Intrinsic value of Chevron - CVX

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$105.47

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$105.47

 
Intrinsic value

$18.69

 
Up/down potential

-82%

 
Rating

str. sell

 
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 CVX 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 198.9

 

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, %
  -14.78
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
Revenue, $m
  110,484
  120,096
  130,100
  140,504
  151,319
  162,559
  174,238
  186,376
  198,993
  212,112
  225,758
  239,959
  254,743
  270,142
  286,190
  302,922
  320,376
  338,591
  357,610
  377,476
  398,237
  419,940
  442,637
  466,382
  491,230
  517,242
  544,478
  573,003
  602,886
  634,198
  667,013
Variable operating expenses, $m
 
  93,155
  100,876
  108,907
  117,254
  125,930
  134,944
  144,313
  154,052
  164,178
  174,711
  185,213
  196,624
  208,510
  220,897
  233,811
  247,283
  261,343
  276,022
  291,357
  307,381
  324,132
  341,651
  359,979
  379,158
  399,235
  420,257
  442,275
  465,340
  489,508
  514,837
Fixed operating expenses, $m
 
  30,625
  31,391
  32,175
  32,980
  33,804
  34,649
  35,516
  36,403
  37,314
  38,246
  39,203
  40,183
  41,187
  42,217
  43,272
  44,354
  45,463
  46,599
  47,764
  48,959
  50,183
  51,437
  52,723
  54,041
  55,392
  56,777
  58,196
  59,651
  61,143
  62,671
Total operating expenses, $m
  114,866
  123,780
  132,267
  141,082
  150,234
  159,734
  169,593
  179,829
  190,455
  201,492
  212,957
  224,416
  236,807
  249,697
  263,114
  277,083
  291,637
  306,806
  322,621
  339,121
  356,340
  374,315
  393,088
  412,702
  433,199
  454,627
  477,034
  500,471
  524,991
  550,651
  577,508
Operating income, $m
  -4,382
  -3,684
  -2,167
  -578
  1,085
  2,825
  4,644
  6,547
  8,538
  10,621
  12,801
  15,543
  17,936
  20,445
  23,076
  25,838
  28,738
  31,785
  34,988
  38,355
  41,898
  45,625
  49,549
  53,680
  58,031
  62,615
  67,444
  72,532
  77,895
  83,547
  89,505
EBITDA, $m
  15,075
  17,326
  20,554
  23,924
  27,437
  31,100
  34,919
  38,899
  43,048
  47,376
  51,892
  56,606
  61,528
  66,672
  72,050
  77,675
  83,562
  89,726
  96,183
  102,950
  110,045
  117,486
  125,294
  133,489
  142,092
  151,126
  160,616
  170,586
  181,062
  192,073
  203,646
Interest expense (income), $m
  158
  1,369
  1,694
  2,035
  2,389
  2,757
  3,139
  3,537
  3,950
  4,380
  4,826
  5,291
  5,774
  6,277
  6,801
  7,348
  7,917
  8,511
  9,131
  9,779
  10,455
  11,162
  11,900
  12,673
  13,481
  14,327
  15,212
  16,140
  17,111
  18,128
  19,194
Earnings before tax, $m
  -2,160
  -5,053
  -3,861
  -2,613
  -1,304
  68
  1,505
  3,010
  4,588
  6,241
  7,975
  10,253
  12,162
  14,167
  16,275
  18,491
  20,821
  23,274
  25,856
  28,577
  31,443
  34,464
  37,648
  41,007
  44,550
  48,288
  52,231
  56,393
  60,784
  65,420
  70,312
Tax expense, $m
  -1,729
  0
  0
  0
  0
  18
  406
  813
  1,239
  1,685
  2,153
  2,768
  3,284
  3,825
  4,394
  4,992
  5,622
  6,284
  6,981
  7,716
  8,490
  9,305
  10,165
  11,072
  12,029
  13,038
  14,102
  15,226
  16,412
  17,663
  18,984
Net income, $m
  -497
  -5,053
  -3,861
  -2,613
  -1,304
  50
  1,099
  2,198
  3,349
  4,556
  5,822
  7,484
  8,878
  10,342
  11,881
  13,498
  15,199
  16,990
  18,875
  20,861
  22,953
  25,158
  27,483
  29,935
  32,522
  35,250
  38,129
  41,167
  44,373
  47,756
  51,328

