Intrinsic value of Exxon Mobil - XOM

Previous Close

$77.47

  Intrinsic Value

$101.15

stock screener

  Rating & Target

buy

+31%

  Value-price divergence*

-76%

Previous close

$77.47

 
Intrinsic value

$101.15

 
Up/down potential

+31%

 
Rating

buy

 
Value-price divergence*

-76%

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

We calculate the intrinsic value of XOM 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 320.4

 

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, %
  -15.75
  29.70
  27.23
  25.01
  23.01
  21.21
  19.59
  18.13
  16.81
  15.63
  14.57
  13.61
  12.75
  11.98
  11.28
  10.65
  10.09
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
  6.29
  6.16
Revenue, $m
  218,608
  283,535
  360,741
  450,952
  554,699
  672,326
  804,002
  949,740
  1,109,429
  1,282,861
  1,469,765
  1,669,835
  1,882,757
  2,108,236
  2,346,012
  2,595,875
  2,857,683
  3,131,362
  3,416,919
  3,714,442
  4,024,100
  4,346,146
  4,680,915
  5,028,818
  5,390,347
  5,766,067
  6,156,615
  6,562,698
  6,985,093
  7,424,642
  7,882,252
Variable operating expenses, $m
 
  200,742
  255,405
  319,274
  392,727
  476,007
  569,234
  672,416
  785,476
  908,266
  1,040,594
  1,182,243
  1,332,992
  1,492,631
  1,660,976
  1,837,880
  2,023,239
  2,217,004
  2,419,179
  2,629,825
  2,849,063
  3,077,072
  3,314,088
  3,560,403
  3,816,366
  4,082,375
  4,358,883
  4,646,390
  4,945,446
  5,256,646
  5,580,635
Fixed operating expenses, $m
 
  66,138
  67,792
  69,486
  71,224
  73,004
  74,829
  76,700
  78,617
  80,583
  82,597
  84,662
  86,779
  88,948
  91,172
  93,451
  95,788
  98,182
  100,637
  103,153
  105,732
  108,375
  111,084
  113,862
  116,708
  119,626
  122,616
  125,682
  128,824
  132,044
  135,346
Total operating expenses, $m
  217,672
  266,880
  323,197
  388,760
  463,951
  549,011
  644,063
  749,116
  864,093
  988,849
  1,123,191
  1,266,905
  1,419,771
  1,581,579
  1,752,148
  1,931,331
  2,119,027
  2,315,186
  2,519,816
  2,732,978
  2,954,795
  3,185,447
  3,425,172
  3,674,265
  3,933,074
  4,202,001
  4,481,499
  4,772,072
  5,074,270
  5,388,690
  5,715,981
Operating income, $m
  936
  16,654
  37,545
  62,191
  90,749
  123,315
  159,939
  200,624
  245,336
  294,013
  346,574
  402,929
  462,986
  526,657
  593,863
  664,544
  738,656
  816,175
  897,103
  981,464
  1,069,305
  1,160,700
  1,255,743
  1,354,553
  1,457,273
  1,564,066
  1,675,115
  1,790,626
  1,910,823
  2,035,951
  2,166,272
EBITDA, $m
  23,244
  45,620
  74,399
  108,262
  147,418
  192,002
  242,078
  297,652
  358,678
  425,072
  496,728
  573,523
  655,333
  742,039
  833,537
  929,744
  1,030,603
  1,136,082
  1,246,183
  1,360,939
  1,480,416
  1,604,711
  1,733,955
  1,868,308
  2,007,963
  2,153,140
  2,304,088
  2,461,085
  2,624,436
  2,794,468
  2,971,540
Interest expense (income), $m
  818
  1,369
  3,031
  5,002
  7,305
  9,954
  12,957
  16,319
  20,040
  24,116
  28,544
  33,316
  38,424
  43,860
  49,617
  55,687
  62,066
  68,751
  75,738
  83,028
  90,624
  98,530
  106,752
  115,299
  124,181
  133,411
  143,003
  152,974
  163,342
  174,126
  185,348
Earnings before tax, $m
  7,969
  15,285
  34,514
  57,189
  83,443
  113,361
  146,982
  184,306
  225,296
  269,896
  318,030
  369,613
  424,562
  482,797
  544,247
  608,857
  676,589
  747,425
  821,366
  898,436
  978,681
  1,062,170
  1,148,991
  1,239,255
  1,333,092
  1,430,655
  1,532,112
  1,637,652
  1,747,481
  1,861,825
  1,980,924
Tax expense, $m
  -406
  4,127
  9,319
  15,441
  22,530
  30,608
  39,685
  49,762
  60,830
  72,872
  85,868
  99,796
  114,632
  130,355
  146,947
  164,391
  182,679
  201,805
  221,769
  242,578
  264,244
  286,786
  310,228
  334,599
  359,935
  386,277
  413,670
  442,166
  471,820
  502,693
  534,850
Net income, $m
  7,840
  11,158
  25,195
  41,748
  60,914
  82,754
  107,297
  134,543
  164,466
  197,024
  232,162
  269,818
  309,930
  352,441
  397,300
  444,466
  493,910
  545,620
  599,597
  655,858
  714,437
  775,384
  838,763
  904,656
  973,157
  1,044,378
  1,118,442
  1,195,486
  1,275,661
  1,359,132
  1,446,075

