Intrinsic value of Statoil ADR - STO

Previous Close

$17.26

  Intrinsic Value

$11.98

stock screener

  Rating & Target

sell

-31%

  Value-price divergence*

-106%

Previous close

$17.26

 
Intrinsic value

$11.98

 
Up/down potential

-31%

 
Rating

sell

 
Value-price divergence*

-106%

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

We calculate the intrinsic value of STO 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 56.4

 

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, %
  -21.09
  53.30
  48.47
  44.12
  40.21
  36.69
  33.52
  30.67
  28.10
  25.79
  23.71
  21.84
  20.16
  18.64
  17.28
  16.05
  14.94
  13.95
  13.06
  12.25
  11.52
  10.87
  10.28
  9.76
  9.28
  8.85
  8.47
  8.12
  7.81
  7.53
  7.27
Revenue, $m
  45,688
  70,040
  103,988
  149,871
  210,135
  287,232
  383,514
  501,133
  641,960
  807,531
  999,016
  1,217,213
  1,462,567
  1,735,210
  2,035,006
  2,361,614
  2,714,546
  3,093,227
  3,497,051
  3,925,424
  4,377,814
  4,853,777
  5,352,985
  5,875,246
  6,420,516
  6,988,906
  7,580,688
  8,196,293
  8,836,311
  9,501,489
  10,192,721
Variable operating expenses, $m
 
  62,668
  93,027
  134,059
  187,952
  256,899
  343,003
  448,187
  574,126
  722,193
  893,435
  1,088,532
  1,307,948
  1,551,767
  1,819,869
  2,111,949
  2,427,570
  2,766,218
  3,127,350
  3,510,437
  3,915,001
  4,340,646
  4,787,079
  5,254,127
  5,741,752
  6,250,053
  6,779,273
  7,329,798
  7,902,155
  8,497,011
  9,115,168
Fixed operating expenses, $m
 
  4,970
  5,094
  5,222
  5,352
  5,486
  5,623
  5,764
  5,908
  6,056
  6,207
  6,362
  6,521
  6,684
  6,852
  7,023
  7,198
  7,378
  7,563
  7,752
  7,946
  8,144
  8,348
  8,557
  8,771
  8,990
  9,215
  9,445
  9,681
  9,923
  10,171
Total operating expenses, $m
  45,608
  67,638
  98,121
  139,281
  193,304
  262,385
  348,626
  453,951
  580,034
  728,249
  899,642
  1,094,894
  1,314,469
  1,558,451
  1,826,721
  2,118,972
  2,434,768
  2,773,596
  3,134,913
  3,518,189
  3,922,947
  4,348,790
  4,795,427
  5,262,684
  5,750,523
  6,259,043
  6,788,488
  7,339,243
  7,911,836
  8,506,934
  9,125,339
Operating income, $m
  80
  2,401
  5,866
  10,589
  16,830
  24,847
  34,888
  47,182
  61,926
  79,282
  99,374
  122,319
  148,098
  176,758
  208,285
  242,642
  279,778
  319,631
  362,138
  407,236
  454,868
  504,987
  557,559
  612,562
  669,993
  729,863
  792,200
  857,050
  924,475
  994,555
  1,067,382
EBITDA, $m
  11,630
  13,136
  21,788
  33,522
  48,971
  68,768
  93,522
  123,788
  160,050
  202,706
  252,056
  308,309
  371,579
  441,898
  519,234
  603,497
  694,560
  792,276
  896,487
  1,007,041
  1,123,798
  1,246,644
  1,375,495
  1,510,300
  1,651,048
  1,797,768
  1,950,529
  2,109,444
  2,274,664
  2,446,382
  2,624,830
Interest expense (income), $m
  548
  980
  2,207
  3,918
  6,230
  9,267
  13,152
  18,003
  23,930
  31,027
  39,370
  49,020
  60,015
  72,379
  86,117
  101,225
  117,683
  135,468
  154,550
  174,899
  196,486
  219,282
  243,267
  268,423
  294,740
  322,217
  350,859
  380,680
  411,702
  443,953
  477,472
Earnings before tax, $m
  -178
  1,421
  3,659
  6,672
  10,600
  15,580
  21,737
  29,179
  37,995
  48,255
  60,004
  73,299
  88,083
  104,380
  122,168
  141,417
  162,095
  184,163
  207,588
  232,336
  258,382
  285,704
  314,292
  344,139
  375,253
  407,645
  441,341
  476,370
  512,774
  550,601
  589,910
Tax expense, $m
  2,724
  384
  988
  1,801
  2,862
  4,207
  5,869
  7,878
  10,259
  13,029
  16,201
  19,791
  23,783
  28,183
  32,985
  38,183
  43,766
  49,724
  56,049
  62,731
  69,763
  77,140
  84,859
  92,918
  101,318
  110,064
  119,162
  128,620
  138,449
  148,662
  159,276
Net income, $m
  -2,922
  1,038
  2,671
  4,870
  7,738
  11,373
  15,868
  21,300
  27,737
  35,226
  43,803
  53,509
  64,301
  76,197
  89,182
  103,235
  118,329
  134,439
  151,539
  169,606
  188,619
  208,564
  229,433
  251,222
  273,934
  297,581
  322,179
  347,750
  374,325
  401,939
  430,634