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7,001
  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
  260,078
  274,819
  297,712
  321,520
  346,268
  371,988
  398,714
  426,490
  455,362
  485,383
  516,610
  549,105
  582,936
  618,174
  654,897
  693,185
  733,125
  774,808
  818,329
  863,790
  911,297
  960,961
  1,012,900
  1,067,235
  1,124,097
  1,183,619
  1,245,944
  1,311,220
  1,379,602
  1,451,254
  1,526,346
Adjusted assets (=assets-cash), $m
  253,077
  274,819
  297,712
  321,520
  346,268
  371,988
  398,714
  426,490
  455,362
  485,383
  516,610
  549,105
  582,936
  618,174
  654,897
  693,185
  733,125
  774,808
  818,329
  863,790
  911,297
  960,961
  1,012,900
  1,067,235
  1,124,097
  1,183,619
  1,245,944
  1,311,220
  1,379,602
  1,451,254
  1,526,346
Revenue / Adjusted assets
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
Average production assets, $m
  185,291
  201,401
  218,178
  235,626
  253,762
  272,611
  292,197
  312,553
  333,712
  355,712
  378,597
  402,411
  427,204
  453,029
  479,941
  508,000
  537,270
  567,817
  599,712
  633,028
  667,843
  704,240
  742,303
  782,122
  823,793
  867,414
  913,089
  960,926
  1,011,040
  1,063,550
  1,118,581
Working capital, $m
  -2,166
  1,801
  1,952
  2,108
  2,270
  2,438
  2,614
  2,796
  2,985
  3,182
  3,386
  3,599
  3,821
  4,052
  4,293
  4,544
  4,806
  5,079
  5,364
  5,662
  5,974
  6,299
  6,640
  6,996
  7,368
  7,759
  8,167
  8,595
  9,043
  9,513
  10,005
Total debt, $m
  46,126
  48,402
  58,132
  68,250
  78,768
  89,699
  101,058
  112,862
  125,133
  137,892
  151,163
  164,974
  179,352
  194,328
  209,935
  226,208
  243,182
  260,897
  279,394
  298,715
  318,905
  340,013
  362,086
  385,179
  409,345
  434,642
  461,130
  488,873
  517,935
  548,387
  580,301
Total liabilities, $m
  114,522
  116,798
  126,528
  136,646
  147,164
  158,095
  169,454
  181,258
  193,529
  206,288
  219,559
  233,370
  247,748
  262,724
  278,331
  294,604
  311,578
  329,293
  347,790
  367,111
  387,301
  408,409
  430,482
  453,575
  477,741
  503,038
  529,526
  557,269
  586,331
  616,783
  648,697
Total equity, $m
  145,556
  158,021
  171,184
  184,874
  199,104
  213,893
  229,261
  245,232
  261,833
  279,095
  297,051
  315,735
  335,188
  355,450
  376,566
  398,581
  421,547
  445,514
  470,539
  496,679
  523,996
  552,553
  582,417
  613,660
  646,356
  680,581
  716,418
  753,952
  793,271
  834,471
  877,649
Total liabilities and equity, $m
  260,078
  274,819
  297,712
  321,520
  346,268
  371,988
  398,715
  426,490
  455,362
  485,383
  516,610
  549,105
  582,936
  618,174
  654,897
  693,185
  733,125
  774,807
  818,329
  863,790
  911,297
  960,962
  1,012,899
  1,067,235
  1,124,097
  1,183,619
  1,245,944
  1,311,221
  1,379,602
  1,451,254
  1,526,346
Debt-to-equity ratio
  0.317
  0.310
  0.340
  0.370
  0.400
  0.420
  0.440
  0.460
  0.480
  0.490
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
Adjusted equity ratio
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -497
  -5,053
  -3,861
  -2,613
  -1,304
  50
  1,099
  2,198
  3,349
  4,556
  5,822
  7,484
  8,878
  10,342
  11,881
  13,498
  15,199
  16,990
  18,875
  20,861
  22,953
  25,158
  27,483
  29,935
  32,522
  35,250
  38,129
  41,167
  44,373
  47,756
  51,328
Depreciation, amort., depletion, $m
  19,457
  21,009
  22,721
  24,502
  26,352
  28,276
  30,274
  32,351
  34,510
  36,755
  39,090
  41,062
  43,592
  46,227
  48,974
  51,837
  54,823
  57,941
  61,195
  64,595
  68,147
  71,861
  75,745
  79,808
  84,061
  88,512
  93,172
  98,054
  103,167
  108,526
  114,141
Funds from operations, $m
  11,967
  15,956
  18,860
  21,889
  25,049
