Intrinsic value of Royal Dutch Shell ADR Cl A - RDS-A

Previous Close

$55.06

  Intrinsic Value

$10.45

stock screener

  Rating & Target

str. sell

-81%

  Value-price divergence*

-86%

Previous close

$55.06

 
Intrinsic value

$10.45

 
Up/down potential

-81%

 
Rating

str. sell

 
Value-price divergence*

-86%

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

We calculate the intrinsic value of RDS-A 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 228.8

 

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, %
  -11.84
  47.90
  43.61
  39.75
  36.27
  33.15
  30.33
  27.80
  25.52
  23.47
  21.62
  19.96
  18.46
  17.12
  15.90
  14.81
  13.83
  12.95
  12.15
  11.44
  10.80
  10.22
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.25
  7.02
Revenue, $m
  233,591
  345,481
  496,145
  693,358
  944,868
  1,258,060
  1,639,655
  2,095,460
  2,630,199
  3,247,429
  3,949,534
  4,737,794
  5,612,508
  6,573,158
  7,618,592
  8,747,221
  9,957,201
  11,246,604
  12,613,574
  14,056,448
  15,573,864
  17,164,833
  18,828,805
  20,565,700
  22,375,934
  24,260,431
  26,220,621
  28,258,436
  30,376,299
  32,577,111
  34,864,235
Variable operating expenses, $m
 
  349,005
  500,639
  699,122
  952,252
  1,267,461
  1,651,514
  2,110,254
  2,648,437
  3,269,642
  3,976,269
  4,768,307
  5,648,654
  6,615,491
  7,667,658
  8,803,556
  10,021,328
  11,319,036
  12,694,809
  14,146,976
  15,674,164
  17,275,380
  18,950,068
  20,698,149
  22,520,041
  24,416,675
  26,389,489
  28,440,428
  30,571,931
  32,786,917
  35,088,770
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
  232,733
  349,005
  500,639
  699,122
  952,252
  1,267,461
  1,651,514
  2,110,254
  2,648,437
  3,269,642
  3,976,269
  4,768,307
  5,648,654
  6,615,491
  7,667,658
  8,803,556
  10,021,328
  11,319,036
  12,694,809
  14,146,976
  15,674,164
  17,275,380
  18,950,068
  20,698,149
  22,520,041
  24,416,675
  26,389,489
  28,440,428
  30,571,931
  32,786,917
  35,088,770
Operating income, $m
  858
  -3,524
  -4,494
  -5,764
  -7,384
  -9,401
  -11,859
  -14,794
  -18,238
  -22,213
  -26,735
  -30,513
  -36,146
  -42,333
  -49,066
  -56,335
  -64,127
  -72,431
  -81,235
  -90,527
  -100,300
  -110,546
  -121,263
  -132,449
  -144,107
  -156,244
  -168,868
  -181,992
  -195,632
  -209,806
  -224,536
EBITDA, $m
  25,851
  29,870
  42,897
  59,948
  81,693
  108,772
  141,764
  181,173
  227,406
  280,772
  341,476
  409,628
  485,256
  568,313
  658,701
  756,282
  860,897
  972,378
  1,090,566
  1,215,317
  1,346,512
  1,484,067
  1,627,933
  1,778,105
  1,934,617
  2,097,550
  2,267,027
  2,443,216
  2,626,326
  2,816,608
  3,014,352
Interest expense (income), $m
  2,938
  3,237
  7,255
  12,667
  19,751
  28,785
  40,035
  53,741
  70,114
  89,321
  111,491
  136,711
  165,024
  196,444
  230,949
  268,501
  309,040
  352,502
  398,817
  447,917
  499,744
  554,249
  611,395
  671,164
  733,552
  798,575
  866,264
  936,673
  1,009,870
  1,085,942
  1,164,994
Earnings before tax, $m
  5,606
  -6,760
  -11,749
  -18,431
  -27,135
  -38,186
  -51,893
  -68,535
  -88,351
  -111,534
  -138,226
  -167,223
  -201,171
  -238,777
  -280,015
  -324,835
  -373,168
  -424,933
  -480,051
  -538,445
  -600,044
  -664,795
  -732,658
  -803,613
  -877,659
  -954,819
  -1,035,133
  -1,118,665
  -1,205,502
  -1,295,748
  -1,389,529
Tax expense, $m
  829
  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
  4,575
  -6,760
  -11,749
  -18,431
  -27,135
  -38,186
  -51,893
  -68,535
  -88,351
  -111,534
  -138,226
  -167,223
  -201,171
  -238,777
  -280,015
  -324,835
  -373,168
  -424,933
  -480,051
  -538,445
  -600,044
  -664,795
  -732,658
  -803,613
  -877,659
  -954,819
  -1,035,133
  -1,118,665
  -1,205,502
  -1,295,748
  -1,389,529

