Intrinsic value of Chevron - CVX

Previous Close

$120.42

  Intrinsic Value

$18.60

stock screener

  Rating & Target

str. sell

-85%

Previous close

$120.42

 
Intrinsic value

$18.60

 
Up/down potential

-85%

 
Rating

str. sell

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 228.2

 

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
  17.00
  15.80
  14.72
  13.75
  12.87
  12.09
  11.38
  10.74
  10.17
  9.65
  9.18
  8.77
  8.39
  8.05
  7.75
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
Revenue, $m
  110,484
  129,266
  149,690
  171,725
  195,333
  220,479
  247,126
  275,242
  304,802
  335,787
  368,187
  402,002
  437,241
  473,921
  512,073
  551,734
  592,953
  635,785
  680,298
  726,566
  774,672
  824,708
  876,772
  930,972
  987,422
  1,046,244
  1,107,570
  1,171,535
  1,238,287
  1,307,978
  1,380,770
Variable operating expenses, $m
 
  101,008
  116,895
  134,035
  152,399
  171,959
  192,686
  214,556
  237,550
  261,651
  286,854
  312,699
  340,109
  368,641
  398,318
  429,169
  461,230
  494,548
  529,173
  565,162
  602,582
  641,502
  682,000
  724,160
  768,070
  813,825
  861,527
  911,283
  963,206
  1,017,416
  1,074,037
Fixed operating expenses, $m
 
  29,821
  30,567
  31,331
  32,114
  32,917
  33,740
  34,584
  35,448
  36,334
  37,243
  38,174
  39,128
  40,106
  41,109
  42,137
  43,190
  44,270
  45,377
  46,511
  47,674
  48,866
  50,087
  51,340
  52,623
  53,939
  55,287
  56,669
  58,086
  59,538
  61,027
Total operating expenses, $m
  114,804
  130,829
  147,462
  165,366
  184,513
  204,876
  226,426
  249,140
  272,998
  297,985
  324,097
  350,873
  379,237
  408,747
  439,427
  471,306
  504,420
  538,818
  574,550
  611,673
  650,256
  690,368
  732,087
  775,500
  820,693
  867,764
  916,814
  967,952
  1,021,292
  1,076,954
  1,135,064
Operating income, $m
  -4,320
  -1,563
  2,228
  6,359
  10,820
  15,603
  20,700
  26,102
  31,804
  37,801
  44,091
  51,129
  58,003
  65,173
  72,646
  80,429
  88,532
  96,967
  105,749
  114,893
  124,417
  134,340
  144,684
  155,472
  166,729
  178,481
  190,755
  203,583
  216,995
  231,024
  245,706
EBITDA, $m
  15,137
  21,015
  28,302
  36,203
  44,704
  53,790
  63,447
  73,661
  84,421
  95,720
  107,554
  119,921
  132,825
  146,272
  160,273
  174,843
  190,000
  205,765
  222,163
  239,225
  256,981
  275,466
  294,720
  314,782
  335,699
  357,517
  380,285
  404,059
  428,894
  454,849
  481,987
Interest expense (income), $m
  158
  1,369
  2,006
  2,701
  3,451
  4,255
  5,111
  6,018
  6,975
  7,981
  9,036
  10,139
  11,290
  12,489
  13,738
  15,037
  16,387
  17,790
  19,248
  20,763
  22,338
  23,975
  25,678
  27,450
  29,295
  31,217
  33,219
  35,307
  37,484
  39,756
  42,128
Earnings before tax, $m
  -2,160
  -2,933
  222
  3,657
  7,369
  11,348
  15,589
  20,084
  24,829
  29,820
  35,055
  40,991
  46,713
  52,684
  58,908
  65,392
  72,145
  79,178
  86,501
  94,130
  102,079
  110,365
  119,006
  128,022
  137,434
  147,264
  157,536
  168,276
  179,511
  191,268
  203,578
Tax expense, $m
  -1,729
  0
  60
  988
  1,990
  3,064
  4,209
  5,423
  6,704
  8,051
  9,465
  11,067
  12,613
  14,225
  15,905
  17,656
  19,479
  21,378
  23,355
  25,415
  27,561
  29,799
  32,132
  34,566
  37,107
  39,761
  42,535
  45,435
  48,468
  51,642
  54,966
Net income, $m
  -497
  -2,933
  162
  2,670
  5,379
  8,284
  11,380
  14,662
  18,125
  21,769
  25,590
  29,923
  34,101
  38,459
  43,003
  47,736
  52,666
  57,800
  63,146
  68,715
  74,518
  80,566
  86,874
  93,456
  100,327
  107,503
  115,001
  122,842
  131,043
  139,626
  148,612

