Intrinsic value of Devon Energy - DVN

Previous Close

$34.93

  Intrinsic Value

$0.93

stock screener

  Rating & Target

str. sell

-97%

  Value-price divergence*

-66%

Previous close

$34.93

 
Intrinsic value

$0.93

 
Up/down potential

-97%

 
Rating

str. sell

 
Value-price divergence*

-66%

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

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 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 18.4

 

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, %
  -21.61
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  10,304
  10,510
  10,752
  11,028
  11,338
  11,682
  12,059
  12,470
  12,915
  13,393
  13,907
  14,457
  15,044
  15,669
  16,333
  17,037
  17,784
  18,574
  19,410
  20,293
  21,226
  22,210
  23,247
  24,341
  25,493
  26,707
  27,985
  29,330
  30,745
  32,234
  33,800
Variable operating expenses, $m
 
  27,077
  27,690
  28,392
  29,179
  30,052
  31,009
  32,052
  33,180
  34,396
  35,701
  36,700
  38,190
  39,776
  41,461
  43,250
  45,145
  47,152
  49,273
  51,515
  53,882
  56,380
  59,014
  61,790
  64,715
  67,796
  71,040
  74,454
  78,047
  81,827
  85,802
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
  13,468
  27,077
  27,690
  28,392
  29,179
  30,052
  31,009
  32,052
  33,180
  34,396
  35,701
  36,700
  38,190
  39,776
  41,461
  43,250
  45,145
  47,152
  49,273
  51,515
  53,882
  56,380
  59,014
  61,790
  64,715
  67,796
  71,040
  74,454
  78,047
  81,827
  85,802
Operating income, $m
  -3,164
  -16,566
  -16,938
  -17,364
  -17,841
  -18,370
  -18,950
  -19,582
  -20,266
  -21,003
  -21,793
  -22,243
  -23,146
  -24,107
  -25,129
  -26,213
  -27,361
  -28,577
  -29,863
  -31,222
  -32,656
  -34,170
  -35,766
  -37,449
  -39,222
  -41,089
  -43,055
  -45,124
  -47,302
  -49,593
  -52,002
EBITDA, $m
  -1,372
  -14,708
  -15,046
  -15,433
  -15,867
  -16,348
  -16,876
  -17,451
  -18,073
  -18,743
  -19,462
  -20,232
  -21,053
  -21,927
  -22,857
  -23,843
  -24,887
  -25,993
  -27,163
  -28,399
  -29,704
  -31,081
  -32,533
  -34,063
  -35,676
  -37,374
  -39,162
  -41,045
  -43,025
  -45,109
  -47,301
Interest expense (income), $m
  566
  498
  517
  540
  566
  596
  628
  664
  703
  746
  791
  840
  892
  948
  1,007
  1,070
  1,137
  1,208
  1,283
  1,363
  1,447
  1,535
  1,629
  1,728
  1,832
  1,941
  2,056
  2,178
  2,306
  2,440
  2,582
Earnings before tax, $m
  -3,877
  -17,064
  -17,455
  -17,904
  -18,407
  -18,965
  -19,578
  -20,246
  -20,969
  -21,748
  -22,585
  -23,083
  -24,038
  -25,055
  -26,136
  -27,283
  -28,499
  -29,786
  -31,147
  -32,585
  -34,103
  -35,706
  -37,395
  -39,177
  -41,053
  -43,030
  -45,111
  -47,302
  -49,608
  -52,033
  -54,584
Tax expense, $m
  -173
  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
  -3,302
  -17,064
  -17,455
  -17,904
  -18,407
  -18,965
  -19,578
  -20,246
  -20,969
  -21,748
  -22,585
  -23,083
  -24,038
  -25,055
  -26,136
  -27,283
  -28,499
  -29,786
  -31,147
  -32,585
  -34,103
  -35,706
  -37,395
  -39,177
  -41,053
  -43,030
  -45,111
  -47,302
  -49,608
  -52,033
  -54,584

