Intrinsic value of HollyFrontier - HFC

Previous Close

$27.66

  Intrinsic Value

$4,248

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

-73%

Previous close

$27.66

 
Intrinsic value

$4,248

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

-73%

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

We calculate the intrinsic value of HFC 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 5.0

 

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, %
  -20.41
  52.60
  47.84
  43.56
  39.70
  36.23
  33.11
  30.30
  27.77
  25.49
  23.44
  21.60
  19.94
  18.44
  17.10
  15.89
  14.80
  13.82
  12.94
  12.14
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
Revenue, $m
  10,536
  16,078
  23,770
  34,123
  47,670
  64,940
  86,440
  112,629
  143,903
  180,584
  222,915
  271,058
  325,100
  385,060
  450,902
  522,548
  599,887
  682,794
  771,136
  864,787
  963,632
  1,067,580
  1,176,562
  1,290,541
  1,409,513
  1,533,506
  1,662,585
  1,796,846
  1,936,424
  2,081,484
  2,232,226
Variable operating expenses, $m
 
  7,933
  11,631
  16,609
  23,122
  31,426
  41,764
  54,355
  69,392
  87,028
  107,382
  130,327
  156,311
  185,140
  216,798
  251,246
  288,431
  328,293
  370,769
  415,797
  463,323
  513,302
  565,701
  620,503
  677,706
  737,323
  799,385
  863,939
  931,049
  1,000,796
  1,073,273
Fixed operating expenses, $m
 
  5,648
  5,789
  5,934
  6,082
  6,234
  6,390
  6,550
  6,713
  6,881
  7,053
  7,230
  7,410
  7,596
  7,785
  7,980
  8,180
  8,384
  8,594
  8,809
  9,029
  9,254
  9,486
  9,723
  9,966
  10,215
  10,471
  10,732
  11,001
  11,276
  11,558
Total operating expenses, $m
  10,644
  13,581
  17,420
  22,543
  29,204
  37,660
  48,154
  60,905
  76,105
  93,909
  114,435
  137,557
  163,721
  192,736
  224,583
  259,226
  296,611
  336,677
  379,363
  424,606
  472,352
  522,556
  575,187
  630,226
  687,672
  747,538
  809,856
  874,671
  942,050
  1,012,072
  1,084,831
Operating income, $m
  -109
  2,498
  6,350
  11,580
  18,465
  27,280
  38,287
  51,724
  67,797
  86,674
  108,480
  133,501
  161,379
  192,324
  226,319
  263,322
  303,277
  346,117
  391,773
  440,181
  491,281
  545,024
  601,375
  660,315
  721,841
  785,968
  852,729
  922,175
  994,374
  1,069,413
  1,147,395
EBITDA, $m
  254
  3,070
  7,099
  12,567
  19,764
  28,976
  40,477
  54,517
  71,309
  91,030
  113,809
  139,736
  168,856
  201,181
  236,690
  275,341
  317,074
  361,821
  409,510
  460,071
  513,444
  569,578
  628,436
  689,997
  754,260
  821,239
  890,968
  963,502
  1,038,912
  1,117,287
  1,198,736
Interest expense (income), $m
  54
  78
  166
  287
  451
  665
  938
  1,278
  1,692
  2,186
  2,766
  3,435
  4,196
  5,050
  5,997
  7,038
  8,170
  9,392
  10,703
  12,099
  13,579
  15,141
  16,784
  18,506
  20,307
  22,187
  24,147
  26,187
  28,309
  30,515
  32,807
Earnings before tax, $m
  -172
  2,419
  6,184
  11,293
  18,014
  26,615
  37,349
  50,446
  66,106
  84,488
  105,714
  130,067
  157,183
  187,275
  220,322
  256,284
  295,107
  336,724
  381,071
  428,082
  477,702
  529,883
  584,591
  641,809
  701,534
  763,781
  828,582
  895,988
  966,065
  1,038,898
  1,114,588
Tax expense, $m
  19
  653
  1,670
  3,049
  4,864
  7,186
  10,084
  13,620
  17,849
  22,812
  28,543
  35,118
  42,439
  50,564
  59,487
  69,197
  79,679
  90,916
  102,889
  115,582
  128,980
  143,068
  157,840
  173,288
  189,414
  206,221
  223,717
  241,917
  260,838
  280,503
  300,939
Net income, $m
  -260
  1,766
  4,514
  8,244
  13,150
  19,429
  27,265
  36,826
  48,257
  61,676
  77,171
  94,949
  114,744
  136,710
  160,835
  187,088
  215,428
  245,809
  278,182
  312,500
  348,722
  386,814
  426,752
  468,521
  512,120
  557,560
  604,865
  654,071
  705,228
  758,396
  813,649

