Intrinsic value of SM Energy - SM

Previous Close

$31.22

  Intrinsic Value

$5.34

stock screener

  Rating & Target

str. sell

-83%

Previous close

$31.22

 
Intrinsic value

$5.34

 
Up/down potential

-83%

 
Rating

str. sell

We calculate the intrinsic value of SM 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 3.5

 

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
  1,807
  2,792
  4,175
  6,058
  8,547
  11,750
  15,772
  20,710
  26,648
  33,659
  41,797
  51,100
  61,593
  73,284
  86,169
  100,235
  115,462
  131,826
  149,300
  167,857
  187,474
  208,130
  229,809
  252,502
  276,205
  300,921
  326,660
  353,441
  381,286
  410,228
Variable operating expenses, $m
  3,007
  4,646
  6,947
  10,080
  14,222
  19,552
  26,245
  34,461
  44,343
  56,008
  69,550
  85,031
  102,491
  121,944
  143,384
  166,791
  192,129
  219,358
  248,434
  279,314
  311,957
  346,328
  382,403
  420,163
  459,605
  500,732
  543,563
  588,126
  634,460
  682,620
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
  3,007
  4,646
  6,947
  10,080
  14,222
  19,552
  26,245
  34,461
  44,343
  56,008
  69,550
  85,031
  102,491
  121,944
  143,384
  166,791
  192,129
  219,358
  248,434
  279,314
  311,957
  346,328
  382,403
  420,163
  459,605
  500,732
  543,563
  588,126
  634,460
  682,620
Operating income, $m
  -1,200
  -1,854
  -2,772
  -4,022
  -5,675
  -7,802
  -10,473
  -13,751
  -17,694
  -22,349
  -27,753
  -33,931
  -40,898
  -48,660
  -57,216
  -66,556
  -76,667
  -87,532
  -99,135
  -111,457
  -124,483
  -138,198
  -152,593
  -167,661
  -183,400
  -199,811
  -216,903
  -234,685
  -253,174
  -272,391
EBITDA, $m
  -305
  -470
  -704
  -1,021
  -1,440
  -1,980
  -2,658
  -3,490
  -4,491
  -5,672
  -7,044
  -8,611
  -10,380
  -12,350
  -14,521
  -16,891
  -19,458
  -22,215
  -25,160
  -28,287
  -31,593
  -35,074
  -38,727
  -42,551
  -46,546
  -50,711
  -55,049
  -59,562
  -64,254
  -69,131
Interest expense (income), $m
  130
  16
  283
  672
  1,218
  1,961
  2,943
  4,207
  5,794
  7,743
  10,086
  12,853
  16,064
  19,735
  23,876
  28,490
  33,574
  39,125
  45,134
  51,592
  58,487
  65,810
  73,552
  81,703
  90,258
  99,213
  108,567
  118,320
  128,478
  139,046
  150,034
Earnings before tax, $m
  -1,216
  -2,137
  -3,444
  -5,240
  -7,636
  -10,745
  -14,680
  -19,545
  -25,437
  -32,436
  -40,606
  -49,995
  -60,633
  -72,537
  -85,705
  -100,130
  -115,792
  -132,666
  -150,727
  -169,944
  -190,293
  -211,750
  -234,296
  -257,920
  -282,613
  -308,378
  -335,223
  -363,163
  -392,220
  -422,426
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
  -1,216
  -2,137
  -3,444
  -5,240
  -7,636
  -10,745
  -14,680
  -19,545
  -25,437
  -32,436
  -40,606
  -49,995
  -60,633
  -72,537
  -85,705
  -100,130
  -115,792
  -132,666
  -150,727
  -169,944
  -190,293
  -211,750
  -234,296
  -257,920
  -282,613
  -308,378
  -335,223
  -363,163
  -392,220
  -422,426

