Intrinsic value of Halliburton - HAL

Previous Close

$45.38

  Intrinsic Value

$2.01

stock screener

  Rating & Target

str. sell

-96%

  Value-price divergence*

-105%

Previous close

$45.38

 
Intrinsic value

$2.01

 
Up/down potential

-96%

 
Rating

str. sell

 
Value-price divergence*

-105%

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

We calculate the intrinsic value of HAL 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 39.5

 

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, %
  -32.78
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  15,887
  16,205
  16,577
  17,003
  17,482
  18,012
  18,593
  19,227
  19,912
  20,650
  21,443
  22,291
  23,195
  24,159
  25,182
  26,269
  27,420
  28,638
  29,927
  31,289
  32,726
  34,243
  35,843
  37,529
  39,306
  41,177
  43,147
  45,221
  47,403
  49,699
  52,114
Variable operating expenses, $m
 
  3,252
  3,322
  3,401
  3,490
  3,588
  3,696
  3,814
  3,941
  4,078
  4,226
  4,142
  4,310
  4,489
  4,679
  4,881
  5,095
  5,321
  5,561
  5,814
  6,081
  6,363
  6,660
  6,973
  7,303
  7,651
  8,017
  8,402
  8,808
  9,234
  9,683
Fixed operating expenses, $m
 
  20,002
  20,502
  21,014
  21,540
  22,078
  22,630
  23,196
  23,776
  24,370
  24,980
  25,604
  26,244
  26,900
  27,573
  28,262
  28,969
  29,693
  30,435
  31,196
  31,976
  32,775
  33,595
  34,435
  35,295
  36,178
  37,082
  38,009
  38,960
  39,934
  40,932
Total operating expenses, $m
  22,665
  23,254
  23,824
  24,415
  25,030
  25,666
  26,326
  27,010
  27,717
  28,448
  29,206
  29,746
  30,554
  31,389
  32,252
  33,143
  34,064
  35,014
  35,996
  37,010
  38,057
  39,138
  40,255
  41,408
  42,598
  43,829
  45,099
  46,411
  47,768
  49,168
  50,615
Operating income, $m
  -6,778
  -7,049
  -7,246
  -7,412
  -7,548
  -7,655
  -7,733
  -7,783
  -7,805
  -7,798
  -7,762
  -7,455
  -7,359
  -7,230
  -7,069
  -6,874
  -6,643
  -6,376
  -6,069
  -5,721
  -5,330
  -4,895
  -4,412
  -3,878
  -3,293
  -2,652
  -1,952
  -1,191
  -364
  531
  1,499
EBITDA, $m
  -5,275
  -5,755
  -5,927
  -6,065
  -6,170
  -6,242
  -6,283
  -6,292
  -6,269
  -6,215
  -6,127
  -6,006
  -5,851
  -5,660
  -5,433
  -5,167
  -4,861
  -4,514
  -4,123
  -3,687
  -3,203
  -2,669
  -2,082
  -1,439
  -738
  25
  853
  1,749
  2,717
  3,762
  4,886
Interest expense (income), $m
  659
  586
  603
  623
  645
  670
  698
  729
  762
  798
  837
  879
  923
  971
  1,022
  1,076
  1,133
  1,193
  1,258
  1,326
  1,397
  1,473
  1,553
  1,637
  1,726
  1,819
  1,918
  2,022
  2,131
  2,246
  2,367
Earnings before tax, $m
  -7,625
  -7,636
  -7,849
  -8,034
  -8,193
  -8,325
  -8,431
  -8,512
  -8,567
  -8,596
  -8,599
  -8,334
  -8,282
  -8,201
  -8,091
  -7,950
  -7,776
  -7,569
  -7,326
  -7,046
  -6,728
  -6,368
  -5,964
  -5,515
  -5,019
  -4,471
  -3,870
  -3,212
  -2,495
  -1,715
  -868
Tax expense, $m
  -1,858
  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
  -5,763
  -7,636
  -7,849
  -8,034
  -8,193
  -8,325
  -8,431
  -8,512
  -8,567
  -8,596
  -8,599
  -8,334
  -8,282
  -8,201
  -8,091
  -7,950
  -7,776
  -7,569
  -7,326
  -7,046
  -6,728
  -6,368
  -5,964
  -5,515
  -5,019
  -4,471
  -3,870
  -3,212
  -2,495
  -1,715
  -868

