Intrinsic value of ENI ADR - E

Previous Close

$31.34

  Intrinsic Value

$7.44

stock screener

  Rating & Target

str. sell

-76%

  Value-price divergence*

-84%

Previous close

$31.34

 
Intrinsic value

$7.44

 
Up/down potential

-76%

 
Rating

str. sell

 
Value-price divergence*

-84%

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

We calculate the intrinsic value of E 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 57.5

 

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, %
  -22.86
  35.20
  32.18
  29.46
  27.02
  24.81
  22.83
  21.05
  19.44
  18.00
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
Revenue, $m
  58,852
  79,568
  105,173
  136,159
  172,943
  215,858
  265,144
  320,956
  383,364
  452,370
  527,916
  609,902
  698,198
  792,660
  893,141
  999,504
  1,111,627
  1,229,417
  1,352,807
  1,481,768
  1,616,306
  1,756,466
  1,902,331
  2,054,023
  2,211,703
  2,375,566
  2,545,848
  2,722,816
  2,906,773
  3,098,054
  3,297,025
Variable operating expenses, $m
 
  82,781
  109,375
  141,558
  179,764
  224,336
  275,527
  333,495
  398,314
  469,986
  548,451
  633,465
  725,172
  823,283
  927,646
  1,038,118
  1,154,573
  1,276,913
  1,405,070
  1,539,013
  1,678,749
  1,824,324
  1,975,824
  2,133,376
  2,297,147
  2,467,342
  2,644,202
  2,828,007
  3,019,071
  3,217,741
  3,424,399
Fixed operating expenses, $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
Total operating expenses, $m
  56,762
  82,781
  109,375
  141,558
  179,764
  224,336
  275,527
  333,495
  398,314
  469,986
  548,451
  633,465
  725,172
  823,283
  927,646
  1,038,118
  1,154,573
  1,276,913
  1,405,070
  1,539,013
  1,678,749
  1,824,324
  1,975,824
  2,133,376
  2,297,147
  2,467,342
  2,644,202
  2,828,007
  3,019,071
  3,217,741
  3,424,399
Operating income, $m
  2,091
  -3,213
  -4,202
  -5,400
  -6,821
  -8,479
  -10,383
  -12,539
  -14,950
  -17,616
  -20,534
  -23,562
  -26,974
  -30,623
  -34,505
  -38,614
  -42,946
  -47,496
  -52,263
  -57,245
  -62,443
  -67,858
  -73,493
  -79,353
  -85,445
  -91,775
  -98,354
  -105,191
  -112,298
  -119,687
  -127,374
EBITDA, $m
  10,069
  7,087
  9,367
  12,127
  15,404
  19,226
  23,616
  28,587
  34,145
  40,291
  47,020
  54,322
  62,186
  70,600
  79,549
  89,023
  99,009
  109,500
  120,490
  131,977
  143,959
  156,443
  169,435
  182,946
  196,990
  211,584
  226,751
  242,513
  258,897
  275,934
  293,656
Interest expense (income), $m
  823
  760
  1,599
  2,639
  3,899
  5,394
  7,138
  9,142
  11,410
  13,947
  16,751
  19,822
  23,154
  26,743
  30,583
  34,667
  38,990
  43,547
  48,335
  53,350
  58,591
  64,060
  69,757
  75,685
  81,851
  88,260
  94,920
  101,841
  109,034
  116,511
  124,286
Earnings before tax, $m
  941
  -3,973
  -5,801
  -8,039
  -10,720
  -13,873
  -17,521
  -21,680
  -26,360
  -31,562
  -37,286
  -43,384
  -50,128
  -57,366
  -65,087
  -73,280
  -81,935
  -91,043
  -100,598
  -110,595
  -121,034
  -131,917
  -143,249
  -155,038
  -167,296
  -180,035
  -193,274
  -207,032
  -221,332
  -236,198
  -251,660
Tax expense, $m
  2,043
  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
Net income, $m
  -1,545
  -3,973
  -5,801
  -8,039
  -10,720
  -13,873
  -17,521
  -21,680
  -26,360
  -31,562
  -37,286
  -43,384
  -50,128
  -57,366
  -65,087
  -73,280
  -81,935
  -91,043
  -100,598
  -110,595
  -121,034
  -131,917
  -143,249
  -155,038
  -167,296
  -180,035
  -193,274
  -207,032
  -221,332
  -236,198
  -251,660

