Intrinsic value of Marathon Petroleum - MPC

Previous Close

$51.06

  Intrinsic Value

$684.21

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+119%

Previous close

$51.06

 
Intrinsic value

$684.21

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+119%

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

We calculate the intrinsic value of MPC 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 26.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -12.34
  28.00
  25.70
  23.63
  21.77
  20.09
  18.58
  17.22
  16.00
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.26
  7.04
  6.83
  6.65
  6.49
  6.34
  6.20
  6.08
Revenue, $m
  63,332
  81,065
  101,899
  125,977
  153,399
  184,217
  218,447
  256,070
  297,044
  341,305
  388,783
  439,401
  493,086
  549,770
  609,400
  671,935
  737,351
  805,644
  876,829
  950,940
  1,028,032
  1,108,180
  1,191,478
  1,278,039
  1,367,993
  1,461,490
  1,558,696
  1,659,794
  1,764,983
  1,874,477
  1,988,508
Variable operating expenses, $m
 
  59,969
  75,288
  92,994
  113,158
  135,820
  160,991
  188,657
  218,786
  251,333
  286,245
  323,108
  362,584
  404,266
  448,114
  494,098
  542,201
  592,419
  644,764
  699,260
  755,949
  814,885
  876,137
  939,788
  1,005,935
  1,074,687
  1,146,166
  1,220,507
  1,297,856
  1,378,371
  1,462,222
Fixed operating expenses, $m
 
  14,727
  15,095
  15,473
  15,860
  16,256
  16,662
  17,079
  17,506
  17,944
  18,392
  18,852
  19,323
  19,806
  20,302
  20,809
  21,329
  21,863
  22,409
  22,969
  23,544
  24,132
  24,736
  25,354
  25,988
  26,637
  27,303
  27,986
  28,686
  29,403
  30,138
Total operating expenses, $m
  60,954
  74,696
  90,383
  108,467
  129,018
  152,076
  177,653
  205,736
  236,292
  269,277
  304,637
  341,960
  381,907
  424,072
  468,416
  514,907
  563,530
  614,282
  667,173
  722,229
  779,493
  839,017
  900,873
  965,142
  1,031,923
  1,101,324
  1,173,469
  1,248,493
  1,326,542
  1,407,774
  1,492,360
Operating income, $m
  2,378
  6,369
  11,515
  17,510
  24,381
  32,141
  40,794
  50,335
  60,752
  72,029
  84,146
  97,442
  111,179
  125,698
  140,985
  157,028
  173,821
  191,362
  209,656
  228,710
  248,539
  269,163
  290,606
  312,897
  336,070
  360,166
  385,227
  411,301
  438,441
  466,703
  496,148
EBITDA, $m
  4,379
  8,960
  14,679
  21,338
  28,963
  37,572
  47,167
  57,744
  69,290
  81,785
  95,209
  109,540
  124,755
  140,835
  157,764
  175,529
  194,123
  213,545
  233,798
  254,893
  276,845
  299,676
  323,412
  348,086
  373,737
  400,407
  428,145
  457,003
  487,039
  518,316
  550,900
Interest expense (income), $m
  478
  443
  805
  1,231
  1,723
  2,283
  2,913
  3,612
  4,381
  5,219
  6,123
  7,094
  8,128
  9,225
  10,384
  11,602
  12,880
  14,217
  15,613
  17,068
  18,583
  20,158
  21,796
  23,498
  25,267
  27,106
  29,017
  31,003
  33,069
  35,219
  37,457
Earnings before tax, $m
  1,822
  5,926
  10,710
  16,280
  22,658
  29,858
  37,881
  46,722
  56,371
  66,810
  78,023
  90,348
  103,050
  116,473
  130,601
  145,425
  160,940
  177,145
  194,043
  211,642
  229,957
  249,005
  268,810
  289,398
  310,803
  333,060
  356,210
  380,298
  405,372
  431,484
  458,691
Tax expense, $m
  609
  1,600
  2,892
  4,395
  6,118
  8,062
  10,228
  12,615
  15,220
  18,039
  21,066
  24,394
  27,824
  31,448
  35,262
  39,265
  43,454
  47,829
  52,391
  57,143
  62,088
  67,231
  72,579
  78,138
  83,917
  89,926
  96,177
  102,680
  109,450
  116,501
  123,847
Net income, $m
  1,174
  4,326
  7,818
  11,884
  16,540
  21,796
  27,653
  34,107
  41,151
  48,771
  56,956
  65,954
  75,227
  85,025
  95,339
  106,160
  117,486
  129,316
  141,651
  154,499
  167,868
  181,774
  196,231
  211,261
  226,886
  243,134
  260,034
  277,618
  295,922
  314,983
  334,845

