Intrinsic value of Andeavor - ANDV

Previous Close

$144.84

  Intrinsic Value

$270.88

stock screener

  Rating & Target

str. buy

+87%

Previous close

$144.84

 
Intrinsic value

$270.88

 
Up/down potential

+87%

 
Rating

str. buy

We calculate the intrinsic value of ANDV 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 2017), $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 20.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  42.30
  38.57
  35.21
  32.19
  29.47
  27.03
  24.82
  22.84
  21.06
  19.45
  18.01
  16.71
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
  6.76
Revenue, $m
  49,769
  68,965
  93,250
  123,269
  159,600
  202,732
  253,056
  310,855
  376,310
  449,505
  530,441
  619,052
  715,220
  818,792
  929,599
  1,047,470
  1,172,242
  1,303,775
  1,441,956
  1,586,709
  1,737,999
  1,895,832
  2,060,261
  2,231,384
  2,409,343
  2,594,327
  2,786,566
  2,986,334
  3,193,947
  3,409,758
Variable operating expenses, $m
  46,577
  64,353
  86,842
  114,641
  148,285
  188,228
  234,830
  288,355
  348,969
  416,752
  491,215
  573,273
  662,329
  758,242
  860,855
  970,010
  1,085,555
  1,207,361
  1,335,323
  1,469,372
  1,609,474
  1,755,635
  1,907,905
  2,066,373
  2,231,172
  2,402,476
  2,580,499
  2,765,495
  2,957,755
  3,157,607
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
  46,577
  64,353
  86,842
  114,641
  148,285
  188,228
  234,830
  288,355
  348,969
  416,752
  491,215
  573,273
  662,329
  758,242
  860,855
  970,010
  1,085,555
  1,207,361
  1,335,323
  1,469,372
  1,609,474
  1,755,635
  1,907,905
  2,066,373
  2,231,172
  2,402,476
  2,580,499
  2,765,495
  2,957,755
  3,157,607
Operating income, $m
  3,193
  4,612
  6,408
  8,628
  11,314
  14,504
  18,226
  22,500
  27,340
  32,753
  39,226
  45,779
  52,890
  60,550
  68,744
  77,460
  86,687
  96,414
  106,633
  117,337
  128,525
  140,197
  152,356
  165,011
  178,171
  191,850
  206,066
  220,839
  236,192
  252,151
EBITDA, $m
  5,890
  8,162
  11,036
  14,589
  18,889
  23,993
  29,949
  36,790
  44,536
  53,199
  62,778
  73,265
  84,646
  96,904
  110,018
  123,968
  138,735
  154,302
  170,655
  187,787
  205,692
  224,372
  243,832
  264,084
  285,146
  307,038
  329,790
  353,433
  378,004
  403,545
Interest expense (income), $m
  199
  461
  936
  1,553
  2,334
  3,300
  4,468
  5,855
  7,473
  9,332
  11,437
  13,790
  16,393
  19,242
  22,335
  25,665
  29,229
  33,019
  37,031
  41,261
  45,704
  50,359
  55,224
  60,300
  65,587
  71,090
  76,813
  82,761
  88,943
  95,367
  102,043
Earnings before tax, $m
  2,731
  3,676
  4,855
  6,294
  8,015
  10,036
  12,371
  15,027
  18,008
  21,316
  25,436
  29,386
  33,648
  38,215
  43,078
  48,232
  53,668
  59,383
  65,372
  71,633
  78,166
  84,973
  92,057
  99,424
  107,081
  115,038
  123,305
  131,896
  140,825
  150,109
Tax expense, $m
  737
  993
  1,311
  1,699
  2,164
  2,710
  3,340
  4,057
  4,862
  5,755
  6,868
  7,934
  9,085
  10,318
  11,631
  13,023
  14,490
  16,033
  17,650
  19,341
  21,105
  22,943
  24,855
  26,844
  28,912
  31,060
  33,292
  35,612
  38,023
  40,529
Net income, $m
  1,994
  2,684
  3,544
  4,594
  5,851
  7,326
  9,031
  10,969
  13,146
  15,561
  18,568
  21,452
  24,563
  27,897
  31,447
  35,209
  39,178
  43,349
  47,721
  52,292
  57,061
  62,030
  67,201
  72,579
  78,169
  83,978
  90,013
  96,284
  102,803
  109,579

