526
  42,973
  45,367
  47,717
  50,036
  52,337
  54,635
  56,945
  59,283
  61,666
  64,110
  66,628
Retained Cash Flow (-), $m
  -9,628
  -14,288
  -20,547
  -28,679
  -38,956
  -51,616
  -66,859
  -84,834
  -105,641
  -129,328
  -155,900
  -185,329
  -217,553
  -252,493
  -290,058
  -330,154
  -372,692
  -417,590
  -464,781
  -514,213
  -565,852
  -619,680
  -675,702
  -733,938
  -794,430
  -857,234
  -922,425
  -990,092
  -1,060,342
  -1,133,293
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
  59
  94
  144
  213
  306
  429
  585
  779
  1,016
  1,300
  1,633
  2,017
  2,455
  2,946
  3,492
  4,092
  4,745
  5,450
  6,206
  7,011
  7,866
  8,768
  9,717
  10,712
  11,752
  12,838
  13,971
  15,149
  16,376
  17,650
Cash available for distribution, $m
  -7,860
  -11,783
  -17,065
  -23,985
  -32,806
  -43,766
  -57,074
  -72,902
  -91,377
  -112,583
  -136,562
  -163,319
  -192,830
  -225,045
  -259,900
  -297,323
  -337,237
  -379,569
  -424,255
  -471,241
  -520,485
  -571,963
  -625,666
  -681,602
  -739,795
  -800,289
  -863,142
  -928,426
  -996,232
  -1,066,664
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
  -7,536
  -10,787
  -14,851
  -19,750
  -25,429
  -31,763
  -38,559
  -45,566
  -52,491
  -59,023
  -64,851
  -69,694
  -73,317
  -75,551
  -76,302
  -75,556
  -73,377
  -69,901
  -65,323
  -59,880
  -53,835
  -47,458
  -41,007
  -34,715
  -28,779
  -23,348
  -18,525
  -14,364
  -10,875
  -8,032
Current shareholders' claim on cash, %
  69.6
  49.4
  35.6
  26.2
  19.5
  14.7
  11.2
  8.7
  6.8
  5.4
  4.3
  3.4
  2.8
  2.2
  1.8
  1.5
  1.2
  1.0
  0.9
  0.7
  0.6
  0.5
  0.4
  0.4
  0.3
  0.3
  0.2
  0.2
  0.2
  0.1

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties. The Company's four operating areas include the Northern Delaware Basin, the Southern Delaware Basin, the Midland Basin and the New Mexico Shelf. As of December 31, 2016, the Company's operations were focused in the Permian Basin, which underlies an area of Southeast New Mexico and West Texas approximately 250 miles wide and 300 miles long. The Permian Basin is an oil and natural gas producing region in the United States and is characterized by multiple producing horizons and enhanced recovery potential. As of December 31, 2016, the Company produced approximately 55.1 million barrels of oil equivalent (MMBoe) of oil and natural gas. As of December 31, 2016, all of its 720 MMBoe total estimated proved reserves were located in its core operating areas and consisted of approximately 59.5% oil and 40.5% natural gas.

FINANCIAL RATIOS  of  Concho Resources (CXO)

Valuation Ratios
P/E Ratio -14.8
Price to Sales 13.2
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 15.6
Price to Free Cash Flow -20.1
Growth Rates
Sales Growth Rate -9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.1%
Cap. Spend. - 3 Yr. Gr. Rate 5.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 36%
Total Debt to Equity 36%
Interest Coverage -9
Management Effectiveness
Return On Assets -10.6%
Ret/ On Assets - 3 Yr. Avg. -0.9%
Return On Total Capital -14.2%
Ret/ On T. Cap. - 3 Yr. Avg. -2.3%
Return On Equity -20.1%
Return On Equity - 3 Yr. Avg. -2.4%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 72.4%
Gross Margin - 3 Yr. Avg. 74%
EBITDA Margin -57.5%
EBITDA Margin - 3 Yr. Avg. 34.8%
Operating Margin -130%
Oper. Margin - 3 Yr. Avg. -23.7%
Pre-Tax Margin -143.1%
Pre-Tax Margin - 3 Yr. Avg. -35.2%
Net Profit Margin -89.4%
Net Profit Margin - 3 Yr. Avg. -21.8%
Effective Tax Rate 37.5%
Eff/ Tax Rate - 3 Yr. Avg. 35.5%
Payout Ratio 0%

CXO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CXO stock intrinsic value calculation we used $2586 million for the last fiscal year's total revenue generated by Concho Resources. The default revenue input number comes from 2017 income statement of Concho 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 CXO stock valuation model: a) initial revenue growth rate of 58.2% 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 CXO is calculated based on our internal credit rating of Concho 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 Concho 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 CXO stock the variable cost ratio is equal to 204%.

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 CXO 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 5.4% for Concho Resources.

Corporate tax rate of 27% is the nominal tax rate for Concho 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 CXO stock is equal to 2.3%.

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 CXO are equal to 471.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Concho 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 CXO is equal to -8.2%. 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 - $8915 million for Concho 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 149 million for Concho 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 Concho Resources at the current share price and the inputted number of shares is $22.0 billion.

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