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  887
  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
  44,413
  55,715
  70,033
  86,582
  105,429
  126,610
  150,135
  175,993
  204,154
  234,574
  267,205
  301,994
  338,891
  377,849
  418,832
  461,811
  506,770
  553,707
  602,631
  653,567
  706,551
  761,636
  818,885
  878,377
  940,201
  1,004,461
  1,071,269
  1,140,752
  1,213,047
  1,288,300
  1,366,672
Adjusted assets (=assets-cash), $m
  43,526
  55,715
  70,033
  86,582
  105,429
  126,610
  150,135
  175,993
  204,154
  234,574
  267,205
  301,994
  338,891
  377,849
  418,832
  461,811
  506,770
  553,707
  602,631
  653,567
  706,551
  761,636
  818,885
  878,377
  940,201
  1,004,461
  1,071,269
  1,140,752
  1,213,047
  1,288,300
  1,366,672
Revenue / Adjusted assets
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
  1.455
Average production assets, $m
  25,465
  32,588
  40,963
  50,643
  61,666
  74,055
  87,816
  102,940
  119,412
  137,205
  156,291
  176,639
  198,221
  221,008
  244,979
  270,118
  296,415
  323,869
  352,485
  382,278
  413,269
  445,488
  478,974
  513,772
  549,933
  587,519
  626,596
  667,237
  709,523
  753,540
  799,380
Working capital, $m
  3,255
  3,080
  3,872
  4,787
  5,829
  7,000
  8,301
  9,731
  11,288
  12,970
  14,774
  16,697
  18,737
  20,891
  23,157
  25,534
  28,019
  30,614
  33,319
  36,136
  39,065
  42,111
  45,276
  48,565
  51,984
  55,537
  59,230
  63,072
  67,069
  71,230
  75,563
Total debt, $m
  10,572
  19,162
  29,300
  41,016
  54,360
  69,356
  86,012
  104,319
  124,257
  145,795
  168,897
  193,528
  219,651
  247,233
  276,249
  306,678
  338,509
  371,741
  406,379
  442,441
  479,954
  518,954
  559,487
  601,607
  645,379
  690,874
  738,174
  787,368
  838,553
  891,833
  947,320
Total liabilities, $m
  30,856
  39,446
  49,584
  61,300
  74,644
  89,640
  106,296
  124,603
  144,541
  166,079
  189,181
  213,812
  239,935
  267,517
  296,533
  326,962
  358,793
  392,025
  426,663
  462,725
  500,238
  539,238
  579,771
  621,891
  665,663
  711,158
  758,458
  807,652
  858,837
  912,117
  967,604
Total equity, $m
  13,557
  16,269
  20,450
  25,282
  30,785
  36,970
  43,840
  51,390
  59,613
  68,496
  78,024
  88,182
  98,956
  110,332
  122,299
  134,849
  147,977
  161,683
  175,968
  190,842
  206,313
  222,398
  239,115
  256,486
  274,539
  293,303
  312,811
  333,100
  354,210
  376,184
  399,068
Total liabilities and equity, $m
  44,413
  55,715
  70,034
  86,582
  105,429
  126,610
  150,136
  175,993
  204,154
  234,575
  267,205
  301,994
  338,891
  377,849
  418,832
  461,811
  506,770
  553,708
  602,631
  653,567
  706,551
  761,636
  818,886
  878,377
  940,202
  1,004,461
  1,071,269
  1,140,752
  1,213,047
  1,288,301
  1,366,672
Debt-to-equity ratio
  0.780
  1.180
  1.430
  1.620
  1.770
  1.880
  1.960
  2.030
  2.080
  2.130
  2.160
  2.190
  2.220
  2.240
  2.260
  2.270
  2.290
  2.300
  2.310
  2.320
  2.330
  2.330
  2.340
  2.350
  2.350
  2.360
  2.360
  2.360
  2.370
  2.370
  2.370
Adjusted equity ratio
  0.291
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,174
  4,326
  7,818
  11,884
  16,540
  21,796
  27,653
  34,107
  41,151
  48,771
  56,956
  65,954
  75,227
  85,025
  95,339
  106,160
  117,486
  129,316
  141,651
  154,499
  167,868
  181,774
  196,231
  211,261
  226,886
  243,134
  260,034
  277,618
  295,922
  314,983
  334,845
Depreciation, amort., depletion, $m
  2,001
  2,591
  3,164
  3,827
  4,582
  5,431
  6,373
  7,409
  8,538
  9,756
  11,064
  12,099
  13,577
  15,138
  16,779
  18,501
  20,302
  22,183
  24,143
  26,183
  28,306
