Intrinsic value of Tesoro - TSO

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$94.45

  Intrinsic Value

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  Value-price divergence*

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$94.45

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

We calculate the intrinsic value of TSO 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 10.7

 

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, %
  -14.38
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
Revenue, $m
  24,582
  26,057
  27,594
  29,198
  30,870
  32,616
  34,440
  36,345
  38,336
  40,418
  42,595
  44,873
  47,258
  49,754
  52,368
  55,107
  57,975
  60,982
  64,132
  67,435
  70,898
  74,529
  78,337
  82,331
  86,521
  90,916
  95,527
  100,365
  105,441
  110,769
  116,359
Variable operating expenses, $m
 
  17,561
  18,596
  19,676
  20,802
  21,977
  23,205
  24,487
  25,828
  27,229
  28,695
  30,210
  31,815
  33,496
  35,256
  37,099
  39,031
  41,054
  43,176
  45,399
  47,730
  50,175
  52,739
  55,428
  58,248
  61,207
  64,311
  67,568
  70,986
  74,572
  78,336
Fixed operating expenses, $m
 
  6,862
  7,034
  7,210
  7,390
  7,575
  7,764
  7,958
  8,157
  8,361
  8,570
  8,784
  9,004
  9,229
  9,460
  9,696
  9,939
  10,187
  10,442
  10,703
  10,971
  11,245
  11,526
  11,814
  12,109
  12,412
  12,722
  13,041
  13,367
  13,701
  14,043
Total operating expenses, $m
  23,101
  24,423
  25,630
  26,886
  28,192
  29,552
  30,969
  32,445
  33,985
  35,590
  37,265
  38,994
  40,819
  42,725
  44,716
  46,795
  48,970
  51,241
  53,618
  56,102
  58,701
  61,420
  64,265
  67,242
  70,357
  73,619
  77,033
  80,609
  84,353
  88,273
  92,379
Operating income, $m
  1,481
  1,633
  1,964
  2,312
  2,679
  3,064
  3,471
  3,899
  4,351
  4,827
  5,330
  5,879
  6,439
  7,029
  7,653
  8,311
  9,006
  9,740
  10,515
  11,333
  12,197
  13,109
  14,073
  15,090
  16,163
  17,297
  18,493
  19,756
  21,089
  22,496
  23,980
EBITDA, $m
  2,332
  2,537
  2,920
  3,322
  3,745
  4,190
  4,659
  5,152
  5,671
  6,218
  6,794
  7,402
  8,042
  8,718
  9,430
  10,181
  10,974
  11,810
  12,691
  13,622
  14,603
  15,639
  16,731
  17,884
  19,100
  20,382
  21,735
  23,162
  24,667
  26,255
  27,929
Interest expense (income), $m
  199
  233
  264
  297
  331
  366
  403
  442
  482
  524
  569
  615
  663
  714
  766
  822
  880
  941
  1,004
  1,071
  1,141
  1,215
  1,292
  1,372
  1,457
  1,546
  1,639
  1,737
  1,839
  1,947
  2,060
Earnings before tax, $m
  1,277
  1,400
  1,700
  2,015
  2,348
  2,698
  3,068
  3,457
  3,869
  4,303
  4,761
  5,264
  5,775
  6,316
  6,886
  7,489
  8,126
  8,799
  9,510
  10,262
  11,056
  11,895
  12,781
  13,717
  14,706
  15,751
  16,854
  18,019
  19,250
  20,549
  21,920
Tax expense, $m
  427
  378
  459
  544
  634
  728
  828
  933
  1,045
  1,162
  1,286
  1,421
  1,559
  1,705
  1,859
  2,022
  2,194
  2,376
  2,568
  2,771
  2,985
  3,212
  3,451
  3,704
  3,971
  4,253
  4,551
  4,865
  5,197
  5,548
  5,918
Net income, $m
  734
  1,022
  1,241
  1,471
  1,714
  1,970
  2,239
  2,524
  2,824
  3,141
  3,476
  3,843
  4,216
  4,610
  5,027
  5,467
  5,932
  6,423
  6,943
  7,491
  8,071
  8,683
  9,330
  10,014
  10,736
  11,498
  12,304
  13,154
  14,052
  15,001
  16,002

