Stock Analysis on Net
Stock Analysis on Net

EOG Resources Inc. (NYSE:EOG)

This company has been moved to the archive! The financial data has not been updated since February 27, 2020.

Dividend Discount Model (DDM)

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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. 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)

EOG Resources Inc., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 17.80%
0 DPS01 1.01
1 DPS1 1.01 = 1.01 × (1 + -0.90%) 0.85
2 DPS2 1.04 = 1.01 × (1 + 3.28%) 0.75
3 DPS3 1.12 = 1.04 × (1 + 7.47%) 0.68
4 DPS4 1.25 = 1.12 × (1 + 11.65%) 0.65
5 DPS5 1.44 = 1.25 × (1 + 15.84%) 0.64
5 Terminal value (TV5) 85.36 = 1.44 × (1 + 15.84%) ÷ (17.80% – 15.84%) 37.63
Intrinsic value of EOG Resources Inc. common stock (per share) $41.20
Current share price $60.00

Based on: 10-K (reporting date: 2019-12-31).

1 DPS0 = Sum of the last year dividends per share of EOG Resources Inc. 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 4.68%
Expected rate of return on market portfolio2 E(RM) 13.78%
Systematic risk of EOG Resources Inc. common stock βEOG 1.44
 
Required rate of return on EOG Resources Inc. common stock3 rEOG 17.80%

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 rEOG = RF + βEOG [E(RM) – RF]
= 4.68% + 1.44 [13.78% – 4.68%]
= 17.80%

Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

EOG Resources Inc., PRAT model

Microsoft Excel
Average Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in thousands)
Common stock dividends declared 629,169 469,443 387,164 376,012 367,767
Net income (loss) 2,734,910 3,419,040 2,582,579 (1,096,686) (4,524,515)
Operating revenues and other 17,379,973 17,275,399 11,208,320 7,650,632 8,757,428
Total assets 37,124,608 33,934,474 29,833,078 29,459,433 26,975,244
Stockholders’ equity 21,640,716 19,364,188 16,283,273 13,981,581 12,943,035
Financial Ratios
Retention rate1 0.77 0.86 0.85 — —
Profit margin2 15.74% 19.79% 23.04% -14.33% -51.66%
Asset turnover3 0.47 0.51 0.38 0.26 0.32
Financial leverage4 1.72 1.75 1.83 2.11 2.08
Averages
Retention rate 0.83
Profit margin -1.49%
Asset turnover 0.39
Financial leverage 1.90
 
Dividend growth rate (g)5 -0.90%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

1 Retention rate = (Net income (loss) – Common stock dividends declared) ÷ Net income (loss)
= (2,734,910 – 629,169) ÷ 2,734,910
= 0.77

2 Profit margin = 100 × Net income (loss) ÷ Operating revenues and other
= 100 × 2,734,910 ÷ 17,379,973
= 15.74%

3 Asset turnover = Operating revenues and other ÷ Total assets
= 17,379,973 ÷ 37,124,608
= 0.47

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 37,124,608 ÷ 21,640,716
= 1.72

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.83 × -1.49% × 0.39 × 1.90
= -0.90%

Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × r – D0) ÷ (P0 + D0)
= 100 × ($60.00 × 17.80% – $1.01) ÷ ($60.00 + $1.01)
= 15.84%

where:
P0 = current price of share of EOG Resources Inc. common stock
D0 = the last year dividends per share of EOG Resources Inc. common stock
r = required rate of return on EOG Resources Inc. common stock

Dividend growth rate (g) forecast

EOG Resources Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -0.90%
2 g2 3.28%
3 g3 7.47%
4 g4 11.65%
5 and thereafter g5 15.84%

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 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -0.90% + (15.84% – -0.90%) × (2 – 1) ÷ (5 – 1)
= 3.28%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -0.90% + (15.84% – -0.90%) × (3 – 1) ÷ (5 – 1)
= 7.47%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -0.90% + (15.84% – -0.90%) × (4 – 1) ÷ (5 – 1)
= 11.65%