Intrinsic value of Occidental Petroleum - OXY

Previous Close

$69.50

  Intrinsic Value

$7.03

stock screener

  Rating & Target

str. sell

-90%

Previous close

$69.50

 
Intrinsic value

$7.03

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of OXY 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 53.1

 

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, %
  -19.07
  20.60
  19.04
  17.64
  16.37
  15.24
  14.21
  13.29
  12.46
  11.72
  11.04
  10.44
  9.90
  9.41
  8.97
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
Revenue, $m
  10,196
  12,296
  14,638
  17,219
  20,038
  23,091
  26,373
  29,878
  33,601
  37,537
  41,683
  46,035
  50,590
  55,348
  60,310
  65,478
  70,855
  76,446
  82,257
  88,296
  94,572
  101,094
  107,874
  114,925
  122,261
  129,895
  137,844
  146,126
  154,758
  163,759
  173,150
Variable operating expenses, $m
 
  21,703
  25,835
  30,392
  35,368
  40,756
  46,548
  52,734
  59,306
  66,254
  73,571
  81,251
  89,291
  97,690
  106,448
  115,569
  125,060
  134,928
  145,184
  155,843
  166,919
  178,431
  190,398
  202,843
  215,790
  229,265
  243,295
  257,912
  273,148
  289,035
  305,611
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  11,951
  21,703
  25,835
  30,392
  35,368
  40,756
  46,548
  52,734
  59,306
  66,254
  73,571
  81,251
  89,291
  97,690
  106,448
  115,569
  125,060
  134,928
  145,184
  155,843
  166,919
  178,431
  190,398
  202,843
  215,790
  229,265
  243,295
  257,912
  273,148
  289,035
  305,611
Operating income, $m
  -1,755
  -9,407
  -11,198
  -13,173
  -15,329
  -17,665
  -20,175
  -22,857
  -25,705
  -28,716
  -31,888
  -35,216
  -38,701
  -42,341
  -46,137
  -50,091
  -54,204
  -58,481
  -62,927
  -67,547
  -72,347
  -77,337
  -82,524
  -87,918
  -93,529
  -99,370
  -105,451
  -111,786
  -118,390
  -125,276
  -132,460
EBITDA, $m
  2,513
  -4,264
  -5,075
  -5,970
  -6,948
  -8,006
  -9,144
  -10,360
  -11,651
  -13,016
  -14,453
  -15,962
  -17,541
  -19,191
  -20,912
  -22,703
  -24,568
  -26,506
  -28,521
  -30,615
  -32,791
  -35,053
  -37,404
  -39,848
  -42,392
  -45,039
  -47,795
  -50,667
  -53,660
  -56,781
  -60,037
Interest expense (income), $m
  312
  344
  502
  676
  868
  1,077
  1,304
  1,548
  1,809
  2,086
  2,378
  2,687
  3,010
  3,349
  3,703
  4,072
  4,456
  4,856
  5,272
  5,704
  6,153
  6,619
  7,104
  7,609
  8,133
  8,678
  9,246
  9,837
  10,453
  11,095
  11,764
Earnings before tax, $m
  -1,845
  -9,750
  -11,699
  -13,848
  -16,197
  -18,742
  -21,479
  -24,405
  -27,514
  -30,802
  -34,266
  -37,903
  -41,711
  -45,690
  -49,840
  -54,163
  -58,660
  -63,337
  -68,199
  -73,250
  -78,500
  -83,956
  -89,628
  -95,526
  -101,662
  -108,048
  -114,697
  -121,623
  -128,843
  -136,370
  -144,224
Tax expense, $m
  -662
  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
  -574
  -9,750
  -11,699
  -13,848
  -16,197
  -18,742
  -21,479
  -24,405
  -27,514
  -30,802
  -34,266
  -37,903
  -41,711
  -45,690
  -49,840
  -54,163
  -58,660
  -63,337
  -68,199
  -73,250
  -78,500
  -83,956
  -89,628
  -95,526
  -101,662
  -108,048
  -114,697
  -121,623
  -128,843
  -136,370
  -144,224

