Intrinsic value of BP ADR - BP

Previous Close

$44.54

  Intrinsic Value

$52.93

stock screener

  Rating & Target

hold

+19%

Previous close

$44.54

 
Intrinsic value

$52.93

 
Up/down potential

+19%

 
Rating

hold

We calculate the intrinsic value of BP 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -17.89
  31.10
  28.49
  26.14
  24.03
  22.12
  20.41
  18.87
  17.48
  16.24
  15.11
  14.10
  13.19
  12.37
  11.63
  10.97
  10.37
  9.84
  9.35
  8.92
  8.53
  8.17
  7.86
  7.57
  7.31
  7.08
  6.87
  6.69
  6.52
  6.37
  6.23
Revenue, $m
  183,008
  320,647
  411,999
  519,700
  644,568
  787,173
  947,850
  1,126,715
  1,323,704
  1,538,610
  1,771,120
  2,020,857
  2,287,417
  2,570,403
  2,869,451
  3,184,254
  3,514,580
  3,860,288
  4,221,331
  4,597,767
  4,989,760
  5,397,580
  5,821,605
  6,262,315
  6,720,293
  7,196,218
  7,690,865
  8,205,102
  8,739,887
  9,296,263
  9,875,359
Variable operating expenses, $m
 
  265,816
  341,547
  430,831
  534,347
  652,567
  785,767
  934,046
  1,097,351
  1,275,508
  1,468,259
  1,675,290
  1,896,269
  2,130,864
  2,378,775
  2,639,746
  2,913,587
  3,200,179
  3,499,483
  3,811,549
  4,136,511
  4,474,594
  4,826,111
  5,191,460
  5,571,123
  5,965,664
  6,375,727
  6,802,030
  7,245,366
  7,706,602
  8,186,673
Fixed operating expenses, $m
 
  33,752
  34,494
  35,253
  36,029
  36,821
  37,631
  38,459
  39,305
  40,170
  41,054
  41,957
  42,880
  43,823
  44,787
  45,773
  46,780
  47,809
  48,861
  49,936
  51,034
  52,157
  53,304
  54,477
  55,676
  56,900
  58,152
  59,432
  60,739
  62,075
  63,441
Total operating expenses, $m
  185,936
  299,568
  376,041
  466,084
  570,376
  689,388
  823,398
  972,505
  1,136,656
  1,315,678
  1,509,313
  1,717,247
  1,939,149
  2,174,687
  2,423,562
  2,685,519
  2,960,367
  3,247,988
  3,548,344
  3,861,485
  4,187,545
  4,526,751
  4,879,415
  5,245,937
  5,626,799
  6,022,564
  6,433,879
  6,861,462
  7,306,105
  7,768,677
  8,250,114
Operating income, $m
  -2,928
  21,079
  35,958
  53,616
  74,193
  97,786
  124,451
  154,209
  187,048
  222,932
  261,808
  303,610
  348,268
  395,716
  445,889
  498,735
  554,214
  612,300
  672,987
  736,283
  802,215
  870,829
  942,190
  1,016,379
  1,093,495
  1,173,653
  1,256,986
  1,343,641
  1,433,782
  1,527,586
  1,625,245
EBITDA, $m
  11,577
  45,224
  66,981
  92,749
  122,729
  157,060
  195,824
  239,051
  286,723
  338,790
  395,173
  455,780
  520,511
  589,267
  661,958
  738,509
  818,861
  902,980
  990,853
  1,082,494
  1,177,944
  1,277,267
  1,380,557
  1,487,931
  1,599,533
  1,715,528
  1,836,108
  1,961,485
  2,091,895
  2,227,594
  2,368,860
Interest expense (income), $m
  1,137
  3,414
  6,401
  9,991
  14,223
  19,129
  24,733
  31,047
  38,075
  45,816
  54,261
  63,397
  73,211
  83,685
  94,805
  106,556
  118,926
  131,906
  145,491
  159,678
  174,470
  189,873
  205,899
  222,561
  239,878
  257,874
  276,576
  296,013
  316,220
  337,234
  359,097
Earnings before tax, $m
  -2,295
  17,665
  29,557
  43,625
  59,970
  78,656
  99,718
  123,162
  148,973
  177,116
  207,547
  240,213
  275,058
  312,031
  351,084
  392,179
  435,287
  480,394
  527,496
  576,605
  627,745
  680,956
  736,292
  793,818
  853,616
  915,778
  980,410
  1,047,628
  1,117,562
  1,190,351
  1,266,148
Tax expense, $m
  -2,467
  4,769
  7,980
  11,779
  16,192
  21,237
  26,924
  33,254
  40,223
  47,821
  56,038
  64,857
  74,266
  84,248
  94,793
  105,888
  117,528
  129,706
  142,424
  155,683
  169,491
  183,858
  198,799
  214,331
  230,476
  247,260
  264,711
  282,860
  301,742
  321,395
  341,860
Net income, $m
  115
  12,895
  21,577
  31,846
  43,778
  57,419
  72,794
  89,908
  108,750
  129,295
  151,509
  175,355
  200,792
  227,782
  256,291
  286,290
  317,760
  350,688
  385,072
  420,921
  458,254
  497,098
  537,493
  579,487
  623,140
  668,518
  715,699
  764,768
  815,820
  868,957
  924,288