  28,325
  31,373
  34,549
  37,859
  41,311
  44,912
  48,547
  52,471
  56,570
  60,854
  65,335
  70,023
  74,931
  80,070
  85,456
  91,100
  97,020
  103,229
  109,744
  116,582
  123,762
  131,301
  139,220
  147,540
  156,282
  165,469
Change in working capital, $m
  -879
  144
  150
  156
  162
  169
  175
  182
  189
  197
  205
  213
  222
  231
  241
  251
  262
  273
  285
  298
  311
  326
  340
  356
  373
  390
  409
  428
  448
  470
  492
Cash from operations, $m
  12,846
  12,707
  18,710
  21,733
  24,886
  28,157
  31,198
  34,367
  37,670
  41,115
  44,708
  48,334
  52,249
  56,339
  60,613
  65,084
  69,761
  74,657
  79,785
  85,158
  90,789
  96,694
  102,888
  109,388
  116,209
  123,371
  130,893
  138,792
  147,092
  155,812
  164,976
Maintenance CAPEX, $m
  0
  -18,907
  -20,551
  -22,263
  -24,043
  -25,894
  -27,817
  -29,816
  -31,893
  -34,052
  -36,297
  -38,632
  -41,062
  -43,592
  -46,227
  -48,974
  -51,837
  -54,823
  -57,941
  -61,195
  -64,595
  -68,147
  -71,861
  -75,745
  -79,808
  -84,061
  -88,512
  -93,172
  -98,054
  -103,167
  -108,526
New CAPEX, $m
  -18,109
  -16,110
  -16,777
  -17,448
  -18,137
  -18,848
  -19,587
  -20,355
  -21,159
  -22,001
  -22,885
  -23,814
  -24,793
  -25,824
  -26,912
  -28,059
  -29,270
  -30,547
  -31,895
  -33,316
  -34,815
  -36,396
  -38,063
  -39,820
  -41,671
  -43,621
  -45,675
  -47,837
  -50,114
  -52,510
  -55,031
Cash from investing activities, $m
  -16,852
  -35,017
  -37,328
  -39,711
  -42,180
  -44,742
  -47,404
  -50,171
  -53,052
  -56,053
  -59,182
  -62,446
  -65,855
  -69,416
  -73,139
  -77,033
  -81,107
  -85,370
  -89,836
  -94,511
  -99,410
  -104,543
  -109,924
  -115,565
  -121,479
  -127,682
  -134,187
  -141,009
  -148,168
  -155,677
  -163,557
Free cash flow, $m
  -4,006
  -22,310
  -18,618
  -17,978
  -17,294
  -16,586
  -16,206
  -15,805
  -15,382
  -14,938
  -14,474
  -14,113
  -13,607
  -13,078
  -12,526
  -11,949
  -11,346
  -10,713
  -10,050
  -9,354
  -8,621
  -7,850
  -7,036
  -6,177
  -5,270
  -4,310
  -3,294
  -2,217
  -1,076
  135
  1,420
Issuance/(repayment) of debt, $m
  7,470
  9,277
  9,729
  10,118
  10,518
  10,931
  11,359
  11,805
  12,271
  12,759
  13,271
  13,811
  14,378
  14,976
  15,607
  16,272
  16,974
  17,715
  18,497
  19,321
  20,190
  21,107
  22,074
  23,093
  24,166
  25,297
  26,488
  27,742
  29,062
  30,452
  31,914
Issuance/(repurchase) of shares, $m
  650
  25,498
  22,052
  21,549
  21,006
  20,444
  20,215
  19,971
  19,713
  19,441
  19,158
  18,987
  18,681
  18,364
  18,034
  17,692
  17,337
  16,966
  16,578
  16,173
  15,747
  15,299
  14,827
  14,328
  13,799
  13,238
  12,643
  12,009
  11,333
  10,613
  9,844
Cash from financing (excl. dividends), $m  
  8,057
  34,775
  31,781
  31,667
  31,524
  31,375
  31,574
  31,776
  31,984
  32,200
  32,429
  32,798
  33,059
  33,340
  33,641
  33,964
  34,311
  34,681
  35,075
  35,494
  35,937
  36,406
  36,901
  37,421
  37,965
  38,535
  39,131
  39,751
  40,395
  41,065
  41,758
Total cash flow (excl. dividends), $m
  3,998
  -13,033
  -8,888
  -7,859
  -6,776
  -5,655
  -4,848
  -4,000
  -3,111
  -2,179
  -1,203
  -302
  772
  1,898
  3,081
  4,323
  5,629
  7,002
  8,446
  9,967
  11,569
  13,258
  15,038
  16,915
  18,896
  20,987
  23,194
  25,525
  27,987
  30,587
  33,334
Retained Cash Flow (-), $m
  7,160
  -12,465
  -13,163
  -13,690
  -14,230
  -14,789
  -15,368
  -15,971
  -16,601
  -17,262
  -17,955
  -18,685
  -19,453
  -20,262
  -21,115
  -22,016
  -22,965
  -23,968
  -25,025
  -26,140
  -27,316
  -28,557
  -29,865
  -31,243
  -32,695
  -34,225
  -35,837
  -37,534
  -39,320
  -41,200
  -43,178
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
 
