Intrinsic value of Devon Energy - DVN

Previous Close

$42.41

  Intrinsic Value

$377.81

stock screener

  Rating & Target

str. buy

+791%

Previous close

$42.41

 
Intrinsic value

$377.81

 
Up/down potential

+791%

 
Rating

str. buy

We calculate the intrinsic value of DVN 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 22.3

 

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, %
  35.40
  32.36
  29.62
  27.16
  24.95
  22.95
  21.16
  19.54
  18.09
  16.78
  15.60
  14.54
  13.59
  12.73
  11.95
  11.26
  10.63
  10.07
  9.56
  9.11
  8.70
  8.33
  7.99
  7.69
  7.42
  7.18
  6.96
  6.77
  6.59
  6.43
Revenue, $m
  18,887
  24,999
  32,404
  41,206
  51,485
  63,301
  76,693
  91,679
  108,260
  126,424
  146,146
  167,395
  190,137
  214,336
  239,959
  266,977
  295,365
  325,108
  356,197
  388,635
  422,430
  457,603
  494,182
  532,206
  571,722
  612,786
  655,461
  699,821
  745,946
  793,924
Variable operating expenses, $m
  9,454
  12,436
  16,049
  20,343
  25,359
  31,124
  37,658
  44,970
  53,060
  61,923
  71,307
  81,675
  92,771
  104,578
  117,080
  130,262
  144,113
  158,625
  173,794
  189,621
  206,110
  223,272
  241,120
  259,672
  278,953
  298,988
  319,810
  341,454
  363,959
  387,369
Fixed operating expenses, $m
  5,754
  5,880
  6,010
  6,142
  6,277
  6,415
  6,556
  6,701
  6,848
  6,999
  7,153
  7,310
  7,471
  7,635
  7,803
  7,975
  8,150
  8,330
  8,513
  8,700
  8,892
  9,087
  9,287
  9,491
  9,700
  9,914
  10,132
  10,355
  10,582
  10,815
Total operating expenses, $m
  15,208
  18,316
  22,059
  26,485
  31,636
  37,539
  44,214
  51,671
  59,908
  68,922
  78,460
  88,985
  100,242
  112,213
  124,883
  138,237
  152,263
  166,955
  182,307
  198,321
  215,002
  232,359
  250,407
  269,163
  288,653
  308,902
  329,942
  351,809
  374,541
  398,184
Operating income, $m
  3,680
  6,683
  10,346
  14,721
  19,849
  25,762
  32,479
  40,008
  48,352
  57,503
  67,686
  78,410
  89,895
  102,123
  115,076
  128,740
  143,101
  158,153
  173,890
  190,313
  207,428
  225,244
  243,776
  263,043
  283,069
  303,884
  325,519
  348,012
  371,404
  395,740
EBITDA, $m
  7,064
  11,086
  15,983
  21,824
  28,665
  36,546
  45,494
  55,520
  66,626
  78,803
  92,034
  106,298
  121,572
  137,831
  155,053
  173,218
  192,309
  212,316
  233,232
  255,060
  277,805
  301,480
  326,106
  351,708
  378,318
  405,974
  434,719
  464,602
  495,679
  528,008
Interest expense (income), $m
  566
  562
  964
  1,461
  2,063
  2,778
  3,614
  4,575
  5,663
  6,881
  8,229
  9,706
  11,309
  13,037
  14,885
  16,853
  18,936
  21,132
  23,440
  25,858
  28,385
  31,022
  33,769
  36,628
  39,602
  42,693
  45,906
  49,244
  52,713
  56,319
  60,069
Earnings before tax, $m
  3,118
  5,719
  8,885
  12,658
  17,071
  22,148
  27,904
  34,345
  41,471
  49,273
  57,980
  67,101
  76,859
  87,238
  98,223
  109,804
  121,969
  134,713
  148,032
  161,928
  176,406
  191,475
  207,147
  223,441
  240,376
  257,978
  276,275
  295,299
  315,085
  335,672
Tax expense, $m
  842
  1,544
  2,399
  3,418
  4,609
  5,980
  7,534
  9,273
  11,197
  13,304
  15,655
  18,117
  20,752
  23,554
  26,520
  29,647
  32,932
  36,373
  39,969
  43,721
  47,630
  51,698
  55,930
  60,329
  64,902
  69,654
  74,594
  79,731
  85,073
  90,631
Net income, $m
  2,276
  4,175
  6,486
  9,240
  12,462
  16,168
  20,370
  25,072
  30,273
  35,969
  42,326
  48,984
  56,107
  63,683
  71,703
  80,157
  89,038
  98,340
  108,064
  118,208
  128,776
  139,777
  151,217
  163,112
  175,475
  188,324
  201,681
  215,569
  230,012
  245,040