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,295
  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
  20,398
  18,133
  19,203
  20,318
  21,482
  22,697
  23,966
  25,292
  26,678
  28,126
  29,642
  31,227
  32,886
  34,624
  36,443
  38,348
  40,345
  42,437
  44,629
  46,928
  49,338
  51,864
  54,514
  57,294
  60,209
  63,268
  66,477
  69,843
  73,376
  77,083
  80,974
Adjusted assets (=assets-cash), $m
  17,103
  18,133
  19,203
  20,318
  21,482
  22,697
  23,966
  25,292
  26,678
  28,126
  29,642
  31,227
  32,886
  34,624
  36,443
  38,348
  40,345
  42,437
  44,629
  46,928
  49,338
  51,864
  54,514
  57,294
  60,209
  63,268
  66,477
  69,843
  73,376
  77,083
  80,974
Revenue / Adjusted assets
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
  1.437
Average production assets, $m
  11,003
  11,674
  12,362
  13,080
  13,830
  14,612
  15,429
  16,282
  17,174
  18,107
  19,083
  20,103
  21,171
  22,290
  23,461
  24,688
  25,973
  27,320
  28,731
  30,211
  31,762
  33,389
  35,095
  36,884
  38,761
  40,730
  42,796
  44,963
  47,238
  49,624
  52,129
Working capital, $m
  3,860
  1,094
  1,159
  1,226
  1,297
  1,370
  1,446
  1,526
  1,610
  1,698
  1,789
  1,885
  1,985
  2,090
  2,199
  2,314
  2,435
  2,561
  2,694
  2,832
  2,978
  3,130
  3,290
  3,458
  3,634
  3,818
  4,012
  4,215
  4,429
  4,652
  4,887
Total debt, $m
  6,933
  7,340
  8,245
  9,189
  10,174
  11,202
  12,276
  13,397
  14,569
  15,795
  17,077
  18,418
  19,822
  21,292
  22,831
  24,443
  26,132
  27,901
  29,756
  31,701
  33,740
  35,877
  38,119
  40,471
  42,937
  45,525
  48,239
  51,087
  54,076
  57,212
  60,504
Total liabilities, $m
  14,933
  15,340
  16,245
  17,189
  18,174
  19,202
  20,276
  21,397
  22,569
  23,795
  25,077
  26,418
  27,822
  29,292
  30,831
  32,443
  34,132
  35,901
  37,756
  39,701
  41,740
  43,877
  46,119
  48,471
  50,937
  53,525
  56,239
  59,087
  62,076
  65,212
  68,504
Total equity, $m
  5,465
  2,792
  2,957
  3,129
  3,308
  3,495
  3,691
  3,895
  4,108
  4,331
  4,565
  4,809
  5,065
  5,332
  5,612
  5,906
  6,213
  6,535
  6,873
  7,227
  7,598
  7,987
  8,395
  8,823
  9,272
  9,743
  10,237
  10,756
  11,300
  11,871
  12,470
Total liabilities and equity, $m
  20,398
  18,132
  19,202
  20,318
  21,482
  22,697
  23,967
  25,292
  26,677
  28,126
  29,642
  31,227
  32,887
  34,624
  36,443
  38,349
  40,345
  42,436
  44,629
  46,928
  49,338
  51,864
  54,514
  57,294
  60,209
  63,268
  66,476
  69,843
  73,376
  77,083
  80,974
Debt-to-equity ratio
  1.269
  2.630
  2.790
  2.940
  3.080
  3.200
  3.330
  3.440
  3.550
  3.650
  3.740
  3.830
  3.910
  3.990
  4.070
  4.140
  4.210
  4.270
  4.330
  4.390
  4.440
  4.490
  4.540
  4.590
  4.630
  4.670
  4.710
  4.750
  4.790
  4.820
  4.850
Adjusted equity ratio
  0.127
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  734
  1,022
  1,241
  1,471
  1,714
  1,970
  2,239
  2,524
  2,824
  3,141
  3,476
  3,843
  4,216
  4,610
  5,027
  5,467
  5,932
  6,423
  6,943
  7,491
  8,071
  8,683
  9,330
  10,014
  10,736
  11,498
  12,304
  13,154
  14,052
  15,001
  16,002
Depreciation, amort., depletion, $m
  851
  903
  956
  1,010
  1,067
  1,126
  1,188
  1,253
  1,320
  1,391
  1,465