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  40,661
  56,344
  76,185
  100,710
  130,392
  165,631
  206,745
  253,966
  307,443
  367,242
  433,367
  505,762
  584,330
  668,948
  759,477
  855,776
  957,714
  1,065,175
  1,178,068
  1,296,331
  1,419,933
  1,548,882
  1,683,220
  1,823,026
  1,968,418
  2,119,548
  2,276,606
  2,439,816
  2,609,434
  2,785,750
Adjusted assets (=assets-cash), $m
  40,661
  56,344
  76,185
  100,710
  130,392
  165,631
  206,745
  253,966
  307,443
  367,242
  433,367
  505,762
  584,330
  668,948
  759,477
  855,776
  957,714
  1,065,175
  1,178,068
  1,296,331
  1,419,933
  1,548,882
  1,683,220
  1,823,026
  1,968,418
  2,119,548
  2,276,606
  2,439,816
  2,609,434
  2,785,750
Revenue / Adjusted assets
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
  1.224
Average production assets, $m
  22,098
  30,621
  41,403
  54,732
  70,862
  90,013
  112,357
  138,020
  167,081
  199,580
  235,516
  274,859
  317,558
  363,544
  412,742
  465,077
  520,476
  578,876
  640,228
  704,499
  771,671
  841,749
  914,756
  990,734
  1,069,748
  1,151,881
  1,237,235
  1,325,932
  1,418,112
  1,513,933
Working capital, $m
  448
  621
  839
  1,109
  1,436
  1,825
  2,278
  2,798
  3,387
  4,046
  4,774
  5,571
  6,437
  7,369
  8,366
  9,427
  10,550
  11,734
  12,978
  14,280
  15,642
  17,062
  18,542
  20,082
  21,684
  23,349
  25,079
  26,877
  28,746
  30,688
Total debt, $m
  15,601
  25,889
  38,904
  54,993
  74,464
  97,581
  124,552
  155,529
  190,609
  229,838
  273,216
  320,707
  372,247
  427,757
  487,144
  550,316
  617,188
  687,682
  761,740
  839,320
  920,403
  1,004,994
  1,093,119
  1,184,832
  1,280,209
  1,379,350
  1,482,381
  1,589,446
  1,700,716
  1,816,379
Total liabilities, $m
  26,674
  36,962
  49,977
  66,066
  85,537
  108,654
  135,625
  166,602
  201,682
  240,911
  284,289
  331,780
  383,320
  438,830
  498,217
  561,389
  628,261
  698,755
  772,813
  850,393
  931,476
  1,016,067
  1,104,192
  1,195,905
  1,291,282
  1,390,423
  1,493,454
  1,600,519
  1,711,789
  1,827,452
Total equity, $m
  13,987
  19,382
  26,208
  34,644
  44,855
  56,977
  71,120
  87,364
  105,760
  126,331
  149,078
  173,982
  201,009
  230,118
  261,260
  294,387
  329,454
  366,420
  405,255
  445,938
  488,457
  532,815
  579,028
  627,121
  677,136
  729,124
  783,152
  839,297
  897,645
  958,298
Total liabilities and equity, $m
  40,661
  56,344
  76,185
  100,710
  130,392
  165,631
  206,745
  253,966
  307,442
  367,242
  433,367
  505,762
  584,329
  668,948
  759,477
  855,776
  957,715
  1,065,175
  1,178,068
  1,296,331
  1,419,933
  1,548,882
  1,683,220
  1,823,026
  1,968,418
  2,119,547
  2,276,606
  2,439,816
  2,609,434
  2,785,750
Debt-to-equity ratio
  1.120
  1.340
  1.480
  1.590
  1.660
  1.710
  1.750
  1.780
  1.800
  1.820
  1.830
  1.840
  1.850
  1.860
  1.860
  1.870
  1.870
  1.880
  1.880
  1.880
  1.880
  1.890
  1.890
  1.890
  1.890
  1.890
  1.890
  1.890
  1.890
  1.900
Adjusted equity ratio
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,994
  2,684
  3,544
  4,594
  5,851
  7,326
  9,031
  10,969
  13,146
  15,561
  18,568
  21,452
  24,563
  27,897
  31,447
  35,209
  39,178
  43,349
  47,721
  52,292
  57,061
  62,030
  67,201
  72,579
  78,169
  83,978
  90,013
  96,284
  102,803
  109,579
Depreciation, amort., depletion, $m
  2,698
  3,550
  4,628
  5,961
  7,574
  9,489
  11,724
  14,290
  17,196
  20,446
  23,552
  27,486
  31,756
  36,354
  41,274
  46,508
  52,048
  57,888
  64,023
  70,450
  77,167
  84,175
  91,476
  99,073
  106,975
  115,188
  123,724
  132,593
  141,811
  151,393
Funds from operations, $m
  4,692
  6,233
  8,172
  10,555
  13,425
  16,816
  20,754
  25,259
  30,342
  36,007
  42,120
  48,938
  56,319
  64,251
  72,721
  81,717
  91,225
  101,237
  111,744
  122,742
  134,228
  146,205
  158,677
  171,653
  185,144
  199,166
  213,736
  228,878
  244,614
  260,972
Change in working capital, $m
  133
  173
  219
  270
  327
  388
  453
  520
  589
  659
  728
  797
  866
  932
  997
  1,061
  1,123
  1,184
  1,244
  1,303