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  12,766
  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
  104,530
  140,642
  208,811
  300,945
  421,957
  576,771
  770,109
  1,006,291
  1,289,076
  1,621,549
  2,006,057
  2,444,203
  2,936,882
  3,484,357
  4,086,357
  4,742,196
  5,450,895
  6,211,300
  7,022,190
  7,882,378
  8,790,792
  9,746,540
  10,748,966
  11,797,683
  12,892,602
  14,033,948
  15,222,265
  16,458,420
  17,743,597
  19,079,294
  20,467,312
Adjusted assets (=assets-cash), $m
  91,764
  140,642
  208,811
  300,945
  421,957
  576,771
  770,109
  1,006,291
  1,289,076
  1,621,549
  2,006,057
  2,444,203
  2,936,882
  3,484,357
  4,086,357
  4,742,196
  5,450,895
  6,211,300
  7,022,190
  7,882,378
  8,790,792
  9,746,540
  10,748,966
  11,797,683
  12,892,602
  14,033,948
  15,222,265
  16,458,420
  17,743,597
  19,079,294
  20,467,312
Revenue / Adjusted assets
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
Average production assets, $m
  69,803
  107,021
  158,894
  229,002
  321,086
  438,891
  586,010
  765,731
  980,914
  1,233,908
  1,526,497
  1,859,902
  2,234,803
  2,651,400
  3,109,489
  3,608,546
  4,147,826
  4,726,452
  5,343,494
  5,998,049
  6,689,300
  7,416,571
  8,179,361
  8,977,376
  9,810,548
  10,679,048
  11,583,291
  12,523,936
  13,501,884
  14,518,275
  15,574,478
Working capital, $m
  8,115
  -1,471
  -2,184
  -3,147
  -4,413
  -6,032
  -8,054
  -10,524
  -13,481
  -16,958
  -20,979
  -25,561
  -30,714
  -36,439
  -42,735
  -49,594
  -57,005
  -64,958
  -73,438
  -82,434
  -91,934
  -101,929
  -112,413
  -123,380
  -134,831
  -146,767
  -159,194
  -172,122
  -185,563
  -199,531
  -214,047
Total debt, $m
  31,673
  63,055
  111,933
  177,992
  264,758
  375,760
  514,383
  683,725
  886,482
  1,124,865
  1,400,558
  1,714,709
  2,067,960
  2,460,499
  2,892,133
  3,362,370
  3,870,507
  4,415,717
  4,997,125
  5,613,880
  6,265,213
  6,950,484
  7,669,224
  8,421,154
  9,206,211
  10,024,556
  10,876,579
  11,762,902
  12,684,374
  13,642,069
  14,637,277
Total liabilities, $m
  69,458
  100,840
  149,718
  215,777
  302,543
  413,545
  552,168
  721,510
  924,267
  1,162,650
  1,438,343
  1,752,494
  2,105,745
  2,498,284
  2,929,918
  3,400,155
  3,908,292
  4,453,502
  5,034,910
  5,651,665
  6,302,998
  6,988,269
  7,707,009
  8,458,939
  9,243,996
  10,062,341
  10,914,364
  11,800,687
  12,722,159
  13,679,854
  14,675,062
Total equity, $m
  35,072
  39,802
  59,094
  85,167
  119,414
  163,226
  217,941
  284,780
  364,808
  458,898
  567,714
  691,709
  831,138
  986,073
  1,156,439
  1,342,041
  1,542,603
  1,757,798
  1,987,280
  2,230,713
  2,487,794
  2,758,271
  3,041,957
  3,338,744
  3,648,606
  3,971,607
  4,307,901
  4,657,733
  5,021,438
  5,399,440
