Intrinsic value of Concho Resources - CXO

Previous Close

$134.59

  Intrinsic Value

$11.10

stock screener

  Rating & Target

str. sell

-92%

Previous close

$134.59

 
Intrinsic value

$11.10

 
Up/down potential

-92%

 
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 0001), $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 27.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  4,138
  6,393
  9,560
  13,871
  19,570
  26,905
  36,114
  47,420
  61,018
  77,071
  95,704
  117,008
  141,033
  167,802
  197,305
  229,513
  264,380
  301,849
  341,860
  384,352
  429,270
  476,568
  526,208
  578,169
  632,443
  689,037
  747,974
  809,295
  873,054
  939,324
Variable operating expenses, $m
  8,439
  13,037
  19,496
  28,286
  39,906
  54,861
  73,639
  96,692
  124,418
  157,149
  195,140
  238,578
  287,566
  342,147
  402,304
  467,977
  539,070
  615,469
  697,051
  783,692
  875,280
  971,719
  1,072,936
  1,178,884
  1,289,547
  1,404,942
  1,525,115
  1,650,147
  1,780,153
  1,915,277
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
  8,439
  13,037
  19,496
  28,286
  39,906
  54,861
  73,639
  96,692
  124,418
  157,149
  195,140
  238,578
  287,566
  342,147
  402,304
  467,977
  539,070
  615,469
  697,051
  783,692
  875,280
  971,719
  1,072,936
  1,178,884
  1,289,547
  1,404,942
  1,525,115
  1,650,147
  1,780,153
  1,915,277
Operating income, $m
  -4,302
  -6,644
  -9,936
  -14,415
  -20,336
  -27,956
  -37,525
  -49,272
  -63,400
  -80,079
  -99,436
  -121,570
  -146,533
  -174,345
  -204,999
  -238,463
  -274,690
  -313,620
  -355,191
  -399,340
  -446,010
  -495,151
  -546,727
  -600,715
  -657,105
  -715,905
  -777,141
  -840,853
  -907,099
  -975,953
EBITDA, $m
  -2,460
  -3,800
  -5,683
  -8,246
  -11,634
  -15,994
  -21,469
  -28,190
  -36,273
  -45,816
  -56,893
  -69,557
  -83,840
  -99,753
  -117,291
  -136,438
  -157,165
  -179,439
  -203,224
  -228,485
  -255,187
  -283,303
  -312,813
  -343,702
  -375,966
  -409,609
  -444,645
  -481,098
  -519,001
  -558,396
Interest expense (income), $m
  232
  167
  324
  551
  870
  1,305
  1,879
  2,619
  3,547
  4,687
  6,058
  7,677
  9,555
  11,703
  14,125
  16,824
  19,799
  23,046
  26,561
  30,339
  34,372
  38,656
  43,185
  47,954
  52,958
  58,197
  63,669
  69,374
  75,317
  81,499
  87,927
Earnings before tax, $m
  -4,468
  -6,968
  -10,486
  -15,285
  -21,641
  -29,836
  -40,144
  -52,819
  -68,087
  -86,137
  -107,113
  -131,125
  -158,236
  -188,471
  -221,823
  -258,262
  -297,735
  -340,181
  -385,530
  -433,712
  -484,666
  -538,336
  -594,681
  -653,673
  -715,302
  -779,574
  -846,515
  -916,169
  -988,597
  -1,063,880
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
  -4,468
  -6,968
  -10,486
  -15,285
  -21,641
  -29,836
  -40,144
  -52,819
  -68,087
  -86,137
  -107,113
  -131,125
  -158,236
  -188,471
  -221,823
  -258,262
  -297,735
  -340,181
  -385,530
  -433,712
  -484,666
  -538,336
  -594,681
  -653,673
  -715,302
  -779,574
  -846,515
  -916,169
  -988,597
  -1,063,880