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18,781
  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
  411,275
  580,640
  833,858
  1,165,308
  1,588,013
  2,114,387
  2,755,723
  3,521,781
  4,420,502
  5,457,864
  6,637,872
  7,962,679
  9,432,786
  11,047,324
  12,804,357
  14,701,213
  16,734,792
  18,901,856
  21,199,284
  23,624,283
  26,174,561
  28,848,459
  31,645,051
  34,564,201
  37,606,611
  40,773,833
  44,068,270
  47,493,169
  51,052,604
  54,751,447
  58,595,352
Adjusted assets (=assets-cash), $m
  392,494
  580,640
  833,858
  1,165,308
  1,588,013
  2,114,387
  2,755,723
  3,521,781
  4,420,502
  5,457,864
  6,637,872
  7,962,679
  9,432,786
  11,047,324
  12,804,357
  14,701,213
  16,734,792
  18,901,856
  21,199,284
  23,624,283
  26,174,561
  28,848,459
  31,645,051
  34,564,201
  37,606,611
  40,773,833
  44,068,270
  47,493,169
  51,052,604
  54,751,447
  58,595,352
Revenue / Adjusted assets
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
  0.595
Average production assets, $m
  217,095
  320,952
  460,919
  644,130
  877,782
  1,168,738
  1,523,240
  1,946,682
  2,443,455
  3,016,861
  3,669,117
  4,401,411
  5,214,020
  6,106,463
  7,077,672
  8,126,169
  9,250,240
  10,448,095
  11,718,010
  13,058,441
  14,468,119
  15,946,130
  17,491,960
  19,105,535
  20,787,242
  22,537,940
  24,358,956
  26,252,087
  28,219,582
  30,264,136
  32,388,874
Working capital, $m
  12,744
  5,182
  7,442
  10,400
  14,173
  18,871
  24,595
  31,432
  39,453
  48,711
  59,243
  71,067
  84,188
  98,597
  114,279
  131,208
  149,358
  168,699
  189,204
  210,847
  233,608
  257,472
  282,432
  308,485
  335,639
  363,906
  393,309
  423,877
  455,644
  488,657
  522,964
Total debt, $m
  92,476
  186,038
  324,801
  506,436
  738,078
  1,026,531
  1,377,983
  1,797,783
  2,290,282
  2,858,756
  3,505,401
  4,231,395
  5,037,014
  5,921,780
  6,884,635
  7,924,112
  9,038,513
  10,226,064
  11,485,055
  12,813,954
  14,211,506
  15,676,803
  17,209,335
  18,809,029
  20,476,270
  22,211,907
  24,017,259
  25,894,104
  27,844,674
  29,871,640
  31,978,100
Total liabilities, $m
  224,629
  318,191
  456,954
  638,589
  870,231
  1,158,684
  1,510,136
  1,929,936
  2,422,435
  2,990,909
  3,637,554
  4,363,548
  5,169,167
  6,053,933
  7,016,788
  8,056,265
  9,170,666
  10,358,217
  11,617,208
  12,946,107
  14,343,659
  15,808,956
  17,341,488
  18,941,182
  20,608,423
  22,344,060
  24,149,412
  26,026,257
  27,976,827
  30,003,793
  32,110,253
Total equity, $m
  186,646
  262,449
  376,904
  526,719
  717,782
  955,703
  1,245,587
  1,591,845
  1,998,067
  2,466,954
  3,000,318
  3,599,131
  4,263,619
  4,993,390
  5,787,569
  6,644,948
  7,564,126
  8,543,639
  9,582,077
  10,678,176
  11,830,902
  13,039,504
  14,303,563
  15,623,019
  16,998,188
  18,429,772
  19,918,858
  21,466,913
  23,075,777
  24,747,654
  26,485,099
Total liabilities and equity, $m
  411,275
  580,640
  833,858