  5,792,249
Total liabilities and equity, $m
  104,530
  140,642
  208,812
  300,944
  421,957
  576,771
  770,109
  1,006,290
  1,289,075
  1,621,548
  2,006,057
  2,444,203
  2,936,883
  3,484,357
  4,086,357
  4,742,196
  5,450,895
  6,211,300
  7,022,190
  7,882,378
  8,790,792
  9,746,540
  10,748,966
  11,797,683
  12,892,602
  14,033,948
  15,222,265
  16,458,420
  17,743,597
  19,079,294
  20,467,311
Debt-to-equity ratio
  0.903
  1.580
  1.890
  2.090
  2.220
  2.300
  2.360
  2.400
  2.430
  2.450
  2.470
  2.480
  2.490
  2.500
  2.500
  2.510
  2.510
  2.510
  2.510
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
  2.520
  2.530
  2.530
  2.530
  2.530
Adjusted equity ratio
  0.255
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2,922
  1,038
  2,671
  4,870
  7,738
  11,373
  15,868
  21,300
  27,737
  35,226
  43,803
  53,509
  64,301
  76,197
  89,182
  103,235
  118,329
  134,439
  151,539
  169,606
  188,619
  208,564
  229,433
  251,222
  273,934
  297,581
  322,179
  347,750
  374,325
  401,939
  430,634
Depreciation, amort., depletion, $m
  11,550
  10,735
  15,922
  22,933
  32,141
  43,922
  58,634
  76,606
  98,124
  123,424
  152,682
  185,990
  223,480
  265,140
  310,949
  360,855
  414,783
  472,645
  534,349
  599,805
  668,930
  741,657
  817,936
  897,738
  981,055
  1,067,905
  1,158,329
  1,252,394
  1,350,188
  1,451,827
  1,557,448
Funds from operations, $m
  2,760
  11,773
  18,593
  27,803
  39,879
  55,295
  74,501
  97,906
  125,861
  158,650
  196,485
  239,499
  287,781
  341,337
  400,131
  464,089
  533,112
  607,084
  685,889
  769,410
  857,549
  950,221
  1,047,369
  1,148,959
  1,254,989
  1,365,486
  1,480,508
  1,600,144
  1,724,513
  1,853,766
  1,988,082
Change in working capital, $m
  -6,274
  -511
  -713
  -964
  -1,266
  -1,619
  -2,022
  -2,470
  -2,957
  -3,477
  -4,021
  -4,582
  -5,152
  -5,725
  -6,296
  -6,859
  -7,412
  -7,952
  -8,480
  -8,996
  -9,500
  -9,995
  -10,483
  -10,967
  -11,451
  -11,936
  -12,427
  -12,928
  -13,440
  -13,969
  -14,516
Cash from operations, $m
  9,034
  12,284
  19,306
  28,767
  41,145
  56,914
  76,523
  100,376
  128,818
  162,127
  200,506
  244,081
  292,934
  347,063
  406,427
  470,948
  540,523
  615,037
  694,369
  778,406
  867,049
  960,217
  1,057,852
  1,159,927
  1,266,440
  1,377,422
  1,492,935
  1,613,071
  1,737,954
  1,867,735
  2,002,598
Maintenance CAPEX, $m
  0
  -6,980
  -10,702
  -15,889
  -22,900
  -32,109
  -43,889
  -58,601
  -76,573
  -98,091
  -123,391
  -152,650
  -185,990
  -223,480
  -265,140
  -310,949
  -360,855
  -414,783
  -472,645
  -534,349
  -599,805
  -668,930
  -741,657
  -817,936
  -897,738
  -981,055
  -1,067,905
  -1,158,329
  -1,252,394
  -1,350,188
  -1,451,827
New CAPEX, $m
  -12,191