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,959
  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
  25,913
  24,442
  25,004
  25,647
  26,368
  27,168
  28,045
  29,000
  30,034
  31,148
  32,343
  33,622
  34,986
  36,439
  37,983
  39,622
  41,358
  43,196
  45,140
  47,194
  49,362
  51,650
  54,063
  56,607
  59,286
  62,109
  65,080
  68,208
  71,500
  74,962
  78,605
Adjusted assets (=assets-cash), $m
  23,954
  24,442
  25,004
  25,647
  26,368
  27,168
  28,045
  29,000
  30,034
  31,148
  32,343
  33,622
  34,986
  36,439
  37,983
  39,622
  41,358
  43,196
  45,140
  47,194
  49,362
  51,650
  54,063
  56,607
  59,286
  62,109
  65,080
  68,208
  71,500
  74,962
  78,605
Revenue / Adjusted assets
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
Average production assets, $m
  17,629
  17,983
  18,396
  18,869
  19,400
  19,988
  20,633
  21,336
  22,097
  22,916
  23,796
  24,737
  25,741
  26,809
  27,945
  29,151
  30,428
  31,781
  33,211
  34,722
  36,317
  38,001
  39,776
  41,647
  43,619
  45,695
  47,882
  50,183
  52,605
  55,152
  57,832
Working capital, $m
  1,156
  -820
  -839
  -860
  -884
  -911
  -941
  -973
  -1,007
  -1,045
  -1,085
  -1,128
  -1,173
  -1,222
  -1,274
  -1,329
  -1,387
  -1,449
  -1,514
  -1,583
  -1,656
  -1,732
  -1,813
  -1,899
  -1,988
  -2,083
  -2,183
  -2,288
  -2,398
  -2,514
  -2,636
Total debt, $m
  10,154
  10,553
  11,022
  11,557
  12,159
  12,826
  13,557
  14,354
  15,216
  16,145
  17,142
  18,209
  19,347
  20,558
  21,846
  23,213
  24,661
  26,194
  27,815
  29,527
  31,336
  33,244
  35,257
  37,378
  39,613
  41,967
  44,445
  47,054
  49,799
  52,687
  55,724
Total liabilities, $m
  19,986
  20,385
  20,854
  21,389
  21,991
  22,658
  23,389
  24,186
  25,048
  25,977
  26,974
  28,041
  29,179
  30,390
  31,678
  33,045
  34,493
  36,026
  37,647
  39,359
  41,168
  43,076
  45,089
  47,210
  49,445
  51,799
  54,277
  56,886
  59,631
  62,519
  65,556
Total equity, $m
  5,927
  4,057
  4,151
  4,257
  4,377
  4,510
  4,655
  4,814
  4,986
  5,171
  5,369
  5,581
  5,808
  6,049
  6,305
  6,577
  6,865
  7,171
  7,493
  7,834
  8,194
  8,574
  8,974
  9,397
  9,842
  10,310
  10,803
  11,323
  11,869
  12,444
  13,048
Total liabilities and equity, $m
  25,913
  24,442
  25,005
  25,646
  26,368
  27,168
  28,044
  29,000
  30,034
  31,148
  32,343
  33,622
  34,987
  36,439
  37,983
  39,622
  41,358
  43,197
  45,140
  47,193
  49,362
  51,650
  54,063
  56,607
  59,287
  62,109
  65,080
  68,209
  71,500
  74,963
  78,604
Debt-to-equity ratio
  1.713
  2.600
  2.660
  2.710
  2.780
  2.840
  2.910
  2.980
  3.050
  3.120
  3.190
  3.260
  3.330
  3.400
  3.460
  3.530
  3.590
  3.650
  3.710
  3.770
  3.820
  3.880
  3.930
  3.980
  4.030
  4.070
  4.110
  4.160
  4.200
  4.230
  4.270
Adjusted equity ratio
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3,302
  -17,064
  -17,455
  -17,904
  -18,407
  -18,965
  -19,578
  -20,246
  -20,969
  -21,748
  -22,585
  -23,083
  -24,038
  -25,055
  -26,136
  -27,283
  -28,499
  -29,786
  -31,147
  -32,585
  -34,103
  -35,706
  -37,395
  -39,177
  -41,053
  -43,030
  -45,111
  -47,302
  -49,608
  -52,033
  -54,584
Depreciation, amort., depletion, $m
  1,792
  1,858
  1,892
  1,930
  1,974
  2,021
  2,074
  2,131
  2,193
  2,260
  2,331
  2,011
  2,093
  2,180
  2,272
  2,370
  2,474
  2,584
  2,700
  2,823
  2,953
  3,089
  3,234
  3,386
  3,546
  3,715
  3,893
  4,080
  4,277
  4,484
  4,702
Funds from operations, $m