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,135
  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
  9,436
  12,670
  18,731
  26,889
  37,565
  51,174
  68,117
  88,754
  113,398
  142,304
  175,662
  213,600
  256,186
  303,436
  355,321
  411,779
  472,724
  538,057
  607,672
  681,471
  759,363
  841,276
  927,157
  1,016,975
  1,110,728
  1,208,437
  1,310,153
  1,415,955
  1,525,945
  1,640,255
  1,759,043
Adjusted assets (=assets-cash), $m
  8,301
  12,670
  18,731
  26,889
  37,565
  51,174
  68,117
  88,754
  113,398
  142,304
  175,662
  213,600
  256,186
  303,436
  355,321
  411,779
  472,724
  538,057
  607,672
  681,471
  759,363
  841,276
  927,157
  1,016,975
  1,110,728
  1,208,437
  1,310,153
  1,415,955
  1,525,945
  1,640,255
  1,759,043
Revenue / Adjusted assets
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
  1.269
Average production assets, $m
  4,361
  6,656
  9,841
  14,127
  19,735
  26,885
  35,786
  46,628
  59,576
  74,762
  92,287
  112,218
  134,591
  159,415
  186,674
  216,335
  248,353
  282,677
  319,250
  358,022
  398,944
  441,978
  487,097
  534,284
  583,538
  634,872
  688,310
  743,894
  801,680
  861,734
  924,141
Working capital, $m
  1,768
  965
  1,426
  2,047
  2,860
  3,896
  5,186
  6,758
  8,634
  10,835
  13,375
  16,263
  19,506
  23,104
  27,054
  31,353
  35,993
  40,968
  46,268
  51,887
  57,818
  64,055
  70,594
  77,432
  84,571
  92,010
  99,755
  107,811
  116,185
  124,889
  133,934
Total debt, $m
  2,235
  4,740
  8,213
  12,888
  19,005
  26,803
  36,511
  48,336
  62,457
  79,020
  98,134
  119,873
  144,274
  171,349
  201,079
  233,430
  268,351
  305,786
  345,676
  387,963
  432,595
  479,531
  528,741
  580,207
  633,927
  689,914
  748,198
  808,822
  871,846
  937,346
  1,005,412
Total liabilities, $m
  4,754
  7,260
  10,733
  15,408
  21,525
  29,323
  39,031
  50,856
  64,977
  81,540
  100,654
  122,393
  146,794
  173,869
  203,599
  235,950
  270,871
  308,306
  348,196
  390,483
  435,115
  482,051
  531,261
  582,727
  636,447
  692,434
  750,718
  811,342
  874,366
  939,866
  1,007,932
Total equity, $m
  4,681
  5,410
  7,998
  11,482
  16,040
  21,852
  29,086
  37,898
  48,421
  60,764
  75,008
  91,207
  109,391
  129,567
  151,722
  175,830
  201,853
  229,750
  259,476
  290,988
  324,248
  359,225
  395,896
  434,248
  474,281
  516,003
  559,436
  604,613
  651,578
  700,389
  751,111
Total liabilities and equity, $m
  9,435
  12,670
  18,731
  26,890
  37,565
  51,175
  68,117
  88,754
  113,398
  142,304
  175,662
  213,600
  256,185
  303,436
  355,321
  411,780
  472,724
  538,056
  607,672
  681,471
  759,363
  841,276
  927,157
  1,016,975
  1,110,728
  1,208,437
  1,310,154
  1,415,955
  1,525,944
  1,640,255
  1,759,043
Debt-to-equity ratio
  0.477
  0.880
  1.030
  1.120
  1.180
  1.230
  1.260
  1.280
  1.290
  1.300
  1.310
  1.310
  1.320
  1.320
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
  1.340
Adjusted equity ratio
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427
  0.427