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  12,747
  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
  131,448
  160,419
  212,042
  274,514
  348,676
  435,197
  534,565
  647,088
  772,912
  912,037
  1,064,348
  1,229,642
  1,407,658
  1,598,105
  1,800,688
  2,015,129
  2,241,184
  2,478,662
  2,727,434
  2,987,436
  3,258,682
  3,541,263
  3,835,345
  4,141,176
  4,459,078
  4,789,449
  5,132,759
  5,489,549
  5,860,430
  6,246,076
  6,647,228
Adjusted assets (=assets-cash), $m
  118,701
  160,419
  212,042
  274,514
  348,676
  435,197
  534,565
  647,088
  772,912
  912,037
  1,064,348
  1,229,642
  1,407,658
  1,598,105
  1,800,688
  2,015,129
  2,241,184
  2,478,662
  2,727,434
  2,987,436
  3,258,682
  3,541,263
  3,835,345
  4,141,176
  4,459,078
  4,789,449
  5,132,759
  5,489,549
  5,860,430
  6,246,076
  6,647,228
Revenue / Adjusted assets
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
Average production assets, $m
  75,181
  101,608
  134,306
  173,875
  220,849
  275,650
  338,589
  409,861
  489,556
  577,677
  674,149
  778,845
  891,599
  1,012,227
  1,140,542
  1,276,366
  1,419,548
  1,569,965
  1,727,535
  1,892,218
  2,064,023
  2,243,007
  2,429,277
  2,622,988
  2,824,344
  3,033,598
  3,251,048
  3,477,037
  3,711,950
  3,956,215
  4,210,301
Working capital, $m
  10,844
  6,922
  9,150
  11,846
  15,046
  18,780
  23,068
  27,923
  33,353
  39,356
  45,929
  53,062
  60,743
  68,961
  77,703
  86,957
  96,712
  106,959
  117,694
  128,914
  140,619
  152,813
  165,503
  178,700
  192,418
  206,674
  221,489
  236,885
  252,889
  269,531
  286,841
Total debt, $m
  28,749
  45,678
  75,413
  111,397
  154,114
  203,951
  261,186
  326,000
  398,474
  478,610
  566,341
  661,551
  764,088
  873,786
  990,473
  1,113,991
  1,244,199
  1,380,987
  1,524,279
  1,674,040
  1,830,278
  1,993,044
  2,162,436
  2,338,594
  2,521,706
  2,711,999
  2,909,746
  3,115,257
  3,328,885
  3,551,017
  3,782,080
Total liabilities, $m
  75,471
  92,401
  122,136
  158,120
  200,837
  250,674
  307,909
  372,723
  445,197
  525,333
  613,064
  708,274
  810,811
  920,509
  1,037,196
  1,160,714
  1,290,922
  1,427,710
  1,571,002
  1,720,763
  1,877,001
  2,039,767
  2,209,159
  2,385,317
  2,568,429
  2,758,722
  2,956,469
  3,161,980
  3,375,608
  3,597,740
  3,828,803
Total equity, $m
  55,976
  68,018
  89,906
  116,394
  147,839
  184,524
  226,656
  274,365
  327,715
  386,704
  451,283
  521,368
  596,847
  677,597
  763,492
  854,414
  950,262
  1,050,953
  1,156,432
  1,266,673
  1,381,681
  1,501,495
  1,626,186
  1,755,859
  1,890,649
  2,030,726
  2,176,290
  2,327,569
  2,484,822
  2,648,336
  2,818,425