  -37,218
  -51,873
  -70,109
  -92,083
  -117,805
  -147,119
  -179,721
  -215,184
  -252,993
  -292,589
  -333,405
  -374,901
  -416,597
  -458,088
  -499,057
  -539,281
  -578,625
  -617,042
  -654,555
  -691,252
  -727,271
  -762,790
  -798,015
  -833,172
  -868,500
  -904,243
  -940,645
  -977,948
  -1,016,391
  -1,056,203
Cash from investing activities, $m
  -10,446
  -44,198
  -62,575
  -85,998
  -114,983
  -149,914
  -191,008
  -238,322
  -291,757
  -351,084
  -415,980
  -486,055
  -560,891
  -640,077
  -723,228
  -810,006
  -900,136
  -993,408
  -1,089,687
  -1,188,904
  -1,291,057
  -1,396,201
  -1,504,447
  -1,615,951
  -1,730,910
  -1,849,555
  -1,972,148
  -2,098,974
  -2,230,342
  -2,366,579
  -2,508,030
Free cash flow, $m
  -1,412
  -31,914
  -43,269
  -57,231
  -73,839
  -92,999
  -114,485
  -137,946
  -162,938
  -188,958
  -215,474
  -241,974
  -267,958
  -293,015
  -316,801
  -339,058
  -359,612
  -378,371
  -395,318
  -410,498
  -424,008
  -435,984
  -446,595
  -456,024
  -464,470
  -472,133
  -479,212
  -485,902
  -492,388
  -498,844
  -505,433
Issuance/(repayment) of debt, $m
  -83
  35,056
  48,877
  66,060
  86,766
  111,002
  138,623
  169,342
  202,757
  238,383
  275,692
  314,151
  353,251
  392,539
  431,634
  470,237
  508,138
  545,210
  581,408
  616,755
  651,333
  685,272
  718,739
  751,930
  785,057
  818,345
  852,023
  886,323
  921,472
  957,695
  995,208
Issuance/(repurchase) of shares, $m
  0
  12,784
  16,621
  21,203
  26,508
  32,439
  38,847
  45,539
  52,292
  58,864
  65,013
  70,487
  75,127
  78,738
  81,184
  82,368
  82,233
  80,755
  77,943
  73,828
  68,462
  61,913
  54,254
  45,565
  35,928
  25,420
  14,115
  2,082
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -83
  47,840
  65,498
  87,263
  113,274
  143,441
  177,470
  214,881
  255,049
  297,247
  340,705
  384,638
  428,378
  471,277
  512,818
  552,605
  590,371
  625,965
  659,351
  690,583
  719,795
  747,185
  772,993
  797,495
  820,985
  843,765
  866,138
  888,405
  921,472
  957,695
  995,208
Total cash flow (excl. dividends), $m
  -1,647
  15,926
  22,229
  30,032
  39,435
  50,442
  62,985
  76,936
  92,110
  108,289
  125,232
  142,664
  160,421
  178,262
  196,016
  213,547
  230,758
  247,594
  264,033
  280,084
  295,787
  311,200
  326,398
  341,471
  356,515
  371,632
  386,926
  402,502
  429,084
  458,851
  489,775
Retained Cash Flow (-), $m
  5,199
  -13,822
  -19,292
  -26,074
  -34,246
  -43,812
  -54,715
  -66,839
  -80,028
  -94,090
  -108,816
  -123,995
  -139,428
  -154,935
  -170,366
  -185,603
  -200,562
  -215,195
  -229,482
  -243,433
  -257,081
  -270,477
  -283,686
  -296,787
  -309,862
  -323,001
  -336,294
  -349,832
  -363,705
  -378,002
  -392,809
Prev. year cash balance distribution, $m
 