  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
 
  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
Discount rate, %
 
  5.10
  5.36
  5.62
  5.90
  6.20
  6.51
  6.83
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.27
  12.89
  13.53
  14.21
  14.92
  15.66
  16.45
  17.27
  18.13
  19.04
  19.99
  20.99
PV of cash for 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
Current shareholders' claim on cash, %
  100
  88.6
  80.4
  73.6
  68.0
  63.2
  59.1
  55.6
  52.5
  49.8
  47.4
  45.3
  43.4
  41.8
  40.3
  38.9
  37.7
  36.6
  35.7
  34.8
  34.0
  33.3
  32.7
  32.1
  31.6
  31.1
  30.7
  30.3
  30.0
  29.7
  29.4

Chevron Corporation, through its subsidiaries, engages in integrated energy, chemicals, and petroleum operations worldwide. The company operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, and production of crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage, and marketing of natural gas, as well as operates a gas-to-liquids plant. The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil and refined products; transporting crude oil and refined products through pipeline, marine vessel, motor equipment, and rail car; and manufacturing and marketing commodity petrochemicals, and fuel and lubricant additives, as well as plastics for industrial uses. It is also involved in the cash management and debt financing activities; insurance operations; real estate activities; and technology businesses. Further, the company holds interests in power plants, as well as operates geothermal plants; and engages in the transportation of refined products primarily in the coastal waters of the United States. The company was formerly known as ChevronTexaco Corporation and changed its name to Chevron Corporation in 2005. Chevron Corporation was founded in 1879 and is headquartered in San Ramon, California.

