Intrinsic value of Delek US Holdings - DK

Previous Close

$20.88

  Intrinsic Value

$2,037

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

-170%

Previous close

$20.88

 
Intrinsic value

$2,037

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

-170%

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

We calculate the intrinsic value of DK 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, %
  -12.21
  33.40
  30.56
  28.00
  25.70
  23.63
  21.77
  20.09
  18.58
  17.23
  16.00
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.27
  7.04
  6.83
  6.65
  6.49
  6.34
Revenue, $m
  4,198
  5,600
  7,312
  9,359
  11,765
  14,545
  17,711
  21,270
  25,223
  29,568
  34,299
  39,411
  44,894
  50,739
  56,939
  63,486
  70,372
  77,594
  85,149
  93,036
  101,257
  109,816
  118,719
  127,975
  137,595
  147,592
  157,981
  168,779
  180,005
  191,681
  203,829
Variable operating expenses, $m
 
  2,122
  2,770
  3,546
  4,457
  5,510
  6,709
  8,057
  9,554
  11,199
  12,991
  14,925
  17,002
  19,216
  21,564
  24,043
  26,651
  29,386
  32,247
  35,234
  38,347
  41,589
  44,961
  48,466
  52,109
  55,895
  59,830
  63,919
  68,171
  72,592
  77,193
Fixed operating expenses, $m
 
  3,050
  3,127
  3,205
  3,285
  3,367
  3,451
  3,538
  3,626
  3,717
  3,810
  3,905
  4,002
  4,102
  4,205
  4,310
  4,418
  4,528
  4,642
  4,758
  4,877
  4,998
  5,123
  5,251
  5,383
  5,517
  5,655
  5,797
  5,942
  6,090
  6,242
Total operating expenses, $m
  4,492
  5,172
  5,897
  6,751
  7,742
  8,877
  10,160
  11,595
  13,180
  14,916
  16,801
  18,830
  21,004
  23,318
  25,769
  28,353
  31,069
  33,914
  36,889
  39,992
  43,224
  46,587
  50,084
  53,717
  57,492
  61,412
  65,485
  69,716
  74,113
  78,682
  83,435
Operating income, $m
  -295
  428
  1,415
  2,609
  4,023
  5,668
  7,551
  9,676
  12,044
  14,652
  17,499
  20,581
  23,889
  27,421
  31,171
  35,133
  39,303
  43,680
  48,260
  53,044
  58,033
  63,229
  68,635
  74,258
  80,103
  86,180
  92,496
  99,063
  105,893
  112,999
  120,394
EBITDA, $m
  -179
  582
  1,615
  2,865
  4,345
  6,066
  8,035
  10,257
  12,732
  15,459
  18,435
  21,655
  25,113
  28,804
  32,722
  36,863
  41,221
  45,795
  50,581
  55,580
  60,793
  66,222
  71,871
  77,746
  83,853
  90,202
  96,802
  103,663
  110,799
  118,223
  125,949
Interest expense (income), $m
  52
  47
  87
  136
  195
  263
  343
  433
  535
  648
  772
  907
  1,053
  1,210
  1,377
  1,554
  1,741
  1,938
  2,145
  2,361
  2,586
  2,821
  3,065
  3,320
  3,584
  3,859
  4,145
  4,442
  4,750
  5,071
  5,405
Earnings before tax, $m
  -391
  380
  1,327
  2,472
  3,828
  5,405
  7,209
  9,243
  11,508
  14,004
  16,727
  19,673
  22,836
  26,211
  29,793
  33,578
  37,562
  41,741
  46,116
  50,684
  55,447
  60,408
  65,570
  70,938
  76,519
  82,320
  88,351
  94,621
  101,143
  107,927
  114,989
Tax expense, $m
  -171
  103
  358
  668
  1,034
  1,459
  1,946
  2,496
  3,107
  3,781
  4,516
  5,312
  6,166
  7,077
  8,044
  9,066
  10,142
  11,270
  12,451
  13,685
  14,971
  16,310
  17,704
  19,153
  20,660
  22,226
  23,855
  25,548
  27,309
  29,140
  31,047
Net income, $m
  -154
  278
  969
  1,805
  2,795
  3,946
  5,262
  6,747
  8,401
  10,223
  12,211
  14,361
  16,670
  19,134
  21,749
  24,512
  27,420
  30,471
  33,664
  36,999
  40,476
  44,098
  47,866
  51,785
  55,859
  60,094
  64,496
  69,074
  73,834
  78,787
  83,942

