Intrinsic value of LyondellBasell Industries - LYB

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$85.42

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$85.42

 
Intrinsic value

$220.65

 
Up/down potential

+158%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of LYB 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 34.3

 

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, %
  -10.85
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
Revenue, $m
  29,183
  31,985
  34,908
  37,954
  41,124
  44,422
  47,850
  51,412
  55,114
  58,961
  62,959
  67,117
  71,442
  75,942
  80,627
  85,507
  90,592
  95,894
  101,424
  107,196
  113,222
  119,516
  126,093
  132,969
  140,160
  147,682
  155,554
  163,794
  172,422
  181,458
  190,924
Variable operating expenses, $m
 
  22,768
  24,844
  27,007
  29,259
  31,601
  34,035
  36,565
  39,194
  41,926
  44,766
  47,666
  50,737
  53,933
  57,261
  60,726
  64,338
  68,103
  72,031
  76,129
  80,409
  84,879
  89,550
  94,433
  99,540
  104,882
  110,473
  116,325
  122,452
  128,870
  135,592
Fixed operating expenses, $m
 
  3,489
  3,576
  3,666
  3,757
  3,851
  3,948
  4,046
  4,147
  4,251
  4,357
  4,466
  4,578
  4,692
  4,810
  4,930
  5,053
  5,180
  5,309
  5,442
  5,578
  5,717
  5,860
  6,007
  6,157
  6,311
  6,469
  6,630
  6,796
  6,966
  7,140
Total operating expenses, $m
  24,107
  26,257
  28,420
  30,673
  33,016
  35,452
  37,983
  40,611
  43,341
  46,177
  49,123
  52,132
  55,315
  58,625
  62,071
  65,656
  69,391
  73,283
  77,340
  81,571
  85,987
  90,596
  95,410
  100,440
  105,697
  111,193
  116,942
  122,955
  129,248
  135,836
  142,732
Operating income, $m
  5,076
  5,728
  6,488
  7,281
  8,108
  8,970
  9,867
  10,801
  11,772
  12,783
  13,836
  14,985
  16,126
  17,316
  18,557
  19,851
  21,201
  22,611
  24,085
  25,625
  27,235
  28,920
  30,683
  32,529
  34,463
  36,489
  38,612
  40,839
  43,173
  45,622
  48,191
EBITDA, $m
  6,140
  6,893
  7,755
  8,654
  9,592
  10,568
  11,585
  12,642
  13,743
  14,888
  16,080
  17,320
  18,613
  19,959
  21,363
  22,826
  24,354
  25,948
  27,614
  29,355
  31,175
  33,079
  35,071
  37,156
  39,340
  41,628
  44,026
  46,539
  49,174
  51,937
  54,836
Interest expense (income), $m
  346
  344
  410
  479
  551
  626
  703
  784
  868
  956
  1,047
  1,141
  1,239
  1,341
  1,447
  1,558
  1,673
  1,793
  1,918
  2,049
  2,185
  2,327
  2,476
  2,631
  2,793
  2,963
  3,140
  3,326
  3,521
  3,724
  3,938
Earnings before tax, $m
  5,233
  5,384
  6,078
  6,802
  7,557
  8,344
  9,163
  10,016
  10,904
  11,828
  12,789
  13,844
  14,887
  15,975
  17,109
  18,293
  19,528
  20,818
  22,166
  23,576
  25,050
  26,592
  28,207
  29,898
  31,669
  33,526
  35,472
  37,512
  39,653
  41,898
  44,254
Tax expense, $m
  1,386
  1,454
  1,641
  1,837
  2,040
  2,253
  2,474
  2,704
  2,944
  3,193
  3,453
  3,738
  4,020
  4,313
  4,620
  4,939
  5,273
  5,621
  5,985
  6,365
  6,763
  7,180
  7,616
  8,072
  8,551
  9,052
  9,577
  10,128
  10,706
  11,312
  11,949
Net income, $m
  3,836
  3,930
  4,437
  4,965
  5,517
  6,091
  6,689
  7,312
  7,960
  8,634
  9,336
  10,106
  10,868
  11,662
  12,490
  13,354
  14,256
  15,197
  16,181
  17,210
  18,286
  19,412
  20,591
  21,826
  23,119
  24,474
  25,894
  27,384
  28,946
  30,585
  32,305