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
  22,009
  34,003
  50,852
  73,783
  104,098
  143,110
  192,096
  252,234
  324,563
  409,950
  509,065
  622,381
  750,178
  892,564
  1,049,496
  1,220,816
  1,406,278
  1,605,582
  1,818,405
  2,044,427
  2,283,354
  2,534,935
  2,798,979
  3,075,368
  3,364,057
  3,665,088
  3,978,585
  4,304,759
  4,643,905
  4,996,404
Adjusted assets (=assets-cash), $m
  22,009
  34,003
  50,852
  73,783
  104,098
  143,110
  192,096
  252,234
  324,563
  409,950
  509,065
  622,381
  750,178
  892,564
  1,049,496
  1,220,816
  1,406,278
  1,605,582
  1,818,405
  2,044,427
  2,283,354
  2,534,935
  2,798,979
  3,075,368
  3,364,057
  3,665,088
  3,978,585
  4,304,759
  4,643,905
  4,996,404
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
  19,496
  30,122
  45,047
  65,361
  92,215
  126,775
  170,169
  223,443
  287,516
  363,157
  450,958
  551,340
  664,550
  790,683
  929,703
  1,081,467
  1,245,760
  1,422,314
  1,610,845
  1,811,068
  2,022,723
  2,245,587
  2,479,493
  2,724,333
  2,980,071
  3,246,740
  3,524,453
  3,813,396
  4,113,831
  4,426,095
Working capital, $m
  -290
  -447
  -669
  -971
  -1,370
  -1,883
  -2,528
  -3,319
  -4,271
  -5,395
  -6,699
  -8,191
  -9,872
  -11,746
  -13,811
  -16,066
  -18,507
  -21,129
  -23,930
  -26,905
  -30,049
  -33,360
  -36,835
  -40,472
  -44,271
  -48,233
  -52,358
  -56,651
  -61,114
  -65,753
Total debt, $m
  5,992
  10,202
  16,116
  24,165
  34,805
  48,499
  65,693
  86,801
  112,189
  142,159
  176,949
  216,723
  261,579
  311,557
  366,640
  426,774
  491,871
  561,826
  636,527
  715,861
  799,724
  888,029
  980,709
  1,077,721
  1,179,051
  1,284,713
  1,394,750
  1,509,237
  1,628,278
  1,752,005
Total liabilities, $m
  7,725
  11,935
  17,849
  25,898
  36,538
  50,232
  67,426
  88,534
  113,922
  143,892
  178,682
  218,456
  263,312
  313,290
  368,373
  428,507
  493,604
  563,559
  638,260
  717,594
  801,457
  889,762
  982,442
  1,079,454
  1,180,784
  1,286,446
  1,396,483
  1,510,970
  1,630,011
  1,753,738
Total equity, $m
  14,284
  22,068
  33,003
  47,885
  67,559
  92,878
  124,670
  163,700
  210,642
  266,058
  330,383
  403,925
  486,866
  579,274
  681,123
  792,310
  912,674
  1,042,023
  1,180,145
  1,326,833
  1,481,897
  1,645,173
  1,816,538
  1,995,914
  2,183,273
  2,378,642
  2,582,102
  2,793,788
  3,013,895
  3,242,666
Total liabilities and equity, $m
  22,009
  34,003
  50,852
  73,783
  104,097
  143,110
  192,096
  252,234
  324,564
  409,950
  509,065
  622,381
  750,178
  892,564
  1,049,496
  1,220,817
  1,406,278
  1,605,582
  1,818,405
  2,044,427
  2,283,354
  2,534,935
  2,798,980
  3,075,368
  3,364,057
  3,665,088
  3,978,585
  4,304,758
  4,643,906
  4,996,404
Debt-to-equity ratio
  0.420
  0.460
  0.490
  0.500
  0.520
  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
  -4,468
  -6,968
  -10,486
  -15,285
  -21,641
  -29,836
  -40,144
  -52,819
  -68,087
  -86,137
  -107,113
  -131,125
  -158,236
  -188,471
  -221,823
  -258,262
  -297,735
  -340,181
  -385,530
  -433,712
  -484,666
  -538,336
  -594,681
  -653,673
  -715,302
  -779,574
  -846,515
  -916,169
  -988,597
  -1,063,880
Depreciation, amort., depletion, $m
  1,842
  2,844
  4,252
  6,169
  8,702
  11,962
  16,056
  21,082
  27,127
  34,263
  42,543
  52,013
  62,693
  74,593
  87,708
  102,025
  117,525
  134,181
  151,967
  170,855
  190,823
  211,848
  233,914
  257,013
  281,139
  306,296
  332,496
  359,754
  388,097
  417,556
Funds from operations, $m
  -2,626
  -4,124
  -6,234
  -9,116
  -12,939
  -17,873
  -24,087
  -31,737
  -40,960
  -51,874
  -64,570
  -79,112
  -95,543
  -113,878
  -134,115
  -156,237
  -180,211
  -206,000
  -233,563
  -262,857
  -293,843
  -326,489
  -360,767
  -396,660
  -434,163
  -473,278
  -514,020
  -556,415
  -600,500
  -646,323
Change in working capital, $m
  -109
  -158
  -222
  -302
  -399
  -513
  -645
  -791
  -952
  -1,124
  -1,304
  -1,491
  -1,682
  -1,874
  -2,065
  -2,255
  -2,441
  -2,623
  -2,801
  -2,974
  -3,144
  -3,311
  -3,475
  -3,637
  -3,799
  -3,962
  -4,126
  -4,292
  -4,463
  -4,639
Cash from operations, $m
  -2,518
  -3,966
  -6,012
  -8,814
  -12,540
  -17,360
  -23,443