  1,165,308
  1,588,013
  2,114,387
  2,755,723
  3,521,781
  4,420,502
  5,457,863
  6,637,872
  7,962,679
  9,432,786
  11,047,323
  12,804,357
  14,701,213
  16,734,792
  18,901,856
  21,199,285
  23,624,283
  26,174,561
  28,848,460
  31,645,051
  34,564,201
  37,606,611
  40,773,832
  44,068,270
  47,493,170
  51,052,604
  54,751,447
  58,595,352
Debt-to-equity ratio
  0.495
  0.710
  0.860
  0.960
  1.030
  1.070
  1.110
  1.130
  1.150
  1.160
  1.170
  1.180
  1.180
  1.190
  1.190
  1.190
  1.190
  1.200
  1.200
  1.200
  1.200
  1.200
  1.200
  1.200
  1.200
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
Adjusted equity ratio
  0.432
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,575
  -6,760
  -11,749
  -18,431
  -27,135
  -38,186
  -51,893
  -68,535
  -88,351
  -111,534
  -138,226
  -167,223
  -201,171
  -238,777
  -280,015
  -324,835
  -373,168
  -424,933
  -480,051
  -538,445
  -600,044
  -664,795
  -732,658
  -803,613
  -877,659
  -954,819
  -1,035,133
  -1,118,665
  -1,205,502
  -1,295,748
  -1,389,529
Depreciation, amort., depletion, $m
  24,993
  33,394
  47,391
  65,712
  89,077
  118,172
  153,623
  195,967
  245,644
  302,985
  368,210
  440,141
  521,402
  610,646
  707,767
  812,617
  925,024
  1,044,810
  1,171,801
  1,305,844
  1,446,812
  1,594,613
  1,749,196
  1,910,554
  2,078,724
  2,253,794
  2,435,896
  2,625,209
  2,821,958
  3,026,414
  3,238,887
Funds from operations, $m
  8,666
  26,634
  35,641
  47,280
  61,942
  79,986
  101,729
  127,432
  157,293
  191,451
  229,984
  272,918
  320,231
  371,870
  427,752
  487,782
  551,856
  619,876
  691,750
  767,399
  846,768
  929,818
  1,016,538
  1,106,941
  1,201,065
  1,298,975
  1,400,763
  1,506,543
  1,616,456
  1,730,666
  1,849,358
Change in working capital, $m
  -11,949
  1,678
  2,260
  2,958
  3,773
  4,698
  5,724
  6,837
  8,021
  9,258
  10,532
  11,824
  13,121
  14,410
  15,682
  16,929
  18,150
  19,341
  20,505
  21,643
  22,761
  23,865
  24,960
  26,053
  27,154
  28,267
  29,403
  30,567
  31,768
  33,012
  34,307
Cash from operations, $m
  20,615
  24,955
  33,381
  44,322
  58,169
  75,289
  96,005
  120,594
  149,272
  182,192
  219,453
  261,094
  307,111
  357,460
  412,070
  470,852
  533,707
  600,535
  671,245
  745,756
  824,006
  905,953
  991,578
  1,080,887
  1,173,911
  1,270,708
  1,371,360
  1,475,976
  1,584,688
  1,697,653
  1,815,051
Maintenance CAPEX, $m
  0
  -21,709
  -32,095
  -46,092
  -64,413
  -87,778
  -116,874
  -152,324
  -194,668
  -244,345
  -301,686
  -366,912
  -440,141
  -521,402
  -610,646
  -707,767
  -812,617
  -925,024
  -1,044,810
  -1,171,801
  -1,305,844
  -1,446,812
  -1,594,613
  -1,749,196
  -1,910,554
  -2,078,724
  -2,253,794
  -2,435,896
  -2,625,209
  -2,821,958
  -3,026,414
New CAPEX, $m
  -22,116
  -103,857
  -139,967
  -183,211
  -233,652
  -290,956
  -354,502
  -423,443
  -496,773
  -573,407
  -652,256
  -732,294
  -812,609
  -892,443
  -971,209
  -1,048,497