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
  40,970
  54,227
  70,292
  89,384
  111,681
  137,313
  166,362
  198,870
  234,838
  274,238
  317,019
  363,113
  412,445
  464,938
  520,519
  579,125
  640,704
  705,222
  772,662
  843,025
  916,334
  992,631
  1,071,979
  1,154,461
  1,240,178
  1,329,253
  1,421,824
  1,518,050
  1,618,104
  1,722,179
Adjusted assets (=assets-cash), $m
  40,970
  54,227
  70,292
  89,384
  111,681
  137,313
  166,362
  198,870
  234,838
  274,238
  317,019
  363,113
  412,445
  464,938
  520,519
  579,125
  640,704
  705,222
  772,662
  843,025
  916,334
  992,631
  1,071,979
  1,154,461
  1,240,178
  1,329,253
  1,421,824
  1,518,050
  1,618,104
  1,722,179
Revenue / Adjusted assets
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
Average production assets, $m
  31,466
  41,648
  53,986
  68,649
  85,774
  105,460
  127,771
  152,737
  180,362
  210,622
  243,479
  278,880
  316,768
  357,084
  399,772
  444,783
  492,078
  541,629
  593,424
  647,465
  703,768
  762,366
  823,308
  886,656
  952,489
  1,020,901
  1,091,998
  1,165,902
  1,242,746
  1,322,678
Working capital, $m
  -2,701
  -3,575
  -4,634
  -5,892
  -7,362
  -9,052
  -10,967
  -13,110
  -15,481
  -18,079
  -20,899
  -23,937
  -27,190
  -30,650
  -34,314
  -38,178
  -42,237
  -46,490
  -50,936
  -55,575
  -60,407
  -65,437
  -70,668
  -76,106
  -81,756
  -87,628
  -93,731
  -100,074
  -106,670
  -113,531
Total debt, $m
  17,852
  27,053
  38,201
  51,451
  66,926
  84,714
  104,875
  127,435
  152,397
  179,740
  209,430
  241,419
  275,656
  312,086
  350,659
  391,332
  434,068
  478,843
  525,646
  574,478
  625,355
  678,305
  733,372
  790,615
  850,103
  911,921
  976,165
  1,042,946
  1,112,383
  1,184,611
Total liabilities, $m
  28,433
  37,634
  48,782
  62,032
  77,507
  95,295
  115,456
  138,016
  162,978
  190,321
  220,011
  252,000
  286,237
  322,667
  361,240
  401,913
  444,649
  489,424
  536,227
  585,059
  635,936
  688,886
  743,953
  801,196
  860,684
  922,502
  986,746
  1,053,527
  1,122,964
  1,195,192
Total equity, $m
  12,537
  16,594
  21,509
  27,351
  34,174
  42,018
  50,907
  60,854
  71,860
  83,917
  97,008
  111,113
  126,208
  142,271
  159,279
  177,212
  196,056
  215,798
  236,435
  257,966
  280,398
  303,745
  328,026
  353,265
  379,495
  406,751
  435,078
  464,523
  495,140
  526,987
Total liabilities and equity, $m
  40,970
  54,228
  70,291
  89,383
  111,681
  137,313
  166,363
  198,870
  234,838
  274,238
  317,019
  363,113
  412,445
  464,938
  520,519
  579,125
  640,705
  705,222
  772,662
  843,025
  916,334
  992,631
  1,071,979
  1,154,461
  1,240,179
  1,329,253
  1,421,824
  1,518,050
  1,618,104
