Intrinsic value of Diamondback Energy, Inc. - FANG

Previous Close

$110.63

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$110.63

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of FANG 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 18.2

 

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, %
  58.30
  52.97
  48.17
  43.86
  39.97
  36.47
  33.33
  30.49
  27.94
  25.65
  23.58
  21.73
  20.05
  18.55
  17.19
  15.97
  14.88
  13.89
  13.00
  12.20
  11.48
  10.83
  10.25
  9.72
  9.25
  8.83
  8.44
  8.10
  7.79
  7.51
Revenue, $m
  3,445
  5,269
  7,808
  11,232
  15,721
  21,455
  28,605
  37,327
  47,758
  60,008
  74,160
  90,272
  108,375
  128,477
  150,566
  174,618
  200,595
  228,455
  258,155
  289,650
  322,902
  357,878
  394,557
  432,923
  472,975
  514,722
  558,184
  603,393
  650,394
  699,242
Variable operating expenses, $m
  528
  -272
  -1,384
  -2,885
  -4,852
  -7,365
  -10,498
  -14,320
  -18,891
  -24,259
  -32,498
  -39,559
  -47,491
  -56,300
  -65,980
  -76,520
  -87,903
  -100,112
  -113,127
  -126,928
  -141,500
  -156,827
  -172,900
  -189,713
  -207,264
  -225,558
  -244,604
  -264,415
  -285,011
  -306,417
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
  528
  -272
  -1,384
  -2,885
  -4,852
  -7,365
  -10,498
  -14,320
  -18,891
  -24,259
  -32,498
  -39,559
  -47,491
  -56,300
  -65,980
  -76,520
  -87,903
  -100,112
  -113,127
  -126,928
  -141,500
  -156,827
  -172,900
  -189,713
  -207,264
  -225,558
  -244,604
  -264,415
  -285,011
  -306,417
Operating income, $m
  2,917
  5,541
  9,192
  14,116
  20,573
  28,819
  39,103
  51,647
  66,649
  84,267
  106,658
  129,831
  155,867
  184,777
  216,546
  251,138
  288,498
  328,568
  371,282
  416,578
  464,401
  514,705
  567,457
  622,636
  680,239
  740,280
  802,787
  867,808
  935,406
  1,005,659
EBITDA, $m
  5,942
  9,090
  13,469
  19,375
  27,120
  37,011
  49,345
  64,392
  82,385
  103,517
  127,931
  155,725
  186,954
  221,630
  259,736
  301,226
  346,038
  394,099
  445,332
  499,663
  557,025
  617,362
  680,634
  746,818
  815,911
  887,926
  962,901
  1,040,890
  1,121,969
  1,206,235
Interest expense (income), $m
  38
  242
  490
  847
  1,343
  2,013
  2,892
  4,014
  5,413
  7,120
  9,161
  11,558
  14,327
  17,480
  21,023
  24,956
  29,279
  33,985
  39,069
  44,520
  50,332
  56,495
  63,002
  69,846
  77,024
  84,531
  92,369
  100,538
  109,043
  117,889
  127,087
Earnings before tax, $m
  2,675
  5,052
  8,345
  12,773
  18,559
  25,928
  35,089
  46,234
  59,529
  75,106
  95,100
  115,504
  138,386
  163,754
  191,590
  221,859
  254,513
  289,499
  326,761
  366,246
  407,906
  451,704
  497,610
  545,612
  595,708
  647,911
  702,249
  758,766
  817,516
  878,573
Tax expense, $m
  722
  1,364
  2,253
  3,449
  5,011
  7,000
  9,474
  12,483
  16,073
  20,279
  25,677
  31,186
  37,364
  44,214
  51,729
  59,902
  68,719
  78,165
  88,226
  98,886
  110,135
  121,960
  134,355
  147,315
  160,841
  174,936
  189,607
  204,867
  220,729
  237,215
Net income, $m
  1,953
  3,688
  6,092
  9,324
  13,548
  18,927
  25,615
  33,751
  43,456
  54,827
  69,423
  84,318
  101,022
  119,541
  139,861
  161,957
  185,794
  211,334
  238,536
  267,360
  297,772
  329,744
  363,256
  398,297
  434,867
  472,975
  512,642
  553,899
  596,787
  641,358