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  689
  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
  2,980
  3,057
  3,991
  5,109
  6,422
  7,939
  9,668
  11,610
  13,768
  16,140
  18,722
  21,512
  24,505
  27,696
  31,080
  34,654
  38,413
  42,355
  46,479
  50,784
  55,271
  59,943
  64,803
  69,856
  75,107
  80,563
  86,234
  92,128
  98,256
  104,629
  111,260
Adjusted assets (=assets-cash), $m
  2,291
  3,057
  3,991
  5,109
  6,422
  7,939
  9,668
  11,610
  13,768
  16,140
  18,722
  21,512
  24,505
  27,696
  31,080
  34,654
  38,413
  42,355
  46,479
  50,784
  55,271
  59,943
  64,803
  69,856
  75,107
  80,563
  86,234
  92,128
  98,256
  104,629
  111,260
Revenue / Adjusted assets
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
  1.832
Average production assets, $m
  1,168
  1,557
  2,033
  2,602
  3,271
  4,044
  4,924
  5,913
  7,012
  8,220
  9,535
  10,956
  12,480
  14,106
  15,829
  17,649
  19,563
  21,571
  23,671
  25,864
  28,149
  30,529
  33,004
  35,577
  38,252
  41,031
  43,919
  46,921
  50,041
  53,287
  56,664
Working capital, $m
  462
  -190
  -249
  -318
  -400
  -495
  -602
  -723
  -858
  -1,005
  -1,166
  -1,340
  -1,526
  -1,725
  -1,936
  -2,159
  -2,393
  -2,638
  -2,895
  -3,163
  -3,443
  -3,734
  -4,036
  -4,351
  -4,678
  -5,018
  -5,371
  -5,738
  -6,120
  -6,517
  -6,930
Total debt, $m
  833
  1,385
  2,162
  3,090
  4,181
  5,443
  6,879
  8,493
  10,286
  12,257
  14,403
  16,722
  19,209
  21,861
  24,673
  27,642
  30,766
  34,042
  37,469
  41,046
  44,775
  48,658
  52,696
  56,895
  61,259
  65,793
  70,506
  75,404
  80,496
  85,792
  91,302
Total liabilities, $m
  1,988
  2,540
  3,317
  4,245
  5,336
  6,598
  8,034
  9,648
  11,441
  13,412
  15,558
  17,877
  20,364
  23,016
  25,828
  28,797
  31,921
  35,197
  38,624
  42,201
  45,930
  49,813
  53,851
  58,050
  62,414
  66,948
  71,661
  76,559
  81,651
  86,947
  92,457
Total equity, $m
  992
  517
  674
  863
  1,085
  1,342
  1,634
  1,962
  2,327
  2,728
  3,164
  3,636
  4,141
  4,681
  5,253
  5,856
  6,492
  7,158
  7,855
  8,582
  9,341
  10,130
  10,952
  11,806
  12,693
  13,615
  14,574
  15,570
  16,605
  17,682
  18,803
Total liabilities and equity, $m
  2,980
  3,057
  3,991
  5,108
  6,421
  7,940
  9,668
  11,610
  13,768
  16,140
  18,722
  21,513
  24,505
  27,697
  31,081
  34,653
  38,413
  42,355
  46,479
  50,783
  55,271
  59,943
  64,803
  69,856
  75,107
  80,563
  86,235
  92,129
  98,256
  104,629
  111,260
Debt-to-equity ratio
  0.840
  2.680
  3.200
  3.580
  3.850
  4.060
  4.210
  4.330
  4.420
  4.490
  4.550
  4.600
  4.640
  4.670
  4.700
  4.720
  4.740
  4.760
  4.770
  4.780
  4.790
  4.800
  4.810
  4.820
  4.830
  4.830
  4.840
  4.840
  4.850
  4.850
  4.860
Adjusted equity ratio
  0.132
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -154
  278
  969
  1,805
  2,795
  3,946
  5,262
  6,747
  8,401
  10,223
  12,211
  14,361
  16,670
  19,134
  21,749
  24,512
  27,420
  30,471
  33,664
  36,999
  40,476
  44,098
  47,866
  51,785
  55,859
  60,094
  64,496
  69,074
  73,834
  78,787
  83,942
Depreciation, amort., depletion, $m
  116
  154
  200
  256
  322
  398
  484
  581
  689
  807
  936
  1,074
  1,224
  1,383
  1,552
  1,730
  1,918