  -30,946
  -40,008
  -50,750
  -63,265
  -77,621
  -93,861
  -112,004
  -132,050
  -153,982
  -177,770
  -203,377
  -230,762
  -259,883
  -290,699
  -323,178
  -357,292
  -393,023
  -430,364
  -469,316
  -509,894
  -552,122
  -596,037
  -641,685
Maintenance CAPEX, $m
  -1,149
  -1,839
  -2,842
  -4,250
  -6,166
  -8,700
  -11,960
  -16,054
  -21,080
  -27,124
  -34,260
  -42,543
  -52,013
  -62,693
  -74,593
  -87,708
  -102,025
  -117,525
  -134,181
  -151,967
  -170,855
  -190,823
  -211,848
  -233,914
  -257,013
  -281,139
  -306,296
  -332,496
  -359,754
  -388,097
New CAPEX, $m
  -7,312
  -10,626
  -14,925
  -20,314
  -26,854
  -34,560
  -43,394
  -53,274
  -64,074
  -75,640
  -87,802
  -100,381
  -113,210
  -126,133
  -139,020
  -151,765
  -164,292
  -176,555
  -188,531
  -200,223
  -211,654
  -222,864
  -233,906
  -244,840
  -255,737
  -266,670
  -277,713
  -288,943
  -300,435
  -312,263
Cash from investing activities, $m
  -8,461
  -12,465
  -17,767
  -24,564
  -33,020
  -43,260
  -55,354
  -69,328
  -85,154
  -102,764
  -122,062
  -142,924
  -165,223
  -188,826
  -213,613
  -239,473
  -266,317
  -294,080
  -322,712
  -352,190
  -382,509
  -413,687
  -445,754
  -478,754
  -512,750
  -547,809
  -584,009
  -621,439
  -660,189
  -700,360
Free cash flow, $m
  -10,979
  -16,431
  -23,779
  -33,378
  -45,560
  -60,619
  -78,797
  -100,273
  -125,162
  -153,515
  -185,327
  -220,546
  -259,084
  -300,831
  -345,663
  -393,455
  -444,088
  -497,457
  -553,474
  -612,072
  -673,209
  -736,865
  -803,045
  -871,778
  -943,114
  -1,017,125
  -1,093,903
  -1,173,561
  -1,256,226
  -1,342,045
Issuance/(repayment) of debt, $m
  2,908
  4,210
  5,914
  8,049
  10,640
  13,693
  17,194
  21,108
  25,388
  29,971
  34,789
  39,774
  44,857
  49,977
  55,083
  60,133
  65,097
  69,956
  74,701
  79,334
  83,863
  88,305
  92,680
  97,012
  101,330
  105,662
  110,037
  114,487
  119,040
  123,727
Issuance/(repurchase) of shares, $m
  9,837
  14,753
  21,421
  30,168
  41,315
  55,155
  71,935
  91,849
  115,029
  141,553
  171,438
  204,667
  241,176
  280,879
  323,673
  369,448
  418,100
  469,529
  523,652
  580,401
  639,729
  701,612
  766,046
  833,049
  902,661
  974,943
  1,049,975
  1,127,856
  1,208,704
  1,292,651
Cash from financing (excl. dividends), $m  
  12,745
  18,963
  27,335
  38,217
  51,955
  68,848
  89,129
  112,957
  140,417
  171,524
  206,227
  244,441
  286,033
  330,856
  378,756
  429,581
  483,197
  539,485
  598,353
  659,735
  723,592
  789,917
  858,726
  930,061
  1,003,991
  1,080,605
  1,160,012
  1,242,343
  1,327,744
  1,416,378
Total cash flow (excl. dividends), $m
  1,765
  2,532
  3,556
  4,838
  6,395
  8,229
  10,332
  12,684
  15,255
  18,009
  20,901
  23,895
  26,949
  30,026
  33,093
  36,127
  39,109
  42,028
  44,879
  47,662
  50,384
  53,052
  55,681
  58,284
  60,877
  63,480
  66,109
  68,782
  71,518
  74,333
Retained Cash Flow (-), $m
  -9,837
  -14,753
  -21,421
  -30,168
  -41,315
  -55,155
  -71,935
  -91,849
  -115,029
  -141,553
  -171,438
  -204,667
  -241,176
  -280,879
  -323,673
  -369,448
  -418,100
  -469,529
  -523,652
  -580,401
  -639,729
  -701,612
  -766,046
  -833,049
  -902,661
  -974,943
  -1,049,975
  -1,127,856
  -1,208,704
  -1,292,651
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
  -8,071
  -12,221
  -17,866
  -25,329
  -34,920
  -46,926
  -61,603
  -79,164
  -99,774
  -123,544
  -150,537
  -180,772
  -214,227
  -250,853
  -290,579
  -333,321
  -378,991
  -427,501
  -478,773
  -532,738
  -589,346
  -648,560
  -710,366
  -774,766
  -841,784
  -911,463
  -983,866
  -1,059,074
  -1,137,186
  -1,218,318
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
  -7,739
  -11,188
  -15,548
  -20,856
  -27,067
  -34,056
  -41,618
  -49,480
  -57,315
  -64,769
  -71,488
  -77,142
  -81,453
  -84,216
  -85,309
  -84,704
  -82,462
  -78,728
  -73,717
  -67,695
  -60,958
  -53,813
  -46,558
  -39,460
  -32,746
  -26,592
  -21,117
  -16,385
  -12,413
  -9,174
Current shareholders' claim on cash, %
  73.3
  54.6
  41.3
  31.7
  24.7
  19.4
  15.5
  12.4
  10.1
  8.3
  6.8
  5.7
  4.7
  4.0
  3.3
  2.8
  2.4
  2.1
  1.8
  1.5
  1.3
  1.1
  1.0
  0.9
  0.7
  0.6
  0.6
  0.5
  0.4
  0.4