  30,513
  32,806
  35,190
  37,667
  40,241
  42,918
  45,701
  48,597
  51,612
  54,752
Funds from operations, $m
  3,761
  6,917
  10,983
  15,711
  21,123
  27,227
  34,027
  41,517
  49,688
  58,528
  68,020
  78,053
  88,804
  100,162
  112,118
  124,662
  137,789
  151,499
  165,794
  180,682
  196,174
  212,286
  229,037
  246,451
  264,553
  283,375
  302,951
  323,319
  344,519
  366,596
  389,597
Change in working capital, $m
  -225
  674
  792
  915
  1,042
  1,171
  1,301
  1,430
  1,557
  1,682
  1,804
  1,923
  2,040
  2,154
  2,266
  2,376
  2,486
  2,595
  2,705
  2,816
  2,930
  3,046
  3,165
  3,289
  3,418
  3,553
  3,694
  3,842
  3,997
  4,161
  4,333
Cash from operations, $m
  3,986
  6,243
  10,191
  14,796
  20,081
  26,056
  32,726
  40,087
  48,131
  56,846
  66,216
  76,129
  86,764
  98,008
  109,852
  122,285
  135,303
  148,903
  163,089
  177,866
  193,245
  209,241
  225,872
  243,161
  261,135
  279,822
  299,257
  319,477
  340,522
  362,435
  385,263
Maintenance CAPEX, $m
  0
  -1,744
  -2,232
  -2,806
  -3,469
  -4,224
  -5,072
  -6,015
  -7,051
  -8,179
  -9,398
  -10,705
  -12,099
  -13,577
  -15,138
  -16,779
  -18,501
  -20,302
  -22,183
  -24,143
  -26,183
  -28,306
  -30,513
  -32,806
  -35,190
  -37,667
  -40,241
  -42,918
  -45,701
  -48,597
  -51,612
New CAPEX, $m
  -2,892
  -7,124
  -8,375
  -9,680
  -11,023
  -12,389
  -13,760
  -15,125
  -16,471
  -17,793
  -19,086
  -20,348
  -21,581
  -22,787
  -23,971
  -25,139
  -26,297
  -27,454
  -28,616
  -29,793
  -30,991
  -32,220
  -33,486
  -34,797
  -36,162
  -37,586
  -39,077
  -40,641
  -42,286
  -44,017
  -45,840
Cash from investing activities, $m
  -2,941
  -8,868
  -10,607
  -12,486
  -14,492
  -16,613
  -18,832
  -21,140
  -23,522
  -25,972
  -28,484
  -31,053
  -33,680
  -36,364
  -39,109
  -41,918
  -44,798
  -47,756
  -50,799
  -53,936
  -57,174
  -60,526
  -63,999
  -67,603
  -71,352
  -75,253
  -79,318
  -83,559
  -87,987
  -92,614
  -97,452
Free cash flow, $m
  1,045
  -2,625
  -416
  2,311
  5,589
  9,443
  13,893
  18,948
  24,609
  30,874
  37,732
  45,076
  53,084
  61,645
  70,743
  80,367
  90,504
  101,147
  112,290
  123,930
  136,070
  148,715
  161,873
  175,557
  189,783
  204,570
  219,939
  235,918
  252,535
  269,821
  287,811
Issuance/(repayment) of debt, $m
  -1,405
  8,618
  10,138
  11,717
  13,343
  14,996
  16,656
  18,307
  19,938
  21,538
  23,103
  24,631
  26,123
  27,583
  29,016
  30,429
  31,831
  33,231
  34,638
  36,062
  37,513
  39,000
  40,533
  42,120
  43,772
  45,496
  47,300
  49,194
  51,185
  53,280
  55,487
Issuance/(repurchase) of shares, $m
  1,574
  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  
  -566
  8,618
  10,138
  11,717
  13,343
  14,996
  16,656
  18,307
  19,938
  21,538
  23,103
  24,631
  26,123
  27,583
  29,016
  30,429
  31,831
  33,231
  34,638
  36,062
  37,513
  39,000
  40,533
  42,120
  43,772
  45,496
  47,300
  49,194
  51,185
  53,280
  55,487
Total cash flow (excl. dividends), $m
  479
  5,993
  9,721
  14,028
  18,932
  24,439
  30,549
  37,255
  44,547
  52,411
  60,835
  69,706
  79,207
  89,227
  99,759
  110,796
  122,336
  134,378
  146,928
  159,993
  173,583
  187,715
  202,406
  217,678
  233,555
  250,065
  267,240
  285,112
  303,719
  323,101
  343,298
Retained Cash Flow (-), $m
  -320
  -3,571
  -4,181
  -4,832
  -5,503
  -6,185
  -6,869
  -7,551
  -8,223
  -8,883
  -9,528
  -10,158
  -10,774
  -11,376
  -11,967
  -12,550
  -13,128
  -13,706
  -14,286
  -14,873
  -15,471
  -16,085
  -16,717
  -17,372
  -18,053
  -18,764
  -19,508
  -20,289
  -21,110
  -21,974
  -22,884
Prev. year cash balance distribution, $m
 