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,233
  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
  43,109
  49,383
  58,786
  69,153
  80,475
  92,735
  105,915
  119,991
  134,944
  150,753
  167,402
  184,878
  203,172
  222,282
  242,210
  262,965
  284,559
  307,013
  330,351
  354,604
  379,807
  406,000
  433,230
  461,547
  491,006
  521,666
  553,592
  586,851
  621,518
  657,668
  695,383
Adjusted assets (=assets-cash), $m
  40,876
  49,383
  58,786
  69,153
  80,475
  92,735
  105,915
  119,991
  134,944
  150,753
  167,402
  184,878
  203,172
  222,282
  242,210
  262,965
  284,559
  307,013
  330,351
  354,604
  379,807
  406,000
  433,230
  461,547
  491,006
  521,666
  553,592
  586,851
  621,518
  657,668
  695,383
Revenue / Adjusted assets
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
Average production assets, $m
  31,988
  38,574
  45,918
  54,016
  62,860
  72,437
  82,731
  93,727
  105,406
  117,755
  130,760
  144,410
  158,700
  173,627
  189,194
  205,405
  222,273
  239,812
  258,042
  276,986
  296,672
  317,132
  338,402
  360,521
  383,531
  407,480
  432,418
  458,397
  485,475
  513,713
  543,173
Working capital, $m
  2,066
  -197
  -234
  -276
  -321
  -369
  -422
  -478
  -538
  -601
  -667
  -737
  -809
  -886
  -965
  -1,048
  -1,134
  -1,223
  -1,316
  -1,413
  -1,513
  -1,618
  -1,726
  -1,839
  -1,956
  -2,078
  -2,206
  -2,338
  -2,476
  -2,620
  -2,770
Total debt, $m
  9,819
  14,331
  19,305
  24,789
  30,778
  37,264
  44,236
  51,682
  59,592
  67,955
  76,763
  86,007
  95,685
  105,794
  116,336
  127,315
  138,739
  150,617
  162,963
  175,792
  189,125
  202,981
  217,386
  232,366
  247,949
  264,169
  281,057
  298,651
  316,990
  336,113
  356,065
Total liabilities, $m
  21,612
  26,124
  31,098
  36,582
  42,571
  49,057
  56,029
  63,475
  71,385
  79,748
  88,556
  97,800
  107,478
  117,587
  128,129
  139,108
  150,532
  162,410
  174,756
  187,585
  200,918
  214,774
  229,179
  244,159
  259,742
  275,962
  292,850
  310,444
  328,783
  347,906
  367,858
Total equity, $m
  21,497
  23,259
  27,688
  32,571
  37,904
  43,678
  49,886
  56,516
  63,559
  71,005
  78,846
  87,077
  95,694
  104,695
  114,081
  123,856
  134,027
  144,603
  155,595
  167,018
  178,889
  191,226
  204,052
  217,389
  231,264
  245,705
  260,742
  276,407
  292,735
  309,761
  327,526
Total liabilities and equity, $m
  43,109
  49,383
  58,786
  69,153
  80,475
  92,735
  105,915
  119,991
  134,944
  150,753
  167,402
  184,877
  203,172
  222,282
  242,210
  262,964
  284,559
  307,013
  330,351
  354,603
  379,807
  406,000
  433,231
  461,548
  491,006
  521,667
  553,592
  586,851
  621,518
  657,667
  695,384
Debt-to-equity ratio
  0.457
  0.620
  0.700
  0.760
  0.810
  0.850
  0.890
  0.910
  0.940
  0.960
  0.970
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.040
  1.050
  1.050
  1.060
  1.060
  1.070
  1.070
  1.070
  1.080
  1.080
  1.080
  1.080
  1.090
  1.090
Adjusted equity ratio
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -574
  -9,750
  -11,699
  -13,848
  -16,197
  -18,742
  -21,479
  -24,405
  -27,514
  -30,802
  -34,266
  -37,903
  -41,711
  -45,690
  -49,840
  -54,163
  -58,660
  -63,337
  -68,199
  -73,250
  -78,500
  -83,956
  -89,628
  -95,526
  -101,662
  -108,048
  -114,697
  -121,623
  -128,843
  -136,370
  -144,224
Depreciation, amort., depletion, $m
  4,268
  5,143
  6,122
  7,202
  8,381
  9,658
  11,031
  12,497
  14,054
  15,701
  17,435
  19,255
  21,160
  23,150
  25,226
  27,387
  29,636
  31,975
  34,406
  36,931
  39,556
  42,284
  45,120
  48,069
  51,138
  54,331
  57,656
  61,120
  64,730
  68,495
  72,423
Funds from operations, $m
  2,533
  -4,607
  -5,577
  -6,646
  -7,816