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  23,528
  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
  263,316
  362,313
  465,536
  587,232
  728,325
  889,462
  1,071,017
  1,273,124
  1,495,711
  1,738,543
  2,001,266
  2,283,454
  2,584,652
  2,904,410
  3,242,317
  3,598,027
  3,971,277
  4,361,907
  4,769,865
  5,195,217
  5,638,147
  6,098,961
  6,578,085
  7,076,063
  7,593,551
  8,131,319
  8,690,243
  9,271,302
  9,875,579
  10,504,252
  11,158,598
Adjusted assets (=assets-cash), $m
  239,788
  362,313
  465,536
  587,232
  728,325
  889,462
  1,071,017
  1,273,124
  1,495,711
  1,738,543
  2,001,266
  2,283,454
  2,584,652
  2,904,410
  3,242,317
  3,598,027
  3,971,277
  4,361,907
  4,769,865
  5,195,217
  5,638,147
  6,098,961
  6,578,085
  7,076,063
  7,593,551
  8,131,319
  8,690,243
  9,271,302
  9,875,579
  10,504,252
  11,158,598
Revenue / Adjusted assets
  0.763
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
  0.885
Average production assets, $m
  148,179
  241,447
  310,235
  391,334
  485,360
  592,742
  713,731
  848,416
  996,749
  1,158,574
  1,333,653
  1,521,705
  1,722,425
  1,935,514
  2,160,696
  2,397,743
  2,646,479
  2,906,797
  3,178,662
  3,462,118
  3,757,289
  4,064,378
  4,383,669
  4,715,524
  5,060,380
  5,418,752
  5,791,221
  6,178,442
  6,581,135
  7,000,086
  7,436,145
Working capital, $m
  9,459
  -51,304
  -65,920
  -83,152
  -103,131
  -125,948
  -151,656
  -180,274
  -211,793
  -246,178
  -283,379
  -323,337
  -365,987
  -411,264
  -459,112
  -509,481
  -562,333
  -617,646
  -675,413
  -735,643
  -798,362
  -863,613
  -931,457
  -1,001,970
  -1,075,247
  -1,151,395
  -1,230,538
  -1,312,816
  -1,398,382
  -1,487,402
  -1,580,057
Total debt, $m
  58,300
  118,536
  185,011
  263,383
  354,247
  458,019
  574,941
  705,098
  848,444
  1,004,828
  1,174,021
  1,355,751
  1,549,722
  1,755,646
  1,973,258
  2,202,335
  2,442,709
  2,694,274
  2,956,999
  3,230,926
  3,516,172
  3,812,937
  4,121,493
  4,442,190
  4,775,453
  5,121,776
  5,481,722
  5,855,925
  6,245,079
  6,649,944
  7,071,343
Total liabilities, $m
  168,030
  233,330
  299,805
  378,177
  469,041
  572,813
  689,735
  819,892
  963,238
  1,119,622
  1,288,815
  1,470,545
  1,664,516
  1,870,440
  2,088,052
  2,317,129
  2,557,503
  2,809,068
  3,071,793
  3,345,720
  3,630,966
  3,927,731
  4,236,287
  4,556,984
  4,890,247
  5,236,570
  5,596,516
  5,970,719
  6,359,873
  6,764,738
  7,186,137
Total equity, $m
  95,286
  128,983
  165,731
  209,054
  259,284
  316,648
  381,282
  453,232
  532,473
  618,921
  712,451
  812,910
  920,136
  1,033,970
  1,154,265
  1,280,898
  1,413,775
  1,552,839
  1,698,072
  1,849,497
  2,007,180
  2,171,230
  2,341,798