  1,773
  -15,206
  -15,563
  -15,973
  -16,433
  -16,944
  -17,504
  -18,115
  -18,776
  -19,489
  -20,254
  -21,072
  -21,945
  -22,875
  -23,864
  -24,913
  -26,025
  -27,202
  -28,447
  -29,762
  -31,151
  -32,616
  -34,162
  -35,791
  -37,507
  -39,315
  -41,219
  -43,222
  -45,331
  -47,549
  -49,882
Change in working capital, $m
  27
  -16
  -19
  -22
  -24
  -27
  -29
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -95
  -100
  -105
  -110
  -116
  -122
Cash from operations, $m
  1,746
  -15,190
  -15,545
  -15,952
  -16,409
  -16,917
  -17,475
  -18,083
  -18,742
  -19,451
  -20,213
  -21,029
  -21,900
  -22,827
  -23,812
  -24,858
  -25,967
  -27,140
  -28,381
  -29,693
  -31,078
  -32,539
  -34,081
  -35,705
  -37,417
  -39,220
  -41,119
  -43,117
  -45,220
  -47,433
  -49,760
Maintenance CAPEX, $m
  0
  -1,433
  -1,462
  -1,496
  -1,534
  -1,577
  -1,625
  -1,678
  -1,735
  -1,796
  -1,863
  -1,935
  -2,011
  -2,093
  -2,180
  -2,272
  -2,370
  -2,474
  -2,584
  -2,700
  -2,823
  -2,953
  -3,089
  -3,234
  -3,386
  -3,546
  -3,715
  -3,893
  -4,080
  -4,277
  -4,484
New CAPEX, $m
  -2,330
  -354
  -414
  -473
  -531
  -588
  -645
  -703
  -761
  -819
  -879
  -941
  -1,004
  -1,069
  -1,136
  -1,205
  -1,277
  -1,352
  -1,430
  -1,511
  -1,595
  -1,683
  -1,775
  -1,871
  -1,972
  -2,077
  -2,186
  -2,301
  -2,422
  -2,548
  -2,680
Cash from investing activities, $m
  -872
  -1,787
  -1,876
  -1,969
  -2,065
  -2,165
  -2,270
  -2,381
  -2,496
  -2,615
  -2,742
  -2,876
  -3,015
  -3,162
  -3,316
  -3,477
  -3,647
  -3,826
  -4,014
  -4,211
  -4,418
  -4,636
  -4,864
  -5,105
  -5,358
  -5,623
  -5,901
  -6,194
  -6,502
  -6,825
  -7,164
Free cash flow, $m
  874
  -16,977
  -17,420
  -17,920
  -18,474
  -19,083
  -19,745
  -20,463
  -21,237
  -22,067
  -22,956
  -23,905
  -24,915
  -25,988
  -27,128
  -28,336
  -29,614
  -30,966
  -32,395
  -33,904
  -35,496
  -37,175
  -38,945
  -40,810
  -42,775
  -44,843
  -47,020
  -49,311
  -51,722
  -54,257
  -56,924
Issuance/(repayment) of debt, $m
  -2,890
  399
  469
  536
  602
  667
  732
  797
  862
  929
  997
  1,067
  1,138
  1,212
  1,288
  1,366
  1,448
  1,533
  1,621
  1,713
  1,808
  1,908
  2,012
  2,121
  2,235
  2,354
  2,478
  2,609
  2,745
  2,888
  3,038
Issuance/(repurchase) of shares, $m
  2,361
  17,153
  17,549
  18,010
  18,527
  19,098
  19,724
  20,405
  21,141
  21,933
  22,783
  23,295
  24,265
  25,296
  26,392
  27,555
  28,787
  30,091
  31,469
  32,926
  34,463
  36,085
  37,796
  39,599
  41,498
  43,499
  45,605
  47,821
  50,154
  52,608
  55,189
Cash from financing (excl. dividends), $m  
  -943
  17,552
  18,018
  18,546
  19,129
  19,765
  20,456
  21,202
  22,003
  22,862
  23,780
  24,362
  25,403
  26,508
  27,680
  28,921
  30,235
  31,624
  33,090
  34,639
  36,271
  37,993
  39,808
  41,720
  43,733
  45,853
  48,083
  50,430
  52,899
  55,496
  58,227
Total cash flow (excl. dividends), $m
  -130
  576
  597
  626
  654
  682
  710
  738
  766
  795
  824
  457
  488
  520
  552
  586
  621
  657
  695
  734
  775
  818
  863
  910
  958
  1,009
  1,063
  1,119
  1,177
  1,238
  1,303
Retained Cash Flow (-), $m
  1,122
  -17,153
  -17,549
  -18,010
  -18,527
  -19,098
  -19,724
  -20,405
  -21,141
  -21,933
  -22,783
  -23,295
  -24,265
  -25,296
  -26,392
  -27,555
  -28,787
  -30,091
  -31,469
  -32,926
  -34,463
  -36,085
  -37,796
  -39,599
  -41,498
  -43,499
  -45,605
  -47,821
  -50,154
  -52,608
  -55,189
Prev. year cash balance distribution, $m
 