  859
  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
 
  3,282
  5,540
  9,196
  13,429
  18,255
  23,680
  29,705
  36,324
  43,528
  51,307
  59,548
  68,433
  77,851
  87,792
  98,246
  109,208
  120,673
  132,642
  145,120
  158,112
  171,630
  185,689
  200,306
  215,502
  231,301
  247,732
  264,823
  282,609
  301,126
  320,413
Discount rate, %
 
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
 
  3,105
  4,932
  7,659
  10,400
  13,059
  15,538
  17,744
  19,595
  21,025
  21,988
  22,424
  22,411
  21,930
  21,025
  19,757
  18,201
  16,436
  14,548
  12,618
  10,719
  8,915
  7,254
  5,772
  4,486
  3,404
  2,518
  1,815
  1,274
  869
  575
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

Marathon Petroleum Corporation, together with its subsidiaries, engages in refining, marketing, retailing, and transporting petroleum products primarily in the United States. It operates through three segments: Refining & Marketing, Speedway, and Midstream. The company refines crude oil and other feed stocks at its seven refineries in the Gulf Coast and Midwest regions of the United States; and purchases ethanol and refined products for resale. Its refined products include gasoline, distillates, propane, feed stocks and petrochemicals, heavy fuel oil, and asphalt. The company also sells transportation fuels and convenience products in the retail market through Speedway convenience stores; gathers, transports, fractionates, stores, and markets natural gas liquids (NGLs); and transports and stores crude oil and refined products. Marathon Petroleum Corporation markets its refined products to resellers, consumers, independent retailers, wholesale customers, its Marathon brand jobbers and Speedway brand convenience stores, airlines, transportation companies, and utilities. The company also exports its refined products. As of February 2, 2017, it owned, leased, and had ownership interests in approximately 8,400 miles of crude and light product pipelines, as well as 5,600 miles of gas gathering and NGLs pipelines; and owned and operated approximately 5,500 independently owned retail outlets in 19 states, and 2,730 convenience stores in 21 states. The company was incorporated in 2009 and is headquartered in Findlay, Ohio.

FINANCIAL RATIOS  of  Marathon Petroleum (MPC)

Valuation Ratios
P/E Ratio 23
Price to Sales 0.4
Price to Book 2
Price to Tangible Book
Price to Cash Flow 6.8
Price to Free Cash Flow 24.6
Growth Rates
Sales Growth Rate -12.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 44.7%
Cap. Spend. - 3 Yr. Gr. Rate 19.1%
Financial Strength
Quick Ratio 32
Current Ratio 0
LT Debt to Equity 77.8%
Total Debt to Equity 78%
Interest Coverage 5
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11.4%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 18.6%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 10%
Gross Margin - 3 Yr. Avg. 9.7%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 6.9%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 4.3%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 33.4%
Eff/ Tax Rate - 3 Yr. Avg. 33.7%
Payout Ratio 61.2%

MPC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MPC stock intrinsic value calculation we used $63332 million for the last fiscal year's total revenue generated by Marathon Petroleum. The default revenue input number comes from 2016 income statement of Marathon Petroleum. 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 MPC stock valuation model: a) initial revenue growth rate of 28% 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 5.7%, whose default value for MPC is calculated based on our internal credit rating of Marathon Petroleum, 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 Marathon Petroleum.
    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 MPC stock the variable cost ratio is equal to 74.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14368 million in the base year in the intrinsic value calculation for MPC 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 4.2% for Marathon Petroleum.