  -9,084
  -10,449
  -11,908
  -13,459
  -15,101
  -16,831
  -18,648
  -20,551
  -22,540
  -24,614
  -26,775
  -29,024
  -31,362
  -33,793
  -36,319
  -38,944
  -41,672
  -44,508
  -47,457
  -50,525
  -53,717
  -57,041
  -60,504
  -64,113
  -67,875
  -71,801
Change in working capital, $m
  -850
  -34
  -37
  -41
  -45
  -49
  -53
  -56
  -60
  -63
  -66
  -70
  -73
  -76
  -79
  -83
  -86
  -89
  -93
  -97
  -100
  -104
  -108
  -113
  -117
  -122
  -127
  -133
  -138
  -144
  -150
Cash from operations, $m
  3,383
  -4,574
  -5,539
  -6,605
  -7,770
  -9,035
  -10,396
  -11,852
  -13,400
  -15,038
  -16,765
  -18,579
  -20,479
  -22,464
  -24,535
  -26,693
  -28,938
  -31,273
  -33,700
  -36,222
  -38,844
  -41,568
  -44,400
  -47,344
  -50,407
  -53,595
  -56,914
  -60,371
  -63,974
  -67,731
  -71,651
Maintenance CAPEX, $m
  0
  -4,265
  -5,143
  -6,122
  -7,202
  -8,381
  -9,658
  -11,031
  -12,497
  -14,054
  -15,701
  -17,435
  -19,255
  -21,160
  -23,150
  -25,226
  -27,387
  -29,636
  -31,975
  -34,406
  -36,931
  -39,556
  -42,284
  -45,120
  -48,069
  -51,138
  -54,331
  -57,656
  -61,120
  -64,730
  -68,495
New CAPEX, $m
  -4,761
  -6,586
  -7,344
  -8,098
  -8,844
  -9,577
  -10,294
  -10,995
  -11,680
  -12,349
  -13,005
  -13,651
  -14,290
  -14,927
  -15,566
  -16,212
  -16,868
  -17,539
  -18,230
  -18,944
  -19,686
  -20,460
  -21,270
  -22,119
  -23,011
  -23,949
  -24,937
  -25,979
  -27,078
  -28,237
  -29,460
Cash from investing activities, $m
  -4,742
  -10,851
  -12,487
  -14,220
  -16,046
  -17,958
  -19,952
  -22,026
  -24,177
  -26,403
  -28,706
  -31,086
  -33,545
  -36,087
  -38,716
  -41,438
  -44,255
  -47,175
  -50,205
  -53,350
  -56,617
  -60,016
  -63,554
  -67,239
  -71,080
  -75,087
  -79,268
  -83,635
  -88,198
  -92,967
  -97,955
Free cash flow, $m
  -1,359
  -15,424
  -18,027
  -20,825
  -23,816
  -26,993
  -30,349
  -33,878
  -37,577
  -41,441
  -45,470
  -49,664
  -54,023
  -58,551
  -63,252
  -68,130
  -73,193
  -78,448
  -83,905
  -89,572
  -95,461
  -101,584
  -107,954
  -114,583
  -121,487
  -128,682
  -136,182
  -144,006
  -152,172
  -160,699
  -169,606
Issuance/(repayment) of debt, $m
  1,493
  4,512
  4,974
  5,484
  5,989
  6,486
  6,972
  7,447
  7,910
  8,363
  8,807
  9,245
  9,678
  10,109
  10,542
  10,979
  11,423
  11,878
  12,346
  12,830
  13,332
  13,856
  14,405
  14,980
  15,584
  16,219
  16,889
  17,594
  18,338
  19,123
  19,952
Issuance/(repurchase) of shares, $m
  14
  13,746
  16,128
  18,731
  21,530
  24,517
  27,687
  31,035
  34,556
  38,248
  42,108
  46,134
  50,328
  54,691
  59,226
  63,938
  68,831
  73,913
  79,191
  84,673
  90,371
  96,294
  102,454
  108,864
  115,537
  122,489
  129,734
  137,289
  145,170
  153,397
  161,988
Cash from financing (excl. dividends), $m  
  2,700
  18,258
  21,102
  24,215
  27,519
  31,003
  34,659
  38,482
  42,466
  46,611
  50,915
  55,379
  60,006
  64,800
  69,768
  74,917
  80,254
  85,791
  91,537
  97,503
  103,703
  110,150
  116,859
  123,844
  131,121
  138,708
  146,623
  154,883
  163,508
  172,520
  181,940
Total cash flow (excl. dividends), $m
  1,341
  2,833
  3,075
  3,390
  3,703
  4,009
  4,310
  4,603
  4,890
  5,170
  5,444
  5,715
  5,983
  6,249
  6,517
  6,787
  7,062
  7,343
  7,632
  7,931
  8,242
  8,566
  8,905
  9,260
  9,634
  10,026
  10,440
  10,876
  11,336
  11,822
  12,334
Retained Cash Flow (-), $m
  2,853
  -13,746
  -16,128
  -18,731
  -21,530
  -24,517
  -27,687
  -31,035
  -34,556
  -38,248
  -42,108
  -46,134
  -50,328
  -54,691
  -59,226
  -63,938
  -68,831
  -73,913
  -79,191
  -84,673
  -90,371
  -96,294
  -102,454
  -108,864
  -115,537
  -122,489
  -129,734
  -137,289
  -145,170
  -153,397
  -161,988
Prev. year cash balance distribution, $m
 