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,009
  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
  27,000
  23,451
  23,991
  24,607
  25,299
  26,066
  26,908
  27,824
  28,816
  29,885
  31,032
  32,259
  33,568
  34,962
  36,443
  38,016
  39,681
  41,445
  43,310
  45,280
  47,361
  49,556
  51,871
  54,312
  56,883
  59,591
  62,442
  65,443
  68,601
  71,923
  75,418
Adjusted assets (=assets-cash), $m
  22,991
  23,451
  23,991
  24,607
  25,299
  26,066
  26,908
  27,824
  28,816
  29,885
  31,032
  32,259
  33,568
  34,962
  36,443
  38,016
  39,681
  41,445
  43,310
  45,280
  47,361
  49,556
  51,871
  54,312
  56,883
  59,591
  62,442
  65,443
  68,601
  71,923
  75,418
Revenue / Adjusted assets
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
Average production assets, $m
  10,325
  10,533
  10,775
  11,052
  11,363
  11,708
  12,086
  12,497
  12,943
  13,423
  13,938
  14,489
  15,077
  15,703
  16,369
  17,075
  17,823
  18,615
  19,453
  20,338
  21,272
  22,258
  23,298
  24,394
  25,549
  26,765
  28,046
  29,394
  30,812
  32,304
  33,874
Working capital, $m
  7,654
  3,889
  3,979
  4,081
  4,196
  4,323
  4,462
  4,614
  4,779
  4,956
  5,146
  5,350
  5,567
  5,798
  6,044
  6,304
  6,581
  6,873
  7,183
  7,509
  7,854
  8,218
  8,602
  9,007
  9,433
  9,883
  10,355
  10,853
  11,377
  11,928
  12,507
Total debt, $m
  12,377
  12,562
  12,971
  13,438
  13,963
  14,544
  15,182
  15,877
  16,629
  17,439
  18,308
  19,238
  20,231
  21,287
  22,410
  23,602
  24,865
  26,201
  27,615
  29,109
  30,686
  32,350
  34,104
  35,954
  37,903
  39,956
  42,117
  44,392
  46,786
  49,304
  51,953
Total liabilities, $m
  17,591
  17,776
  18,185
  18,652
  19,177
  19,758
  20,396
  21,091
  21,843
  22,653
  23,522
  24,452
  25,445
  26,501
  27,624
  28,816
  30,079
  31,415
  32,829
  34,323
  35,900
  37,564
  39,318
  41,168
  43,117
  45,170
  47,331
  49,606
  52,000
  54,518
  57,167
Total equity, $m
  9,409
  5,675
  5,806
  5,955
  6,122
  6,308
  6,512
  6,733
  6,974
  7,232
  7,510
  7,807
  8,123
  8,461
  8,819
  9,200
  9,603
  10,030
  10,481
  10,958
  11,461
  11,993
  12,553
  13,143
  13,766
  14,421
  15,111
  15,837
  16,601
  17,405
  18,251
Total liabilities and equity, $m
  27,000
  23,451
  23,991
  24,607
  25,299
  26,066
  26,908
  27,824
  28,817
  29,885
  31,032
  32,259
  33,568
  34,962
  36,443
  38,016
  39,682
  41,445
  43,310
  45,281
  47,361
  49,557
  51,871
  54,311
  56,883
  59,591
  62,442
  65,443
  68,601
  71,923
  75,418
Debt-to-equity ratio
  1.315
  2.210
  2.230
  2.260
  2.280
  2.310
  2.330
  2.360
  2.380
  2.410
  2.440
  2.460
  2.490
  2.520
  2.540
  2.570
  2.590
  2.610
  2.630
  2.660
  2.680
  2.700
  2.720
  2.740
  2.750
  2.770
  2.790
  2.800
  2.820
  2.830
  2.850
Adjusted equity ratio
  0.235
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5,763
  -7,636
  -7,849
  -8,034
  -8,193
  -8,325
  -8,431
  -8,512
  -8,567
  -8,596
  -8,599
  -8,334
  -8,282
  -8,201
  -8,091
  -7,950
  -7,776
  -7,569
  -7,326
  -7,046
  -6,728
  -6,368
  -5,964
  -5,515
  -5,019
  -4,471
  -3,870
  -3,212
  -2,495
  -1,715
  -868
Depreciation, amort., depletion, $m
  1,503
  1,295
  1,319
  1,347
  1,378
  1,412
  1,450
  1,491
  1,536
  1,584
  1,635
  1,449
  1,508
  1,570
  1,637
  1,707
  1,782
  1,862
  1,945
  2,034
  2,127
  2,226
  2,330
  2,439
  2,555
  2,677