  1,523
  1,604
  1,689
  1,777
  1,870
  1,968
  2,070
  2,177
  2,289
  2,406
  2,529
  2,659
  2,794
  2,936
  3,086
  3,242
  3,406
  3,579
  3,759
  3,949
Funds from operations, $m
  1,372
  1,926
  2,196
  2,481
  2,781
  3,096
  3,427
  3,776
  4,144
  4,532
  4,940
  5,366
  5,820
  6,299
  6,804
  7,337
  7,900
  8,493
  9,119
  9,780
  10,477
  11,213
  11,989
  12,808
  13,672
  14,584
  15,546
  16,560
  17,631
  18,760
  19,951
Change in working capital, $m
  68
  62
  65
  67
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
  110
  115
  120
  126
  132
  139
  145
  153
  160
  168
  176
  185
  194
  203
  213
  224
  235
Cash from operations, $m
  1,304
  2,114
  2,132
  2,414
  2,710
  3,022
  3,351
  3,696
  4,061
  4,444
  4,849
  5,270
  5,720
  6,194
  6,694
  7,222
  7,779
  8,367
  8,987
  9,641
  10,332
  11,060
  11,829
  12,640
  13,496
  14,399
  15,352
  16,357
  17,418
  18,536
  19,716
Maintenance CAPEX, $m
  0
  -834
  -884
  -937
  -991
  -1,048
  -1,107
  -1,169
  -1,234
  -1,301
  -1,372
  -1,446
  -1,523
  -1,604
  -1,689
  -1,777
  -1,870
  -1,968
  -2,070
  -2,177
  -2,289
  -2,406
  -2,529
  -2,659
  -2,794
  -2,936
  -3,086
  -3,242
  -3,406
  -3,579
  -3,759
New CAPEX, $m
  -894
  -671
  -689
  -718
  -749
  -782
  -817
  -853
  -892
  -933
  -976
  -1,021
  -1,068
  -1,118
  -1,171
  -1,227
  -1,285
  -1,347
  -1,412
  -1,480
  -1,551
  -1,627
  -1,706
  -1,789
  -1,877
  -1,969
  -2,066
  -2,167
  -2,274
  -2,387
  -2,505
Cash from investing activities, $m
  -1,317
  -1,505
  -1,573
  -1,655
  -1,740
  -1,830
  -1,924
  -2,022
  -2,126
  -2,234
  -2,348
  -2,467
  -2,591
  -2,722
  -2,860
  -3,004
  -3,155
  -3,315
  -3,482
  -3,657
  -3,840
  -4,033
  -4,235
  -4,448
  -4,671
  -4,905
  -5,152
  -5,409
  -5,680
  -5,966
  -6,264
Free cash flow, $m
  -13
  610
  559
  759
  970
  1,192
  1,427
  1,674
  1,935
  2,211
  2,502
  2,804
  3,129
  3,472
  3,835
  4,218
  4,624
  5,052
  5,506
  5,985
  6,491
  7,027
  7,593
  8,192
  8,825
  9,494
  10,201
  10,948
  11,737
  12,571
  13,452
Issuance/(repayment) of debt, $m
  2,779
  872
  905
  944
  985
  1,028
  1,073
  1,122
  1,172
  1,226
  1,282
  1,341
  1,404
  1,470
  1,539
  1,612
  1,689
  1,770
  1,855
  1,944
  2,039
  2,138
  2,242
  2,351
  2,466
  2,587
  2,715
  2,848
  2,989
  3,136
  3,291
Issuance/(repurchase) of shares, $m
  116
  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  
  2,615
  872
  905
  944
  985
  1,028
  1,073
  1,122
  1,172
  1,226
  1,282
  1,341
  1,404
  1,470
  1,539
  1,612
  1,689
  1,770
  1,855
  1,944
  2,039
  2,138
  2,242
  2,351
  2,466
  2,587
  2,715
  2,848
  2,989
  3,136
  3,291
Total cash flow (excl. dividends), $m
  2,602
  1,482
  1,464
  1,703
  1,955
  2,220
  2,500
  2,796
  3,107
  3,436
  3,783
  4,145
  4,532
  4,942
  5,374
  5,830
  6,313
  6,822
  7,361
  7,929
  8,530
  9,165
  9,835
  10,543
  11,291
  12,081
  12,915
  13,796
  14,726
  15,707
  16,743
Retained Cash Flow (-), $m
  -252
  -157
  -165
  -172
  -179
  -187
  -195
  -204
  -213
  -223
  -233
  -244
  -256
  -268
  -280
  -293
  -307
  -322
  -338
  -354
  -371
  -389
  -408
  -428
  -449
  -471
  -494
  -518
  -544
  -571
  -599
Prev. year cash balance distribution, $m
 
