Stock Analysis on Net
Stock Analysis on Net

EOG Resources Inc. (NYSE:EOG)

This company was transferred to the archive: financial data is no longer updated!

Present Value of Free Cash Flow to the Firm (FCFF)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.


Intrinsic Stock Value (Valuation Summary)

EOG Resources Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

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Year Value FCFFt or Terminal value (TVt) Calculation Present value at 14.53%
01 FCFF0 1,914,094
1 FCFF1 1,945,506 = 1,914,094 × (1 + 1.64%) 1,698,692
2 FCFF2 2,021,676 = 1,945,506 × (1 + 3.92%) 1,541,259
3 FCFF3 2,146,802 = 2,021,676 × (1 + 6.19%) 1,429,020
4 FCFF4 2,328,492 = 2,146,802 × (1 + 8.46%) 1,353,328
5 FCFF5 2,578,510 = 2,328,492 × (1 + 10.74%) 1,308,517
5 Terminal value (TV5) 75,293,823 = 2,578,510 × (1 + 10.74%) ÷ (14.53%10.74%) 38,209,358
Intrinsic value of EOG Resources Inc.’s capital 45,540,173
Less: Long-term debt and finance leases (fair value) 5,509,900
Intrinsic value of EOG Resources Inc.’s common stock 40,030,273
 
Intrinsic value of EOG Resources Inc.’s common stock (per share) $68.77
Current share price $86.56

Based on: 10-K (filing date: 2020-02-27).

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.


Weighted Average Cost of Capital (WACC)

EOG Resources Inc., cost of capital

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Value1 Weight Required rate of return2 Calculation
Equity (fair value) 50,382,633 0.90 15.84%
Long-term debt and finance leases (fair value) 5,509,900 0.10 2.56% = 3.62% × (1 – 29.31%)

Based on: 10-K (filing date: 2020-02-27).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 582,054,451 × $86.56
= $50,382,633,278.56

   Long-term debt and finance leases (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (22.86% + 21.98% + 37.50% + 29.59% + 34.63%) ÷ 5
= 29.31%

WACC = 14.53%


FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

EOG Resources Inc., 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 thousands)
Net interest expense 185,129  245,052  274,372  281,681  237,393 
Net income (loss) 2,734,910  3,419,040  2,582,579  (1,096,686) (4,524,515)
 
Effective income tax rate (EITR)1 22.86% 21.98% 37.50% 29.59% 34.63%
 
Net interest expense, after tax2 142,809  191,190  171,483  198,332  155,184 
Add: Common stock dividends declared 629,169  469,443  387,164  376,012  367,767 
Interest expense (after tax) and dividends 771,978  660,633  558,647  574,344  522,951 
 
EBIT(1 – EITR)3 2,877,719  3,610,230  2,754,062  (898,354) (4,369,331)
 
Current portion of long-term debt 1,014,524  913,093  356,235  6,579  6,579 
Long-term debt, excluding current portion 4,160,919  5,170,169  6,030,836  6,979,779  6,653,685 
Stockholders’ equity 21,640,716  19,364,188  16,283,273  13,981,581  12,943,035 
Total capital 26,816,159  25,447,450  22,670,344  20,967,939  19,603,299 
Financial Ratios
Retention rate (RR)4 0.73 0.82 0.80
Return on invested capital (ROIC)5 10.73% 14.19% 12.15% -4.28% -22.29%
Averages
RR 0.78
ROIC 2.10%
 
FCFF growth rate (g)6 1.64%

Based on: 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-25).

1 See details »

2019 Calculations

2 Net interest expense, after tax = Net interest expense × (1 – EITR)
= 185,129 × (1 – 22.86%)
= 142,809

3 EBIT(1 – EITR) = Net income (loss) + Net interest expense, after tax
= 2,734,910 + 142,809
= 2,877,719

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,877,719771,978] ÷ 2,877,719
= 0.73

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,877,719 ÷ 26,816,159
= 10.73%

6 g = RR × ROIC
= 0.78 × 2.10%
= 1.64%


FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (55,892,533 × 14.53%1,914,094) ÷ (55,892,533 + 1,914,094)
= 10.74%

where:

Total capital, fair value0 = current fair value of EOG Resources Inc.’s debt and equity (US$ in thousands)
FCFF0 = the last year EOG Resources Inc.’s free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of EOG Resources Inc.’s capital


FCFF growth rate (g) forecast

EOG Resources Inc., H-model

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Year Value gt
1 g1 1.64%
2 g2 3.92%
3 g3 6.19%
4 g4 8.46%
5 and thereafter g5 10.74%

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

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 1.64% + (10.74%1.64%) × (2 – 1) ÷ (5 – 1)
= 3.92%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 1.64% + (10.74%1.64%) × (3 – 1) ÷ (5 – 1)
= 6.19%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 1.64% + (10.74%1.64%) × (4 – 1) ÷ (5 – 1)
= 8.46%