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,657
  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
  330,314
  423,818
  539,224
  674,068
  829,146
  1,004,972
  1,201,797
  1,419,642
  1,658,340
  1,917,580
  2,196,958
  2,496,016
  2,814,286
  3,151,325
  3,506,744
  3,880,232
  4,271,574
  4,680,660
  5,107,502
  5,552,230
  6,015,097
  6,496,482
  6,996,883
  7,516,918
  8,057,320
  8,618,934
  9,202,713
  9,809,713
  10,441,096
  11,098,119
  11,782,141
Adjusted assets (=assets-cash), $m
  326,657
  423,818
  539,224
  674,068
  829,146
  1,004,972
  1,201,797
  1,419,642
  1,658,340
  1,917,580
  2,196,958
  2,496,016
  2,814,286
  3,151,325
  3,506,744
  3,880,232
  4,271,574
  4,680,660
  5,107,502
  5,552,230
  6,015,097
  6,496,482
  6,996,883
  7,516,918
  8,057,320
  8,618,934
  9,202,713
  9,809,713
  10,441,096
  11,098,119
  11,782,141
Revenue / Adjusted assets
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
Average production assets, $m
  247,915
  321,528
  409,080
  511,379
  629,028
  762,418
  911,739
  1,077,006
  1,258,093
  1,454,765
  1,666,713
  1,893,592
  2,135,047
  2,390,740
  2,660,377
  2,943,723
  3,240,612
  3,550,964
  3,874,786
  4,212,177
  4,563,329
  4,928,530
  5,308,157
  5,702,680
  6,112,654
  6,538,720
  6,981,601
  7,442,100
  7,921,095
  8,419,544
  8,938,474
Working capital, $m
  -6,222
  5,104
  6,493
  8,117
  9,985
  12,102
  14,472
  17,095
  19,970
  23,092
  26,456
  30,057
  33,890
  37,948
  42,228
  46,726
  51,438
  56,365
  61,505
  66,860
  72,434
  78,231
  84,256
  90,519
  97,026
  103,789
  110,819
  118,129
  125,732
  133,644
  141,881
Total debt, $m
  42,762
  86,596
  142,914
  208,718
  284,396
  370,199
  466,250
  572,558
  689,043
  815,552
  951,888
  1,097,829
  1,253,144
  1,417,620
  1,591,064
  1,773,326
  1,964,301
  2,163,935
  2,372,234
  2,589,261
  2,815,140
  3,050,056
  3,294,252
  3,548,029
  3,811,745
  4,085,813
  4,370,697
  4,666,913
  4,975,028
  5,295,655
  5,629,458
Total liabilities, $m
  162,989
  206,823
  263,141
  328,945
  404,623
  490,426
  586,477
  692,785
  809,270
  935,779
  1,072,115
  1,218,056
  1,373,371
  1,537,847
  1,711,291
  1,893,553
  2,084,528
  2,284,162
  2,492,461
  2,709,488
  2,935,367
  3,170,283
  3,414,479
  3,668,256
  3,931,972
  4,206,040
  4,490,924
  4,787,140
  5,095,255
  5,415,882
  5,749,685
Total equity, $m
  167,325
  216,995
  276,083
  345,123
  424,523
  514,546
  615,320
  726,857
  849,070
  981,801
  1,124,842
  1,277,960
  1,440,914
  1,613,478
  1,795,453
  1,986,679
  2,187,046
  2,396,498
  2,615,041
  2,842,742
  3,079,730
  3,326,199
  3,582,404
  3,848,662
  4,125,348
  4,412,894
  4,711,789
  5,022,573
  5,345,841
  5,682,237
  6,032,456
Total liabilities and equity, $m
  330,314
  423,818
  539,224
  674,068
  829,146
  1,004,972
  1,201,797
  1,419,642
  1,658,340
  1,917,580
  2,196,957
  2,496,016
  2,814,285
  3,151,325
  3,506,744
  3,880,232
  4,271,574
  4,680,660
  5,107,502
  5,552,230
  6,015,097
  6,496,482
  6,996,883
  7,516,918
  8,057,320
  8,618,934
  9,202,713
  9,809,713
  10,441,096
  11,098,119
  11,782,141
Debt-to-equity ratio
  0.256
  0.400
  0.520
  0.600
  0.670
  0.720
  0.760
  0.790
  0.810
  0.830
  0.850
  0.860
  0.870
  0.880
  0.890
  0.890
  0.900
  0.900
  0.910
  0.910
  0.910
  0.920
  0.920
  0.920
  0.920
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
Adjusted equity ratio
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7,840
  11,158
  25,195
  41,748
  60,914
  82,754
  107,297
  134,543
  164,466
  197,024
  232,162
  269,818
  309,930
  352,441
  397,300
  444,466
  493,910
  545,620
  599,597
  655,858
  714,437
  775,384
  838,763
  904,656
  973,157
  1,044,378
  1,118,442
  1,195,486
  1,275,661
  1,359,132
  1,446,075
Depreciation, amort., depletion, $m
  22,308
  28,967
  36,854
  46,070
  56,669
  68,686
  82,139
  97,028
  113,342
  131,060
  150,154
  170,594
  192,347
  215,382
  239,674
  265,200
  291,947
  319,907
  349,080
  379,475
  411,111
  444,012
  478,212
  513,755
  550,690