  1,362
  1,421
  1,480
  1,540
  1,602
  1,665
  1,730
  1,798
  1,869
  1,942
Cash from operations, $m
  4,558
  6,061
  7,954
  10,285
  13,098
  16,427
  20,301
  24,739
  29,753
  35,348
  41,391
  48,140
  55,453
  63,319
  71,724
  80,656
  90,102
  100,053
  110,500
  121,439
  132,867
  144,784
  157,197
  170,113
  183,542
  197,501
  212,006
  227,080
  242,745
  259,030
Maintenance CAPEX, $m
  -1,553
  -2,210
  -3,062
  -4,140
  -5,473
  -7,086
  -9,001
  -11,236
  -13,802
  -16,708
  -19,958
  -23,552
  -27,486
  -31,756
  -36,354
  -41,274
  -46,508
  -52,048
  -57,888
  -64,023
  -70,450
  -77,167
  -84,175
  -91,476
  -99,073
  -106,975
  -115,188
  -123,724
  -132,593
  -141,811
New CAPEX, $m
  -6,566
  -8,523
  -10,782
  -13,328
  -16,131
  -19,151
  -22,344
  -25,663
  -29,062
  -32,499
  -35,936
  -39,343
  -42,698
  -45,986
  -49,199
  -52,335
  -55,399
  -58,400
  -61,352
  -64,270
  -67,173
  -70,078
  -73,007
  -75,978
  -79,014
  -82,133
  -85,354
  -88,697
  -92,180
  -95,820
Cash from investing activities, $m
  -8,119
  -10,733
  -13,844
  -17,468
  -21,604
  -26,237
  -31,345
  -36,899
  -42,864
  -49,207
  -55,894
  -62,895
  -70,184
  -77,742
  -85,553
  -93,609
  -101,907
  -110,448
  -119,240
  -128,293
  -137,623
  -147,245
  -157,182
  -167,454
  -178,087
  -189,108
  -200,542
  -212,421
  -224,773
  -237,631
Free cash flow, $m
  -3,560
  -4,672
  -5,891
  -7,183
  -8,506
  -9,809
  -11,044
  -12,159
  -13,111
  -13,859
  -14,503
  -14,755
  -14,731
  -14,423
  -13,829
  -12,953
  -11,804
  -10,395
  -8,739
  -6,854
  -4,756
  -2,461
  16
  2,658
  5,455
  8,393
  11,464
  14,659
  17,972
  21,399
Issuance/(repayment) of debt, $m
  7,916
  10,288
  13,015
  16,089
  19,471
  23,117
  26,971
  30,977
  35,080
  39,229
  43,378
  47,491
  51,541
  55,509
  59,387
  63,173
  66,871
  70,495
  74,058
  77,580
  81,083
  84,590
  88,125
  91,713
  95,377
  99,142
  103,030
  107,065
  111,269
  115,663
Issuance/(repurchase) of shares, $m
  2,179
  2,711
  3,281
  3,842
  4,360
  4,796
  5,113
  5,275
  5,250
  5,010
  4,179
  3,452
  2,464
  1,212
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  10,095
  12,999
  16,296
  19,931
  23,831
  27,913
  32,084
  36,252
  40,330
  44,239
  47,557
  50,943
  54,005
  56,721
  59,387
  63,173
  66,871
  70,495
  74,058
  77,580
  81,083
  84,590
  88,125
  91,713
  95,377
  99,142
  103,030
  107,065
  111,269
  115,663
Total cash flow (excl. dividends), $m
  6,534
  8,327
  10,406
  12,747
  15,325
  18,103
  21,040
  24,093
  27,219
  30,380
  33,054
  36,188
  39,274
  42,298
  45,558
  50,220
  55,067
  60,100
  65,318
  70,726
  76,327
  82,130
  88,141
  94,371
  100,832
  107,535
  114,494
  121,724
  129,242
  137,062
Retained Cash Flow (-), $m
  -4,172
  -5,395
  -6,825
  -8,437
  -10,211
  -12,122
  -14,143
  -16,244
  -18,396
  -20,571
  -22,747
  -24,904
  -27,027
  -29,109
  -31,142
  -33,127
  -35,067
  -36,967
  -38,835
  -40,682
  -42,519
  -44,358
  -46,212
  -48,093
  -50,015
  -51,989
  -54,028
  -56,144
  -58,349
  -60,653
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
  70
  100
  138
  187
  247
  319
  405
  506
  622
  753
  899
  1,061
  1,238
  1,430
  1,638
  1,859
  2,095
  2,344
  2,608
  2,884
  3,173
  3,476
  3,792
  4,121
  4,463
  4,819
  5,189
  5,573
  5,973
  6,388
Cash available for distribution, $m
  2,361
  2,932
  3,581
  4,311
  5,115
  5,981
  6,897
  7,848
  8,823
  9,809
  10,307
  11,284
  12,247
  13,190
  14,416
  17,093
  20,001
  23,133
  26,483
  30,044
  33,808
  37,771
  41,929
  46,278
  50,817
  55,546
  60,466
  65,580
  70,893
  76,409
Discount rate, %
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
  2,217
  2,570
  2,909
  3,225
  3,497
  3,708
  3,843
  3,897
  3,866
  3,753
  3,407
  3,185
  2,915
  2,614
  2,345
  2,249
  2,096
  1,899
  1,674
  1,435
  1,197
  970
  765
  586
  436
  315
  221
  150
  98
  62
Current shareholders' claim on cash, %
  90.3
  82.6
  76.3
  71.2
  67.2
  63.9
  61.2
  59.1
  57.4
  56.1
  55.2
  54.6
  54.2
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1
  54.1