  2,805
  2,939
  3,081
  3,230
  3,387
Funds from operations, $m
  -690
  -6,341
  -6,530
  -6,688
  -6,815
  -6,913
  -6,981
  -7,021
  -7,031
  -7,013
  -6,964
  -6,885
  -6,774
  -6,631
  -6,454
  -6,242
  -5,994
  -5,708
  -5,381
  -5,013
  -4,600
  -4,142
  -3,634
  -3,076
  -2,464
  -1,794
  -1,065
  -273
  586
  1,516
  2,520
Change in working capital, $m
  1,013
  76
  89
  102
  115
  127
  140
  152
  165
  177
  190
  203
  217
  231
  246
  261
  276
  292
  309
  327
  345
  364
  384
  405
  426
  449
  473
  498
  524
  551
  580
Cash from operations, $m
  -1,703
  -6,417
  -6,620
  -6,790
  -6,930
  -7,040
  -7,121
  -7,173
  -7,196
  -7,190
  -7,154
  -7,088
  -6,991
  -6,862
  -6,700
  -6,503
  -6,270
  -6,000
  -5,690
  -5,339
  -4,945
  -4,506
  -4,018
  -3,481
  -2,890
  -2,243
  -1,538
  -770
  63
  965
  1,940
Maintenance CAPEX, $m
  0
  -1,032
  -1,053
  -1,078
  -1,105
  -1,136
  -1,171
  -1,209
  -1,250
  -1,294
  -1,342
  -1,394
  -1,449
  -1,508
  -1,570
  -1,637
  -1,707
  -1,782
  -1,862
  -1,945
  -2,034
  -2,127
  -2,226
  -2,330
  -2,439
  -2,555
  -2,677
  -2,805
  -2,939
  -3,081
  -3,230
New CAPEX, $m
  -798
  -209
  -242
  -277
  -311
  -344
  -378
  -412
  -446
  -480
  -515
  -551
  -588
  -626
  -665
  -706
  -748
  -792
  -838
  -885
  -934
  -986
  -1,040
  -1,096
  -1,155
  -1,216
  -1,281
  -1,348
  -1,418
  -1,492
  -1,570
Cash from investing activities, $m
  -710
  -1,241
  -1,295
  -1,355
  -1,416
  -1,480
  -1,549
  -1,621
  -1,696
  -1,774
  -1,857
  -1,945
  -2,037
  -2,134
  -2,235
  -2,343
  -2,455
  -2,574
  -2,700
  -2,830
  -2,968
  -3,113
  -3,266
  -3,426
  -3,594
  -3,771
  -3,958
  -4,153
  -4,357
  -4,573
  -4,800
Free cash flow, $m
  -2,413
  -7,658
  -7,915
  -8,144
  -8,346
  -8,521
  -8,670
  -8,793
  -8,891
  -8,964
  -9,012
  -9,033
  -9,028
  -8,996
  -8,936
  -8,846
  -8,726
  -8,574
  -8,389
  -8,170
  -7,914
  -7,619
  -7,284
  -6,907
  -6,484
  -6,015
  -5,495
  -4,923
  -4,295
  -3,609
  -2,860
Issuance/(repayment) of debt, $m
  -3,097
  348
  409
  467
  525
  581
  638
  695
  752
  810
  869
  930
  992
  1,057
  1,123
  1,192
  1,263
  1,337
  1,414
  1,494
  1,577
  1,664
  1,755
  1,850
  1,949
  2,053
  2,161
  2,275
  2,394
  2,518
  2,649
Issuance/(repurchase) of shares, $m
  186
  7,748
  7,980
  8,183
  8,360
  8,510
  8,635
  8,734
  8,807
  8,855
  8,877
  8,631
  8,599
  8,539
  8,450
  8,330
  8,180
  7,996
  7,778
  7,523
  7,231
  6,899
  6,525
  6,106
  5,641
  5,126
  4,560
  3,938
  3,259
  2,519
  1,713
Cash from financing (excl. dividends), $m  
  -2,920
  8,096
  8,389
  8,650
  8,885
  9,091
  9,273
  9,429
  9,559
  9,665
  9,746
  9,561
  9,591
  9,596
  9,573
  9,522
  9,443
  9,333
  9,192
  9,017
  8,808
  8,563
  8,280
  7,956
  7,590
  7,179
  6,721
  6,213
  5,653
  5,037
  4,362
Total cash flow (excl. dividends), $m
  -5,448
  438
  473
  506
  539
  571
  603
  635
  668
  701
  734
  528
  563
  599
  637
  676
  716
  758
  802
  847
  894
  944
  995
  1,049
  1,105
  1,164
  1,226
  1,290
  1,358
  1,428
  1,502
Retained Cash Flow (-), $m
  6,053
  -7,748
  -7,980
  -8,183
  -8,360
  -8,510
  -8,635
  -8,734
  -8,807
  -8,855
  -8,877
  -8,631
  -8,599
  -8,539
  -8,450
  -8,330
  -8,180
  -7,996
  -7,778
  -7,523
  -7,231
  -6,899
  -6,525
  -6,106
  -5,641
  -5,126
  -4,560
  -3,938
  -3,259
  -2,519
  -1,713
Prev. year cash balance distribution, $m
 