FINANCIAL RATIOS  of  Chevron (CVX)

Valuation Ratios
P/E Ratio -401.4
Price to Sales 1.8
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 15.5
Price to Free Cash Flow -37.9
Growth Rates
Sales Growth Rate -14.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -38.6%
Cap. Spend. - 3 Yr. Gr. Rate -13.8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 24.2%
Total Debt to Equity 31.7%
Interest Coverage -13
Management Effectiveness
Return On Assets -0.2%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital -0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity -0.3%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 40%
Gross Margin - 3 Yr. Avg. 38.9%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 19.9%
Operating Margin -4%
Oper. Margin - 3 Yr. Avg. 2.6%
Pre-Tax Margin -2%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin -0.4%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 80%
Eff/ Tax Rate - 3 Yr. Avg. 40.3%
Payout Ratio -1616.1%

CVX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVX stock intrinsic value calculation we used $110484 million for the last fiscal year's total revenue generated by Chevron. The default revenue input number comes from 2016 income statement of Chevron. 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 CVX stock valuation model: a) initial revenue growth rate of 8.7% 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 5.1%, whose default value for CVX is calculated based on our internal credit rating of Chevron, 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 Chevron.
    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 CVX stock the variable cost ratio is equal to 77.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $29878 million in the base year in the intrinsic value calculation for CVX 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 3.5% for Chevron.

Corporate tax rate of 27% is the nominal tax rate for Chevron. 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 CVX 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 CVX are equal to 167.7%.

Life of production assets of 9.8 years is the average useful life of capital assets used in Chevron 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 CVX is equal to 1.5%. 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 - $145556 million for Chevron - 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 1885.91 million for Chevron 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 Chevron at the current share price and the inputted number of shares is $198.9 billion.


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COMPANY NEWS

▶ [$$] Put a Kitten in Your Tank: Big Oil Gets Less Bold   [01:03PM  The Wall Street Journal]
▶ Exxon Profit Beats But Chevron Crushes As Permian Ramps Up   [12:31PM  Investor's Business Daily]
▶ Higher oil prices helps Chevron post a profit   [12:19PM  Associated Press]
▶ GDP Results In Focus   [10:49AM  Zacks]
▶ How Chevron Earnings Crushed Estimates   [10:00AM  24/7 Wall St.]
▶ Exxon, Chevron Q1 Results To Come Amid Expanded Permian Operations   [Apr-27-17 05:15PM  Investor's Business Daily]
▶ Q1 GDP Report, GM, Exxon, Chevron Lead Investing Action Plan   [04:30PM  Investor's Business Daily]
▶ Can Shale Oil Growth Offset Decline In Conventional Activity?   [09:54AM  Investor's Business Daily]
▶ GM Factory Seizure Threatens Oil Sector In Venezuela   [Apr-26-17 05:00PM  Oilprice.com]
▶ Chevron Announces Quarterly Dividend   [04:30PM  Business Wire]
▶ Will Russia Join The OPEC Cut Extension?   [03:30PM  Oilprice.com]
▶ Inside BPs 1Q17 Earnings Outlook: Gauging the Positives   [Apr-24-17 04:06PM  Market Realist]
▶ Oil & Gas Sector: How to Find Hidden Gems   [02:48PM  Investopedia]
▶ Chevron Australian Subsidiary Loses Tax Bill Appeal   [Apr-21-17 11:05AM  TheStreet.com]
▶ The Bullish Case For Energy Stocks   [03:16PM  Barrons.com]
▶ Has Short Interest in Chevron Tumbled?   [07:37AM  Market Realist]
▶ Parkland CEO: Opportunities in Convenience Stores   [Apr-19-17 07:38PM  Bloomberg]
▶ IBM, Chevron Sink DJIA Wednesday   [04:01PM  24/7 Wall St.]
▶ PRESS DIGEST- Canada-April 19   [06:38AM  Reuters]
▶ Why The Permian Doesnt Keep OPEC Awake At Night   [Apr-18-17 07:00PM  Oilprice.com]
▶ U.S. Shale Surging, But Oil Holds Steady   [03:30PM  Oilprice.com]
Stock chart of CVX Financial statements of CVX
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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