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
  34,105
  52,170
  77,303
  111,204
  155,653
  212,424
  283,216
  369,577
  472,852
  594,136
  734,260
  893,787
  1,073,022
  1,272,048
  1,490,755
  1,728,888
  1,986,088
  2,261,935
  2,555,987
  2,867,819
  3,197,045
  3,543,350
  3,906,502
  4,286,368
  4,682,924
  5,096,257
  5,526,573
  5,974,191
  6,439,547
  6,923,189
Adjusted assets (=assets-cash), $m
  34,105
  52,170
  77,303
  111,204
  155,653
  212,424
  283,216
  369,577
  472,852
  594,136
  734,260
  893,787
  1,073,022
  1,272,048
  1,490,755
  1,728,888
  1,986,088
  2,261,935
  2,555,987
  2,867,819
  3,197,045
  3,543,350
  3,906,502
  4,286,368
  4,682,924
  5,096,257
  5,526,573
  5,974,191
  6,439,547
  6,923,189
Revenue / Adjusted assets
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
  0.101
Average production assets, $m
  21,935
  33,554
  49,719
  71,523
  100,111
  136,624
  182,155
  237,700
  304,123
  382,129
  472,253
  574,855
  690,133
  818,140
  958,806
  1,111,966
  1,277,388
  1,454,804
  1,643,929
  1,844,489
  2,056,237
  2,278,969
  2,512,537
  2,756,855
  3,011,907
  3,277,749
  3,554,515
  3,842,408
  4,141,711
  4,452,774
Working capital, $m
  -854
  -1,307
  -1,936
  -2,785
  -3,899
  -5,321
  -7,094
  -9,257
  -11,844
  -14,882
  -18,392
  -22,388
  -26,877
  -31,862
  -37,340
  -43,305
  -49,748
  -56,657
  -64,022
  -71,833
  -80,080
  -88,754
  -97,850
  -107,365
  -117,298
  -127,651
  -138,430
  -149,642
  -161,298
  -173,412
Total debt, $m
  9,066
  15,678
  24,876
  37,284
  53,552
  74,330
  100,240
  131,848
  169,647
  214,037
  265,322
  323,709
  389,309
  462,153
  542,200
  629,356
  723,491
  824,451
  932,074
  1,046,205
  1,166,702
  1,293,449
  1,426,363
  1,565,394
  1,710,533
  1,861,813
  2,019,309
  2,183,137
  2,353,457
  2,530,470
Total liabilities, $m
  12,482
  19,094
  28,293
  40,701
  56,969
  77,747
  103,657
  135,265
  173,064
  217,454
  268,739
  327,126
  392,726
  465,569
  545,616
  632,773
  726,908
  827,868
  935,491
  1,049,622
  1,170,119
  1,296,866
  1,429,780
  1,568,811
  1,713,950
  1,865,230
  2,022,726
  2,186,554
  2,356,874
  2,533,887
Total equity, $m
  21,623
  33,076
  49,010
  70,503
  98,684
  134,677
  179,559
  234,312
  299,788
  376,682
  465,521
  566,661
  680,296
  806,478
  945,139
  1,096,115
  1,259,180
  1,434,067
  1,620,496
  1,818,197
  2,026,927
  2,246,484
  2,476,722
  2,717,557
  2,968,974
  3,231,027
  3,503,847
  3,787,637
  4,082,673
  4,389,302
Total liabilities and equity, $m
  34,105
  52,170
  77,303
  111,204
  155,653
  212,424
  283,216
  369,577
  472,852
  594,136
  734,260
  893,787
  1,073,022
  1,272,047
  1,490,755
  1,728,888
  1,986,088
  2,261,935
  2,555,987
  2,867,819
  3,197,046
  3,543,350
  3,906,502
  4,286,368
  4,682,924
  5,096,257
  5,526,573
  5,974,191
  6,439,547
  6,923,189
Debt-to-equity ratio
  0.420
  0.470
  0.510
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.580
  0.580
  0.580
  0.580
  0.580
  0.580
  0.580
  0.580
  0.580
  0.580
  0.580
  0.580
Adjusted equity ratio
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,953
  3,688
  6,092
  9,324
  13,548
  18,927
  25,615
  33,751
  43,456
  54,827
  69,423
  84,318
  101,022
  119,541
  139,861
  161,957
  185,794
  211,334
  238,536
  267,360
  297,772
  329,744
  363,256
  398,297
  434,867
  472,975
  512,642
  553,899
  596,787
  641,358
Depreciation, amort., depletion, $m
  3,025
  3,549
  4,277
  5,259
  6,547
  8,191
  10,242
  12,744
  15,736
  19,250
  21,273
  25,894
  31,087
  36,853
  43,189
  50,089
  57,540
  65,532
  74,051
  83,085
  92,623
  102,656
  113,177
  124,183
  135,671
  147,646
  160,113
  173,081
  186,564
  200,575
Funds from operations, $m
  4,978
  7,236
  10,369
  14,583
  20,095
  27,119
  35,857
  46,496
  59,193
  74,077
  90,696
  110,212
  132,109
  156,394
  183,050
  212,045
  243,334
  276,866
  312,586
  350,445
  390,395
  432,400
  476,433
  522,480
  570,538
  620,622
  672,755
  726,980
  783,350
  841,933
Change in working capital, $m
  -315
  -453
  -630
  -849
  -1,113
  -1,422
  -1,773
  -2,163