  2,115
  2,321
  2,536
  2,760
  2,993
  3,236
  3,488
  3,750
  4,023
  4,306
  4,600
  4,906
  5,224
  5,555
Funds from operations, $m
  467
  432
  1,169
  2,061
  3,117
  4,343
  5,746
  7,328
  9,090
  11,030
  13,147
  15,436
  17,894
  20,517
  23,301
  26,242
  29,338
  32,586
  35,985
  39,535
  43,236
  47,091
  51,102
  55,273
  59,609
  64,116
  68,802
  73,674
  78,740
  84,011
  89,497
Change in working capital, $m
  199
  -48
  -58
  -70
  -82
  -95
  -108
  -121
  -134
  -148
  -161
  -174
  -186
  -199
  -211
  -223
  -234
  -246
  -257
  -268
  -280
  -291
  -303
  -315
  -327
  -340
  -353
  -367
  -382
  -397
  -413
Cash from operations, $m
  268
  479
  1,228
  2,131
  3,198
  4,438
  5,854
  7,449
  9,224
  11,178
  13,307
  15,609
  18,080
  20,716
  23,512
  26,465
  29,572
  32,832
  36,242
  39,803
  43,516
  47,382
  51,404
  55,587
  59,936
  64,456
  69,155
  74,041
  79,122
  84,408
  89,910
Maintenance CAPEX, $m
  0
  -114
  -153
  -199
  -255
  -321
  -396
  -483
  -580
  -687
  -806
  -935
  -1,074
  -1,224
  -1,383
  -1,552
  -1,730
  -1,918
  -2,115
  -2,321
  -2,536
  -2,760
  -2,993
  -3,236
  -3,488
  -3,750
  -4,023
  -4,306
  -4,600
  -4,906
  -5,224
New CAPEX, $m
  -47
  -389
  -476
  -569
  -669
  -773
  -880
  -989
  -1,099
  -1,208
  -1,315
  -1,421
  -1,524
  -1,625
  -1,724
  -1,820
  -1,914
  -2,008
  -2,100
  -2,193
  -2,285
  -2,379
  -2,475
  -2,573
  -2,674
  -2,779
  -2,888
  -3,002
  -3,121
  -3,246
  -3,377
Cash from investing activities, $m
  181
  -503
  -629
  -768
  -924
  -1,094
  -1,276
  -1,472
  -1,679
  -1,895
  -2,121
  -2,356
  -2,598
  -2,849
  -3,107
  -3,372
  -3,644
  -3,926
  -4,215
  -4,514
  -4,821
  -5,139
  -5,468
  -5,809
  -6,162
  -6,529
  -6,911
  -7,308
  -7,721
  -8,152
  -8,601
Free cash flow, $m
  449
  -25
  599
  1,362
  2,275
  3,344
  4,577
  5,977
  7,546
  9,283
  11,186
  13,254
  15,482
  17,867
  20,405
  23,093
  25,927
  28,906
  32,027
  35,290
  38,694
  42,243
  45,936
  49,778
  53,774
  57,927
  62,245
  66,733
  71,401
  76,256
  81,309
Issuance/(repayment) of debt, $m
  -24
  636
  776
  929
  1,091
  1,261
  1,436
  1,614
  1,793
  1,971
  2,146
  2,319
  2,487
  2,652
  2,812
  2,969
  3,124
  3,276
  3,427
  3,578
  3,729
  3,882
  4,039
  4,199
  4,364
  4,535
  4,712
  4,898
  5,092
  5,296
  5,510
Issuance/(repurchase) of shares, $m
  -6
  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  
  -24
  636
  776
  929
  1,091
  1,261
  1,436
  1,614
  1,793
  1,971
  2,146
  2,319
  2,487
  2,652
  2,812
  2,969
  3,124
  3,276
  3,427
  3,578
  3,729
  3,882
  4,039
  4,199
  4,364
  4,535
  4,712
  4,898
  5,092
  5,296
  5,510
Total cash flow (excl. dividends), $m
  425
  612
  1,376
  2,291
  3,366
  4,605
  6,013
  7,591
  9,339
  11,253
  13,332
  15,572
  17,969
  20,519
  23,218
  26,063
  29,051
  32,182
  35,454
  38,867
  42,424
  46,125
  49,975
  53,977
  58,137
  62,462
  66,957
  71,631
  76,493
  81,552
  86,819
Retained Cash Flow (-), $m
  161
  -130
  -158
  -189
  -222
  -256
  -292
  -328
  -365
  -401
  -436
  -472
  -506
  -539
  -572
  -604
  -635
  -666
  -697
  -728
  -758
  -790
  -821
  -854
  -887
  -922
  -958
  -996
  -1,036
  -1,077
  -1,121
Prev. year cash balance distribution, $m
 