Total liabilities and equity, $m
  131,447
  160,419
  212,042
  274,514
  348,676
  435,198
  534,565
  647,088
  772,912
  912,037
  1,064,347
  1,229,642
  1,407,658
  1,598,106
  1,800,688
  2,015,128
  2,241,184
  2,478,663
  2,727,434
  2,987,436
  3,258,682
  3,541,262
  3,835,345
  4,141,176
  4,459,078
  4,789,448
  5,132,759
  5,489,549
  5,860,430
  6,246,076
  6,647,228
Debt-to-equity ratio
  0.514
  0.670
  0.840
  0.960
  1.040
  1.110
  1.150
  1.190
  1.220
  1.240
  1.250
  1.270
  1.280
  1.290
  1.300
  1.300
  1.310
  1.310
  1.320
  1.320
  1.320
  1.330
  1.330
  1.330
  1.330
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
Adjusted equity ratio
  0.394
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,545
  -3,973
  -5,801
  -8,039
  -10,720
  -13,873
  -17,521
  -21,680
  -26,360
  -31,562
  -37,286
  -43,384
  -50,128
  -57,366
  -65,087
  -73,280
  -81,935
  -91,043
  -100,598
  -110,595
  -121,034
  -131,917
  -143,249
  -155,038
  -167,296
  -180,035
  -193,274
  -207,032
  -221,332
  -236,198
  -251,660
Depreciation, amort., depletion, $m
  7,978
  10,300
  13,570
  17,527
  22,224
  27,704
  33,998
  41,125
  49,095
  57,907
  67,554
  77,885
  89,160
  101,223
  114,054
  127,637
  141,955
  156,996
  172,753
  189,222
  206,402
  224,301
  242,928
  262,299
  282,434
  303,360
  325,105
  347,704
  371,195
  395,621
  421,030
Funds from operations, $m
  8,844
  6,327
  7,769
  9,488
  11,505
  13,832
  16,477
  19,445
  22,735
  26,345
  30,269
  34,500
  39,032
  43,857
  48,967
  54,356
  60,020
  65,953
  72,156
  78,627
  85,368
  92,383
  99,678
  107,260
  115,139
  123,325
  131,831
  140,672
  149,863
  159,423
  169,370
Change in working capital, $m
  -187
  1,802
  2,228
  2,696
  3,200
  3,734
  4,288
  4,856
  5,430
  6,004
  6,573
  7,133
  7,682
  8,218
  8,742
  9,254
  9,755
  10,248
  10,735
  11,220
  11,705
  12,194
  12,690
  13,197
  13,718
  14,256
  14,815
  15,396
  16,004
  16,641
  17,310
Cash from operations, $m
  9,031
  4,525
  5,541
  6,792
  8,304
  10,098
  12,189
  14,589
  17,306
  20,341
  23,696
  27,367
  31,350
  35,639
  40,225
  45,103
  50,265
  55,706
  61,421
  67,407
  73,663
  80,189
  86,988
  94,063
  101,421
  109,069
  117,016
  125,276
  133,859
  142,782
  152,060
Maintenance CAPEX, $m
  0
  -7,518
  -10,161
  -13,431
  -17,387
  -22,085
  -27,565
  -33,859
  -40,986
  -48,956
  -57,768
  -67,415
  -77,885
  -89,160
  -101,223
  -114,054
  -127,637
  -141,955
  -156,996
  -172,753
  -189,222
  -206,402
  -224,301
  -242,928
  -262,299
  -282,434
  -303,360
  -325,105
  -347,704
  -371,195
  -395,621
New CAPEX, $m
  -9,689
  -26,427
  -32,698
  -39,569
  -46,974
  -54,802
  -62,939