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
  295,804
  342,541
  392,963
  446,987
  504,529
  565,506
  629,845
  697,488
  768,391
  842,534
  919,913
  1,000,550
  1,084,488
  1,171,792
  1,262,550
  1,356,871
  1,454,886
  1,556,747
  1,662,623
  1,772,706
  1,887,204
  2,006,343
  2,130,370
  2,259,546
  2,394,152
  2,534,484
  2,680,859
  2,833,609
  2,993,085
  3,159,657
Adjusted assets (=assets-cash), $m
  253,077
  295,804
  342,541
  392,963
  446,987
  504,529
  565,506
  629,845
  697,488
  768,391
  842,534
  919,913
  1,000,550
  1,084,488
  1,171,792
  1,262,550
  1,356,871
  1,454,886
  1,556,747
  1,662,623
  1,772,706
  1,887,204
  2,006,343
  2,130,370
  2,259,546
  2,394,152
  2,534,484
  2,680,859
  2,833,609
  2,993,085
  3,159,657
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
  216,780
  251,031
  287,982
  327,574
  369,744
  414,430
  461,581
  511,153
  563,115
  617,450
  674,158
  733,252
  794,766
  858,747
  925,258
  994,382
  1,066,212
  1,140,860
  1,218,452
  1,299,126
  1,383,035
  1,470,347
  1,561,239
  1,655,906
  1,754,552
  1,857,394
  1,964,665
  2,076,608
  2,193,479
  2,315,551
Working capital, $m
  -2,166
  1,939
  2,245
  2,576
  2,930
  3,307
  3,707
  4,129
  4,572
  5,037
  5,523
  6,030
  6,559
  7,109
  7,681
  8,276
  8,894
  9,537
  10,204
  10,898
  11,620
  12,371
  13,152
  13,965
  14,811
  15,694
  16,614
  17,573
  18,574
  19,620
  20,712
Total debt, $m
  46,126
  57,321
  77,184
  98,613
  121,574
  146,029
  171,944
  199,288
  228,036
  258,170
  289,681
  322,567
  356,838
  392,511
  429,616
  468,188
  508,274
  549,931
  593,221
  638,219
  685,004
  733,666
  784,300
  837,011
  891,911
  949,118
  1,008,760
  1,070,969
  1,135,888
  1,203,665
  1,274,458
Total liabilities, $m
  114,522
  125,717
  145,580
  167,009
  189,970
  214,425
  240,340
  267,684
  296,432
  326,566
  358,077
  390,963
  425,234
  460,907
  498,012
  536,584
  576,670
  618,327
  661,617
  706,615
  753,400
  802,062
  852,696
  905,407
  960,307
  1,017,514
  1,077,156
  1,139,365
  1,204,284
  1,272,061
  1,342,854
Total equity, $m
  145,556
  170,087
  196,961
  225,954
  257,018
  290,104
  325,166
  362,161
  401,055
  441,825
  484,457
  528,950
  575,317
  623,581
  673,780
  725,966
  780,201
  836,560
  895,129
  956,008
  1,019,306
  1,085,142
  1,153,647
  1,224,963
  1,299,239
  1,376,637
  1,457,328
  1,541,494
  1,629,325
  1,721,024
  1,816,803
Total liabilities and equity, $m
  260,078
  295,804
  342,541
  392,963
  446,988
  504,529
  565,506
  629,845
  697,487
  768,391
  842,534
  919,913
  1,000,551
  1,084,488
  1,171,792
  1,262,550
  1,356,871
  1,454,887
  1,556,746
  1,662,623
  1,772,706
  1,887,204
  2,006,343
  2,130,370
  2,259,546
  2,394,151
  2,534,484
  2,680,859
  2,833,609
  2,993,085
  3,159,657
Debt-to-equity ratio
  0.317
  0.340
  0.390
  0.440
  0.470
  0.500
  0.530
  0.550
  0.570
  0.580
  0.600
  0.610
  0.620
  0.630
  0.640
  0.640
  0.650
  0.660
  0.660
  0.670
  0.670
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
  0.700
  0.700
  0.700
Adjusted equity ratio
  0.548
  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
  -2,933
  162
  2,670
  5,379
  8,284
  11,380
  14,662
  18,125
  21,769
  25,590
  29,923
  34,101
  38,459
  43,003
  47,736
  52,666
  57,800
  63,146
  68,715
  74,518
  80,566
  86,874
  93,456
  100,327
  107,503
  115,001
  122,842
  131,043
  139,626
  148,612
Depreciation, amort., depletion, $m
  19,457
  22,578
  26,073
  29,844
  33,884
  38,187
  42,747
  47,558
  52,617
  57,919
  63,463
  68,792
  74,822
  81,099
  87,627
  94,414
  101,468
  108,797
  116,414
  124,332
  132,564
  141,126
  150,035
  159,310
  168,970
  179,036
  189,530
  200,476
  211,899