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
  9,874
  15,256
  22,815
  33,104
  46,704
  64,208
  86,186
  113,167
  145,618
  183,928
  228,397
  279,237
  336,574
  400,457
  470,866
  547,731
  630,940
  720,360
  815,845
  917,252
  1,024,448
  1,137,322
  1,255,789
  1,379,793
  1,509,316
  1,644,376
  1,785,030
  1,931,371
  2,083,532
  2,241,684
Adjusted assets (=assets-cash), $m
  9,874
  15,256
  22,815
  33,104
  46,704
  64,208
  86,186
  113,167
  145,618
  183,928
  228,397
  279,237
  336,574
  400,457
  470,866
  547,731
  630,940
  720,360
  815,845
  917,252
  1,024,448
  1,137,322
  1,255,789
  1,379,793
  1,509,316
  1,644,376
  1,785,030
  1,931,371
  2,083,532
  2,241,684
Revenue / Adjusted assets
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
  0.183
Average production assets, $m
  9,311
  14,386
  21,515
  31,217
  44,042
  60,548
  81,273
  106,716
  137,318
  173,444
  215,378
  263,320
  317,389
  377,631
  444,027
  516,510
  594,976
  679,298
  769,341
  864,967
  966,054
  1,072,494
  1,184,207
  1,301,143
  1,423,284
  1,550,645
  1,683,281
  1,821,280
  1,964,768
  2,113,906
Working capital, $m
  -622
  -960
  -1,436
  -2,084
  -2,940
  -4,042
  -5,426
  -7,124
  -9,167
  -11,579
  -14,378
  -17,579
  -21,188
  -25,210
  -29,642
  -34,481
  -39,719
  -45,348
  -51,359
  -57,743
  -64,491
  -71,597
  -79,054
  -86,861
  -95,014
  -103,517
  -112,371
  -121,584
  -131,162
  -141,118
Total debt, $m
  2,400
  5,694
  10,320
  16,616
  24,940
  35,652
  49,102
  65,615
  85,475
  108,921
  136,136
  167,250
  202,340
  241,437
  284,527
  331,568
  382,492
  437,217
  495,654
  557,715
  623,319
  692,398
  764,900
  840,790
  920,058
  1,002,715
  1,088,795
  1,178,356
  1,271,478
  1,368,267
Total liabilities, $m
  6,043
  9,337
  13,963
  20,259
  28,583
  39,295
  52,746
  69,258
  89,118
  112,564
  139,779
  170,893
  205,984
  245,080
  288,170
  335,211
  386,135
  440,860
  499,297
  561,358
  626,962
  696,041
  768,543
  844,433
  923,701
  1,006,358
  1,092,438
  1,181,999
  1,275,122
  1,371,911
Total equity, $m
  3,831
  5,919
  8,852
  12,844
  18,121
  24,913
  33,440
  43,909
  56,500
  71,364
  88,618
  108,344
  130,591
  155,377
  182,696
  212,520
  244,805
  279,499
  316,548
  355,894
  397,486
  441,281
  487,246
  535,360
  585,615
  638,018
  692,591
  749,372
  808,410
  869,773
Total liabilities and equity, $m
  9,874
  15,256
  22,815
  33,103
  46,704
  64,208
  86,186
  113,167
  145,618
  183,928
  228,397
  279,237
  336,575
  400,457
  470,866
  547,731
  630,940
  720,359
  815,845
  917,252
  1,024,448
  1,137,322
  1,255,789
  1,379,793
  1,509,316
  1,644,376
  1,785,029
  1,931,371
  2,083,532
  2,241,684
Debt-to-equity ratio
  0.630
  0.960
  1.170
  1.290
  1.380
  1.430
  1.470
  1.490
  1.510
  1.530
  1.540
  1.540
  1.550
  1.550
  1.560
  1.560
  1.560
  1.560
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
  1.570
Adjusted equity ratio
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388
  0.388