  3,846
  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
 
  -3,464
  -7,506
  -7,677
  -7,821
  -7,939
  -8,032
  -8,098
  -8,139
  -8,154
  -8,142
  -8,103
  -8,036
  -7,939
  -7,813
  -7,654
  -7,463
  -7,238
  -6,976
  -6,676
  -6,337
  -5,955
  -5,529
  -5,057
  -4,535
  -3,962
  -3,334
  -2,648
  -1,901
  -1,090
  -211
Discount rate, %
 
  8.70
  9.14
  9.59
  10.07
  10.57
  11.10
  11.66
  12.24
  12.85
  13.50
  14.17
  14.88
  15.62
  16.41
  17.23
  18.09
  18.99
  19.94
  20.94
  21.98
  23.08
  24.24
  25.45
  26.72
  28.06
  29.46
  30.93
  32.48
  34.11
  35.81
PV of cash for distribution, $m
 
  -3,187
  -6,302
  -5,833
  -5,328
  -4,803
  -4,270
  -3,742
  -3,231
  -2,746
  -2,296
  -1,886
  -1,521
  -1,203
  -932
  -706
  -522
  -377
  -264
  -180
  -119
  -76
  -47
  -27
  -15
  -8
  -4
  -2
  -1
  0
  0
Current shareholders' claim on cash, %
  100
  75.1
  56.3
  42.1
  31.6
  23.7
  17.9
  13.6
  10.3
  7.9
  6.1
  4.8
  3.8
  3.1
  2.5
  2.0
  1.7
  1.4
  1.2
  1.0
  0.9
  0.8
  0.7
  0.6
  0.5
  0.5
  0.5
  0.4
  0.4
  0.4
  0.4

Halliburton Company provides a range of services and products to the upstream oil and natural gas industry worldwide. The company’s Completion and Production segment offers production enhancement services, including stimulation and sand control services; and cementing services, such as bonding the well, well casing, and casing equipment. It also provides completion tools that offer downhole solutions and services, including well completion products and services, intelligent well completions, liner hanger systems, sand control systems, and service tools; pressure control services comprising coiled tubing, hydraulic workover units, and downhole tools; and pipeline and process services, such as pre-commissioning and maintenance, subsea pipeline, conventional pipeline, and process services. In addition, this segment offers oilfield production and completion chemicals and services; electrical submersible pumps and progressive cavity pumps; and installation, maintenance, repair, and testing services. The company’s Drilling and Evaluation segment provides drilling fluid systems, performance additives, completion fluids, solids control, specialized testing equipment, and waste management services; and drilling systems and services. It also offers wireline and perforating services, including open-hole logging, and cased-hole and slickline services; and drill bits and services comprising roller cone rock bits, fixed cutter bits, hole enlargement, and related downhole tools and services, as well as coring equipment and services. In addition, this segment offers integrated exploration, drilling, and production software, as well as related professional and data management services; testing and subsea services, such as acquisition and analysis of reservoir information and optimization solutions; and oilfield project management and integrated solutions. Halliburton Company was founded in 1919 and is based in Houston, Texas.

FINANCIAL RATIOS  of  Halliburton (HAL)

Valuation Ratios
P/E Ratio -6.8
Price to Sales 2.5
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow -23.1
Price to Free Cash Flow -15.7
Growth Rates
Sales Growth Rate -32.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -63.5%
Cap. Spend. - 3 Yr. Gr. Rate -22.9%
Financial Strength
Quick Ratio 25
Current Ratio 0.2
LT Debt to Equity 129.8%
Total Debt to Equity 131.5%
Interest Coverage -11
Management Effectiveness
Return On Assets -16.5%
Ret/ On Assets - 3 Yr. Avg. -1.8%
Return On Total Capital -21.9%
Ret/ On T. Cap. - 3 Yr. Avg. -3%
Return On Equity -46.3%
Return On Equity - 3 Yr. Avg. -9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 5.4%
Gross Margin - 3 Yr. Avg. 10.7%
EBITDA Margin -34.4%
EBITDA Margin - 3 Yr. Avg. -2.3%
Operating Margin -42.7%
Oper. Margin - 3 Yr. Avg. -9.3%
Pre-Tax Margin -48%
Pre-Tax Margin - 3 Yr. Avg. -12.5%
Net Profit Margin -36.3%
Net Profit Margin - 3 Yr. Avg. -9.5%
Effective Tax Rate 24.4%
Eff/ Tax Rate - 3 Yr. Avg. 26.9%
Payout Ratio -10.8%