  223,824
  236,281
Funds from operations, $m
  11,967
  19,646
  26,236
  32,514
  39,263
  46,471
  54,127
  62,220
  70,742
  79,687
  89,053
  98,715
  108,922
  119,558
  130,630
  142,151
  154,134
  166,597
  179,560
  193,047
  207,082
  221,692
  236,910
  252,766
  269,297
  286,538
  304,531
  323,318
  342,942
  363,450
  384,893
Change in working capital, $m
  -879
  282
  306
  331
  354
  377
  400
  422
  443
  465
  486
  507
  529
  550
  572
  595
  618
  642
  668
  694
  722
  751
  781
  813
  847
  882
  920
  959
  1,001
  1,045
  1,092
Cash from operations, $m
  12,846
  19,364
  25,929
  32,183
  38,909
  46,094
  53,727
  61,798
  70,299
  79,223
  88,567
  98,208
  108,394
  119,008
  130,058
  141,556
  153,515
  165,954
  178,893
  192,353
  206,360
  220,942
  236,129
  251,953
  268,450
  285,656
  303,612
  322,358
  341,940
  362,405
  383,801
Maintenance CAPEX, $m
  0
  -18,907
  -22,120
  -25,615
  -29,386
  -33,426
  -37,729
  -42,289
  -47,100
  -52,158
  -57,461
  -63,005
  -68,792
  -74,822
  -81,099
  -87,627
  -94,414
  -101,468
  -108,797
  -116,414
  -124,332
  -132,564
  -141,126
  -150,035
  -159,310
  -168,970
  -179,036
  -189,530
  -200,476
  -211,899
  -223,824
New CAPEX, $m
  -18,109
  -31,489
  -34,251
  -36,952
  -39,592
  -42,169
  -44,687
  -47,151
  -49,572
  -51,962
  -54,335
  -56,707
  -59,095
  -61,514
  -63,981
  -66,512
  -69,123
  -71,830
  -74,648
  -77,591
  -80,674
  -83,909
  -87,311
  -90,893
  -94,667
  -98,646
  -102,843
  -107,271
  -111,943
  -116,872
  -122,072
Cash from investing activities, $m
  -16,852
  -50,396
  -56,371
  -62,567
  -68,978
  -75,595
  -82,416
  -89,440
  -96,672
  -104,120
  -111,796
  -119,712
  -127,887
  -136,336
  -145,080
  -154,139
  -163,537
  -173,298
  -183,445
  -194,005
  -205,006
  -216,473
  -228,437
  -240,928
  -253,977
  -267,616
  -281,879
  -296,801
  -312,419
  -328,771
  -345,896
Free cash flow, $m
  -4,006
  -31,032
  -30,442
  -30,384
  -30,069
  -29,501
  -28,689
  -27,642
  -26,373
  -24,898
  -23,229
  -21,505
  -19,493
  -17,328
  -15,021
  -12,583
  -10,022
  -7,343
  -4,553
  -1,653
  1,354
  4,469
  7,691
  11,025
  14,473
  18,040
  21,733
  25,558
  29,522
  33,634
  37,905
Issuance/(repayment) of debt, $m
  7,470
  18,196
  19,863
  21,429
  22,960
  24,455
  25,915
  27,344
  28,748
  30,134
  31,511
  32,886
  34,271
  35,674
  37,104
  38,572
  40,087
  41,656
  43,291
  44,997
  46,785
  48,662
  50,634
  52,711
  54,900
  57,207
  59,641
  62,209
  64,919
  67,777
  70,793
Issuance/(repurchase) of shares, $m
  650
  27,464
  26,712
  26,323
  25,685
  24,802
  23,682
  22,334
  20,769
  19,001
  17,042
  14,570
  12,266
  9,805
  7,197
  4,449
  1,569
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  8,057
  45,660
  46,575
  47,752
  48,645
  49,257
  49,597
  49,678
  49,517
  49,135
  48,553
  47,456
  46,537
  45,479
  44,301
  43,021
  41,656
  41,656
  43,291
  44,997
  46,785
  48,662
  50,634
  52,711
  54,900
  57,207
  59,641
  62,209
  64,919
  67,777
  70,793
Total cash flow (excl. dividends), $m
  3,998
  14,628
  16,133
  17,368
  18,577
  19,756
  20,908
  22,036
  23,144
  24,238
  25,324
  25,951
  27,044
  28,151
  29,280
  30,438
  31,633
  34,313
  38,738
  43,345
  48,139
  53,130
  58,326
  63,736
  69,373
  75,248
  81,374
  87,767
  94,441
  101,412
  108,697
Retained Cash Flow (-), $m
  7,160
  -27,464
  -26,874
  -28,993
  -31,064
  -33,086
  -35,062
  -36,995
  -38,894
  -40,770
  -42,632
  -44,493
  -46,366
  -48,264
  -50,200
  -52,186
  -54,235
  -56,359
  -58,570
  -60,879
  -63,298
  -65,836
  -68,505
  -71,315
  -74,276
  -77,398
  -80,691
  -84,166
  -87,831
  -91,699
  -95,779
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
 
