Stock Analysis on Net
Stock Analysis on Net

EQT Corp. (NYSE:EQT)

This company has been moved to the archive! The financial data has not been updated since October 27, 2022.

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

Microsoft Excel

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)

EQT Corp., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 11.51%
01 FCFF0 811,251
1 FCFF1 773,714 = 811,251 × (1 + -4.63%) 693,835
2 FCFF2 761,081 = 773,714 × (1 + -1.63%) 612,044
3 FCFF3 771,445 = 761,081 × (1 + 1.36%) 556,329
4 FCFF4 805,050 = 771,445 × (1 + 4.36%) 520,626
5 FCFF5 864,226 = 805,050 × (1 + 7.35%) 501,194
5 Terminal value (TV5) 22,290,444 = 864,226 × (1 + 7.35%) ÷ (11.51% – 7.35%) 12,926,987
Intrinsic value of EQT Corp. capital 15,811,015
Less: Debt (fair value) 6,572,606
Intrinsic value of EQT Corp. common stock 9,238,409
 
Intrinsic value of EQT Corp. common stock (per share) $25.17
Current share price $39.10

Based on: 10-K (reporting date: 2021-12-31).

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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)

EQT Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 14,351,499 0.69 14.80%
Debt (fair value) 6,572,606 0.31 4.34% = 5.50% × (1 – 21.12%)

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 367,046,005 × $39.10
= $14,351,498,795.50

   Debt (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
= (27.30% + 23.60% + 23.50% + 22.80% + 8.40%) ÷ 5
= 21.12%

WACC = 11.51%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

EQT Corp., PRAT model

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Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in thousands)
Interest expense 308,903 271,200 199,851 228,958 167,971
Income from discontinued operations, net of tax — — — 373,762 471,113
Net income (loss) attributable to EQT Corporation (1,155,759) (967,166) (1,221,695) (2,244,568) 1,508,529
 
Effective income tax rate (EITR)1 27.30% 23.60% 23.50% 22.80% 8.40%
 
Interest expense, after tax2 224,572 207,197 152,886 176,756 153,861
Add: Dividends — 7,664 30,655 31,375 20,827
Interest expense (after tax) and dividends 224,572 214,861 183,541 208,131 174,688
 
EBIT(1 – EITR)3 (931,187) (759,969) (1,068,809) (2,441,574) 1,191,277
 
Current portion of debt 954,900 154,161 16,204 704,390 12,406
Credit facility borrowings — 300,000 294,000 800,000 1,295,000
Term Loan Facility borrowings — — 999,353 — —
Senior notes 4,435,782 4,371,467 3,878,366 3,882,932 4,575,203
Note payable to EQM Midstream Partners, LP 94,320 99,838 105,056 110,059 114,720
Common shareholders’ equity 10,029,527 9,255,240 9,803,588 10,958,229 13,319,618
Total capital 15,514,529 14,180,706 15,096,567 16,455,610 19,316,947
Financial Ratios
Retention rate (RR)4 — — — — 0.85
Return on invested capital (ROIC)5 -6.00% -5.36% -7.08% -14.84% 6.17%
Averages
RR 0.85
ROIC -5.42%
 
FCFF growth rate (g)6 -4.63%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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2021 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 308,903 × (1 – 27.30%)
= 224,572

3 EBIT(1 – EITR) = Net income (loss) attributable to EQT Corporation – Income from discontinued operations, net of tax + Interest expense, after tax
= -1,155,759 – 0 + 224,572
= -931,187

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [-931,187 – 224,572] ÷ -931,187
= —

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × -931,187 ÷ 15,514,529
= -6.00%

6 g = RR × ROIC
= 0.85 × -5.42%
= -4.63%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (20,924,105 × 11.51% – 811,251) ÷ (20,924,105 + 811,251)
= 7.35%

where:

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

FCFF growth rate (g) forecast

EQT Corp., H-model

Microsoft Excel
Year Value gt
1 g1 -4.63%
2 g2 -1.63%
3 g3 1.36%
4 g4 4.36%
5 and thereafter g5 7.35%

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 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -4.63% + (7.35% – -4.63%) × (2 – 1) ÷ (5 – 1)
= -1.63%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -4.63% + (7.35% – -4.63%) × (3 – 1) ÷ (5 – 1)
= 1.36%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -4.63% + (7.35% – -4.63%) × (4 – 1) ÷ (5 – 1)
= 4.36%