Stock Analysis on Net
Stock Analysis on Net
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ConocoPhillips (NYSE:COP)

This company was transferred to the archive: financial data is no longer updated!

Dividend Discount Model (DDM)

Intermediate level

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.


Intrinsic Stock Value (Valuation Summary)

ConocoPhillips, dividends per share (DPS) forecast

US$

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Year Value DPSt or Terminal value (TVt) Calculation Present value at 13.61%
0 DPS01 1.34
1 DPS1 1.35 = 1.34 × (1 + 0.87%) 1.19
2 DPS2 1.39 = 1.35 × (1 + 3.19%) 1.08
3 DPS3 1.47 = 1.39 × (1 + 5.52%) 1.00
4 DPS4 1.58 = 1.47 × (1 + 7.85%) 0.95
5 DPS5 1.74 = 1.58 × (1 + 10.18%) 0.92
5 Terminal value (TV5) 55.83 = 1.74 × (1 + 10.18%) ÷ (13.61%10.18%) 29.49
Intrinsic value of ConocoPhillips’s common stock (per share) $34.62
Current share price $42.78

Based on: 10-K (filing date: 2020-02-18).

1 DPS0 = Sum of the last year dividends per share of ConocoPhillips’s common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 1.38%
Expected rate of return on market portfolio2 E(RM) 12.45%
Systematic risk of ConocoPhillips’s common stock βCOP 1.11
 
Required rate of return on ConocoPhillips’s common stock3 rCOP 13.61%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rCOP = RF + βCOP [E(RM) – RF]
= 1.38% + 1.11 [12.45%1.38%]
= 13.61%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

ConocoPhillips, PRAT model

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Average Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Dividends paid 1,500  1,363  1,305  1,253  3,664 
Net income (loss) attributable to ConocoPhillips 7,189  6,257  (855) (3,615) (4,428)
Sales and other operating revenues 32,567  36,417  29,106  23,693  29,564 
Total assets 70,514  69,980  73,362  89,772  97,484 
Common stockholders’ equity 34,981  31,939  30,607  34,974  39,762 
Financial Ratios
Retention rate1 0.79 0.78
Profit margin2 22.07% 17.18% -2.94% -15.26% -14.98%
Asset turnover3 0.46 0.52 0.40 0.26 0.30
Financial leverage4 2.02 2.19 2.40 2.57 2.45
Averages
Retention rate 0.79
Profit margin 1.22%
Asset turnover 0.39
Financial leverage 2.32
 
Dividend growth rate (g)5 0.87%

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

2019 Calculations

1 Retention rate = (Net income (loss) attributable to ConocoPhillips – Dividends paid) ÷ Net income (loss) attributable to ConocoPhillips
= (7,1891,500) ÷ 7,189 = 0.79

2 Profit margin = 100 × Net income (loss) attributable to ConocoPhillips ÷ Sales and other operating revenues
= 100 × 7,189 ÷ 32,567 = 22.07%

3 Asset turnover = Sales and other operating revenues ÷ Total assets
= 32,567 ÷ 70,514 = 0.46

4 Financial leverage = Total assets ÷ Common stockholders’ equity
= 70,514 ÷ 34,981 = 2.02

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.79 × 1.22% × 0.39 × 2.32 = 0.87%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($42.78 × 13.61%$1.34) ÷ ($42.78 + $1.34) = 10.18%

where:
P0 = current price of share of ConocoPhillips’s common stock
D0 = the last year dividends per share of ConocoPhillips’s common stock
r = required rate of return on ConocoPhillips’s common stock


Dividend growth rate (g) forecast

ConocoPhillips, H-model

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Year Value gt
1 g1 0.87%
2 g2 3.19%
3 g3 5.52%
4 g4 7.85%
5 and thereafter g5 10.18%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 0.87% + (10.18%0.87%) × (2 – 1) ÷ (5 – 1) = 3.19%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 0.87% + (10.18%0.87%) × (3 – 1) ÷ (5 – 1) = 5.52%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 0.87% + (10.18%0.87%) × (4 – 1) ÷ (5 – 1) = 7.85%