Corporate tax rate of 27% is the nominal tax rate for Marathon Petroleum. 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 MPC 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 MPC are equal to 40.2%.

Life of production assets of 14.6 years is the average useful life of capital assets used in Marathon Petroleum 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 MPC is equal to 3.8%. 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 - $13557 million for Marathon Petroleum - 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 515.787 million for Marathon Petroleum 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 Marathon Petroleum at the current share price and the inputted number of shares is $26.3 billion.

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HFC HollyFrontier 27.82 4,244.87  str.buy
VLO Valero Energy 65.99 2,056.36  str.buy
CLMT Calumet Specia 6.20 38.06  str.buy
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COMPANY NEWS

▶ Could Andeavors Refining Margins Expand in 3Q17?   [Aug-17-17 07:36AM  Market Realist]
▶ [$$] Marathon Petroleum   [Aug-11-17 10:21PM  Barrons.com]
▶ Whats Expected from Marathon Petroleum Stock?   [09:07AM  Market Realist]
▶ BP plc (ADR) (BP) Stock: Is MLP Spinoff a Pipe Dream?   [Jul-31-17 05:05PM  InvestorPlace]
▶ Marathon Petroleum misses Street 2Q forecasts   [Jul-27-17 11:56PM  Associated Press]
▶ Speedway income hits a record   [04:01PM  American City Business Journals]
▶ Marathon Petroleum Corp. increases dividend 11 percent   [Jul-26-17 12:19PM  GlobeNewswire]
▶ BP plc (ADR) (BP) Could Make a Big Income Announcement   [Jul-19-17 12:55PM  InvestorPlace]
▶ BP mulling IPO of U.S. pipeline assets   [Jul-18-17 05:48PM  Reuters]
▶ Speedway to fill 2,000 jobs in nine states   [02:34PM  American City Business Journals]
▶ MPCs Refining Earnings Outlook for 2Q17   [Jul-17-17 06:05PM  Market Realist]
▶ Marathon says decision coming soon on spinning off Speedway   [Jul-13-17 05:00PM  American City Business Journals]
▶ Refiners Valuations: MPC, TSO, VLO, and PSX   [Jul-12-17 09:05AM  Market Realist]
▶ Short Interest in Refining Stocks: MPC, PSX, TSO, and VLO   [Jul-11-17 10:36AM  Market Realist]
▶ Do Analysts Expect Refining Stocks Dividends to Increase?   [Jul-10-17 09:06AM  Market Realist]
▶ Analysts Ratings for Refiners: MPC, VLO, TSO, and PSX   [Jul-06-17 09:39PM  Market Realist]
▶ Decision expected soon on Speedway spinoff   [Jul-05-17 03:09PM  American City Business Journals]
▶ Last Weeks Key Energy Industry Updates   [Jul-03-17 03:17PM  Market Realist]
▶ [$$] West Coast Energy Market Could Rise   [11:06AM  Barrons.com]
▶ Why Marathon Petroleums Refining Margin Rose   [07:37AM  Market Realist]
▶ A Look at MPCs Segmental Earnings   [Jun-30-17 10:37AM  Market Realist]
▶ Why Most Wall Street Analysts Rate MPC a Buy?   [09:07AM  Market Realist]
▶ The Current Focus of Marathon Petroleums Capex   [Jun-29-17 05:35PM  Market Realist]
▶ Not All Energy Stocks Fall in Conjunction With Oil Prices   [Jun-28-17 02:48PM  InvestorPlace]
▶ Phillips 66s Midstream Earnings in 1Q17   [Jun-22-17 09:05AM  Market Realist]
▶ Why Most Analyst Ratings for Phillips 66 Are a Hold   [Jun-20-17 07:36AM  Market Realist]
▶ Could Tesoros Refining Margins Rise in 2Q17?   [Jun-12-17 10:36AM  Market Realist]
▶ Goldman Reveals Top Stocks Owned By Hedge Funds This Year   [Jun-05-17 02:01PM  Investopedia]
▶ Why Phillips 66 Commands Premium Valuations   [Jun-02-17 07:37AM  Market Realist]
▶ After-hours buzz: PANW, HPE & more   [May-31-17 05:39PM  CNBC]
▶ What Valero Needs to Soar in 2Q17   [07:35AM  Market Realist]
▶ What RINs Could Do to MPCs Refining Earnings in 2Q17   [May-29-17 10:35AM  Market Realist]
Stock chart of MPC Financial statements of MPC
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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