Intrinsic value of CVR Refining - CVRR

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$8.90

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$8.90

 
Intrinsic value

$497.47

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CVRR 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

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.3

 

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, %
  -14.16
  33.90
  31.01
  28.41
  26.07
  23.96
  22.07
  20.36
  18.82
  17.44
  16.20
  15.08
  14.07
  13.16
  12.35
  11.61
  10.95
  10.36
  9.82
  9.34
  8.90
  8.51
  8.16
  7.85
  7.56
  7.31
  7.07
  6.87
  6.68
  6.51
  6.36
Revenue, $m
  4,431
  5,933
  7,773
  9,981
  12,583
  15,598
  19,040
  22,916
  27,230
  31,979
  37,158
  42,760
  48,776
  55,196
  62,011
  69,211
  76,790
  84,742
  93,063
  101,753
  110,813
  120,247
  130,062
  140,267
  150,873
  161,895
  173,348
  185,253
  197,628
  210,499
  223,889
Variable operating expenses, $m
 
  3,619
  4,742
  6,089
  7,676
  9,515
  11,614
  13,979
  16,610
  19,507
  22,666
  26,084
  29,754
  33,670
  37,827
  42,219
  46,842
  51,693
  56,769
  62,069
  67,596
  73,351
  79,338
  85,563
  92,033
  98,756
  105,742
  113,004
  120,553
  128,404
  136,572
Fixed operating expenses, $m
 
  1,734
  1,778
  1,822
  1,868
  1,914
  1,962
  2,011
  2,062
  2,113
  2,166
  2,220
  2,276
  2,332
  2,391
  2,451
  2,512
  2,575
  2,639
  2,705
  2,773
  2,842
  2,913
  2,986
  3,060
  3,137
  3,215
  3,296
  3,378
  3,463
  3,549
Total operating expenses, $m
  4,354
  5,353
  6,520
  7,911
  9,544
  11,429
  13,576
  15,990
  18,672
  21,620
  24,832
  28,304
  32,030
  36,002
  40,218
  44,670
  49,354
  54,268
  59,408
  64,774
  70,369
  76,193
  82,251
  88,549
  95,093
  101,893
  108,957
  116,300
  123,931
  131,867
  140,121
Operating income, $m
  78
  580
  1,254
  2,071
  3,040
  4,169
  5,463
  6,926
  8,558
  10,359
  12,326
  14,456
  16,747
  19,194
  21,793
  24,542
  27,436
  30,475
  33,656
  36,979
  40,445
  44,055
  47,811
  51,718
  55,780
  60,002
  64,391
  68,953
  73,697
  78,632
  83,768
EBITDA, $m
  207
  752
  1,480
  2,361
  3,406
  4,622
  6,017
  7,592
  9,350
  11,288
  13,406
  15,700
  18,165
  20,799
  23,597
  26,554
  29,669
  32,939
  36,362
  39,937
  43,667
  47,551
  51,593
  55,797
  60,167
  64,709
  69,431
  74,339
  79,443
  84,752
  90,277
Interest expense (income), $m
  42
  41
  67
  99
  138
  183
  236
  296
  364
  439
  522
  613
  711
  816
  928
  1,047
  1,173
  1,306
  1,445
  1,590
  1,742
  1,901
  2,066
  2,237
  2,416
  2,601
  2,794
  2,994
  3,202
  3,419
  3,644
Earnings before tax, $m
  15
  539
  1,187
  1,972
  2,902
  3,986
  5,228
  6,630
  8,194
  9,919
  11,804
  13,844
  16,036
  18,378
  20,865
  23,494
  26,263
  29,169
  32,211
  35,388
  38,702
  42,154
  45,746
  49,481
  53,364
  57,401
  61,597
  65,959
  70,495
  75,213
  80,124
Tax expense, $m
  0
  146
  320
  532
  784
  1,076
  1,411
  1,790
  2,212
  2,678
  3,187
  3,738
  4,330
  4,962
  5,634
  6,344
  7,091
  7,876
  8,697
  9,555
  10,450
  11,382
  12,351
  13,360
  14,408
  15,498
  16,631
  17,809
  19,034
  20,308
  21,633
Net income, $m
  15
  394
  867
  1,439
  2,119
  2,910
  3,816
  4,840
  5,982
  7,241
  8,617
  10,106
  11,707
  13,416
  15,232
  17,151
  19,172
  21,293
  23,514
  25,834
  28,253
  30,772
  33,394
  36,121
  38,956
  41,903
  44,966
  48,150
  51,461
  54,906
  58,490