  1,722,179
Debt-to-equity ratio
  1.420
  1.630
  1.780
  1.880
  1.960
  2.020
  2.060
  2.090
  2.120
  2.140
  2.160
  2.170
  2.180
  2.190
  2.200
  2.210
  2.210
  2.220
  2.220
  2.230
  2.230
  2.230
  2.240
  2.240
  2.240
  2.240
  2.240
  2.250
  2.250
  2.250
Adjusted equity ratio
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,276
  4,175
  6,486
  9,240
  12,462
  16,168
  20,370
  25,072
  30,273
  35,969
  42,326
  48,984
  56,107
  63,683
  71,703
  80,157
  89,038
  98,340
  108,064
  118,208
  128,776
  139,777
  151,217
  163,112
  175,475
  188,324
  201,681
  215,569
  230,012
  245,040
Depreciation, amort., depletion, $m
  3,385
  4,403
  5,637
  7,103
  8,816
  10,784
  13,015
  15,512
  18,274
  21,301
  24,348
  27,888
  31,677
  35,708
  39,977
  44,478
  49,208
  54,163
  59,342
  64,747
  70,377
  76,237
  82,331
  88,666
  95,249
  102,090
  109,200
  116,590
  124,275
  132,268
Funds from operations, $m
  5,661
  8,578
  12,123
  16,343
  21,277
  26,952
  33,385
  40,584
  48,548
  57,270
  66,673
  76,872
  87,784
  99,392
  111,680
  124,635
  138,245
  152,503
  167,406
  182,954
  199,153
  216,013
  233,548
  251,777
  270,724
  290,414
  310,881
  332,159
  354,287
  377,308
Change in working capital, $m
  -706
  -874
  -1,059
  -1,259
  -1,470
  -1,690
  -1,915
  -2,143
  -2,371
  -2,597
  -2,820
  -3,039
  -3,252
  -3,460
  -3,664
  -3,863
  -4,059
  -4,253
  -4,446
  -4,639
  -4,833
  -5,030
  -5,231
  -5,437
  -5,651
  -5,872
  -6,103
  -6,343
  -6,596
  -6,861
Cash from operations, $m
  6,367
  9,452
  13,182
  17,602
  22,747
  28,642
  35,300
  42,727
  50,919
  59,867
  69,494
  79,910
  91,036
  102,852
  115,344
  128,499
  142,305
  156,757
  171,852
  187,593
  203,986
  221,043
  238,779
  257,215
  276,374
  296,286
  316,983
  338,502
  360,883
  384,169
Maintenance CAPEX, $m
  -2,324
  -3,147
  -4,165
  -5,399
  -6,865
  -8,577
  -10,546
  -12,777
  -15,274
  -18,036
  -21,062
  -24,348
  -27,888
  -31,677
  -35,708
  -39,977
  -44,478
  -49,208
  -54,163
  -59,342
  -64,747
  -70,377
  -76,237
  -82,331
  -88,666
  -95,249
  -102,090
  -109,200
  -116,590
  -124,275
New CAPEX, $m
  -8,231
  -10,182
  -12,338
  -14,663
  -17,125
  -19,686
  -22,311
  -24,967
  -27,624
  -30,260
  -32,857
  -35,401
  -37,888
  -40,316
  -42,688
  -45,011
  -47,295
  -49,552
  -51,795
  -54,041
  -56,303
  -58,598
  -60,941
  -63,348
  -65,833
  -68,412
  -71,097
  -73,904
  -76,844
  -79,932
Cash from investing activities, $m
  -10,555
  -13,329
  -16,503
  -20,062
  -23,990
  -28,263
  -32,857
  -37,744
  -42,898
  -48,296
  -53,919
  -59,749
  -65,776
  -71,993
  -78,396
  -84,988
  -91,773
  -98,760
  -105,958
  -113,383
  -121,050