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,022
  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
  23,442
  23,484
  25,630
  27,866
  30,194
  32,615
  35,132
  37,747
  40,465
  43,290
  46,226
  49,278
  52,454
  55,758
  59,198
  62,780
  66,514
  70,407
  74,467
  78,705
  83,129
  87,750
  92,579
  97,628
  102,907
  108,430
  114,210
  120,260
  126,594
  133,229
  140,179
Adjusted assets (=assets-cash), $m
  21,420
  23,484
  25,630
  27,866
  30,194
  32,615
  35,132
  37,747
  40,465
  43,290
  46,226
  49,278
  52,454
  55,758
  59,198
  62,780
  66,514
  70,407
  74,467
  78,705
  83,129
  87,750
  92,579
  97,628
  102,907
  108,430
  114,210
  120,260
  126,594
  133,229
  140,179
Revenue / Adjusted assets
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
Average production assets, $m
  10,159
  11,131
  12,148
  13,208
  14,311
  15,459
  16,652
  17,891
  19,180
  20,518
  21,910
  23,357
  24,862
  26,428
  28,058
  29,756
  31,526
  33,371
  35,296
  37,304
  39,401
  41,592
  43,880
  46,273
  48,776
  51,393
  54,133
  57,000
  60,003
  63,147
  66,441
Working capital, $m
  5,059
  3,966
  4,329
  4,706
  5,099
  5,508
  5,933
  6,375
  6,834
  7,311
  7,807
  8,323
  8,859
  9,417
  9,998
  10,603
  11,233
  11,891
  12,577
  13,292
  14,039
  14,820
  15,636
  16,488
  17,380
  18,313
  19,289
  20,310
  21,380
  22,501
  23,675
Total debt, $m
  8,981
  9,998
  11,681
  13,434
  15,259
  17,157
  19,130
  21,181
  23,312
  25,526
  27,828
  30,221
  32,711
  35,301
  37,998
  40,807
  43,734
  46,786
  49,969
  53,291
  56,760
  60,383
  64,169
  68,127
  72,266
  76,596
  81,127
  85,871
  90,837
  96,038
  101,487
Total liabilities, $m
  17,394
  18,411
  20,094
  21,847
  23,672
  25,570
  27,543
  29,594
  31,725
  33,939
  36,241
  38,634
  41,124
  43,714
  46,411
  49,220
  52,147
  55,199
  58,382
  61,704
  65,173
  68,796
  72,582
  76,540
  80,679
  85,009
  89,540
  94,284
  99,250
  104,451
  109,900
Total equity, $m
  6,048
  5,072
  5,536
  6,019
  6,522
  7,045
  7,588
  8,153
  8,740
  9,351
  9,985
  10,644
  11,330
  12,044
  12,787
  13,561
  14,367
  15,208
  16,085
  17,000
  17,956
  18,954
  19,997
  21,088
  22,228
  23,421
  24,669
  25,976
  27,344
  28,777
  30,279
Total liabilities and equity, $m
  23,442
  23,483
  25,630
  27,866
  30,194
  32,615
  35,131
  37,747
  40,465
  43,290
  46,226
  49,278
  52,454
  55,758
  59,198
  62,781
  66,514
  70,407
  74,467
  78,704
  83,129
  87,750
  92,579
  97,628
  102,907
  108,430
  114,209
  120,260
  126,594
  133,228
  140,179
Debt-to-equity ratio
  1.485
  1.970
  2.110
  2.230
  2.340
  2.440
  2.520
  2.600
  2.670
  2.730
  2.790
  2.840
  2.890
  2.930
  2.970
  3.010
  3.040
  3.080
  3.110
  3.130
  3.160
  3.190
  3.210
  3.230
  3.250
  3.270
  3.290
  3.310
  3.320
  3.340
  3.350
Adjusted equity ratio
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,836
  3,930
  4,437
  4,965
  5,517
  6,091
  6,689
  7,312
  7,960
  8,634
  9,336
  10,106
  10,868
  11,662
  12,490
  13,354
  14,256
  15,197
  16,181
  17,210
  18,286
  19,412
  20,591
  21,826
  23,119
  24,474
  25,894
  27,384
  28,946
  30,585
  32,305
Depreciation, amort., depletion, $m
  1,064
  1,166
  1,268
  1,374
  1,484
  1,599
  1,718
  1,842
  1,971
  2,105
  2,244
  2,336
  2,486
  2,643
  2,806
  2,976