  -1,124,071
  -1,197,856
  -1,269,915
  -1,340,430
  -1,409,679
  -1,478,011
  -1,545,830
  -1,613,575
  -1,681,707
  -1,750,697
  -1,821,017
  -1,893,130
  -1,967,495
  -2,044,554
  -2,124,738
Cash from investing activities, $m
  -30,963
  -125,566
  -172,062
  -229,303
  -298,065
  -378,734
  -471,376
  -575,767
  -691,441
  -817,752
  -953,942
  -1,099,206
  -1,252,750
  -1,413,845
  -1,581,855
  -1,756,264
  -1,936,688
  -2,122,880
  -2,314,725
  -2,512,231
  -2,715,523
  -2,924,823
  -3,140,443
  -3,362,771
  -3,592,261
  -3,829,421
  -4,074,811
  -4,329,026
  -4,592,704
  -4,866,512
  -5,151,152
Free cash flow, $m
  -10,348
  -100,612
  -138,681
  -184,981
  -239,896
  -303,445
  -375,370
  -455,172
  -542,169
  -635,560
  -734,489
  -838,111
  -945,640
  -1,056,385
  -1,169,785
  -1,285,412
  -1,402,981
  -1,522,345
  -1,643,479
  -1,766,475
  -1,891,516
  -2,018,869
  -2,148,864
  -2,281,884
  -2,418,350
  -2,558,714
  -2,703,450
  -2,853,050
  -3,008,016
  -3,168,859
  -3,336,100
Issuance/(repayment) of debt, $m
  11,074
  103,046
  138,763
  181,635
  231,642
  288,453
  351,452
  419,800
  492,499
  568,474
  646,645
  725,994
  805,619
  884,766
  962,854
  1,039,477
  1,114,401
  1,187,551
  1,258,991
  1,328,899
  1,397,552
  1,465,296
  1,532,532
  1,599,695
  1,667,241
  1,735,637
  1,805,351
  1,876,845
  1,950,570
  2,026,966
  2,106,460
Issuance/(repurchase) of shares, $m
  0
  91,861
  126,204
  168,247
  218,198
  276,107
  341,777
  414,794
  494,573
  580,421
  671,590
  766,036
  865,659
  968,547
  1,074,194
  1,182,214
  1,292,345
  1,404,446
  1,518,489
  1,634,544
  1,752,770
  1,873,397
  1,996,717
  2,123,069
  2,252,829
  2,386,403
  2,524,218
  2,666,720
  2,814,366
  2,967,625
  3,126,974
Cash from financing (excl. dividends), $m  
  8,906
  194,907
  264,967
  349,882
  449,840
  564,560
  693,229
  834,594
  987,072
  1,148,895
  1,318,235
  1,492,030
  1,671,278
  1,853,313
  2,037,048
  2,221,691
  2,406,746
  2,591,997
  2,777,480
  2,963,443
  3,150,322
  3,338,693
  3,529,249
  3,722,764
  3,920,070
  4,122,040
  4,329,569
  4,543,565
  4,764,936
  4,994,591
  5,233,434
Total cash flow (excl. dividends), $m
  -2,945
  94,295
  126,286
  164,901
  209,944
  261,114
  317,859
  379,422
  444,903
  513,336
  583,746
  653,919
  725,638
  796,928
  867,264
  936,280
  1,003,765
  1,069,653
  1,134,000
  1,196,969
  1,258,806
  1,319,824
  1,380,385
  1,440,880
  1,501,720
  1,563,326
  1,626,119
  1,690,515
  1,756,921
  1,825,733
  1,897,334
Retained Cash Flow (-), $m
  -23,770
  -91,861
  -126,204
  -168,247
  -218,198
  -276,107
  -341,777
  -414,794
  -494,573
  -580,421
  -671,590
  -766,036
  -865,659
  -968,547
  -1,074,194
  -1,182,214
  -1,292,345
  -1,404,446
  -1,518,489
  -1,634,544
  -1,752,770
  -1,873,397
  -1,996,717
  -2,123,069
  -2,252,829
  -2,386,403
  -2,524,218
  -2,666,720
  -2,814,366
  -2,967,625
  -3,126,974
Prev. year cash balance distribution, $m
 