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -260
  1,766
  4,514
  8,244
  13,150
  19,429
  27,265
  36,826
  48,257
  61,676
  77,171
  94,949
  114,744
  136,710
  160,835
  187,088
  215,428
  245,809
  278,182
  312,500
  348,722
  386,814
  426,752
  468,521
  512,120
  557,560
  604,865
  654,071
  705,228
  758,396
  813,649
Depreciation, amort., depletion, $m
  363
  572
  749
  987
  1,299
  1,696
  2,190
  2,793
  3,512
  4,356
  5,329
  6,234
  7,477
  8,856
  10,371
  12,019
  13,797
  15,704
  17,736
  19,890
  22,164
  24,554
  27,061
  29,682
  32,419
  35,271
  38,239
  41,327
  44,538
  47,874
  51,341
Funds from operations, $m
  548
  2,338
  5,263
  9,231
  14,449
  21,125
  29,455
  39,618
  51,769
  66,032
  82,501
  101,183
  122,221
  145,567
  171,206
  199,106
  229,225
  261,513
  295,918
  332,390
  370,886
  411,369
  453,813
  498,203
  544,538
  592,831
  643,104
  695,399
  749,765
  806,270
  864,990
Change in working capital, $m
  -54
  333
  462
  621
  813
  1,036
  1,290
  1,571
  1,876
  2,201
  2,540
  2,889
  3,243
  3,598
  3,951
  4,299
  4,640
  4,974
  5,301
  5,619
  5,931
  6,237
  6,539
  6,839
  7,138
  7,440
  7,745
  8,056
  8,375
  8,704
  9,044
Cash from operations, $m
  602
  2,006
  4,802
  8,610
  13,636
  20,089
  28,165
  38,047
  49,893
  63,831
  79,961
  98,294
  118,978
  141,969
  167,255
  194,808
  224,585
  256,539
  290,617
  326,771
  364,955
  405,132
  447,274
  491,364
  537,400
  585,391
  635,360
  687,343
  741,391
  797,566
  855,946
Maintenance CAPEX, $m
  0
  -242
  -370
  -547
  -785
  -1,096
  -1,494
  -1,988
  -2,590
  -3,310
  -4,153
  -5,127
  -6,234
  -7,477
  -8,856
  -10,371
  -12,019
  -13,797
  -15,704
  -17,736
  -19,890
  -22,164
  -24,554
  -27,061
  -29,682
  -32,419
  -35,271
  -38,239
  -41,327
  -44,538
  -47,874
New CAPEX, $m
  -480
  -2,296
  -3,184
  -4,286
  -5,608
  -7,150
  -8,901
  -10,842
  -12,947
  -15,186
  -17,525
  -19,931
  -22,373
  -24,824
  -27,259
  -29,661
  -32,018
  -34,323
  -36,574
  -38,771
  -40,922
  -43,034
  -45,119
  -47,188
  -49,254
  -51,333
  -53,438
  -55,584
  -57,785
  -60,055
  -62,407
Cash from investing activities, $m
  -802
  -2,538
  -3,554
  -4,833
  -6,393
  -8,246
  -10,395
  -12,830
  -15,537
  -18,496
  -21,678
  -25,058
  -28,607
  -32,301
  -36,115
  -40,032
  -44,037
  -48,120
  -52,278
  -56,507
  -60,812
  -65,198
  -69,673
  -74,249
  -78,936
  -83,752
  -88,709
  -93,823
  -99,112
  -104,593
  -110,281
Free cash flow, $m
  -200
  -532
  1,248
  3,777
  7,243
  11,842
  17,770
  25,217
  34,355
  45,335
  58,282
  73,236
  90,371
  109,668
  131,140
  154,776
  180,548
  208,418
  238,339
  270,264
  304,143
  339,934
  377,601
  417,116
  458,463
  501,639
  546,651
  593,519
  642,278
  692,974
  745,664
Issuance/(repayment) of debt, $m
  1,188
  2,505
  3,473
  4,675
  6,117
  7,798
  9,708
  11,825
  14,121
  16,563
  19,114
  21,738
  24,402
  27,074
  29,730
  32,351
  34,922
  37,435
  39,890
  42,287
  44,632
  46,936
  49,209
  51,466
  53,720
  55,987
  58,284
  60,624
  63,024
  65,500
  68,065
Issuance/(repurchase) of shares, $m
  -8
  98
  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  
  1,077
  2,603
  3,473
  4,675
  6,117
  7,798
  9,708
  11,825
  14,121
  16,563
  19,114
  21,738
  24,402
  27,074
  29,730
  32,351
  34,922
  37,435
  39,890
  42,287
  44,632
  46,936
  49,209
  51,466
  53,720
  55,987
  58,284
  60,624
  63,024
  65,500
  68,065
Total cash flow (excl. dividends), $m
  878
  2,070
  4,721
  8,452
  13,360
  19,640
  27,478
  37,042
  48,476
  61,898
  77,396
  94,974
  114,773
  136,743
  160,870
  187,126
  215,469
  245,853
  278,229
  312,550
  348,776
  386,870
  426,810
  468,582
  512,183
  557,626
  604,934
  654,143
  705,302
  758,474
  813,730
Retained Cash Flow (-), $m
  572
  -1,864
  -2,588
  -3,484
  -4,558
  -5,811
  -7,234
  -8,812
  -10,523
  -12,343
  -14,244
  -16,199
  -18,184
  -20,176
  -22,155
  -24,108
  -26,024
  -27,897
  -29,726
  -31,512
  -33,260
  -34,977
  -36,671
  -38,352
  -40,032
  -41,722
  -43,433
  -45,177
  -46,966
  -48,811
  -50,722
Prev. year cash balance distribution, $m
 