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  314
  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
  2,332
  2,702
  3,540
  4,545
  5,730
  7,103
  8,670
  10,435
  12,400
  14,562
  16,921
  19,472
  22,211
  25,135
  28,238
  31,517
  34,968
  38,589
  42,379
  46,336
  50,461
  54,757
  59,227
  63,874
  68,704
  73,723
  78,938
  84,359
  89,995
  95,856
  101,953
Adjusted assets (=assets-cash), $m
  2,018
  2,702
  3,540
  4,545
  5,730
  7,103
  8,670
  10,435
  12,400
  14,562
  16,921
  19,472
  22,211
  25,135
  28,238
  31,517
  34,968
  38,589
  42,379
  46,336
  50,461
  54,757
  59,227
  63,874
  68,704
  73,723
  78,938
  84,359
  89,995
  95,856
  101,953
Revenue / Adjusted assets
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
  2.196
Average production assets, $m
  1,532
  2,053
  2,689
  3,453
  4,354
  5,397
  6,588
  7,929
  9,421
  11,065
  12,857
  14,795
  16,877
  19,098
  21,456
  23,947
  26,569
  29,321
  32,200
  35,207
  38,341
  41,606
  45,002
  48,532
  52,202
  56,016
  59,979
  64,097
  68,379
  72,833
  77,466
Working capital, $m
  314
  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 debt, $m
  542
  890
  1,319
  1,834
  2,441
  3,144
  3,946
  4,850
  5,856
  6,963
  8,170
  9,477
  10,879
  12,376
  13,965
  15,644
  17,411
  19,265
  21,205
  23,231
  25,343
  27,543
  29,831
  32,210
  34,683
  37,253
  39,923
  42,699
  45,584
  48,585
  51,707
Total liabilities, $m
  1,035
  1,383
  1,812
  2,327
  2,934
  3,637
  4,439
  5,343
  6,349
  7,456
  8,663
  9,970
  11,372
  12,869
  14,458
  16,137
  17,904
  19,758
  21,698
  23,724
  25,836
  28,036
  30,324
  32,703
  35,176
  37,746
  40,416
  43,192
  46,077
  49,078
  52,200
Total equity, $m
  1,297
  1,318
  1,727
  2,218
  2,796
  3,466
  4,231
  5,092
  6,051
  7,106
  8,257
  9,502
  10,839
  12,266
  13,780
  15,380
  17,064
  18,832
  20,681
  22,612
  24,625
  26,722
  28,903
  31,170
  33,527
  35,977
  38,522
  41,167
  43,917
  46,778
  49,753
Total liabilities and equity, $m
  2,332
  2,701
  3,539
  4,545
  5,730
  7,103
  8,670
  10,435
  12,400
  14,562
  16,920
  19,472
  22,211
  25,135
  28,238
  31,517
  34,968
  38,590
  42,379
  46,336
  50,461
  54,758
  59,227
  63,873
  68,703
  73,723
  78,938
  84,359
  89,994
  95,856
  101,953
Debt-to-equity ratio
  0.418
  0.680
  0.760
  0.830
  0.870
  0.910
  0.930
  0.950
  0.970
  0.980
  0.990
  1.000
  1.000
  1.010
  1.010
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.040
  1.040
  1.040
  1.040
  1.040
  1.040
Adjusted equity ratio
  0.487
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  394
  867
  1,439
  2,119
  2,910
  3,816
  4,840
  5,982
  7,241
  8,617
  10,106
  11,707
  13,416
  15,232
  17,151
  19,172
  21,293
  23,514
  25,834
  28,253
  30,772
  33,394
  36,121
  38,956
  41,903
  44,966
  48,150
  51,461
  54,906
  58,490
Depreciation, amort., depletion, $m
  129
  173
  226
  290
  366
  454
  554
  666
  792
  930
  1,080
  1,243
  1,418
  1,605
  1,803
  2,012
  2,233
  2,464
  2,706
  2,959