  2,830
  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
 
  4,155
  1,299
  1,531
  1,775
  2,033
  2,305
  2,591
  2,894
  3,213
  3,550
  3,901
  4,277
  4,674
  5,094
  5,537
  6,005
  6,500
  7,023
  7,575
  8,159
  8,776
  9,427
  10,115
  10,842
  11,610
  12,421
  13,278
  14,182
  15,136
  16,144
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  3,934
  1,159
  1,279
  1,381
  1,463
  1,523
  1,562
  1,577
  1,571
  1,543
  1,493
  1,427
  1,345
  1,249
  1,144
  1,031
  915
  799
  686
  578
  478
  388
  309
  240
  183
  136
  99
  70
  48
  32
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

Tesoro Corporation, through its subsidiaries, operates as an independent petroleum refining, logistics, and marketing company in the United States. The company operates through three segments: Refining, TLLP, and Marketing. The Refining segment refines crude oil and other feed stocks into transportation fuels, such as gasoline and gasoline blend stocks, jet fuel, and diesel fuel, as well as other products, including heavy fuel oils, liquefied petroleum gas, petroleum coke, calcined coke, and asphalt. This segment also sells refined products in the bulk market principally to independent unbranded distributors, other refining and marketing companies, utilities, railroads, airlines, marine, and industrial end-users in the western United States. It owns and operates 7 petroleum refineries with a combined crude oil capacity of approximately 895 thousand barrels per day. The TLLP segment owns and operates a network of approximately 650 miles of crude oil, natural gas, and produced water gathering pipelines; and natural gas processing and fractionation complexes. The Marketing segment sells gasoline and diesel fuel through retail stations, as well as through third-party dealers and distributors. This segment operates a network of 2,492 retail stations under the ARCO, Shell, Exxon, Mobil, USA Gasoline, Rebel, Thrifty, and Tesoro brands. The company was formerly known as Tesoro Petroleum Corporation and changed its name to Tesoro Corporation in November 2004. Tesoro Corporation was founded in 1968 and is headquartered in San Antonio, Texas.

FINANCIAL RATIOS  of  Tesoro (TSO)

Valuation Ratios
P/E Ratio 15
Price to Sales 0.4
Price to Book 2
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 26.9
Growth Rates
Sales Growth Rate -14.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.2%
Cap. Spend. - 3 Yr. Gr. Rate 9.4%
Financial Strength
Quick Ratio 7
Current Ratio 0.2
LT Debt to Equity 118.4%
Total Debt to Equity 126.9%
Interest Coverage 7
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 7%
Return On Total Capital 6.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11.6%
Return On Equity 13.7%
Return On Equity - 3 Yr. Avg. 21.6%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 19.8%
Gross Margin - 3 Yr. Avg. 18.9%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 9.1%
Operating Margin 6%
Oper. Margin - 3 Yr. Avg. 6.6%
Pre-Tax Margin 5.2%
Pre-Tax Margin - 3 Yr. Avg. 6%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 33.4%
Eff/ Tax Rate - 3 Yr. Avg. 35.5%
Payout Ratio 33.9%

TSO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TSO stock intrinsic value calculation we used $24582 million for the last fiscal year's total revenue generated by Tesoro. The default revenue input number comes from 2016 income statement of Tesoro. 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 TSO stock valuation model: a) initial revenue growth rate of 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 5.6%, whose default value for TSO is calculated based on our internal credit rating of Tesoro, 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 Tesoro.
    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 TSO stock the variable cost ratio is equal to 67.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6695 million in the base year in the intrinsic value calculation for TSO 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 3.6% for Tesoro.