  2,519,078
  2,703,304
  2,894,750
  3,093,726
  3,300,584
  3,515,706
  3,739,514
  3,972,461
Total liabilities and equity, $m
  263,316
  362,313
  465,536
  587,231
  728,325
  889,461
  1,071,017
  1,273,124
  1,495,711
  1,738,543
  2,001,266
  2,283,455
  2,584,652
  2,904,410
  3,242,317
  3,598,027
  3,971,278
  4,361,907
  4,769,865
  5,195,217
  5,638,146
  6,098,961
  6,578,085
  7,076,062
  7,593,551
  8,131,320
  8,690,242
  9,271,303
  9,875,579
  10,504,252
  11,158,598
Debt-to-equity ratio
  0.612
  0.920
  1.120
  1.260
  1.370
  1.450
  1.510
  1.560
  1.590
  1.620
  1.650
  1.670
  1.680
  1.700
  1.710
  1.720
  1.730
  1.740
  1.740
  1.750
  1.750
  1.760
  1.760
  1.760
  1.770
  1.770
  1.770
  1.770
  1.780
  1.780
  1.780
Adjusted equity ratio
  0.299
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  115
  12,895
  21,577
  31,846
  43,778
  57,419
  72,794
  89,908
  108,750
  129,295
  151,509
  175,355
  200,792
  227,782
  256,291
  286,290
  317,760
  350,688
  385,072
  420,921
  458,254
  497,098
  537,493
  579,487
  623,140
  668,518
  715,699
  764,768
  815,820
  868,957
  924,288
Depreciation, amort., depletion, $m
  14,505
  24,145
  31,024
  39,133
  48,536
  59,274
  71,373
  84,842
  99,675
  115,857
  133,365
  152,171
  172,243
  193,551
  216,070
  239,774
  264,648
  290,680
  317,866
  346,212
  375,729
  406,438
  438,367
  471,552
  506,038
  541,875
  579,122
  617,844
  658,113
  700,009
  743,615
Funds from operations, $m
  6,190
  37,040
  52,600
  70,980
  92,314
  116,693
  144,167
  174,750
  208,425
  245,152
  284,875
  327,526
  373,035
  421,334
  472,361
  526,065
  582,408
  641,367
  702,938
  767,133
  833,983
  903,536
  975,860
  1,051,040
  1,129,178
  1,210,393
  1,294,821
  1,382,613
  1,473,934
  1,568,965
  1,667,903
Change in working capital, $m
  -4,501
  -12,170
  -14,616
  -17,232
  -19,979
  -22,817
  -25,708
  -28,618
  -31,518
  -34,385
  -37,202
  -39,958
  -42,650
  -45,278
  -47,848
  -50,368
  -52,852
  -55,313
  -57,767
  -60,230
  -62,719
  -65,251
  -67,844
  -70,514
  -73,276
  -76,148
  -79,144
  -82,278
  -85,566
  -89,020
  -92,655
Cash from operations, $m
  10,691
  49,210
  67,216
  88,212
  112,293
  139,510
  169,875
  203,369
  239,944
  279,537
  322,076
  367,484
  415,684
  466,611
  520,208
  576,433
  635,260
  696,681
  760,705
  827,363
  896,701
  968,787
  1,043,704
  1,121,553
  1,202,454
  1,286,541
  1,373,965
  1,464,891
  1,559,499
  1,657,985
  1,760,558
Maintenance CAPEX, $m
  0
  -18,424
  -24,145
  -31,024
  -39,133
  -48,536
  -59,274
  -71,373
  -84,842
  -99,675
  -115,857
  -133,365
  -152,171
  -172,243
  -193,551
  -216,070
  -239,774
  -264,648
  -290,680
  -317,866