Andeavor, formerly Tesoro Corporation, is an independent petroleum refining, logistics and marketing company. he Company operates through three segments. The Refining operating segment refines crude oil and other feedstocks into transportation fuels, such as gasoline and gasoline blendstocks, jet fuel and diesel fuel, as well as other products, including heavy fuel oils, liquefied petroleum gas and petroleum coke for sale in bulk markets to a range of customers within its markets. The TLLP segment comprises Tesoro Logistics LP's (TLLP) assets and operations, and includes certain crude oil and natural gas gathering assets, natural gas and natural gas liquids (NGLs) processing assets, and crude oil and refined products terminaling, and transportation. The marketing segment sells transportation fuels through branded and unbranded channels.

FINANCIAL RATIOS  of  Andeavor (ANDV)

Valuation Ratios
P/E Ratio 23.1
Price to Sales 0.7
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 13
Price to Free Cash Flow 41.3
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%

ANDV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ANDV stock intrinsic value calculation we used $34975 million for the last fiscal year's total revenue generated by Andeavor. The default revenue input number comes from 2017 income statement of Andeavor. 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 ANDV stock valuation model: a) initial revenue growth rate of 42.3% 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 6.5%, whose default value for ANDV is calculated based on our internal credit rating of Andeavor, 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 Andeavor.
    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 ANDV stock the variable cost ratio is equal to 94%.