HAL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HAL stock intrinsic value calculation we used $15887 million for the last fiscal year's total revenue generated by Halliburton. The default revenue input number comes from 2016 income statement of Halliburton. 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 HAL stock valuation model: a) initial revenue growth rate of 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 8.7%, whose default value for HAL is calculated based on our internal credit rating of Halliburton, 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 Halliburton.
    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 HAL stock the variable cost ratio is equal to 20.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $19514 million in the base year in the intrinsic value calculation for HAL 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 4.8% for Halliburton.

Corporate tax rate of 27% is the nominal tax rate for Halliburton. 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 HAL 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 HAL are equal to 65%.

Life of production assets of 10 years is the average useful life of capital assets used in Halliburton 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 HAL is equal to 24%. 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 - $9409 million for Halliburton - 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 871.115 million for Halliburton 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 Halliburton at the current share price and the inputted number of shares is $39.5 billion.

RELATED COMPANIES Price Int.Val. Rating
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PES Pioneer Energy 2.50 0.99  str.sell
NOV National Oilwe 34.00 5.28  str.sell
TTI Tetra Technolo 3.12 0.52  str.sell
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COMPANY NEWS

▶ Schlumberger To Report As Cracks Appear Even In U.S. Market   [Jul-17-17 04:37PM  Investor's Business Daily]
▶ Halliburton buys Oklahoma-based oil field equipment supplier   [12:55PM  American City Business Journals]
▶ The Next Oil Boom Could Be Here Sooner Than You Think   [Jul-15-17 03:15PM  Motley Fool]
▶ Whats National Oilwell Varcos Stock Price Forecast?   [Jul-14-17 09:08AM  Market Realist]
▶ Shorting HAL: Short Interest in Halliburton as of July 10   [Jul-13-17 10:36AM  Market Realist]
▶ Buy these 3 energy winners and avoid this trio of losers   [Jul-12-17 06:08PM  MarketWatch]
▶ Oil Rises Despite Gloomy Outlook   [03:30PM  Oilprice.com]
▶ U.S. Shale Players Return to Oil & Gas Patches   [Jul-10-17 05:10PM  Zacks]
▶ Why OFS Stocks Are Seeing Bearish Trends   [01:04PM  Market Realist]
▶ Bottom-fishing for stocks? 4 trades   [Jul-07-17 05:00PM  CNBC Videos]
▶ Halliburton in Summit Acquisition   [Jul-05-17 08:00PM  Rigzone.com]
▶ Halliburton Acquires Summit ESP   [06:50AM  Business Wire]
▶ [$$] GE's Baker Hughes Deal Deepens Its Stake in Energy   [Jul-03-17 10:53AM  The Wall Street Journal]
▶ Halliburton: Bigger & Better?   [Jun-28-17 11:30AM  Barrons.com]
▶ After crude drops these stocks outperform   [Jun-23-17 10:19AM  CNBC Videos]
▶ Shallow HAL: Halliburton Should Find Buying Support Soon   [Jun-22-17 03:34PM  TheStreet.com]
▶ Winners of oil's decline   [Jun-21-17 01:48PM  CNBC Videos]
▶ Schlumberger: Why Do You Hate Me?   [11:51AM  Barrons.com]
▶ What Happened in the Energy Sector Last Week?   [Jun-19-17 02:17PM  Market Realist]
▶ [$$] General Electric Shares Could Return 15%   [Jun-17-17 12:01AM  Barrons.com]
▶ Analysts Recommendations for Halliburton   [Jun-16-17 07:36AM  Market Realist]
▶ Whats Halliburtons Dividend Yield?   [10:36AM  Market Realist]
▶ What Investors Can Expect from Halliburton   [09:07AM  Market Realist]
▶ Whats Happening to Halliburtons Net Debt?   [07:36AM  Market Realist]
▶ Halliburtons Valuation Compared to Its Peers   [Jun-14-17 02:36PM  Market Realist]
Stock chart of HAL Financial statements of HAL Annual reports of HAL
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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