  3,153
  3,337
  3,530
  3,730
  3,940
  4,159
  4,388
  4,627
  4,878
  5,139
  5,413
  5,700
  6,000
  6,315
  6,644
Funds from operations, $m
  5,980
  5,096
  5,704
  6,339
  7,001
  7,690
  8,407
  9,154
  9,930
  10,739
  11,580
  12,442
  13,354
  14,305
  15,296
  16,329
  17,408
  18,534
  19,711
  20,941
  22,227
  23,572
  24,979
  26,453
  27,996
  29,613
  31,308
  33,084
  34,947
  36,900
  38,949
Change in working capital, $m
  374
  347
  363
  378
  393
  409
  425
  442
  459
  477
  496
  516
  536
  558
  581
  605
  631
  657
  686
  716
  747
  780
  816
  853
  892
  933
  976
  1,022
  1,070
  1,120
  1,174
Cash from operations, $m
  5,606
  5,277
  5,342
  5,961
  6,608
  7,281
  7,982
  8,712
  9,471
  10,262
  11,084
  11,926
  12,818
  13,747
  14,715
  15,724
  16,778
  17,877
  19,025
  20,225
  21,479
  22,791
  24,164
  25,600
  27,105
  28,680
  30,332
  32,062
  33,877
  35,780
  37,776
Maintenance CAPEX, $m
  0
  -1,016
  -1,113
  -1,215
  -1,321
  -1,431
  -1,546
  -1,665
  -1,789
  -1,918
  -2,052
  -2,191
  -2,336
  -2,486
  -2,643
  -2,806
  -2,976
  -3,153
  -3,337
  -3,530
  -3,730
  -3,940
  -4,159
  -4,388
  -4,627
  -4,878
  -5,139
  -5,413
  -5,700
  -6,000
  -6,315
New CAPEX, $m
  -2,243
  -972
  -1,017
  -1,060
  -1,103
  -1,147
  -1,193
  -1,240
  -1,288
  -1,339
  -1,392
  -1,447
  -1,505
  -1,566
  -1,630
  -1,698
  -1,770
  -1,845
  -1,925
  -2,008
  -2,097
  -2,190
  -2,289
  -2,393
  -2,502
  -2,618
  -2,739
  -2,868
  -3,002
  -3,145
  -3,294
Cash from investing activities, $m
  -2,297
  -1,988
  -2,130
  -2,275
  -2,424
  -2,578
  -2,739
  -2,905
  -3,077
  -3,257
  -3,444
  -3,638
  -3,841
  -4,052
  -4,273
  -4,504
  -4,746
  -4,998
  -5,262
  -5,538
  -5,827
  -6,130
  -6,448
  -6,781
  -7,129
  -7,496
  -7,878
  -8,281
  -8,702
  -9,145
  -9,609
Free cash flow, $m
  3,309
  3,289
  3,211
  3,687
  4,183
  4,702
  5,243
  5,807
  6,394
  7,005
  7,641
  8,288
  8,977
  9,694
  10,442
  11,220
  12,032
  12,879
  13,764
  14,687
  15,652
  16,661
  17,716
  18,819
  19,975
  21,185
  22,453
  23,782
  25,174
  26,635
  28,167
Issuance/(repayment) of debt, $m
  989
  1,613
  1,683
  1,753
  1,825
  1,898
  1,973
  2,051
  2,131
  2,214
  2,302
  2,393
  2,489
  2,590
  2,697
  2,809
  2,927
  3,052
  3,183
  3,322
  3,469
  3,623
  3,786
  3,958
  4,139
  4,330
  4,531
  4,743
  4,966
  5,201
  5,449
Issuance/(repurchase) of shares, $m
  -2,938
  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  
  -1,954
  1,613
  1,683
  1,753
  1,825
  1,898
  1,973
  2,051
  2,131
  2,214
  2,302
  2,393
  2,489
  2,590
  2,697
  2,809
  2,927
  3,052
  3,183
  3,322
  3,469
  3,623
  3,786
  3,958
  4,139
  4,330
  4,531
  4,743
  4,966
  5,201
  5,449
Total cash flow (excl. dividends), $m
  1,346
  4,902
  4,894
  5,440
  6,008
  6,600
  7,217
  7,858
  8,525
  9,219
  9,943
  10,682
  11,466
  12,285
  13,138
  14,029
  14,959
  15,931
  16,947
  18,009
  19,121
  20,284
  21,502
  22,777
  24,114
  25,515
  26,984
  28,525
  30,141
  31,836
  33,616
Retained Cash Flow (-), $m
  502
  -450
  -464
  -483
  -503
  -523
  -544
  -565
  -587
  -610
  -634
  -659
  -686
  -714
  -743
  -774
  -806
  -841
  -877
  -915
  -956
  -998
  -1,043
  -1,090
  -1,140
  -1,193
  -1,248
  -1,307
  -1,368
  -1,433
  -1,501
Prev. year cash balance distribution, $m
 