  589,074
  628,973
  670,459
  713,612
  758,517
  805,268
Funds from operations, $m
  20,476
  40,125
  62,049
  87,819
  117,583
  151,440
  189,436
  231,571
  277,808
  328,084
  382,316
  440,412
  502,277
  567,823
  636,974
  709,666
  785,857
  865,527
  948,677
  1,035,334
  1,125,548
  1,219,396
  1,316,976
  1,418,411
  1,523,847
  1,633,452
  1,747,415
  1,865,945
  1,989,274
  2,117,650
  2,251,343
Change in working capital, $m
  -1,606
  1,169
  1,390
  1,624
  1,867
  2,117
  2,370
  2,623
  2,874
  3,122
  3,364
  3,601
  3,833
  4,059
  4,280
  4,498
  4,713
  4,926
  5,140
  5,355
  5,574
  5,797
  6,026
  6,262
  6,508
  6,763
  7,030
  7,310
  7,603
  7,912
  8,237
Cash from operations, $m
  22,082
  38,956
  60,660
  86,195
  115,715
  149,323
  187,066
  228,947
  274,934
  324,962
  378,952
  436,810
  498,444
  563,765
  632,694
  705,168
  781,145
  860,600
  943,537
  1,029,978
  1,119,974
  1,213,599
  1,310,950
  1,412,149
  1,517,339
  1,626,689
  1,740,385
  1,858,636
  1,981,670
  2,109,738
  2,243,106
Maintenance CAPEX, $m
  0
  -22,335
  -28,967
  -36,854
  -46,070
  -56,669
  -68,686
  -82,139
  -97,028
  -113,342
  -131,060
  -150,154
  -170,594
  -192,347
  -215,382
  -239,674
  -265,200
  -291,947
  -319,907
  -349,080
  -379,475
  -411,111
  -444,012
  -478,212
  -513,755
  -550,690
  -589,074
  -628,973
  -670,459
  -713,612
  -758,517
New CAPEX, $m
  -16,163
  -73,614
  -87,552
  -102,299
  -117,649
  -133,390
  -149,320
  -165,267
  -181,087
  -196,672
  -211,949
  -226,879
  -241,454
  -255,693
  -269,637
  -283,345
  -296,889
  -310,352
  -323,822
  -337,391
  -351,152
  -365,201
  -379,627
  -394,523
  -409,974
  -426,066
  -442,881
  -460,499
  -478,996
  -498,448
  -518,930
Cash from investing activities, $m
  -12,403
  -95,949
  -116,519
  -139,153
  -163,719
  -190,059
  -218,006
  -247,406
  -278,115
  -310,014
  -343,009
  -377,033
  -412,048
  -448,040
  -485,019
  -523,019
  -562,089
  -602,299
  -643,729
  -686,471
  -730,627
  -776,312
  -823,639
  -872,735
  -923,729
  -976,756
  -1,031,955
  -1,089,472
  -1,149,455
  -1,212,060
  -1,277,447
Free cash flow, $m
  9,679
  -56,992
  -55,859
  -52,958
  -48,004
  -40,736
  -30,941
  -18,458
  -3,181
  14,949
  35,943
  59,777
  86,396
  115,725
  147,674
  182,149
  219,055
  258,301
  299,808
  343,508
  389,346
  437,287
  487,311
  539,414
  593,611
  649,933
  708,430
  769,164
  832,215
  897,677
  965,658
Issuance/(repayment) of debt, $m
  4,293
  47,491
  56,318
  65,804
  75,678
  85,803
  96,051
  106,308
  116,484
  126,509
  136,336
  145,940
  155,316
  164,475
  173,445
  182,262
  190,975
  199,634
  208,299
  217,027
  225,879
  234,916
  244,196
  253,777
  263,716
  274,068
  284,884
  296,216
  308,115
  320,627
  333,803
Issuance/(repurchase) of shares, $m
  -971
  38,512
  33,893
  27,292
  18,486
  7,269
  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  
  3,160
  86,003
  90,211
  93,096
  94,164
  93,072
  96,051
  106,308
  116,484
  126,509
  136,336
  145,940
  155,316
  164,475
  173,445
  182,262
  190,975
  199,634
  208,299
  217,027
  225,879
  234,916
  244,196
  253,777
  263,716
  274,068
  284,884
  296,216
  308,115
  320,627
  333,803
Total cash flow (excl. dividends), $m
  12,405
  29,011
  34,352
  40,137
  46,160
  52,336
  65,109
  87,850
  113,304
  141,458
  172,279
  205,717
  241,712
  280,200
  321,119
  364,412
  410,029
  457,936
  508,107
  560,535
  615,226
  672,203
  731,506
  793,191
  857,327
  924,001
  993,314
  1,065,380
  1,140,330
  1,218,305
  1,299,460
Retained Cash Flow (-), $m
  3,486
  -49,670
  -59,088
  -69,040
  -79,400
  -90,023
  -100,774
  -111,537
  -122,213
  -132,731
  -143,041
  -153,118
  -162,954
  -172,564
  -181,975
  -191,226
  -200,367
  -209,452
  -218,543
  -227,700
  -236,988
  -246,469
  -256,205
  -266,258
  -276,686
  -287,546
  -298,895
  -310,784
  -323,268
  -336,396
  -350,219
Prev. year cash balance distribution, $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 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
 