  -71,271
  -79,696
  -88,121
  -96,473
  -104,696
  -112,754
  -120,628
  -128,314
  -135,825
  -143,182
  -150,417
  -157,570
  -164,683
  -171,805
  -178,984
  -186,270
  -193,711
  -201,356
  -209,254
  -217,450
  -225,988
  -234,913
  -244,265
  -254,086
Cash from investing activities, $m
  -4,689
  -33,945
  -42,859
  -53,000
  -64,361
  -76,887
  -90,504
  -105,130
  -120,682
  -137,077
  -154,241
  -172,111
  -190,639
  -209,788
  -229,537
  -249,879
  -270,819
  -292,372
  -314,566
  -337,436
  -361,027
  -385,386
  -410,571
  -436,639
  -463,655
  -491,688
  -520,810
  -551,093
  -582,617
  -615,460
  -649,707
Free cash flow, $m
  4,342
  -29,420
  -37,317
  -46,208
  -56,057
  -66,788
  -78,314
  -90,541
  -103,376
  -116,735
  -130,544
  -144,744
  -159,288
  -174,149
  -189,312
  -204,776
  -220,553
  -236,666
  -253,145
  -270,030
  -287,364
  -305,197
  -323,582
  -342,575
  -362,235
  -382,620
  -403,793
  -425,818
  -448,757
  -472,678
  -497,648
Issuance/(repayment) of debt, $m
  -808
  23,974
  29,735
  35,984
  42,717
  49,836
  57,236
  64,813
  72,474
  80,136
  87,731
  95,209
  102,537
  109,698
  116,688
  123,518
  130,208
  136,788
  143,292
  149,761
  156,238
  162,766
  169,392
  176,159
  183,111
  190,294
  197,747
  205,511
  213,627
  222,132
  231,063
Issuance/(repurchase) of shares, $m
  0
  21,717
  27,689
  34,527
  42,164
  50,558
  59,653
  69,390
  79,709
  90,551
  101,866
  113,469
  125,607
  138,116
  150,982
  164,203
  177,783
  191,734
  206,077
  220,836
  236,043
  251,731
  267,940
  284,711
  302,086
  320,112
  338,837
  358,311
  378,585
  399,712
  421,748
Cash from financing (excl. dividends), $m  
  -812
  45,691
  57,424
  70,511
  84,881
  100,394
  116,889
  134,203
  152,183
  170,687
  189,597
  208,678
  228,144
  247,814
  267,670
  287,721
  307,991
  328,522
  349,369
  370,597
  392,281
  414,497
  437,332
  460,870
  485,197
  510,406
  536,584
  563,822
  592,212
  621,844
  652,811
Total cash flow (excl. dividends), $m
  3,532
  16,271
  20,107
  24,303
  28,825
  33,605
  38,574
  43,663
  48,807
  53,952
  59,052
  63,935
  68,856
  73,664
  78,358
  82,944
  87,437
  91,856
  96,223
  100,568
  104,917
  109,301
  113,750
  118,294
  122,963
  127,786
  132,791
  138,005
  143,455
  149,166
  155,164
Retained Cash Flow (-), $m
  2,593
  -21,717
  -27,689
  -34,527
  -42,164
  -50,558
  -59,653
  -69,390
  -79,709
  -90,551
  -101,866
  -113,469
  -125,607
  -138,116
  -150,982
  -164,203
  -177,783
  -191,734
  -206,077
  -220,836
  -236,043
  -251,731
  -267,940
  -284,711
  -302,086
  -320,112
  -338,837
  -358,311
  -378,585
  -399,712
  -421,748
Prev. year cash balance distribution, $m
 