  1,426
  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
 
  5,878
  4,430
  4,957
  5,506
  6,078
  6,673
  7,293
  7,938
  8,609
  9,308
  10,022
  10,781
  11,571
  12,395
  13,255
  14,153
  15,090
  16,070
  17,094
  18,165
  19,285
  20,459
  21,687
  22,974
  24,322
  25,736
  27,218
  28,772
  30,403
  32,114
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  5,619
  4,032
  4,273
  4,474
  4,630
  4,739
  4,798
  4,806
  4,764
  4,672
  4,527
  4,345
  4,123
  3,868
  3,586
  3,283
  2,967
  2,645
  2,325
  2,014
  1,718
  1,441
  1,189
  963
  766
  597
  456
  340
  248
  177
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

LyondellBasell Industries N.V. operates as a manufacturer of chemicals and polymers, refiner of crude oil, producer of gasoline blending components, and developer and licensor of technologies for production of polymers worldwide. The company operates in five segments: Olefins and Polyolefins—Americas; Olefins and Polyolefins—Europe, Asia, International; Intermediates and Derivatives; Refining; and Technology. It produces and markets olefins, including ethylene, propylene, and butadiene; polyethylene products, which consist of high density polyethylene, low density polyethylene, and linear low density polyethylene; polyolefins, such as polyethylene and polypropylene (PP); and PP homopolymers, copolymers, and compounds. The company also produces and sells propylene oxide and its derivatives; oxyfuels and related products; and intermediate chemicals, such as styrene monomers, methanol products, glacial acetic acids, vinyl acetate monomers, and ethylene oxides and derivatives. In addition, it refines crude oil into gasoline, diesel, and jet fuel; develops and licenses chemical and polyolefin process technologies; and manufactures and sells polyolefin catalysts, as well as purchases and sells ethylene. The company also exports its products. LyondellBasell Industries N.V. was founded in 2005 and is based in London, the United Kingdom.

FINANCIAL RATIOS  of  LyondellBasell Industries (LYB)

Valuation Ratios
P/E Ratio 9
Price to Sales 1.2
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 6.2
Price to Free Cash Flow 10.3
Growth Rates
Sales Growth Rate -10.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 55.8%
Cap. Spend. - 3 Yr. Gr. Rate 7.5%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 138.6%
Total Debt to Equity 148.5%
Interest Coverage 16
Management Effectiveness
Return On Assets 17.7%
Ret/ On Assets - 3 Yr. Avg. 18.3%
Return On Total Capital 25.9%
Ret/ On T. Cap. - 3 Yr. Avg. 26.9%
Return On Equity 60.9%
Return On Equity - 3 Yr. Avg. 53.8%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 20.6%
Gross Margin - 3 Yr. Avg. 19%
EBITDA Margin 22.8%
EBITDA Margin - 3 Yr. Avg. 20.5%
Operating Margin 17.4%
Oper. Margin - 3 Yr. Avg. 16.2%
Pre-Tax Margin 17.9%
Pre-Tax Margin - 3 Yr. Avg. 16.5%
Net Profit Margin 13.1%
Net Profit Margin - 3 Yr. Avg. 12%
Effective Tax Rate 26.5%
Eff/ Tax Rate - 3 Yr. Avg. 27.1%
Payout Ratio 36.4%

LYB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LYB stock intrinsic value calculation we used $29183 million for the last fiscal year's total revenue generated by LyondellBasell Industries. The default revenue input number comes from 2016 income statement of LyondellBasell Industries. 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 LYB stock valuation model: a) initial revenue growth rate of 9.6% 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 4.6%, whose default value for LYB is calculated based on our internal credit rating of LyondellBasell Industries, 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 LyondellBasell Industries.
    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 LYB stock the variable cost ratio is equal to 71.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3404 million in the base year in the intrinsic value calculation for LYB 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 4.1% for LyondellBasell Industries.

Corporate tax rate of 27% is the nominal tax rate for LyondellBasell Industries. 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 LYB 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 LYB are equal to 34.8%.

Life of production assets of 10 years is the average useful life of capital assets used in LyondellBasell Industries 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 LYB is equal to 12.4%. 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 - $6048 million for LyondellBasell Industries - 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 402.127 million for LyondellBasell Industries 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 LyondellBasell Industries at the current share price and the inputted number of shares is $34.3 billion.


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Stock chart of LYB Financial statements of LYB
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