  1,959
  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
 
  -14,619
  -16,951
  -17,384
  -17,872
  -18,416
  -19,014
  -19,667
  -20,375
  -21,138
  -21,959
  -22,838
  -23,777
  -24,777
  -25,840
  -26,969
  -28,166
  -29,433
  -30,774
  -32,191
  -33,688
  -35,267
  -36,933
  -38,689
  -40,540
  -42,489
  -44,542
  -46,703
  -48,977
  -51,369
  -53,886
Discount rate, %
 
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
 
  -13,536
  -14,426
  -13,490
  -12,541
  -11,579
  -10,611
  -9,641
  -8,679
  -7,734
  -6,816
  -5,936
  -5,103
  -4,327
  -3,614
  -2,972
  -2,403
  -1,908
  -1,486
  -1,135
  -848
  -619
  -442
  -307
  -208
  -137
  -87
  -54
  -33
  -19
  -11
Current shareholders' claim on cash, %
  100
  41.8
  17.4
  7.3
  3.0
  1.3
  0.5
  0.2
  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
  0.0
  0.0
  0.0
  0.0

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 -5.5
Price to Sales 1.8
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 10.5
Price to Free Cash Flow -31.3
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 $10304 million for the last fiscal year's total revenue generated by Devon Energy. The default revenue input number comes from 2016 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 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 8%, 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 257.7%.

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 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 4.9% 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 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 DVN are equal to 171.1%.

Life of production assets of 12.3 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 -7.8%. 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 - $5927 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 526.316 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 $18.4 billion.