  -20,659
  -24,736
  -28,903
  -33,240
  -37,687
  -35,665
  -23,687
  -8,910
  8,727
  29,238
  52,600
  78,758
  107,636
  139,144
  173,186
  209,663
  248,483
  289,564
  332,834
  378,238
  425,734
  475,301
  526,933
  580,641
  636,455
  694,419
  754,596
  817,062
  881,909
  949,241
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
 
  -19,807
  -22,645
  -25,153
  -27,370
  -29,212
  -25,883
  -16,002
  -5,569
  5,013
  15,328
  24,979
  33,609
  40,925
  46,713
  50,844
  53,280
  54,066
  53,326
  51,247
  48,062
  44,035
  39,438
  34,536
  29,573
  24,759
  20,260
  16,196
  12,641
  9,627
  7,147
Current shareholders' claim on cash, %
  100
  89.3
  82.5
  78.5
  76.3
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7
  75.7

Exxon Mobil Corporation explores for and produces crude oil and natural gas in the United States, Canada/South America, Europe, Africa, Asia, and Australia/Oceania. The company operates through Upstream, Downstream, and Chemical segments. It also manufactures petroleum products; manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene, and polypropylene plastics, as well as various specialty product; and transports and sells crude oil, natural gas, and petroleum products. As of December 31, 2016, the company had approximately 35,047 gross and 29,375 net operated wells. Exxon Mobil Corporation was founded in 1870 and is headquartered in Irving, Texas.