  9,092
  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
 
  11,197
  2,937
  3,958
  5,189
  6,629
  8,271
  10,096
  12,082
  14,199
  16,416
  18,669
  20,992
  23,327
  25,650
  27,944
  30,197
  32,400
  34,551
  36,651
  38,706
  40,723
  42,712
  44,684
  46,653
  48,631
  50,632
  52,671
  65,379
  80,849
  96,966
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  10,735
  2,689
  3,445
  4,273
  5,138
  6,002
  6,821
  7,551
  8,157
  8,606
  8,865
  8,958
  8,869
  8,611
  8,204
  7,674
  7,050
  6,363
  5,643
  4,918
  4,212
  3,544
  2,929
  2,376
  1,892
  1,477
  1,130
  1,012
  883
  730
Current shareholders' claim on cash, %
  100
  76.6
  60.8
  49.7
  41.7
  35.6
  31.0
  27.5
  24.7
  22.4
  20.6
  19.1
  17.9
  16.9
  16.1
  15.4
  14.8
  14.4
  14.0
  13.7
  13.4
  13.2
  13.1
  12.9
  12.9
  12.8
  12.8
  12.8
  12.8
  12.8
  12.8

Statoil ASA, an energy company, explores for, produces, transports, refines, and markets petroleum and petroleum-derived products, and other forms of energy in Norway and internationally. The company operates through Development and Production Norway; Development and Production International; Marketing, Midstream and Processing; and Other segments. It owns exploration licenses in Norway, North America, South America and sub-Saharan Africa, North Africa, Europe and Asia, and the Oceania. The company also transports, processes, manufactures, markets, and trades oil and gas commodities, such as crude, condensate, gas liquids, products, natural gas, and liquefied natural gas (LNG); markets and trades electricity and emission rights; and operates refineries, gas processing plants, LNG plant, methanol plant, and crude oil terminals. In addition, the company develops offshore wind, and carbon capture and storage projects, as well as offers other renewable energy and low-carbon energy solutions. As of December 31, 2015, it had proved reserves of 5,060 million barrels of oil equivalent. The company was formerly known as StatoilHydro ASA and changed its name to Statoil ASA in November 2009. Statoil ASA was founded in 1972 and is headquartered in Stavanger, Norway.

FINANCIAL RATIOS  of  Statoil ADR (STO)

Valuation Ratios
P/E Ratio -19.1
Price to Sales 1.2
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 6.2
Price to Free Cash Flow -17.7
Growth Rates
Sales Growth Rate -21.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.4%
Cap. Spend. - 3 Yr. Gr. Rate 0.3%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 79.8%
Total Debt to Equity 90.3%
Interest Coverage 1
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. -10.1%
Return On Total Capital -4.2%
Ret/ On T. Cap. - 3 Yr. Avg. -2.1%
Return On Equity -7.8%
Return On Equity - 3 Yr. Avg. -4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 52.9%
Gross Margin - 3 Yr. Avg. 52.7%
EBITDA Margin 26.1%
EBITDA Margin - 3 Yr. Avg. 30.5%
Operating Margin 0.2%
Oper. Margin - 3 Yr. Avg. 7%
Pre-Tax Margin -0.4%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin -6.4%
Net Profit Margin - 3 Yr. Avg. -3.8%
Effective Tax Rate -1530.3%
Eff/ Tax Rate - 3 Yr. Avg. 2682.6%
Payout Ratio -64.2%

STO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STO stock intrinsic value calculation we used $45688 million for the last fiscal year's total revenue generated by Statoil ADR. The default revenue input number comes from 2016 income statement of Statoil ADR. 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 STO stock valuation model: a) initial revenue growth rate of 53.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for STO is calculated based on our internal credit rating of Statoil ADR, 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 Statoil ADR.
    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 STO stock the variable cost ratio is equal to 89.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4849 million in the base year in the intrinsic value calculation for STO 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 Statoil ADR.

Corporate tax rate of 27% is the nominal tax rate for Statoil ADR. 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 STO 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 STO are equal to 152.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Statoil ADR 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 STO is equal to -2.1%. 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 - $35072 million for Statoil ADR - 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 3269.45 million for Statoil ADR 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 Statoil ADR at the current share price and the inputted number of shares is $56.4 billion.