  -12,836
  -10,741
  -11,624
  -12,487
  -13,330
  -14,153
  -14,959
  -15,751
  -16,532
  -17,308
  -18,542
  -19,323
  -20,113
  -20,920
  -21,748
  -22,602
  -22,046
  -19,832
  -17,534
  -15,158
  -12,706
  -10,180
  -7,579
  -4,903
  -2,150
  683
  3,601
  6,609
  9,713
  12,919
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
 
  -12,213
  -9,677
  -9,865
  -9,927
  -9,868
  -9,695
  -9,417
  -9,047
  -8,598
  -8,083
  -7,708
  -7,083
  -6,438
  -5,785
  -5,137
  -4,507
  -3,665
  -2,711
  -1,944
  -1,342
  -884
  -547
  -309
  -149
  -48
  11
  40
  50
  49
  43
Current shareholders' claim on cash, %
  100
  89.3
  81.1
  74.8
  69.7
  65.7
  62.4
  59.8
  57.7
  56.0
  54.6
  53.6
  52.8
  52.3
  51.9
  51.7
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6
  51.6

Chevron Corporation (Chevron) manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in integrated energy and chemicals operations. The Company operates through two business segments: Upstream and Downstream. Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas; transporting crude oil by international oil export pipelines; processing, transporting, storage and marketing of natural gas, and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products, and manufacturing and marketing of commodity petrochemicals.

FINANCIAL RATIOS  of  Chevron (CVX)

Valuation Ratios
P/E Ratio -458.3
Price to Sales 2.1
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 17.7
Price to Free Cash Flow -43.3
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 46.3%
Gross Margin - 3 Yr. Avg. 42.9%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 19.9%
Operating Margin -3.9%
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 17% 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 78.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $29094 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 1894.98 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 $228.2 billion.

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YPF YPF ADR 22.20 4.82  str.sell
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COMPANY NEWS

▶ Chevron Leads These Five Industrial Stocks Trading Near Buy Points   [Dec-11-17 04:15PM  Investor's Business Daily]
▶ 5 Top Oil Dividend Stocks to Buy Now   [Dec-09-17 10:33AM  Motley Fool]
▶ Integrated Energy Gainers: PBR and CVX   [09:02AM  Market Realist]
▶ Interior delays Obama-era regulation on methane emissions   [Dec-07-17 08:14PM  Associated Press]
▶ ETFs with exposure to Chevron Corp. : December 5, 2017   [Dec-05-17 12:36PM  Capital Cube]
▶ 3 Big Oil Stocks to Consider Buying Now   [Dec-04-17 03:07PM  Motley Fool]
▶ OPEC Extension Sends Oil Prices Soaring   [Dec-01-17 03:30PM  Oilprice.com]
▶ Big Oil Set for 2018 Bull Market   [08:50AM  Investopedia]
▶ ConocoPhillips Is a Falling Knife Catch It   [11:02AM  InvestorPlace]
▶ 5 Great Oil Stocks to Trade Ahead of Big OPEC Meeting   [Nov-27-17 02:42PM  TheStreet.com]
▶ How to Play This Week's OPEC Meeting   [02:30PM  TheStreet.com]
▶ Norways $35B Oil Stock Dump Could Hurt The Industry   [Nov-22-17 05:00PM  Oilprice.com]
▶ NYSE Dividend Stock Picks   [08:02AM  Simply Wall St.]
▶ Bankrupt Venezuela Asks Partners For Free Oil   [Nov-21-17 04:00PM  Oilprice.com]
▶ Best-In-Class NYSE Energy Dividend Stocks   [08:03AM  Simply Wall St.]
▶ These two oil giants are among today's IQ100 laggards   [Nov-16-17 03:10PM  CNBC Videos]
▶ Should You Buy Oil Stocks in 2018?   [Nov-14-17 08:09PM  Zacks]
▶ Oil prices are up now, but surge might be short-term   [Nov-13-17 04:07PM  Associated Press]
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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