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,216
  -2,137
  -3,444
  -5,240
  -7,636
  -10,745
  -14,680
  -19,545
  -25,437
  -32,436
  -40,606
  -49,995
  -60,633
  -72,537
  -85,705
  -100,130
  -115,792
  -132,666
  -150,727
  -169,944
  -190,293
  -211,750
  -234,296
  -257,920
  -282,613
  -308,378
  -335,223
  -363,163
  -392,220
  -422,426
Depreciation, amort., depletion, $m
  895
  1,383
  2,069
  3,002
  4,235
  5,822
  7,815
  10,261
  13,204
  16,677
  20,709
  25,319
  30,518
  36,311
  42,695
  49,664
  57,209
  65,317
  73,975
  83,170
  92,890
  103,124
  113,866
  125,110
  136,854
  149,101
  161,854
  175,123
  188,920
  203,260
Funds from operations, $m
  -321
  -754
  -1,375
  -2,239
  -3,401
  -4,923
  -6,865
  -9,284
  -12,233
  -15,758
  -19,896
  -24,675
  -30,115
  -36,226
  -43,011
  -50,466
  -58,583
  -67,349
  -76,751
  -86,774
  -97,403
  -108,626
  -120,430
  -132,810
  -145,759
  -159,278
  -173,369
  -188,039
  -203,300
  -219,166
Change in working capital, $m
  -233
  -339
  -476
  -648
  -856
  -1,102
  -1,384
  -1,699
  -2,043
  -2,412
  -2,799
  -3,200
  -3,610
  -4,022
  -4,432
  -4,839
  -5,238
  -5,629
  -6,011
  -6,384
  -6,748
  -7,106
  -7,458
  -7,806
  -8,154
  -8,502
  -8,854
  -9,212
  -9,579
  -9,956
Cash from operations, $m
  -88
  -415
  -900
  -1,591
  -2,545
  -3,821
  -5,481
  -7,586
  -10,190
  -13,347
  -17,097
  -21,475
  -26,506
  -32,204
  -38,578
  -45,627
  -53,344
  -61,720
  -70,740
  -80,391
  -90,655
  -101,520
  -112,973
  -125,003
  -137,605
  -150,776
  -164,515
  -178,827
  -193,721
  -209,210
Maintenance CAPEX, $m
  -559
  -895
  -1,383
  -2,069
  -3,002
  -4,235
  -5,822
  -7,815
  -10,261
  -13,204
  -16,677
  -20,709
  -25,319
  -30,518
  -36,311
  -42,695
  -49,664
  -57,209
  -65,317
  -73,975
  -83,170
  -92,890
  -103,124
  -113,866
  -125,110
  -136,854
  -149,101
  -161,854
  -175,123
  -188,920
New CAPEX, $m
  -3,493
  -5,075
  -7,128
  -9,702
  -12,826
  -16,506
  -20,725
  -25,444
  -30,602
  -36,126
  -41,934
  -47,942
  -54,069
  -60,241
  -66,396
  -72,483
  -78,466
  -84,323
  -90,042
  -95,627
  -101,086
  -106,440
  -111,714
  -116,936
  -122,140
  -127,362
  -132,636
  -137,999
  -143,488
  -149,137
Cash from investing activities, $m
  -4,052
  -5,970
  -8,511
  -11,771
  -15,828
  -20,741
  -26,547
  -33,259
  -40,863
  -49,330
  -58,611
  -68,651
  -79,388
  -90,759
  -102,707
  -115,178
  -128,130
  -141,532
  -155,359
  -169,602
  -184,256
  -199,330
  -214,838
  -230,802
  -247,250
  -264,216
  -281,737
  -299,853
  -318,611
  -338,057
Free cash flow, $m
  -4,141
  -6,385
  -9,411
  -13,362
  -18,372
  -24,562
  -32,028
  -40,844
  -51,053
  -62,676
  -75,708
  -90,127
  -105,894
  -122,964
  -141,285
  -160,805
  -181,475
  -203,252
  -226,100
  -249,992
  -274,911
  -300,850
  -327,811
  -355,805
  -384,856
  -414,991
  -446,251
  -478,680
  -512,332
  -547,267
Issuance/(repayment) of debt, $m
  2,261
  3,293
  4,626
  6,297
  8,324
  10,712
  13,450
  16,513
  19,860
  23,445
  27,215
  31,114
  35,091
  39,096
  43,091
  47,041
  50,924
  54,725
  58,437
  62,061
  65,604
  69,079
  72,501
  75,891
  79,268
  82,657
  86,080
  89,561
  93,123
  96,789
Issuance/(repurchase) of shares, $m
  2,653
  4,225
  6,377
  9,232
  12,913
  17,536
  23,207
  30,014
  38,028
  47,300
  57,860
  69,721
  82,880
  97,323
  113,024
  129,953
  148,077
  167,361
  187,775
  209,290
  231,885
  255,545
  280,261
  306,033
  332,868
  360,782
  389,796
  419,943
  451,259
  483,789
Cash from financing (excl. dividends), $m  
  4,914
  7,518
  11,003
  15,529
  21,237
  28,248
  36,657
  46,527
  57,888
  70,745
  85,075
  100,835
  117,971
  136,419
  156,115
  176,994
  199,001
  222,086
  246,212
  271,351
  297,489
  324,624
  352,762
  381,924
  412,136
  443,439
  475,876
  509,504
  544,382
  580,578
Total cash flow (excl. dividends), $m
  773
  1,133
  1,592
  2,167
  2,865
  3,687
  4,629
  5,683
  6,835
  8,069
  9,366
  10,708
  12,077
  13,455
  14,830
  16,190
  17,526
  18,834
  20,112
  21,359
  22,578
  23,774
  24,952
  26,119
  27,281
  28,447
  29,625
  30,823
  32,049
  33,311
Retained Cash Flow (-), $m
  -2,653
  -4,225
  -6,377
  -9,232
  -12,913
  -17,536
  -23,207
  -30,014
  -38,028
  -47,300
  -57,860
  -69,721
  -82,880
  -97,323
  -113,024
  -129,953
  -148,077
  -167,361
  -187,775
  -209,290
  -231,885
  -255,545
  -280,261
  -306,033
  -332,868
  -360,782
  -389,796
  -419,943
  -451,259
  -483,789
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
  -1,880
  -3,092
  -4,785
  -7,065
  -10,048
  -13,850
  -18,578
  -24,331
  -31,193
  -39,231
  -48,493
  -59,012
  -70,804
  -83,868
  -98,194
  -113,764
  -130,551
  -148,527
  -167,663
  -187,931
  -209,307
  -231,771
  -255,309
  -279,915
  -305,587
  -332,335
  -360,171
  -389,120
  -419,210
  -450,478
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
  -1,802
  -2,830
  -4,164
  -5,817
  -7,789
  -10,051
  -12,551
  -15,208
  -17,919
  -20,567
  -23,029
  -25,183
  -26,921
  -28,156
  -28,828
  -28,910
  -28,406
  -27,353
  -25,815
  -23,880
  -21,649
  -19,231
  -16,733
  -14,257
  -11,888
  -9,696
  -7,730
  -6,020
  -4,576
  -3,392
Current shareholders' claim on cash, %
  56.9
  32.4
  18.7
  10.9
  6.5
  3.9
  2.4
  1.5
  0.9
  0.6
  0.4
  0.2
  0.2
  0.1
  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