  9,297
  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
 
  11,731
  82
  -3,346
  -8,254
  -14,993
  -23,918
  -35,372
  -49,670
  -67,086
  -87,845
  -112,117
  -140,021
  -171,619
  -206,931
  -245,935
  -288,580
  -334,793
  -384,489
  -437,576
  -493,964
  -553,573
  -616,333
  -682,189
  -751,109
  -823,076
  -898,099
  -976,205
  -1,057,446
  -1,141,893
  -1,229,640
Discount rate, %
 
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
 
  11,173
  74
  -2,848
  -6,590
  -11,162
  -16,502
  -22,464
  -28,832
  -35,323
  -41,617
  -47,383
  -52,306
  -56,117
  -58,616
  -59,686
  -59,306
  -57,542
  -54,542
  -50,521
  -45,735
  -40,462
  -34,978
  -29,537
  -24,355
  -19,600
  -15,384
  -11,770
  -8,770
  -6,358
  -4,482
Current shareholders' claim on cash, %
  100
  70.3
  50.5
  37.0
  27.7
  21.1
  16.3
  12.8
  10.2
  8.3
  6.8
  5.6
  4.7
  3.9
  3.4
  2.9
  2.5
  2.2
  1.9
  1.7
  1.5
  1.3
  1.1
  1.0
  0.9
  0.8
  0.7
  0.7
  0.6
  0.5
  0.5

Royal Dutch Shell plc operates as an independent oil and gas company worldwide. It operates through Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas, and natural gas liquids. It also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy. In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas (LNG) for transport, lubricants, bitumen, and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses. Further, it is involved in the exploration, development, production, liquefaction, and marketing of hydrocarbons; purchase, sale, and shipping of LNG and regasified natural gas; and production of base chemicals comprising ethylene, propylene, and aromatics, as well as intermediate chemicals, such as styrene monomer, propylene oxide, solvents, detergent alcohols, ethylene oxide, and ethylene glycol. The company holds interests in approximately 23 refineries; 100 distribution terminals; and 770 supply points. It sells fuels under the Shell V-Power brand. Royal Dutch Shell plc was founded in 1907 and is headquartered in The Hague, the Netherlands.

FINANCIAL RATIOS  of  Royal Dutch Shell ADR Cl A (RDS-A)

Valuation Ratios
P/E Ratio 98
Price to Sales 1.9
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 21.8
Price to Free Cash Flow -298.8
Growth Rates
Sales Growth Rate -11.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.4%
Cap. Spend. - 3 Yr. Gr. Rate -11.2%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 44.5%
Total Debt to Equity 49.5%
Interest Coverage 3
Management Effectiveness
Return On Assets 1.9%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital 1.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 2.6%
Return On Equity - 3 Yr. Avg. 4.1%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 18.2%
Gross Margin - 3 Yr. Avg. 16.4%
EBITDA Margin 14.4%
EBITDA Margin - 3 Yr. Avg. 11.8%
Operating Margin 0.4%
Oper. Margin - 3 Yr. Avg. 1.3%
Pre-Tax Margin 2.4%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 2%
Net Profit Margin - 3 Yr. Avg. 2.1%
Effective Tax Rate 14.8%
Eff/ Tax Rate - 3 Yr. Avg. 18.4%
Payout Ratio 211.5%

RDS-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RDS-A stock intrinsic value calculation we used $233591 million for the last fiscal year's total revenue generated by Royal Dutch Shell ADR Cl A. The default revenue input number comes from 2016 income statement of Royal Dutch Shell ADR Cl A. 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 RDS-A stock valuation model: a) initial revenue growth rate of 47.9% 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%, whose default value for RDS-A is calculated based on our internal credit rating of Royal Dutch Shell ADR Cl A, 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 Royal Dutch Shell ADR Cl A.
    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 RDS-A stock the variable cost ratio is equal to 101.2%.