  605
  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
 
  1,087
  1,218
  2,102
  3,144
  4,349
  5,721
  7,263
  8,974
  10,853
  12,896
  15,101
  17,463
  19,979
  22,646
  25,459
  28,416
  31,516
  34,757
  38,140
  41,665
  45,335
  49,153
  53,123
  57,250
  61,539
  65,999
  70,635
  75,458
  80,475
  85,699
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
 
  1,042
  1,115
  1,829
  2,589
  3,371
  4,152
  4,907
  5,609
  6,234
  6,761
  7,171
  7,452
  7,597
  7,603
  7,474
  7,221
  6,857
  6,401
  5,872
  5,294
  4,689
  4,078
  3,482
  2,916
  2,394
  1,926
  1,516
  1,167
  878
  645
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

Delek US Holdings, Inc. operates as an integrated energy company that operates in petroleum refining, wholesale distribution, and convenience store retailing businesses. The company operates in three segments: Refining, Logistics, and Retail. The Refining segment owns and operates two refineries in Tyler, Texas, and El Dorado, Arkansas; and produces various petroleum-based products used in transportation and industrial markets. This segment offers a range of products, such as gasoline, diesel, jet fuels, liquefied petroleum gas, and natural gas liquids, as well as biodiesel blended products. The Logistics segment gathers, transports, and stores crude oil and intermediate products, as well as markets, distributes, transports, and stores refined products. It also offers crude oil and refined product transportation services; terminalling; and wholesale marketing services to third parties in Texas, Tennessee, and Arkansas, as well as markets light products using third-party terminals. This segment owns approximately 400 miles of crude oil transportation pipelines, 245 miles of active refined product pipelines, 600-mile crude oil gathering system, and associated crude oil storage tanks with an aggregate of approximately 8.5 million barrels of active shell capacity. The Retail segment markets gasoline, diesel, and other refined petroleum products, as well as convenience merchandise. As of December 31, 2015, this segment operated a network of approximately 358 company-operated convenience store locations under the MAPCO Express, MAPCO Mart, Discount Food Mart, Fast Food and Fuel, East Coast, Delta Express, and Favorite Markets brands. The company serves oil companies, independent refiners and marketers, jobbers, distributors, utility and transportation companies, independent retail fuel operators, and the United States government. Delek US Holdings, Inc. was founded in 2001 and is headquartered in Brentwood, Tennessee.