SM Energy Company is an independent energy company. The Company is engaged in the acquisition, exploration, development and production of crude oil and condensate, natural gas and natural gas liquids in onshore North America. It operates in the exploration and production segment of the oil and gas industry within the United States. Its operations are concentrated in onshore operating areas in the United States, which include South Texas and Gulf Coast Region, Rocky Mountain Region and Permian Region. It has working interests in approximately 1,027 gross productive oil wells and approximately 1,882 gross productive gas wells. Its South Texas and Gulf Coast Region has both operated and non-operated Eagle Ford shale program. It has approximately 124,000 net acres in Divide County, North Dakota, and approximately 156,000 net acres in the Powder River Basin. Its Permian Region closed multiple transactions in the Midland Basin in west Texas acquiring approximately 62,000 net acres.

FINANCIAL RATIOS  of  SM Energy (SM)

Valuation Ratios
P/E Ratio -4.6
Price to Sales 2.9
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow -45.1
Growth Rates
Sales Growth Rate -22.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -57.8%
Cap. Spend. - 3 Yr. Gr. Rate -16.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 116.1%
Total Debt to Equity 116.1%
Interest Coverage -8
Management Effectiveness
Return On Assets -11.3%
Ret/ On Assets - 3 Yr. Avg. -1.5%
Return On Total Capital -15.5%
Ret/ On T. Cap. - 3 Yr. Avg. -2.8%
Return On Equity -34.9%
Return On Equity - 3 Yr. Avg. -7.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 49.4%
Gross Margin - 3 Yr. Avg. 57.7%
EBITDA Margin -23.8%
EBITDA Margin - 3 Yr. Avg. 24.6%
Operating Margin -88.5%
Oper. Margin - 3 Yr. Avg. -27.2%
Pre-Tax Margin -101.9%
Pre-Tax Margin - 3 Yr. Avg. -35.8%
Net Profit Margin -64.2%
Net Profit Margin - 3 Yr. Avg. -22.5%
Effective Tax Rate 36.9%
Eff/ Tax Rate - 3 Yr. Avg. 37.5%
Payout Ratio -1.1%

SM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SM stock intrinsic value calculation we used $1129.376 million for the last fiscal year's total revenue generated by SM Energy. The default revenue input number comes from 0001 income statement of SM 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 SM 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 SM is calculated based on our internal credit rating of SM 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 SM 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 SM stock the variable cost ratio is equal to 166.4%.