  -346,212
  -375,729
  -406,438
  -438,367
  -471,552
  -506,038
  -541,875
  -579,122
  -617,844
  -658,113
  -700,009
New CAPEX, $m
  -16,701
  -57,210
  -68,788
  -81,099
  -94,025
  -107,382
  -120,989
  -134,685
  -148,333
  -161,824
  -175,080
  -188,052
  -200,720
  -213,088
  -225,183
  -237,047
  -248,736
  -260,318
  -271,865
  -283,456
  -295,171
  -307,089
  -319,291
  -331,855
  -344,857
  -358,371
  -372,469
  -387,221
  -402,693
  -418,951
  -436,059
Cash from investing activities, $m
  -14,753
  -75,634
  -92,933
  -112,123
  -133,158
  -155,918
  -180,263
  -206,058
  -233,175
  -261,499
  -290,937
  -321,417
  -352,891
  -385,331
  -418,734
  -453,117
  -488,510
  -524,966
  -562,545
  -601,322
  -641,383
  -682,818
  -725,729
  -770,222
  -816,409
  -864,409
  -914,344
  -966,343
  -1,020,537
  -1,077,064
  -1,136,068
Free cash flow, $m
  -4,062
  -26,423
  -25,717
  -23,910
  -20,866
  -16,408
  -10,388
  -2,690
  6,769
  18,038
  31,139
  46,066
  62,794
  81,281
  101,474
  123,317
  146,750
  171,715
  198,160
  226,040
  255,319
  285,969
  317,975
  351,332
  386,045
  422,132
  459,620
  498,548
  538,962
  580,921
  624,490
Issuance/(repayment) of debt, $m
  5,808
  55,306
  66,476
  78,372
  90,864
  103,772
  116,921
  130,157
  143,346
  156,384
  169,194
  181,729
  193,972
  205,924
  217,612
  229,077
  240,373
  251,566
  262,725
  273,926
  285,247
  296,764
  308,556
  320,698
  333,263
  346,323
  359,947
  374,202
  389,154
  404,866
  421,399
Issuance/(repurchase) of shares, $m
  0
  17,597
  15,171
  11,477
  6,451
  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 from financing (excl. dividends), $m  
  6,588
  72,903
  81,647
  89,849
  97,315
  103,772
  116,921
  130,157
  143,346
  156,384
  169,194
  181,729
  193,972
  205,924
  217,612
  229,077
  240,373
  251,566
  262,725
  273,926
  285,247
  296,764
  308,556
  320,698
  333,263
  346,323
  359,947
  374,202
  389,154
  404,866
  421,399
Total cash flow (excl. dividends), $m
  1,706
  46,480
  55,930
  65,939
  76,450
  87,364
  106,534
  127,467
  150,115
  174,422
  200,333
  227,796
  256,766
  287,205
  319,086
  352,394
  387,123
  423,281
  460,885
  499,967
  540,566
  582,734
  626,531
  672,029
  719,308
  768,455
  819,567
  872,750
  928,116
  985,786
  1,045,889
Retained Cash Flow (-), $m
  1,930
  -30,492
  -36,747
  -43,324
  -50,229
  -57,364
  -64,634
  -71,950
  -79,241
  -86,448
  -93,529
  -100,459
  -107,227
  -113,834
  -120,295
  -126,633
  -132,877
  -139,064
  -145,233
  -151,425
  -157,683
  -164,050
  -170,568
  -177,280
  -184,226
  -191,445
  -198,977
  -206,857
  -215,122
  -223,808
  -232,947
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
 