  -2,587
  -3,038
  -3,510
  -3,996
  -4,489
  -4,985
  -5,478
  -5,965
  -6,442
  -6,909
  -7,365
  -7,811
  -8,246
  -8,674
  -9,096
  -9,515
  -9,933
  -10,353
  -10,779
  -11,212
  -11,656
  -12,114
Cash from operations, $m
  5,293
  7,689
  10,998
  15,432
  21,208
  28,541
  37,630
  48,659
  61,780
  77,115
  94,206
  114,208
  136,599
  161,379
  188,528
  218,010
  249,777
  283,775
  319,952
  358,255
  398,641
  441,074
  485,529
  531,994
  580,471
  630,975
  683,534
  738,192
  795,007
  854,048
Maintenance CAPEX, $m
  -624
  -988
  -1,511
  -2,240
  -3,222
  -4,509
  -6,154
  -8,205
  -10,707
  -13,699
  -17,213
  -21,273
  -25,894
  -31,087
  -36,853
  -43,189
  -50,089
  -57,540
  -65,532
  -74,051
  -83,085
  -92,623
  -102,656
  -113,177
  -124,183
  -135,671
  -147,646
  -160,113
  -173,081
  -186,564
New CAPEX, $m
  -8,077
  -11,619
  -16,164
  -21,804
  -28,588
  -36,514
  -45,531
  -55,545
  -66,423
  -78,006
  -90,124
  -102,602
  -115,279
  -128,007
  -140,666
  -153,160
  -165,423
  -177,416
  -189,125
  -200,560
  -211,748
  -222,732
  -233,568
  -244,318
  -255,052
  -265,843
  -276,765
  -287,894
  -299,302
  -311,063
Cash from investing activities, $m
  -8,701
  -12,607
  -17,675
  -24,044
  -31,810
  -41,023
  -51,685
  -63,750
  -77,130
  -91,705
  -107,337
  -123,875
  -141,173
  -159,094
  -177,519
  -196,349
  -215,512
  -234,956
  -254,657
  -274,611
  -294,833
  -315,355
  -336,224
  -357,495
  -379,235
  -401,514
  -424,411
  -448,007
  -472,383
  -497,627
Free cash flow, $m
  -3,409
  -4,918
  -6,677
  -8,612
  -10,601
  -12,482
  -14,055
  -15,091
  -15,350
  -14,590
  -13,131
  -9,667
  -4,574
  2,285
  11,010
  21,661
  34,266
  48,820
  65,295
  83,645
  103,808
  125,719
  149,305
  174,499
  201,237
  229,460
  259,122
  290,185
  322,623
  356,421
Issuance/(repayment) of debt, $m
  4,586
  6,612
  9,198
  12,408
  16,268
  20,778
  25,910
  31,608
  37,798
  44,390
  51,286
  58,387
  65,600
  72,843
  80,047
  87,157
  94,135
  100,960
  107,623
  114,130
  120,497
  126,748
  132,914
  139,031
  145,139
  151,280
  157,495
  163,828
  170,320
  177,013
Issuance/(repurchase) of shares, $m
  5,971
  7,766
  9,842
  12,169
  14,632
  17,066
  19,267
  21,002
  22,020
  22,067
  19,416
  16,822
  12,613
  6,642
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  10,557
  14,378
  19,040
  24,577
  30,900
  37,844
  45,177
  52,610
  59,818
  66,457
  70,702
  75,209
  78,213
  79,485
  80,047
  87,157
  94,135
  100,960
  107,623
  114,130
  120,497
  126,748
  132,914
  139,031
  145,139
  151,280
  157,495
  163,828
  170,320
  177,013
Total cash flow (excl. dividends), $m
  7,148
  9,459
  12,363
  15,966
  20,299
  25,362
  31,122
  37,519
  44,468
  51,867
  57,570
  65,542
  73,639
  81,770
  91,057
  108,818
  128,401
  149,780
  172,918
  197,775
  224,305
  252,466
  282,219
  313,530
  346,376
  380,740
  416,618
  454,014
  492,943
  533,434
Retained Cash Flow (-), $m
  -7,923
  -11,453
  -15,934
  -21,494
  -28,180
  -35,993
  -44,882
  -54,753
  -65,476
  -76,894
  -88,839
  -101,140
  -113,635
  -126,182
  -138,660
  -150,976
  -163,065
  -174,887
  -186,429
  -197,701
  -208,730
  -219,557
  -230,238
  -240,835
  -251,416
  -262,053
  -272,820
  -283,790
  -295,036
  -306,629
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
  -776
  -1,994
  -3,571
  -5,528
  -7,881
  -10,631
  -13,760
  -17,234
  -21,008
  -25,027
  -31,269
  -35,598
  -39,996
  -44,412
  -47,604
  -42,159
  -34,664
  -25,107
  -13,511
  74
  15,575
  32,909
  51,981
  72,695
  94,960
  118,687
  143,798
  170,224
  197,907
  226,805
Discount rate, %
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
  -741
  -1,811
  -3,069
  -4,472
  -5,970
  -7,495
  -8,973
  -10,325
  -11,481
  -12,381
  -13,890
  -14,076
  -13,948
  -13,527
  -12,531
  -9,486
  -6,589
  -3,981
  -1,764
  8
  1,320
  2,196
  2,686
  2,858
  2,787
  2,551
  2,216
  1,841
  1,468
  1,126
Current shareholders' claim on cash, %
  75.3
  59.3
  48.4
  40.8
  35.3
  31.2
  28.2
  25.9
  24.2
  22.9
  22.0
  21.5
  21.1
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0
  21.0