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 SM 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 11.8% for SM Energy.

Corporate tax rate of 27% is the nominal tax rate for SM 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 SM 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 SM are equal to 515.3%.

Life of production assets of 10.4 years is the average useful life of capital assets used in SM 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 SM is equal to -34.4%. 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 - $2394.608 million for SM 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 112.138 million for SM 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 SM Energy at the current share price and the inputted number of shares is $3.5 billion.

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COMPANY NEWS

▶ SM Energy: 2Q Earnings Snapshot   [06:32PM  Associated Press]
▶ As America's hiring spree continues, these Denver companies are leading the charge   [Jul-16-18 04:35PM  American City Business Journals]
▶ How this Denver-based oil and gas company's Midland wells are beating expectations   [Jul-03-18 01:09PM  American City Business Journals]
▶ Data dive: A look at CEO-worker pay ratios at Colorado public companies   [Jul-02-18 07:30AM  American City Business Journals]
▶ SM Energy To Redeem Senior Notes Due 2021   [Jun-14-18 04:30PM  PR Newswire]
▶ Why Oil and Gas Stocks Are Slumping Today   [04:35PM  Motley Fool]
▶ SM Energy: 1Q Earnings Snapshot   [May-03-18 05:26PM  Associated Press]
▶ When Will SM Energy Company (NYSE:SM) Become Profitable?   [Apr-22-18 11:46AM  Simply Wall St.]
▶ Stock Market News For Apr 18, 2018   [Apr-18-18 10:17AM  Zacks]
▶ Edited Transcript of SM presentation 7-Mar-17 6:40pm GMT   [Apr-10-18 03:26PM  Thomson Reuters StreetEvents]
▶ Edited Transcript of SM presentation 9-Apr-18 6:05pm GMT   [07:16AM  Thomson Reuters StreetEvents]
▶ SM Energy Declares Semi-annual Cash Dividend   [Mar-29-18 04:45PM  PR Newswire]
▶ After-hours buzz: RHT, ANAB & more   [Mar-26-18 05:34PM  CNBC]
▶ Here's Why SM Energy Stock Is Down 12% After Earnings   [Feb-22-18 02:07PM  Motley Fool]
▶ SM Energy Company to Host Earnings Call   [08:40AM  ACCESSWIRE]
▶ SM Energy reports 4Q loss   [Feb-21-18 06:05PM  Associated Press]
▶ Live From NAPE: Oil and Gas Drillers Excited About $60 Oil   [Feb-08-18 02:20PM  TheStreet.com]
▶ SE Asia Stocks-Pause after recent gains   [Jan-23-18 11:32PM  Reuters]
▶ US Crude Oil Inventories Fell 10% in the Last 10 Weeks   [Jan-19-18 09:01AM  Market Realist]
▶ These Energy Stocks Rose with Oil Prices Last Week   [Jan-17-18 09:03AM  Market Realist]
▶ Denver energy company is selling Wyoming assets for $500 million   [09:54AM  American City Business Journals]
▶ Stock Market News For Jan 10, 2018   [Jan-10-18 10:24AM  Zacks]
▶ OPECs Compliance towards Production Cuts   [09:40AM  Market Realist]
▶ Stocks To Watch: SM Energy Sees RS Rating Jump To 83   [Jan-08-18 03:00AM  Investor's Business Daily]
▶ OPECs Plan for a Production Cut Exit Strategy   [Jan-04-18 12:20PM  Market Realist]
▶ SM Energy Earns Relative Strength Rating Upgrade   [03:00AM  Investor's Business Daily]
▶ OPECs Spare Crude Oil Production Capacity near 7-Month High   [Dec-28-17 08:18AM  Market Realist]
▶ SM Energy Sees RS Rating Climb To 78   [Dec-22-17 03:00AM  Investor's Business Daily]

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