  734
  962
  1,236
  1,559
  1,934
  2,362
  2,844
  3,380
  3,971
  4,616
  5,313
  6,063
  6,862
  7,711
  8,608
  9,553
  10,544
  11,581
  12,664
  13,793
  14,969
  16,193
  17,465
  18,787
  20,161
  21,589
  23,073
  24,615
  26,220
  27,889
Cash available for distribution, $m
 
  15,987
  19,182
  22,615
  26,220
  29,999
  41,900
  55,517
  70,874
  87,974
  106,803
  127,337
  149,539
  173,371
  198,791
  225,761
  254,246
  284,216
  315,652
  348,542
  382,883
  418,684
  455,963
  494,749
  535,082
  577,009
  620,590
  665,893
  712,994
  761,979
  812,942
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
 
  15,328
  17,561
  19,681
  21,590
  23,253
  30,408
  37,506
  44,298
  50,536
  55,993
  60,470
  63,814
  65,919
  66,738
  66,280
  64,609
  61,841
  58,130
  53,666
  48,653
  43,306
  37,833
  32,426
  27,253
  22,446
  18,106
  14,292
  11,031
  8,318
  6,121
Current shareholders' claim on cash, %
  100
  98.2
  97.0
  96.3
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9
  95.9

BP p.l.c. is an integrated oil and gas company. The Company owns an interest in OJSC Oil Company Rosneft (Rosneft), an oil and gas company. The Company's segments include Upstream, Downstream, Rosneft, and Other businesses and corporate. The Upstream segment is engaged in oil and natural gas exploration, field development and production, as well as midstream transportation, storage and processing. The Downstream segment has global manufacturing and marketing operations. The Rosneft segment has a resource base of hydrocarbons onshore and offshore. The Other businesses and corporate segment comprises the biofuels and wind businesses, shipping and treasury functions, and corporate activities around the world. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants to keep engines moving and the petrochemicals products used to make everyday items as diverse as paints, clothes and packaging.

FINANCIAL RATIOS  of  BP ADR (BP)

Valuation Ratios
P/E Ratio 7527.3
Price to Sales 4.7
Price to Book 9.1
Price to Tangible Book
Price to Cash Flow 81
Price to Free Cash Flow -144
Growth Rates
Sales Growth Rate -17.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.4%
Cap. Spend. - 3 Yr. Gr. Rate -7.4%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 54.2%
Total Debt to Equity 61.2%
Interest Coverage -1
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital 0.1%
Ret/ On T. Cap. - 3 Yr. Avg. -0.6%
Return On Equity 0.1%
Return On Equity - 3 Yr. Avg. -1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 15.1%
Gross Margin - 3 Yr. Avg. 13.7%
EBITDA Margin 7.3%
EBITDA Margin - 3 Yr. Avg. 5.4%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. -2%
Pre-Tax Margin -1.3%
Pre-Tax Margin - 3 Yr. Avg. -1.4%
Net Profit Margin 0.1%
Net Profit Margin - 3 Yr. Avg. -0.6%
Effective Tax Rate 107.5%
Eff/ Tax Rate - 3 Yr. Avg. 53.3%
Payout Ratio 4009.6%

BP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BP stock intrinsic value calculation we used $244582 million for the last fiscal year's total revenue generated by BP ADR. The default revenue input number comes from 2016 income statement of BP ADR. 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 BP stock valuation model: a) initial revenue growth rate of 31.1% 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 BP is calculated based on our internal credit rating of BP ADR, 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 BP ADR.
    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 BP stock the variable cost ratio is equal to 82.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $33025 million in the base year in the intrinsic value calculation for BP 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 5.4% for BP ADR.