  1,135
  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
 
  1,341
  2,132
  4,968
  8,802
  13,829
  20,244
  28,230
  37,953
  49,556
  63,153
  78,775
  96,588
  116,567
  138,715
  163,018
  189,446
  217,956
  248,503
  281,038
  315,515
  351,893
  390,139
  430,229
  472,151
  515,904
  561,501
  608,966
  658,337
  709,663
  763,007
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
 
  1,286
  1,952
  4,323
  7,247
  10,719
  14,692
  19,072
  23,722
  28,467
  33,108
  37,409
  41,218
  44,321
  46,569
  47,859
  48,142
  47,424
  45,764
  43,272
  40,092
  36,397
  32,371
  28,198
  24,048
  20,069
  16,382
  13,070
  10,185
  7,747
  5,745
Current shareholders' claim on cash, %
  100
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5

HollyFrontier Corporation operates as an independent petroleum refiner in the United States. The company operates through two segments, Refining and HEP. It primarily produces high-value refined products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. The company offers its products to other refiners, convenience store chains, independent marketers, retailers, truck stop chains, wholesalers, railroads, governmental entities, paving contractors or manufacturers, and commercial and specialty markets, as well as for commercial airline use. It owns and operates five refineries with a combined crude oil processing capacity of approximately 457,000 barrels per day in El Dorado, Kansas; Tulsa, Oklahoma; Artesia, New Mexico; Cheyenne, Wyoming; Woods Cross, Utah; and vacuum distillation and other facilities in Lovington, New Mexico, as well as owns and operates asphalt terminals in Arizona, New Mexico, and Oklahoma. The company’s refineries serve markets in the Mid-Continent, Southwest, and Rocky Mountain regions of the United States. The company was formerly known as Holly Corporation and changed its name to HollyFrontier Corporation as a result of its merger with Frontier Oil Corporation in July 2011. HollyFrontier Corporation was founded in 1947 and is based in Dallas, Texas.

FINANCIAL RATIOS  of  HollyFrontier (HFC)

Valuation Ratios
P/E Ratio -18.9
Price to Sales 0.5
Price to Book 1
Price to Tangible Book
Price to Cash Flow 8.1
Price to Free Cash Flow 40.2
Growth Rates
Sales Growth Rate -20.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -29%
Cap. Spend. - 3 Yr. Gr. Rate 2.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 47.7%
Total Debt to Equity 47.7%
Interest Coverage -2
Management Effectiveness
Return On Assets -2.2%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital -3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.9%
Return On Equity -5.2%
Return On Equity - 3 Yr. Avg. 4.5%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 19.5%
Gross Margin - 3 Yr. Avg. 17.4%
EBITDA Margin 2.3%
EBITDA Margin - 3 Yr. Avg. 6.3%
Operating Margin -1%
Oper. Margin - 3 Yr. Avg. 3.6%
Pre-Tax Margin -1.6%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin -2.5%
Net Profit Margin - 3 Yr. Avg. 1.5%
Effective Tax Rate -11%
Eff/ Tax Rate - 3 Yr. Avg. 17.6%
Payout Ratio -90%

HFC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HFC stock intrinsic value calculation we used $10536 million for the last fiscal year's total revenue generated by HollyFrontier. The default revenue input number comes from 2016 income statement of HollyFrontier. 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 HFC stock valuation model: a) initial revenue growth rate of 52.6% 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 HFC is calculated based on our internal credit rating of HollyFrontier, 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 HollyFrontier.
    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 HFC stock the variable cost ratio is equal to 50%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5510 million in the base year in the intrinsic value calculation for HFC 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 HollyFrontier.