  5,702
  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
 
  256
  -7,583
  -10,224
  -13,339
  -16,952
  -21,079
  -25,727
  -30,902
  -36,599
  -42,813
  -49,534
  -56,751
  -64,452
  -72,624
  -81,259
  -90,346
  -99,878
  -109,853
  -120,268
  -131,126
  -142,431
  -154,191
  -166,417
  -179,123
  -192,326
  -206,047
  -220,306
  -235,130
  -250,546
  -266,584
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
 
  246
  -6,942
  -8,898
  -10,984
  -13,140
  -15,298
  -17,381
  -19,314
  -21,024
  -22,445
  -23,523
  -24,218
  -24,506
  -24,381
  -23,856
  -22,959
  -21,732
  -20,231
  -18,518
  -16,662
  -14,732
  -12,794
  -10,907
  -9,123
  -7,482
  -6,011
  -4,728
  -3,638
  -2,735
  -2,007
Current shareholders' claim on cash, %
  100
  70.4
  50.4
  36.7
  27.1
  20.3
  15.5
  11.9
  9.3
  7.3
  5.8
  4.7
  3.8
  3.1
  2.5
  2.1
  1.7
  1.5
  1.2
  1.0
  0.9
  0.7
  0.6
  0.5
  0.5
  0.4
  0.3
  0.3
  0.3
  0.2
  0.2

Eni SpA engages in the oil and gas, electricity generation and sale, petrochemicals, oilfield services construction, and engineering industries. The company is involved in the oil and natural gas exploration, and field development and production activities, as well as liquefied natural gas (LNG) operations in 40 countries, including Italy, Libya, Egypt, Norway, the United Kingdom, Angola, Congo, Nigeria, the United States, Kazakhstan, Russia, Algeria, Australia, Venezuela, Iraq, Ghana, and Mozambique. It also supplies, trades, and markets gas and electricity; transports international gas; supplies crude oil; and refines and markets petroleum products at retail and wholesale markets primarily in Italy and rest of Europe. In addition, the company engages in the generation of electricity; commodity risk management and asset-backed trading activities; and production of various chemicals, including olefins and aromatics, basic intermediate products, polyethylene, polystyrenes, and elastomers in Italy and Western Europe. Further, it provides a range of engineering, drilling, and construction services to the oil and gas industry, and downstream refining and petrochemical sectors. Eni SpA was founded in 1953 and is headquartered in Rome, Italy.

FINANCIAL RATIOS  of  ENI ADR (E)

Valuation Ratios
P/E Ratio -73
Price to Sales 1.9
Price to Book 2
Price to Tangible Book
Price to Cash Flow 12.5
Price to Free Cash Flow -171.5
Growth Rates
Sales Growth Rate -22.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.8%
Cap. Spend. - 3 Yr. Gr. Rate -6.4%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 38.8%
Total Debt to Equity 51.4%
Interest Coverage 2
Management Effectiveness
Return On Assets -1.8%
Ret/ On Assets - 3 Yr. Avg. -2%
Return On Total Capital -1.8%
Ret/ On T. Cap. - 3 Yr. Avg. -3.5%
Return On Equity -2.7%
Return On Equity - 3 Yr. Avg. -5.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 48.7%
Gross Margin - 3 Yr. Avg. 42.8%
EBITDA Margin 16.6%
EBITDA Margin - 3 Yr. Avg. 13.7%
Operating Margin 3.6%
Oper. Margin - 3 Yr. Avg. 2.9%
Pre-Tax Margin 1.6%
Pre-Tax Margin - 3 Yr. Avg. 1.4%
Net Profit Margin -2.6%
Net Profit Margin - 3 Yr. Avg. -4.5%
Effective Tax Rate 217.1%
Eff/ Tax Rate - 3 Yr. Avg. 74.1%
Payout Ratio -196.8%

E stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the E stock intrinsic value calculation we used $58852 million for the last fiscal year's total revenue generated by ENI ADR. The default revenue input number comes from 2016 income statement of ENI ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our E stock valuation model: a) initial revenue growth rate of 35.2% 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 E is calculated based on our internal credit rating of ENI ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of ENI ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of E stock the variable cost ratio is equal to 104.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for E 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 ENI ADR.

Corporate tax rate of 27% is the nominal tax rate for ENI ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the E 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 E are equal to 127.7%.