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COMPANY NEWS

▶ What to Expect from ConocoPhillipss 3Q17 Revenues   [Oct-13-17 05:06PM  Market Realist]
▶ What to Expect from Devon Energys Production This Year   [Oct-12-17 04:37PM  Market Realist]
▶ A Look at the Top 5 Oil and Gas Producers   [03:05PM  Market Realist]
▶ Where Devon Energy Stock Could Settle This Week   [Oct-11-17 10:38AM  Market Realist]
▶ Has Devon Energy Stock Started a New Uptrend?   [07:39AM  Market Realist]
▶ Big Loser: Apache Grounded   [Oct-10-17 04:58PM  Barrons.com]
▶ Oil: Buy Concho, Devon; Sell Chesapeake   [10:12AM  Barrons.com]
▶ Analyzing Southwestern Energys 3Q17 Revenue Expectations   [Oct-09-17 09:13AM  Market Realist]
▶ 3 Scorching-Hot Oil Stocks -- Are They Buys?   [Oct-08-17 09:13AM  Motley Fool]
▶ Sustainability Or Growth? E&Ps Face A Difficult Decision   [Oct-01-17 04:00PM  Oilprice.com]
▶ 3 High-Yield Stocks You Won't Want to Overlook   [Sep-24-17 12:47PM  Motley Fool]
▶ 5 Big Gainers In Oil & Gas This Week   [Sep-22-17 04:00PM  Oilprice.com]
▶ 3 Top Oil Stocks to Buy Before September Ends   [Sep-21-17 10:31AM  Motley Fool]
▶ Why Devon Energy Corporation (DVN) Could Be A Buy   [Sep-16-17 02:43PM  Simply Wall St.]
▶ Devon Energy Provides Hurricane Harvey Production Update   [Sep-15-17 09:20AM  Business Wire]
▶ Oil Prices Might Be Less Pressured Than Expected   [Sep-14-17 10:39AM  Barrons.com]
▶ Factors Causing EOG Resources Revenues to Trend Upward   [Sep-11-17 10:37AM  Market Realist]
▶ Oil CEOs on Harvey's Impact in 90 Seconds   [09:07AM  Bloomberg Video]
▶ Devon CEO Says Harvey Won't Significantly Impact Earnings   [Sep-07-17 01:28PM  Bloomberg Video]
▶ How Marathon Oil Stock Performed Last Week   [02:38PM  Market Realist]
▶ ETF Topper: Oil E&P Fund Recovers From Hurricane Harvey   [Sep-01-17 04:54PM  Barrons.com]
▶ Better Buy: Apache Corp. vs. Devon Energy   [07:07AM  Motley Fool]
▶ Why We Missed the Mark With Devon Energy   [Aug-31-17 01:00PM  Motley Fool]
▶ How Did Marathon Oil Stock Perform Last Week?   [Aug-30-17 07:38AM  Market Realist]
▶ Three E&P Stocks That Look Attractive Now   [Aug-29-17 10:29AM  Barrons.com]
▶ Analyzing ConocoPhillipss Worldwide Operation Production Mix   [Aug-28-17 10:37AM  Market Realist]
▶ Harvey throws a wrench into U.S. energy engine   [Aug-27-17 09:00PM  Reuters]
▶ How Crude Oil Prices Moved ConocoPhillipss Stock Price   [Aug-25-17 04:06PM  Market Realist]
▶ Occidentals Stock Price Range Forecast in Mid-August   [Aug-23-17 07:38AM  Market Realist]
▶ Will Fridays Reversal Mark the End of MROs Downtrend?   [Aug-21-17 05:08PM  Market Realist]
▶ Know This Natural Gas ETF   [Aug-14-17 02:10PM  Benzinga]
▶ How Southwestern Energy Stock Performed after Past Earnings   [Aug-11-17 09:07AM  Market Realist]
▶ EnLink Midstream Continues to Expand in the STACK Region   [Aug-10-17 01:34PM  Market Realist]
▶ Chart of the Week: Whats the Short Interest in Devon Energy?   [Aug-08-17 01:05PM  Market Realist]
Financial statements of DVN
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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