Corporate tax rate of 27% is the nominal tax rate for HollyFrontier. 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 HFC 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 HFC are equal to 41.4%.

Life of production assets of 18 years is the average useful life of capital assets used in HollyFrontier 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 HFC is equal to 6%. 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 - $4681 million for HollyFrontier - 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 182.097 million for HollyFrontier 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 HollyFrontier at the current share price and the inputted number of shares is $5.0 billion.

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COMPANY NEWS

▶ Better Buy: Phillips 66 vs. HollyFrontier Corp.   [Aug-15-17 08:31AM  Motley Fool]
▶ These Energy Stocks Rose the Most Last Week   [Aug-08-17 09:36AM  Market Realist]
▶ Whats the Forecast for Andeavor Stock?   [10:40AM  Market Realist]
▶ HollyFrontier beats 2Q profit forecasts   [Aug-02-17 09:40PM  Associated Press]
▶ Whats Expected from Marathon Petroleum Stock?   [09:07AM  Market Realist]
▶ US Oil Refiner HollyFrontier's Profit Tops Estimates   [Aug-01-17 08:00PM  Rigzone.com]
▶ ETFs with exposure to HollyFrontier Corp. : July 24, 2017   [Jul-24-17 04:24PM  Capital Cube]
▶ Shorting Valero: Mapping the Short Interest in VLO   [Jul-19-17 10:36AM  Market Realist]
▶ Marathon Petroleums 2Q17 Estimates: What to Expect   [Jul-17-17 04:14PM  Market Realist]
▶ ETFs with exposure to HollyFrontier Corp. : July 14, 2017   [Jul-14-17 02:49PM  Capital Cube]
▶ Refiners Tumble on Proposed Biofuel Quotas   [Jul-06-17 04:01PM  GuruFocus.com]
▶ Chart in Focus: Tesoros Falling Short Interest   [Jun-28-17 10:35AM  Market Realist]
▶ HollyFrontier's Positioned to Succeed   [Jun-07-17 07:00AM  Morningstar]
▶ ETFs with exposure to HollyFrontier Corp. : June 1, 2017   [Jun-01-17 01:51PM  Capital Cube]
▶ How Holly Energy Partners, L.P. Makes Most of Its Money   [May-24-17 11:08AM  Motley Fool]
▶ Has Short Interest in Marathon Petroleum Fallen?   [May-23-17 09:06AM  Market Realist]
▶ ETFs with exposure to HollyFrontier Corp. : May 22, 2017   [May-22-17 01:43PM  Capital Cube]
▶ 2 Stocks That Pay You Big Distributions   [May-16-17 11:27AM  Motley Fool]
▶ ETFs with exposure to HollyFrontier Corp. : May 11, 2017   [May-11-17 04:48PM  Capital Cube]
▶ HollyFrontier Corporation Announces Regular Cash Dividend   [May-10-17 05:52PM  Business Wire]
▶ HollyFrontier reports 1Q loss   [06:51AM  Associated Press]
▶ Valeros Institutional Holdings before the 1Q17 Results   [Apr-19-17 09:06AM  Market Realist]
▶ 3 Energy Stocks You Don't Have to Babysit   [Apr-12-17 11:15AM  Motley Fool]
▶ Short Interest Impacts Integrated Energy and Refiner Stocks   [Mar-31-17 10:53AM  Market Realist]
▶ Energy: Coming Shale Growth a Major Threat to Oil Prices   [Mar-30-17 07:00AM  Morningstar]
▶ 3 Top Dividend Stocks Selling for a Discount This Spring   [Mar-27-17 07:47AM  Motley Fool]
▶ How Tesoros Beta Compares to Its Peers   [Mar-24-17 10:36AM  Market Realist]
▶ 2 Hated Dividend Stocks to Buy Now   [09:15AM  Motley Fool]
▶ 2 Hated Dividend Stocks to Buy Now   [09:15AM  at Motley Fool]
▶ 3 Energy Stocks Wall Street Hates but You Should Love   [Mar-22-17 11:04AM  at Motley Fool]
▶ [$$] Marathon: A Top Pick in Refining   [Mar-14-17 03:15PM  at Barrons.com]
▶ 5 Things Holly Energy Partners Management Wants You to Know   [Mar-08-17 09:07AM  at Motley Fool]
▶ HollyFrontier's Management Has 1 Major Focus in 2017   [Mar-07-17 09:48AM  at Motley Fool]
Stock chart of HFC Financial statements of HFC
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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