Life of production assets of 10 years is the average useful life of capital assets used in ENI ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for E is equal to 8.7%. 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 - $55976 million for ENI ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1833.76 million for ENI ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of ENI ADR at the current share price and the inputted number of shares is $57.5 billion.

RELATED COMPANIES Price Int.Val. Rating
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PTR PetroChina ADR 61.88 15.16  str.sell
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COMPANY NEWS

▶ Big Oil Might Be In Better Shape Than U.S. Shale   [Aug-09-17 06:00PM  Oilprice.com]
▶ Enis Arctic Risk Could Pay Off   [Aug-06-17 01:00PM  Oilprice.com]
▶ How Will The EU Respond To Fresh US Sanctions On Russia?   [Aug-02-17 03:00PM  Oilprice.com]
▶ [$$] Eni fast-tracks promising Mexican well   [Aug-01-17 01:44AM  Financial Times]
▶ Eni SpA posts 2Q profit   [Jul-28-17 08:04PM  Associated Press]
▶ Why Are Majors Shying Away From Gazprom?   [Jul-27-17 03:00PM  Oilprice.com]
▶ How Chevron Stock Has Performed ahead of 2Q17 Earnings   [Jul-20-17 06:06PM  Market Realist]
▶ Will Enis Arctic Efforts Be Profitable?   [Jul-19-17 05:00PM  Oilprice.com]
▶ Oil Up As Saudis Consider Deeper Output Cuts   [Jul-18-17 03:00PM  Oilprice.com]
▶ World Class Oil Discovery Puts Mexico Back In The Race   [Jul-16-17 03:00PM  Oilprice.com]
▶ Markets Overcome The Crash: Oil Rally Continues   [Jul-04-17 03:00PM  Oilprice.com]
▶ Mexicos Oil Reserves Fall In Spite Of Oil Major Interest   [Jul-03-17 03:00PM  Oilprice.com]
▶ Oil Industry To Waste Trillions As Peak Demand Looms   [Jun-25-17 07:00PM  Oilprice.com]
▶ Stock Market News for June 23, 2017   [Jun-23-17 11:26AM  Zacks]
▶ Read This Before You Buy Big Oil Stocks   [Jun-22-17 11:26AM  Motley Fool]
▶ Whats ExxonMobils Future Growth Trajectory?   [Jun-21-17 04:36PM  Market Realist]
▶ [$$] Eni signs deal to carry out feasibility study in Iran   [Jun-20-17 07:03AM  Financial Times]
▶ Why I Will Never Buy Eni S.p.A. Stock   [Jun-16-17 06:12PM  Motley Fool]
▶ BPs Beta: Is the Stock Less Volatile Than Its Peers?   [Jun-07-17 10:35AM  Market Realist]
▶ BP, Eni deepen blockchain trading in European gas   [Jun-05-17 08:24AM  Reuters]
▶ Interest In Mexicos Offshore Blocks Is Surging   [Jun-03-17 01:00PM  Oilprice.com]
▶ ETFs with exposure to Eni SpA : May 31, 2017   [May-31-17 12:29PM  Capital Cube]
▶ OPEC Deal: 9-Month Extension Looking Increasingly Likely   [May-23-17 03:00PM  Oilprice.com]
▶ Eni SpA posts 1Q profit   [May-10-17 03:39PM  Associated Press]
▶ Oklahoma Taking Advantage Of Mexicos Oil Boom   [May-09-17 04:00PM  Oilprice.com]
▶ Exxon Attempts To Maneuver Around Russian Sanctions   [Apr-23-17 04:00PM  Oilprice.com]
▶ [$$] US turns down Exxon request for Russia sanctions waiver   [Apr-21-17 04:39PM  Financial Times]
▶ Oil Majors See Huge Opportunity In Eastern Mediterranean   [Apr-20-17 04:00PM  Oilprice.com]
Stock chart of E Financial statements of E
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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