Corporate tax rate of 27% is the nominal tax rate for BP ADR. 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 BP stock is equal to 0.3%.

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 BP are equal to 75.3%.

Life of production assets of 10 years is the average useful life of capital assets used in BP ADR 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 BP is equal to -16%. 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 - $98491 million for BP ADR - 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 21050 million for BP ADR 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 BP ADR at the current share price and the inputted number of shares is $937.6 billion.

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CEO CNOOC ADR 158.27 0.30  str.sell

COMPANY NEWS

▶ BP Stock Is Finding Buyers on Dips   [03:09PM  TheStreet.com]
▶ [$$] Former BP CEO to Steer Glencores Response to U.S. Subpoena   [Jul-11-18 07:50PM  The Wall Street Journal]
▶ Bull of the Day: BP plc (BP)   [06:55AM  Zacks]
▶ [$$] Former BP CEO to Steer Glencore's Response to Subpoena   [04:52AM  The Wall Street Journal]
▶ Big Oils Next Major Move   [Jul-08-18 11:00AM  Oilprice.com]
▶ BP Is Front-Runner to Buy BHP's U.S. Shale Unit   [Jul-06-18 05:56PM  Bloomberg]
▶ ConocoPhillips, BP make deals to swap stakes in U.K., Alaska assets   [Jul-03-18 04:45PM  American City Business Journals]
▶ Stranded BP Cargoes: A Red Flag For Chinese Oil Demand?   [Jun-30-18 11:00AM  Oilprice.com]
▶ China opens doors to more foreign investment   [10:26AM  Yahoo Finance Video]
▶ BP To Buy UKs Largest EV Charging Company   [Jun-28-18 03:00PM  Oilprice.com]
▶ Atlantic Richfield ordered to pay $29M for pollution cleanup   [Jun-27-18 04:47PM  Associated Press]
▶ A Storm Is Brewing In The Southern Gas Corridor   [Jun-23-18 05:00PM  Oilprice.com]
▶ Why BP p.l.c. (BP) Stock Might be a Great Pick   [Jun-22-18 08:44AM  Zacks]
▶ Deep-Water Drilling Is Back   [Jun-21-18 05:00AM  Bloomberg]
▶ [$$] Oil Industry Tries to Take the Fracking Boom Global   [07:39PM  The Wall Street Journal]
▶ A Look At Our $50 Price Estimate For BP   [Jun-19-18 02:28PM  Forbes]
▶ Tech company moves headquarters into BP sublease space   [01:02PM  American City Business Journals]
▶ Why Gevo, Inc. Stock Soared 262% Yesterday   [10:35AM  InvestorPlace]
▶ [$$] Oil Industry Tries to Take the Fracking Boom Global   [09:04AM  The Wall Street Journal]
▶ OPEC Can Still Stabilize the Market, BP Chief Economist Says   [Jun-18-18 03:15PM  Bloomberg Video]
▶ Oil Demand Growth Could Start To Soften Soon   [Jun-17-18 03:00PM  Oilprice.com]
▶ AP FACT CHECK: Trump on FBI, phantom law on migrant kids   [Jun-16-18 09:46AM  Associated Press]
▶ Judge shows skepticism to New York climate change lawsuit   [Jun-13-18 08:23PM  Associated Press]
▶ Trump declares oil prices too high, blames OPEC   [04:56PM  Associated Press]
▶ UK Manufacturing Output Shrinks : ETFs in Focus   [Jun-12-18 04:54PM  Zacks]
▶ BHP Gets Bids Valuing Shale Unit at Up to $9 Billion   [Jun-05-18 06:07PM  Bloomberg]
Financial statements of BP
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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