  3,222
  3,496
  3,782
  4,078
  4,387
  4,707
  5,040
  5,386
  5,746
  6,120
  6,510
Funds from operations, $m
  328
  566
  1,093
  1,729
  2,484
  3,363
  4,370
  5,506
  6,774
  8,171
  9,697
  11,349
  13,125
  15,021
  17,035
  19,163
  21,405
  23,757
  26,220
  28,792
  31,475
  34,269
  37,176
  40,200
  43,343
  46,610
  50,006
  53,536
  57,207
  61,026
  65,000
Change in working capital, $m
  60
  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 from operations, $m
  268
  549
  1,093
  1,729
  2,484
  3,363
  4,370
  5,506
  6,774
  8,171
  9,697
  11,349
  13,125
  15,021
  17,035
  19,163
  21,405
  23,757
  26,220
  28,792
  31,475
  34,269
  37,176
  40,200
  43,343
  46,610
  50,006
  53,536
  57,207
  61,026
  65,000
Maintenance CAPEX, $m
  0
  -129
  -173
  -226
  -290
  -366
  -454
  -554
  -666
  -792
  -930
  -1,080
  -1,243
  -1,418
  -1,605
  -1,803
  -2,012
  -2,233
  -2,464
  -2,706
  -2,959
  -3,222
  -3,496
  -3,782
  -4,078
  -4,387
  -4,707
  -5,040
  -5,386
  -5,746
  -6,120
New CAPEX, $m
  -102
  -521
  -637
  -764
  -900
  -1,043
  -1,191
  -1,341
  -1,492
  -1,643
  -1,792
  -1,938
  -2,082
  -2,221
  -2,358
  -2,491
  -2,622
  -2,751
  -2,879
  -3,007
  -3,135
  -3,264
  -3,396
  -3,531
  -3,670
  -3,813
  -3,963
  -4,119
  -4,282
  -4,453
  -4,633
Cash from investing activities, $m
  -108
  -650
  -810
  -990
  -1,190
  -1,409
  -1,645
  -1,895
  -2,158
  -2,435
  -2,722
  -3,018
  -3,325
  -3,639
  -3,963
  -4,294
  -4,634
  -4,984
  -5,343
  -5,713
  -6,094
  -6,486
  -6,892
  -7,313
  -7,748
  -8,200
  -8,670
  -9,159
  -9,668
  -10,199
  -10,753
Free cash flow, $m
  160
  -101
  283
  739
  1,294
  1,954
  2,725
  3,611
  4,615
  5,736
  6,975
  8,330
  9,800
  11,381
  13,072
  14,869
  16,770
  18,773
  20,877
  23,080
  25,381
  27,782
  30,284
  32,887
  35,595
  38,410
  41,336
  44,377
  47,539
  50,827
  54,247
Issuance/(repayment) of debt, $m
  -33
  350
  429
  515
  607
  703
  802
  904
  1,006
  1,107
  1,208
  1,306
  1,403
  1,497
  1,589
  1,679
  1,767
  1,854
  1,940
  2,026
  2,112
  2,200
  2,288
  2,379
  2,473
  2,570
  2,670
  2,775
  2,885
  3,001
  3,122
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -33
  350
  429
  515
  607
  703
  802
  904
  1,006
  1,107
  1,208
  1,306
  1,403
  1,497
  1,589
  1,679
  1,767
  1,854
  1,940
  2,026
  2,112
  2,200
  2,288
  2,379
  2,473
  2,570
  2,670
  2,775
  2,885
  3,001
  3,122
Total cash flow (excl. dividends), $m
  127
  250
  712
  1,254
  1,901
  2,657
  3,528
  4,515
  5,620
  6,843
  8,183
  9,637
  11,203
  12,878
  14,661
  16,548
  18,537
  20,627
  22,817
  25,106
  27,494
  29,982
  32,572
  35,266
  38,067
  40,979
  44,006
  47,153
  50,424
  53,827
  57,369
Retained Cash Flow (-), $m
  -16
  -333
  -409
  -491
  -578
  -670
  -765
  -861
  -959
  -1,055
  -1,151
  -1,245
  -1,337
  -1,427
  -1,514
  -1,600
  -1,684
  -1,767
  -1,849
  -1,931
  -2,013
  -2,096
  -2,181
  -2,268
  -2,357
  -2,449
  -2,545
  -2,645
  -2,750
  -2,860
  -2,976
Prev. year cash balance distribution, $m
 