  -128,975
  -137,178
  -145,679
  -154,499
  -163,661
  -173,187
  -183,104
  -193,434
  -204,207
Free cash flow, $m
  -4,187
  -3,877
  -3,321
  -2,460
  -1,242
  379
  2,443
  4,983
  8,021
  11,571
  15,575
  20,161
  25,259
  30,860
  36,948
  43,511
  50,532
  57,997
  65,894
  74,210
  82,936
  92,068
  101,601
  111,536
  121,875
  132,626
  143,796
  155,399
  167,448
  179,963
Issuance/(repayment) of debt, $m
  7,446
  9,201
  11,149
  13,250
  15,474
  17,788
  20,160
  22,560
  24,962
  27,344
  29,690
  31,989
  34,236
  36,430
  38,573
  40,672
  42,736
  44,776
  46,803
  48,832
  50,876
  52,950
  55,068
  57,242
  59,488
  61,818
  64,245
  66,781
  69,438
  72,228
Issuance/(repurchase) of shares, $m
  1,007
  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 from financing (excl. dividends), $m  
  8,453
  9,201
  11,149
  13,250
  15,474
  17,788
  20,160
  22,560
  24,962
  27,344
  29,690
  31,989
  34,236
  36,430
  38,573
  40,672
  42,736
  44,776
  46,803
  48,832
  50,876
  52,950
  55,068
  57,242
  59,488
  61,818
  64,245
  66,781
  69,438
  72,228
Total cash flow (excl. dividends), $m
  4,265
  5,324
  7,828
  10,790
  14,232
  18,167
  22,604
  27,544
  32,983
  38,914
  45,265
  52,150
  59,496
  67,290
  75,522
  84,183
  93,268
  102,773
  112,697
  123,042
  133,813
  145,018
  156,669
  168,778
  181,363
  194,444
  208,041
  222,179
  236,886
  252,190
Retained Cash Flow (-), $m
  -3,283
  -4,057
  -4,916
  -5,842
  -6,823
  -7,843
  -8,889
  -9,947
  -11,006
  -12,056
  -13,091
  -14,105
  -15,096
  -16,063
  -17,008
  -17,933
  -18,843
  -19,743
  -20,637
  -21,531
  -22,433
  -23,347
  -24,280
  -25,239
  -26,230
  -27,257
  -28,327
  -29,445
  -30,617
  -31,847
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
  195
  264
  350
  454
  577
  721
  886
  1,074
  1,284
  1,516
  1,770
  2,046
  2,344
  2,662
  3,001
  3,359
  3,738
  4,135
  4,552
  4,987
  5,441
  5,914
  6,406
  6,919
  7,451
  8,004
  8,579
  9,176
  9,797
  10,443
Cash available for distribution, $m
  983
  1,267
  2,912
  4,948
  7,409
  10,324
  13,715
  17,596
  21,977
  26,858
  32,174
  38,046
  44,400
  51,227
  58,514
  66,250
  74,425
  83,030
  92,060
  101,511
  111,380
  121,671
  132,388
  143,539
  155,134
  167,187
  179,714
  192,734
  206,269
  220,343
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  932
  1,135
  2,448
  3,882
  5,391
  6,921
  8,410
  9,794
  11,014
  12,014
  12,728
  13,180
  13,330
  13,180
  12,751
  12,075
  11,195
  10,164
  9,034
  7,861
  6,693
  5,574
  4,538
  3,609
  2,803
  2,123
  1,567
  1,126
  787
  535
Current shareholders' claim on cash, %
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7