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 RDS-A 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 3.9% for Royal Dutch Shell ADR Cl A.

Corporate tax rate of 27% is the nominal tax rate for Royal Dutch Shell ADR Cl A. 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 RDS-A 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 RDS-A are equal to 92.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Royal Dutch Shell ADR Cl A 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 RDS-A is equal to 1.5%. 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 - $186646 million for Royal Dutch Shell ADR Cl A - 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 4155.3 million for Royal Dutch Shell ADR Cl A 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 Royal Dutch Shell ADR Cl A at the current share price and the inputted number of shares is $228.8 billion.

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COMPANY NEWS

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▶ Supply Risks Could Push Oil Prices Higher This Week   [Aug-14-17 07:00PM  Oilprice.com]
▶ Royal Dutch Shell plc: Holding(s) in Company   [Aug-10-17 12:03PM  PR Newswire]
▶ [$$] Shell Tries to Restart Parts of Netherlands Crude-Oil Refinery   [Aug-08-17 02:19PM  The Wall Street Journal]
▶ Shell makes push into British utility market   [07:07AM  Reuters Videos]
▶ PRESS DIGEST- Financial Times - Aug 7   [Aug-06-17 07:04PM  Reuters]
▶ Enis Arctic Risk Could Pay Off   [01:00PM  Oilprice.com]
▶ BP Surpasses Profit Expectations, Still Wallowing In Debt   [Aug-05-17 07:00PM  Oilprice.com]
▶ The Two OPEC Members Benefitting From The Cut   [Aug-03-17 05:00PM  Oilprice.com]
▶ The Secret Behind Better Oil Major Earnings   [Aug-02-17 07:00PM  Oilprice.com]
▶ [$$] BP Says It Can Now Profit at Oil Below $50   [12:08AM  The Wall Street Journal]
▶ [$$] Big Oil Bites the Low-Price Bullet   [12:08AM  The Wall Street Journal]
▶ Have Oil Majors Really Adapted To $50 Oil?   [Aug-01-17 07:00PM  Oilprice.com]
▶ "Lower-Forever" Oil Isn't Forever-Ever   [01:50PM  Bloomberg]
▶ What Is Chevrons Price Forecast?   [10:39AM  Market Realist]
▶ [$$] BP Says It Can Now Profit at Oil Below $50   [10:07AM  The Wall Street Journal]
▶ [$$] Big Oil Bites the Low-Price Bullet   [07:55AM  The Wall Street Journal]
▶ U.S. Shale Has Set An Example For Oil Majors   [Jul-30-17 05:00PM  Oilprice.com]
▶ Gulf Of Mexico Growth Second Only To Permian   [Jul-29-17 01:00PM  Oilprice.com]
▶ [$$] Big Oil Posts Healthy Profits   [12:07AM  The Wall Street Journal]
▶ How Did Shells 2Q17 Segmental Earnings Move?   [Jul-28-17 05:06PM  Market Realist]
▶ Is This Oil Price Rally Sustainable?   [03:30PM  Oilprice.com]
▶ Exxon 2Q Earnings Fall Short of Estimates   [09:20AM  Bloomberg Video]
▶ [$$] Shell Prepares for Lower Forever Oil Prices   [02:03AM  The Wall Street Journal]
▶ Never Again: Big Oil Is Back And Practicing Caution   [Jul-27-17 06:00PM  Oilprice.com]
▶ Shell Oil beats 2Q profit forecasts   [03:45PM  Associated Press]
▶ Why Are Majors Shying Away From Gazprom?   [03:00PM  Oilprice.com]
▶ [$$] Shell Prepares for 'Lower Forever' Oil Prices   [01:34PM  The Wall Street Journal]
Stock chart of RDS-A Financial statements of RDS-A
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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