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 -13.4
Price to Sales 12
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 14.2
Price to Free Cash Flow -18.3
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 0001 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 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 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 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 CXO are equal to 471.2%.

Life of production assets of 10.6 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 -7%. 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 200.264 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 $27.0 billion.

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COMPANY NEWS

▶ Dividends Are Making a Comeback in the Oil Patch   [Nov-04-18 09:30AM  Motley Fool]
▶ Concho Resources Earnings, Revenue beat in Q3   [Oct-30-18 07:16PM  Investing.com]
▶ Concho Resources: 3Q Earnings Snapshot   [04:26PM  Associated Press]
▶ With crude around $70, its time to sell your oil stocks   [Oct-21-18 08:28AM  MarketWatch]
▶ Should You Be Holding Concho Resources Inc (NYSE:CXO)?   [Oct-17-18 11:33AM  Simply Wall St.]
▶ Vitol Is Taking a Bearish View of Crude Oil Prices   [Oct-16-18 04:12PM  TheStreet.com]
▶ Comcast and Michael Kors skid; Barrick Gold and Concho rise   [Sep-24-18 04:54PM  Associated Press]
▶ Stocks - Activision Jumps Midday on Call of Duty Enthusiasm   [Sep-11-18 02:45PM  Investing.com]
▶ The Top 5 Buys of T. Boone Pickens' BP Capital   [Aug-17-18 01:13PM  GuruFocus.com]
▶ 6 Growth Stocks For A Slowing Economy   [12:45PM  Investopedia]
▶ Shale Producers Shift Away From Permian As Pipeline Bottleneck Weighs   [Aug-03-18 04:10PM  Investor's Business Daily]
▶ Concho Resources: 2Q Earnings Snapshot   [04:34PM  Associated Press]
▶ The Permian Basin's Growing Pains Are Starting to Sting   [Jul-24-18 08:03PM  Motley Fool]
▶ Oil Prices Spike Again After Brief Respite   [03:00PM  Oilprice.com]
▶ The 3 Worst Oil Stocks of 2018 (So Far)   [Jul-05-18 08:29AM  Motley Fool]
▶ Crude Moves Past its Headwinds   [12:54PM  InvestorPlace]
▶ This Oil Stock Sees More Mergers in Its Future   [May-30-18 04:09PM  Motley Fool]
▶ Buy These Energy Stocks on Crude Oil Price Surge   [May-18-18 01:34PM  Investopedia]
▶ What's working: Growth stocks   [May-08-18 08:34AM  CNBC Videos]
▶ Oil Refiners ETF Pumping Strong This Year   [May-03-18 03:29PM  ETF Trends]
▶ Stock Market News For May 2, 2018   [May-02-18 10:15AM  Zacks]
▶ Viper Energy, Anadarko, Concho Resources Beat Late After Noble Energy Tops   [May-01-18 04:31PM  Investor's Business Daily]
▶ Concho Resources: 1Q Earnings Snapshot   [04:26PM  Associated Press]
▶ 6 Oil Stocks Offer Buy Points As Earnings Come Due   [Apr-27-18 05:27PM  Investor's Business Daily]
▶ WeissLaw LLP Investigates RSP Permian, Inc. Acquisition   [Apr-24-18 06:37PM  PR Newswire]

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