FINANCIAL RATIOS  of  Exxon Mobil (XOM)

Valuation Ratios
P/E Ratio 41
Price to Sales 1.5
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 14.6
Price to Free Cash Flow 54.3
Growth Rates
Sales Growth Rate -15.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -39%
Cap. Spend. - 3 Yr. Gr. Rate -13.7%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 17.3%
Total Debt to Equity 25.6%
Interest Coverage 11
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 3.7%
Ret/ On T. Cap. - 3 Yr. Avg. 9.3%
Return On Equity 4.6%
Return On Equity - 3 Yr. Avg. 10.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 28.1%
Gross Margin - 3 Yr. Avg. 26.8%
EBITDA Margin 14.2%
EBITDA Margin - 3 Yr. Avg. 15.8%
Operating Margin 0.4%
Oper. Margin - 3 Yr. Avg. 4.7%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 8.4%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 6%
Effective Tax Rate -5.1%
Eff/ Tax Rate - 3 Yr. Avg. 18.1%
Payout Ratio 158.8%

XOM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XOM stock intrinsic value calculation we used $218608 million for the last fiscal year's total revenue generated by Exxon Mobil. The default revenue input number comes from 2016 income statement of Exxon Mobil. 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 XOM stock valuation model: a) initial revenue growth rate of 29.7% 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 XOM is calculated based on our internal credit rating of Exxon Mobil, 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 Exxon Mobil.
    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 XOM stock the variable cost ratio is equal to 70.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $64525 million in the base year in the intrinsic value calculation for XOM 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 Exxon Mobil.

Corporate tax rate of 27% is the nominal tax rate for Exxon Mobil. 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 XOM 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 XOM are equal to 113.4%.

Life of production assets of 11.1 years is the average useful life of capital assets used in Exxon Mobil 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 XOM is equal to 1.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $167325 million for Exxon Mobil - 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 4135.27 million for Exxon Mobil 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 Exxon Mobil at the current share price and the inputted number of shares is $320.4 billion.

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COMPANY NEWS

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▶ ExxonMobils Journey as a Dividend Aristocrat   [09:32AM  Market Realist]
▶ Exxon Mobil Needs to Break Out of This Pattern   [Aug-14-17 02:28PM  TheStreet.com]
▶ Global Nuclear Power Capacity Could Double By 2050   [Aug-10-17 07:00PM  Oilprice.com]
▶ 52-Week Company Lows   [12:29PM  GuruFocus.com]
▶ Key Updates from the Energy Industry Last Week   [Aug-08-17 09:36AM  Market Realist]
▶ MLPs Fall on Permian Concerns; An Opportunity?   [Aug-07-17 05:38PM  Barrons.com]
▶ 5 things to know in Texas energy this week   [09:55AM  American City Business Journals]
▶ The Secret Behind Better Oil Major Earnings   [Aug-02-17 07:00PM  Oilprice.com]
▶ Oil Holds Under $50 With Key Inventory, Production Data On Tap   [10:23AM  Investor's Business Daily]
▶ [$$] BP Says It Can Now Profit at Oil Below $50   [12:08AM  The Wall Street Journal]
▶ [$$] Big Oil Bites the Low-Price Bullet   [12:08AM  The Wall Street Journal]
▶ ExxonMobils 2Q17 Earnings Rose despite a 7% Earnings Miss   [Aug-01-17 05:17PM  Market Realist]
▶ 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]
▶ Sell FAANG, Buy Beaten Down Commodities Stocks   [Jul-31-17 09:57PM  Forbes]
▶ ConocoPhillips in 3 Charts   [08:03PM  Motley Fool]
▶ 5 Ways to trade energy   [05:00PM  CNBC Videos]
▶ Gulf Of Mexico Growth Second Only To Permian   [Jul-29-17 01:00PM  Oilprice.com]
▶ [$$] Big Oil Posts Healthy Profits   [12:07AM  The Wall Street Journal]
▶ Exxon misses 2Q profit forecasts   [Jul-28-17 11:14PM  Associated Press]
▶ Chevron swings to profit, Exxon misses   [04:26PM  Reuters Videos]
▶ Is This Oil Price Rally Sustainable?   [03:30PM  Oilprice.com]
▶ [$$] Big Oil Posts Healthy Profits   [01:54PM  The Wall Street Journal]
▶ Will oil be 'lower forever'?   [01:41PM  CNBC Videos]
▶ ExxonMobil: Not Chevron   [01:16PM  Barrons.com]
Stock chart of XOM Financial statements of XOM
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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