RELATED COMPANIES Price Int.Val. Rating
E ENI ADR 30.45 7.44  str.sell
TOT Total ADR 49.62 10.00  str.sell
CVX Chevron 103.25 18.49  str.sell
XOM Exxon Mobil 80.12 102.38  buy
BP BP ADR 34.68 6.50  str.sell
PBR Petroleo Brasi 8.48 3.08  str.sell

COMPANY NEWS

▶ Checking the Forecast for Chevron Stock ahead of Q2 Earnings   [Jul-21-17 09:13AM  Market Realist]
▶ Oil Up As Saudis Consider Deeper Output Cuts   [Jul-18-17 03:00PM  Oilprice.com]
▶ Norways Giant Gas Field Is Set For Record Output   [Jul-17-17 06:00PM  Oilprice.com]
▶ Statoil ASA: Notifiable trading   [01:22AM  GlobeNewswire]
▶ Bear of the Day: Statoil (STO)   [06:48AM  Zacks]
▶ [$$] Plans for U.S. Wind Farms Run Into Headwinds   [12:29AM  The Wall Street Journal]
▶ Statoil Drills Dry Wells Off Canada's Newfoundland   [Jul-09-17 08:00PM  Rigzone.com]
▶ [$$] Plans for Offshore Wind Farms Face Headwinds in U.S.   [04:33PM  The Wall Street Journal]
▶ Ocean Installer Secures Subsea Work with Statoil   [Jul-06-17 08:00PM  Rigzone.com]
▶ Markets Overcome The Crash: Oil Rally Continues   [Jul-04-17 03:00PM  Oilprice.com]
▶ Lundin Petroleum Has Strong Upside Potential   [Jul-03-17 05:23PM  GuruFocus.com]
▶ Is BP Shifting Its Focus To Natural Gas?   [Jul-02-17 01:00PM  Oilprice.com]
▶ Statoil Moves Key IT Tasks from India Back to Norway   [Jun-29-17 08:00PM  Rigzone.com]
▶ Statoil Awards Services Contracts to 5 Ship Owners   [Jun-27-17 08:00PM  Rigzone.com]
▶ Norway Increases Troll Gas Quota For Upcoming Gas Year   [Jun-26-17 08:00PM  Rigzone.com]
▶ Statoil Economist Sees Oil Above $60 'Relatively Soon'   [Jun-23-17 12:54PM  Bloomberg Video]
▶ Oil Majors Snatch Up Mexican Oil Blocks   [Jun-20-17 05:00PM  Oilprice.com]
▶ Shells Beta: Could the Stock Pop in a Rising Market?   [Jun-19-17 09:07AM  Market Realist]
▶ Statoil's share saving plan allocates shares   [02:13AM  GlobeNewswire]
▶ Statoil ASA: Notifiable trading   [01:45AM  GlobeNewswire]
▶ Big Oil's Pivot To Renewables Has Begun   [Jun-14-17 03:00PM  Oilprice.com]
▶ Oil Flat As OPEC Sees Market Balancing At Slower Pace   [Jun-13-17 03:00PM  Oilprice.com]
▶ Short Interest in BP Has Risen: What Does That Imply?   [Jun-08-17 07:35AM  Market Realist]
▶ Statoil ASA: Election to Statoil's board of directors   [Jun-06-17 01:05PM  GlobeNewswire]
▶ PGS CEO To Take On Statoil Chair Role   [May-29-17 08:00PM  Rigzone.com]
▶ Statoil To Start Gina Krog Oil And Gas Field In June   [May-23-17 08:00PM  Rigzone.com]
▶ Statoil ASA: Notifiable trading   [02:02AM  GlobeNewswire]
▶ Statoil's share saving plan allocates shares   [02:45AM  GlobeNewswire]
▶ Statoil Expecting Rise in U.S. Offshore Output   [May-16-17 03:03PM  TheStreet.com]
▶ Statoil ASA: Notifiable trading   [01:47AM  GlobeNewswire]
▶ ETFs with exposure to Statoil ASA : May 11, 2017   [May-11-17 05:34PM  Capital Cube]
▶ Is The Market Ignoring OPEC?   [May-09-17 03:04PM  Oilprice.com]
▶ [$$] As Crude Prices Firm, Oil Majors Rise to the Top   [May-06-17 01:43AM  Barrons.com]
▶ Chinese stocks drop on falling commodity prices   [May-04-17 11:48PM  MarketWatch]
▶ [$$] Statoil: misfit   [11:10AM  Financial Times]
▶ Statoil posts 1Q profit   [05:03AM  Associated Press]
▶ Statoil ASA: First quarter 2017 results   [12:46AM  GlobeNewswire]
Stock chart of STO Financial statements of STO Annual reports of STO
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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