Corporate tax rate of 27% is the nominal tax rate for Tesoro. 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 TSO 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 TSO are equal to 44.8%.

Life of production assets of 13.2 years is the average useful life of capital assets used in Tesoro 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 TSO is equal to 4.2%. 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 - $5465 million for Tesoro - 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 112.804 million for Tesoro 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 Tesoro at the current share price and the inputted number of shares is $10.7 billion.


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COMPANY NEWS

▶ Not All Energy Stocks Fall in Conjunction With Oil Prices   [Jun-28-17 02:48PM  InvestorPlace]
▶ Where Does Institutional Ownership in Tesoro Stand?   [Jun-27-17 10:36AM  Market Realist]
▶ What Tesoros Moving Averages Indicate in 2Q17   [09:08AM  Market Realist]
▶ How Phillips 66s Marketing Segment Performed in 1Q17   [Jun-22-17 07:35AM  Market Realist]
▶ 5 best bets in biotech: Expert   [Jun-16-17 07:37AM  CNBC Videos]
▶ How Valeros Beta Compares to Peers   [07:36AM  Market Realist]
▶ Energy Snapshot: June 5 to June 9, 2017   [01:28PM  Market Realist]
▶ Could Tesoros Refining Margins Rise in 2Q17?   [Jun-12-17 10:36AM  Market Realist]
▶ How Tesoros Refining Yields Moved in 1Q17   [07:36AM  Market Realist]
▶ We Deliver: AMD, PYPL & more   [Jun-09-17 02:31PM  CNBC Videos]
▶ How Tesoros Refining Margin Shaped Up in 1Q17   [09:06AM  Market Realist]
▶ New Strong Sell Stocks for June 8th   [Jun-08-17 10:48AM  Zacks]
▶ How Tesoros 1Q17 Dividend Outflows Shaped Up   [10:36AM  Market Realist]
▶ What Tesoros 1Q17 Cash Flow Analysis Reveals   [09:07AM  Market Realist]
▶ Is Tesoros Leverage Curve Trending Higher?   [07:36AM  Market Realist]
▶ These Energy Stocks Were the Top Gainers Last Week   [Jun-05-17 04:19PM  Market Realist]
▶ Trump decision on Paris Accord will change little for San Antonio   [02:00PM  American City Business Journals]
▶ Why Phillips 66 Stock Fell in 2Q17   [01:02PM  Market Realist]
▶ Tesoro to rebrand after closing $6.4 billion merger   [10:37AM  American City Business Journals]
▶ 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]
▶ This US Refiner Had the Highest Refining Yield in 1Q17   [May-26-17 10:36AM  Market Realist]
▶ Matador Resources Set to Join S&P MidCap 400   [May-25-17 05:45PM  PR Newswire]
▶ EP Energy, Tesoro Form Drilling JV in Utah's Uinta Basin   [May-23-17 08:00PM  Rigzone.com]
▶ Has Institutional Ownership in Marathon Petroleum Surged?   [May-22-17 10:36AM  Market Realist]
▶ ETFs with exposure to Tesoro Corp. : May 18, 2017   [May-18-17 02:04PM  Capital Cube]
▶ MPC, VLO, TSO, PSX: Which Is Analysts Pick?   [09:05AM  Market Realist]
▶ Comparing Refiners Valuation Ratios   [May-17-17 10:36AM  Market Realist]
▶ How Refining Stocks Short Interest Compares   [07:36AM  Market Realist]
▶ Institutional Holdings in Downstream Stocks Rise   [May-16-17 10:37AM  Market Realist]
▶ A Look at MPCs, VLOs, TSOs, and PSXs Beta   [09:07AM  Market Realist]
▶ A Look at Refining Stocks Moving Averages in 2Q17   [May-15-17 09:08AM  Market Realist]
▶ How Refining Stocks Have Performed in 2Q17   [07:37AM  Market Realist]
▶ Tesoro Corp. Value Analysis (NYSE:TSO) : May 11, 2017   [May-11-17 07:48PM  Capital Cube]
▶ Rainy weather, pipeline outage dampen Tesoro's first quarter profits   [May-09-17 01:15PM  American City Business Journals]
Stock chart of TSO Financial statements of TSO Annual reports of TSO
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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