Diamondback Energy, Inc. is an independent oil and natural gas company. The Company focuses on the acquisition, development, exploration and exploitation of unconventional onshore oil and natural gas reserves in the Permian Basin in West Texas. As of December 31, 2016, the Company's total net acreage position in the Permian Basin was approximately 105,894 net acres. As of December 31, 2016, the Company, through its subsidiary, Viper Energy Partners LP (Viper), owned mineral interests underlying approximately 107,568 gross acres primarily in Midland County, Texas in the Permian Basin. The Permian Basin area covers a portion of western Texas and eastern New Mexico. The Company's reserves are located in the Permian Basin of West Texas, in particular in the Clearfork, Spraberry, Wolfcamp, Cline, Strawn and Atoka formations. The Company refers to the Clearfork, Spraberry, Wolfcamp, Strawn and Atoka formations collectively as the Wolfberry play.

FINANCIAL RATIOS  of  Diamondback Energy, Inc. (FANG)

Valuation Ratios
P/E Ratio -60.4
Price to Sales 18.9
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 30
Price to Free Cash Flow -237.4
Growth Rates
Sales Growth Rate 17.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.2%
Cap. Spend. - 3 Yr. Gr. Rate 4.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 29.9%
Total Debt to Equity 29.9%
Interest Coverage -3
Management Effectiveness
Return On Assets -3.1%
Ret/ On Assets - 3 Yr. Avg. -3.9%
Return On Total Capital -4.6%
Ret/ On T. Cap. - 3 Yr. Avg. -5.7%
Return On Equity -5.9%
Return On Equity - 3 Yr. Avg. -7.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 75.7%
Gross Margin - 3 Yr. Avg. 76.6%
EBITDA Margin 9.7%
EBITDA Margin - 3 Yr. Avg. 0.6%
Operating Margin -19.4%
Oper. Margin - 3 Yr. Avg. -47.3%
Pre-Tax Margin -31.3%
Pre-Tax Margin - 3 Yr. Avg. -45.8%
Net Profit Margin -31.3%
Net Profit Margin - 3 Yr. Avg. -38.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 20.9%
Payout Ratio 0%

FANG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FANG stock intrinsic value calculation we used $2176 million for the last fiscal year's total revenue generated by Diamondback Energy, Inc.. The default revenue input number comes from 0001 income statement of Diamondback Energy, Inc.. 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 FANG stock valuation model: a) initial revenue growth rate of 58.3% 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 4.7%, whose default value for FANG is calculated based on our internal credit rating of Diamondback Energy, Inc., 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 Diamondback Energy, Inc..
    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 FANG stock the variable cost ratio is equal to 49.8%.

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 FANG 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 Diamondback Energy, Inc..

Corporate tax rate of 27% is the nominal tax rate for Diamondback Energy, Inc.. 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 FANG 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 FANG are equal to 636.8%.

Life of production assets of 22.2 years is the average useful life of capital assets used in Diamondback Energy, Inc. 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 FANG is equal to -24.8%. 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 - $13699.287 million for Diamondback Energy, Inc. - 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 164.372 million for Diamondback Energy, Inc. 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 Diamondback Energy, Inc. at the current share price and the inputted number of shares is $18.2 billion.

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