  2,233
  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
 
  -8,680
  -13,053
  -15,341
  -17,827
  -20,507
  -23,377
  -26,432
  -29,667
  -33,078
  -36,663
  -40,419
  -44,346
  -48,442
  -52,710
  -57,151
  -61,769
  -66,570
  -71,559
  -76,742
  -82,129
  -87,728
  -93,549
  -99,603
  -105,904
  -112,462
  -119,294
  -126,412
  -133,834
  -141,575
  -149,654
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  -8,306
  -11,902
  -13,267
  -14,550
  -15,713
  -16,721
  -17,543
  -18,153
  -18,533
  -18,671
  -18,563
  -18,215
  -17,638
  -16,853
  -15,886
  -14,769
  -13,536
  -12,227
  -10,878
  -9,529
  -8,212
  -6,959
  -5,794
  -4,737
  -3,799
  -2,986
  -2,298
  -1,730
  -1,273
  -914
Current shareholders' claim on cash, %
  100
  77.6
  60.6
  47.6
  37.5
  29.8
  23.7
  18.9
  15.2
  12.2
  9.8
  8.0
  6.4
  5.2
  4.3
  3.5
  2.8
  2.3
  1.9
  1.6
  1.3
  1.0
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2

Occidental Petroleum Corporation (Occidental) is an oil and gas exploration and production company. The Company operates through three segments: oil and gas, chemical (OxyChem), and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The OxyChem segment manufactures and markets basic chemicals and vinyls. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. The Company also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities. Occidental's domestic upstream oil and gas operations are located in New Mexico and Texas. Its international operations are located in Bolivia, Colombia, Oman, Qatar and the United Arab Emirates (UAE).

FINANCIAL RATIOS  of  Occidental Petroleum (OXY)

Valuation Ratios
P/E Ratio -92.5
Price to Sales 5.2
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 15.7
Price to Free Cash Flow -38.5
Growth Rates
Sales Growth Rate -19.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.5%
Cap. Spend. - 3 Yr. Gr. Rate -9.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 45.7%
Total Debt to Equity 45.7%
Interest Coverage -5
Management Effectiveness
Return On Assets -0.9%
Ret/ On Assets - 3 Yr. Avg. -5.1%
Return On Total Capital -1.8%
Ret/ On T. Cap. - 3 Yr. Avg. -7.2%
Return On Equity -2.5%
Return On Equity - 3 Yr. Avg. -9.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 49.1%
Gross Margin - 3 Yr. Avg. 56%
EBITDA Margin 26.8%
EBITDA Margin - 3 Yr. Avg. 5.8%
Operating Margin -17.2%
Oper. Margin - 3 Yr. Avg. -33.3%
Pre-Tax Margin -18.1%
Pre-Tax Margin - 3 Yr. Avg. -29.6%
Net Profit Margin -5.6%
Net Profit Margin - 3 Yr. Avg. -21.5%
Effective Tax Rate 35.9%
Eff/ Tax Rate - 3 Yr. Avg. 62.4%
Payout Ratio -402.3%

OXY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OXY stock intrinsic value calculation we used $10196 million for the last fiscal year's total revenue generated by Occidental Petroleum. The default revenue input number comes from 2016 income statement of Occidental 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 OXY stock valuation model: a) initial revenue growth rate of 20.6% 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 4.5%, whose default value for OXY is calculated based on our internal credit rating of Occidental 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 Occidental 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 OXY stock the variable cost ratio is equal to 176.5%.

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

Corporate tax rate of 27% is the nominal tax rate for Occidental 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 OXY 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 OXY are equal to 313.7%.

Life of production assets of 7.5 years is the average useful life of capital assets used in Occidental 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 OXY is equal to -1.6%. 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 - $21497 million for Occidental 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 764.625 million for Occidental 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 Occidental Petroleum at the current share price and the inputted number of shares is $53.1 billion.

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Financial statements of OXY
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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