FINANCIAL RATIOS  of  Delek US Holdings (DK)

Valuation Ratios
P/E Ratio -8.4
Price to Sales 0.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 4.8
Price to Free Cash Flow 5.9
Growth Rates
Sales Growth Rate -12.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -78.7%
Cap. Spend. - 3 Yr. Gr. Rate -25.9%
Financial Strength
Quick Ratio 8
Current Ratio 0.1
LT Debt to Equity 75.5%
Total Debt to Equity 84%
Interest Coverage -7
Management Effectiveness
Return On Assets -4%
Ret/ On Assets - 3 Yr. Avg. 2.4%
Return On Total Capital -8.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity -14.4%
Return On Equity - 3 Yr. Avg. 2.7%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 8.1%
Gross Margin - 3 Yr. Avg. 10.9%
EBITDA Margin -5.3%
EBITDA Margin - 3 Yr. Avg. 1.6%
Operating Margin -7%
Oper. Margin - 3 Yr. Avg. -0.4%
Pre-Tax Margin -9.3%
Pre-Tax Margin - 3 Yr. Avg. -1.6%
Net Profit Margin -3.7%
Net Profit Margin - 3 Yr. Avg. -0.3%
Effective Tax Rate 43.7%
Eff/ Tax Rate - 3 Yr. Avg. -0.5%
Payout Ratio -24.7%

DK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DK stock intrinsic value calculation we used $4198 million for the last fiscal year's total revenue generated by Delek US Holdings. The default revenue input number comes from 2016 income statement of Delek US Holdings. 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 DK stock valuation model: a) initial revenue growth rate of 33.4% 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 DK is calculated based on our internal credit rating of Delek US Holdings, 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 Delek US Holdings.
    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 DK stock the variable cost ratio is equal to 37.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2976 million in the base year in the intrinsic value calculation for DK 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 6.3% for Delek US Holdings.

Corporate tax rate of 27% is the nominal tax rate for Delek US Holdings. 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 DK 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 DK are equal to 27.8%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Delek US Holdings 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 DK is equal to -3.4%. 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 - $992 million for Delek US Holdings - 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 64.619 million for Delek US Holdings 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 Delek US Holdings at the current share price and the inputted number of shares is $1.3 billion.

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COMPANY NEWS

▶ Delek US Holdings reports 2Q loss   [Aug-04-17 03:11AM  Associated Press]
▶ Delek US Holdings Reports Second Quarter 2017 Results   [Aug-02-17 05:45PM  GlobeNewswire]
▶ Alon USA Energy Stockholders Approve Merger Transaction   [Jun-28-17 06:21PM  PR Newswire]
▶ How to Uncover Institutional Buying   [Jun-20-17 05:37PM  Zacks]
▶ Your Best Stocks Will Be in the Best Industries   [Jun-14-17 05:45PM  Zacks]
▶ These Energy Stocks Were the Top Gainers Last Week   [Jun-05-17 04:19PM  Market Realist]
▶ Oil Production Cut Extended to March 2018   [May-26-17 12:38PM  GuruFocus.com]
▶ Has Short Interest in Marathon Petroleum Fallen?   [May-23-17 09:06AM  Market Realist]
▶ Delek US Holdings beats 1Q profit forecasts   [May-08-17 05:01PM  Associated Press]
▶ Better Buy: Clean Energy Fuels Corp. vs. Delek US Holdings   [Feb-22-17 10:37AM  at Motley Fool]
Stock chart of DK Financial statements of DK
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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