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 ANDV 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 6% for Andeavor.

Corporate tax rate of 27% is the nominal tax rate for Andeavor. 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 ANDV stock is equal to 0.2%.

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 ANDV are equal to 44.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Andeavor 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 ANDV is equal to 0.9%. 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 - $9815 million for Andeavor - 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 140 million for Andeavor 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 Andeavor at the current share price and the inputted number of shares is $20.3 billion.

COMPANY NEWS

▶ Speedway adds high-level exec as $23B acquisition nears completion   [Aug-15-18 05:00AM  American City Business Journals]
▶ Marathon releases leadership roster for post-Andeavor acquisition   [Aug-10-18 06:17PM  American City Business Journals]
▶ Andeavor: 2Q Earnings Snapshot   [05:21PM  Associated Press]
▶ Andeavor deal paves way for another round of expansion in Mexico   [Jul-24-18 02:42PM  American City Business Journals]
▶ Can Mexico's president-elect end gasoline imports as pledged?   [Jul-16-18 08:36AM  American City Business Journals]
▶ Andeavor to Release Second Quarter 2018 Earnings   [Jul-11-18 04:31PM  GlobeNewswire]
▶ Is It Time To Buy Andeavor (NYSE:ANDV) Based Off Its PE Ratio?   [Jun-25-18 09:14AM  Simply Wall St.]
▶ The Return of Shag CarpetMinus the Cocaine-Dealer Connotations   [Jun-15-18 08:03PM  The Wall Street Journal]
▶ 8 Energy Stocks For The New Oil Boom   [May-25-18 02:00PM  Investopedia]
▶ Mexico Gas Summit to highlight SA companies' projects   [May-23-18 03:51PM  American City Business Journals]
▶ Andeavor Completes Asphalt Terminals Acquisition   [May-21-18 05:31PM  GlobeNewswire]
▶ Buy These Energy Stocks on Crude Oil Price Surge   [May-18-18 01:34PM  Investopedia]
▶ Marathon Petroleum CEO visits San Antonio to meet Andeavor employees   [May-11-18 02:23PM  American City Business Journals]
▶ Marathon deal not expected to affect Andeavor's philanthropy, civic involvement   [May-10-18 03:00PM  American City Business Journals]
▶ Houston midstream co. cancels pipeline open season   [May-08-18 02:13PM  American City Business Journals]
▶ CEO: Marathon to switch most Andeavor-owned gas stations to its brands   [06:20AM  American City Business Journals]
▶ Andeavor: 1Q Earnings Snapshot   [05:19PM  Associated Press]
▶ Andeavor Reports First Quarter 2018 Results   [04:54PM  GlobeNewswire]
▶ Oil Refiners ETF Pumping Strong This Year   [May-03-18 03:29PM  ETF Trends]
▶ WeissLaw LLP Investigates Andeavor Acquisition   [May-01-18 06:20PM  PR Newswire]
▶ Marathon, Andeavor to make bigger play in Mexican fuels market   [03:01PM  American City Business Journals]
▶ Tokyo stocks higher in quiet Labor Day trading   [12:24AM  Associated Press]
▶ Business Highlights   [05:29PM  Associated Press]
▶ Marathon Petroleum, Walmart, Prologis Lead Busy Merger News   [04:04PM  Investor's Business Daily]
▶ Closing Bell: LIVE MARKETS BLOG   [04:04PM  TheStreet.com]
▶ [$$] Shale Boom Fuels Refinery Deal   [12:42PM  The Wall Street Journal]
▶ Why Andeavors Stock Is Skyrocketing Today   [11:43AM  Motley Fool]
▶ Marathon Petroleum to buy Andeavor for more than $23B   [11:19AM  American City Business Journals]
▶ Andeavor to be bought for more than $23B   [10:47AM  American City Business Journals]
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