Devon Energy Corporation is an independent energy company. The Company also controls EnLink Midstream Partners, L.P. (EnLink). The Company's segments include U.S., Canada and EnLink. The Company is engaged primarily in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs). The Company's operations are concentrated in various North American onshore areas in the United States and Canada. The Company's U.S. and Canada segments are primarily engaged in oil and gas exploration and production activities. EnLink is a master limited partnership (MLP) with a midstream business and operations located across the United States. EnLink focuses on providing gathering, transmission, processing, storage, fractionation and marketing to upstream oil and natural gas producers. The Company's properties include Barnett Shale, Delaware Basin, Eagle Ford, Heavy Oil, Rockies Oil and STACK.

FINANCIAL RATIOS  of  Devon Energy (DVN)

Valuation Ratios
P/E Ratio -6.7
Price to Sales 2.2
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 12.7
Price to Free Cash Flow -38
Growth Rates
Sales Growth Rate -21.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -56.1%
Cap. Spend. - 3 Yr. Gr. Rate -19.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 171.3%
Total Debt to Equity 171.3%
Interest Coverage -6
Management Effectiveness
Return On Assets -10%
Ret/ On Assets - 3 Yr. Avg. -13.8%
Return On Total Capital -18.3%
Ret/ On T. Cap. - 3 Yr. Avg. -22.7%
Return On Equity -50.9%
Return On Equity - 3 Yr. Avg. -48.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 83.3%
Gross Margin - 3 Yr. Avg. 84%
EBITDA Margin -14.7%
EBITDA Margin - 3 Yr. Avg. -36.2%
Operating Margin -30.7%
Oper. Margin - 3 Yr. Avg. -54.9%
Pre-Tax Margin -37.6%
Pre-Tax Margin - 3 Yr. Avg. -59.6%
Net Profit Margin -32%
Net Profit Margin - 3 Yr. Avg. -44.6%
Effective Tax Rate 4.5%
Eff/ Tax Rate - 3 Yr. Avg. 30.4%
Payout Ratio -6.7%

DVN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DVN stock intrinsic value calculation we used $13949 million for the last fiscal year's total revenue generated by Devon Energy. The default revenue input number comes from 2017 income statement of Devon 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 DVN stock valuation model: a) initial revenue growth rate of 35.4% 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 5.4%, whose default value for DVN is calculated based on our internal credit rating of Devon 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 Devon 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 DVN stock the variable cost ratio is equal to 50.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5630 million in the base year in the intrinsic value calculation for DVN 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 Devon Energy.

Corporate tax rate of 27% is the nominal tax rate for Devon 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 DVN stock is equal to 1.4%.

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 DVN are equal to 166.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Devon 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 DVN is equal to -14.3%. 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 - $9254 million for Devon 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 526 million for Devon 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 Devon Energy at the current share price and the inputted number of shares is $22.3 billion.

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COMPANY NEWS

▶ Devon Energy selling Delaware Basin properties to Houston co. for $215M   [Aug-15-18 09:31AM  American City Business Journals]
▶ Locked Into Hedges, Shale Misses Out On Oil Price Rally   [Aug-05-18 07:00PM  Oilprice.com]
▶ Devon Energy: 2Q Earnings Snapshot   [04:26PM  Associated Press]
▶ Devon Energy Q2 Earnings Preview   [07:54AM  Benzinga]
▶ United Continental and Grainger rise; Devon Energy skids   [Jul-18-18 04:29PM  Associated Press]
▶ Devon Energy Corp Stock: What Am I Missing?   [Jul-17-18 07:16PM  Motley Fool]
▶ 1 Elite Oil Stock You're Probably Overlooking   [Jul-14-18 11:18AM  Motley Fool]
▶ ConocoPhillips Is Emphatic: Its Stock Is Still Cheap   [Jul-12-18 12:30PM  Motley Fool]
▶ 3 No-Brainer Stocks to Buy in Oil and Gas   [06:02AM  Motley Fool]
▶ Bulls bet on this energy name   [Jun-28-18 02:05PM  CNBC Videos]
▶ 2 Top Stocks in the Oil Patch   [Jun-23-18 07:19AM  Motley Fool]
▶ [$$] Oil extends gains as Opec reaches deal to raise output   [Jun-21-18 09:31PM  Financial Times]
▶ 3 Top Oil Stocks to Buy in June   [06:05AM  Motley Fool]
▶ 3 Incredibly Cheap Oil and Gas Stocks   [Jun-11-18 07:19AM  Motley Fool]
▶ 3 Oil Stocks You May Be Overlooking   [Jun-10-18 06:44PM  Motley Fool]
▶ These Stocks Add To Hopes For $1 Trillion Investor Windfall This Year   [Jun-06-18 04:22PM  Investor's Business Daily]
▶ Devon Energy to Present at J.P. Morgan Energy Conference   [Jun-04-18 12:29PM  Business Wire]
▶ Devon CEO talks oil boom   [06:33AM  CNBC Videos]
▶ Oil Stocks: Why This Time Is Different   [May-12-18 11:15AM  Motley Fool]
▶ Caterpillar, Alphabet, Devon Energy & Qualcomm   [May-11-18 01:08PM  CNBC Videos]
▶ Top 4 Oil Stocks for May 2018   [05:29AM  Investopedia]
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