  312
  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
 
  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 available for distribution, $m
 
  228
  304
  764
  1,322
  1,987
  2,763
  3,654
  4,662
  5,788
  7,032
  8,392
  9,866
  11,452
  13,146
  14,948
  16,853
  18,860
  20,968
  23,174
  25,480
  27,886
  30,391
  32,999
  35,711
  38,530
  41,461
  44,507
  47,674
  50,967
  54,393
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
 
  219
  278
  665
  1,089
  1,540
  2,005
  2,468
  2,914
  3,325
  3,686
  3,985
  4,210
  4,354
  4,413
  4,388
  4,283
  4,104
  3,861
  3,568
  3,238
  2,884
  2,522
  2,163
  1,819
  1,499
  1,210
  955
  738
  556
  410
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

CVR Refining, LP operates as an independent petroleum refiner and marketer of transportation fuels in the United States. It owns and operates a complex full coking medium-sour crude oil refinery in Coffeyville, Kansas. The company also controls and operates logistics assets, including approximately 340 miles of owned and leased pipelines; approximately 150 owned crude oil transports; a network of crude oil gathering tank farms; and approximately 6.4 million barrels of owned and leased crude oil storage capacity, as well as approximately 4.5 million barrels of combined refined products and feedstocks storage capacity. In addition, it owns 170,000 barrels per day pipeline system that transports crude oil from its Broome Station facility to its Coffeyville refinery; approximately 1.5 million barrels of crude oil storage capacity, which supports the gathering system and its Coffeyville refinery; approximately 0.9 million barrels of crude oil storage capacity at its Wynnewood refinery; and approximately 1.5 million barrels of crude oil storage capacity in Cushing, Oklahoma, as well as leases crude oil storage capacity of approximately 2.2 million barrels in Cushing and approximately 0.2 million barrels in Duncan, and approximately 0.1 million barrels at its Wynnewood refinery. CVR Refining GP, LLC operates as the general partner of CVR Refining, LP. The company was founded in 2012 and is based in Sugar Land, Texas. CVR Refining, LP is a subsidiary of CVR Energy, Inc.

FINANCIAL RATIOS  of  CVR Refining (CVRR)

Valuation Ratios
P/E Ratio 87.6
Price to Sales 0.3
Price to Book 1
Price to Tangible Book
Price to Cash Flow 4.9
Price to Free Cash Flow 7.9
Growth Rates
Sales Growth Rate -14.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -47.7%
Cap. Spend. - 3 Yr. Gr. Rate -13%
Financial Strength
Quick Ratio 157
Current Ratio 0
LT Debt to Equity 41.6%
Total Debt to Equity 41.8%
Interest Coverage 1
Management Effectiveness
Return On Assets 2.5%
Ret/ On Assets - 3 Yr. Avg. 10.9%
Return On Total Capital 0.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11%
Return On Equity 1.2%
Return On Equity - 3 Yr. Avg. 15.5%
Asset Turnover 2
Profitability Ratios
Gross Margin 3.4%
Gross Margin - 3 Yr. Avg. 6.1%
EBITDA Margin 4.2%
EBITDA Margin - 3 Yr. Avg. 6.3%
Operating Margin 1.7%
Oper. Margin - 3 Yr. Avg. 3.7%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 0.3%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CVRR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVRR stock intrinsic value calculation we used $4431 million for the last fiscal year's total revenue generated by CVR Refining. The default revenue input number comes from 2016 income statement of CVR Refining. 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 CVRR stock valuation model: a) initial revenue growth rate of 33.9% 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 CVRR is calculated based on our internal credit rating of CVR Refining, 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 CVR Refining.
    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 CVRR stock the variable cost ratio is equal to 61%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1692 million in the base year in the intrinsic value calculation for CVRR 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 7.5% for CVR Refining.

Corporate tax rate of 27% is the nominal tax rate for CVR Refining. 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 CVRR stock is equal to 0%.

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 CVRR are equal to 34.6%.

Life of production assets of 11.9 years is the average useful life of capital assets used in CVR Refining 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 CVRR is equal to 0%. 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 - $1297 million for CVR Refining - 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 149.206 million for CVR Refining 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 CVR Refining at the current share price and the inputted number of shares is $1.3 billion.


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COMPANY NEWS

▶ CVR Refining Announces 2017 First Quarter Earnings Call   [Apr-13-17 09:00AM  PR Newswire]
▶ Integrated Energy and Refiners: Options for Option Traders   [Apr-04-17 11:05AM  Market Realist]
▶ Integrated Energy and Refiner Stocks Implied Volatilities   [Mar-17-17 11:10AM  Market Realist]
▶ Nearly 75% of Analysts Rate Alon USA Partners a Hold   [Feb-23-17 05:06PM  Market Realist]
▶ CVR Refining Announces 2016 Fourth Quarter Earnings Call   [Feb-02-17 09:00AM  PR Newswire]
▶ The Worst Energy Stocks of 2016   [Jan-08-17 06:27AM  at Motley Fool]
▶ 3 Tempting Stocks to Avoid   [Dec-13-16 11:38AM  at Motley Fool]
▶ [$$] RINs, Refiners and Rational Energy Policies   [Dec-07-16 02:31PM  at The Wall Street Journal]
▶ Here's Why CVR Energy's Dividend is Probably Safe   [Nov-27-16 09:17AM  at Motley Fool]
▶ Trump's Win Fuels a Massive Rally in Refining Stocks   [Nov-09-16 04:55PM  at Motley Fool]
Stock chart of CVRR Financial statements of CVRR
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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