Intrinsic value of BP ADR - BP

Previous Close

$38.84

  Intrinsic Value

$6.42

stock screener

  Rating & Target

str. sell

-83%

Previous close

$38.84

 
Intrinsic value

$6.42

 
Up/down potential

-83%

 
Rating

str. sell

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

We calculate the intrinsic value of BP 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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of BP ADR (BP) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -17.89
  27.60
  25.34
  23.31
  21.48
  19.83
  18.35
  17.01
  15.81
  14.73
  13.76
  12.88
  12.09
  11.38
  10.74
  10.17
  9.65
  9.19
  8.77
  8.39
  8.05
  7.75
  7.47
  7.23
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
Revenue, $m
  183,008
  233,518
  292,692
  360,906
  438,413
  525,340
  621,714
  727,472
  842,481
  966,567
  1,099,525
  1,241,145
  1,391,226
  1,549,588
  1,716,085
  1,890,613
  2,073,117
  2,263,591
  2,462,087
  2,668,708
  2,883,617
  3,107,029
  3,339,214
  3,580,491
  3,831,234
  4,091,862
  4,362,844
  4,644,692
  4,937,967
  5,243,270
  5,561,247
Variable operating expenses, $m
 
  244,185
  305,777
  376,781
  457,456
  547,937
  648,252
  758,332
  878,044
  1,007,203
  1,145,596
  1,291,887
  1,448,104
  1,612,940
  1,786,244
  1,967,908
  2,157,873
  2,356,134
  2,562,745
  2,777,814
  3,001,509
  3,234,055
  3,475,732
  3,726,874
  3,987,868
  4,259,151
  4,541,211
  4,834,583
  5,139,847
  5,457,632
  5,788,609
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
  185,936
  244,185
  305,777
  376,781
  457,456
  547,937
  648,252
  758,332
  878,044
  1,007,203
  1,145,596
  1,291,887
  1,448,104
  1,612,940
  1,786,244
  1,967,908
  2,157,873
  2,356,134
  2,562,745
  2,777,814
  3,001,509
  3,234,055
  3,475,732
  3,726,874
  3,987,868
  4,259,151
  4,541,211
  4,834,583
  5,139,847
  5,457,632
  5,788,609
Operating income, $m
  -2,928
  -10,666
  -13,086
  -15,874
  -19,043
  -22,597
  -26,537
  -30,861
  -35,563
  -40,636
  -46,072
  -50,742
  -56,878
  -63,352
  -70,159
  -77,295
  -84,756
  -92,543
  -100,658
  -109,106
  -117,892
  -127,026
  -136,518
  -146,382
  -156,634
  -167,289
  -178,368
  -189,890
  -201,881
  -214,362
  -227,362
EBITDA, $m
  11,577
  7,648
  9,587
  11,821
  14,359
  17,206
  20,363
  23,827
  27,594
  31,658
  36,013
  40,651
  45,567
  50,754
  56,207
  61,923
  67,901
  74,139
  80,641
  87,408
  94,447
  101,765
  109,369
  117,272
  125,485
  134,021
  142,896
  152,128
  161,733
  171,733
  182,148
Interest expense (income), $m
  1,137
  1,808
  3,369
  5,195
  7,301
  9,694
  12,378
  15,353
  18,618
  22,168
  25,999
  30,103
  34,476
  39,109
  43,998
  49,138
  54,526
  60,160
  66,040
  72,168
  78,547
  85,181
  92,078
  99,246
  106,695
  114,436
  122,482
  130,847
  139,548
  148,602
  158,027
Earnings before tax, $m
  -2,295
  -12,475
  -16,454
  -21,070
  -26,344
  -32,291
  -38,915
  -46,214
  -54,180
  -62,804
  -72,071
  -80,846
  -91,353
  -102,461
  -114,157
  -126,432
  -139,282
  -152,703
  -166,698
  -181,274
  -196,439
  -212,207
  -228,596
  -245,629
  -263,328
  -281,725
  -300,849
  -320,738
  -341,429
  -362,964
  -385,390
Tax expense, $m
  -2,467
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  115
  -12,475
  -16,454
  -21,070
  -26,344
  -32,291
  -38,915
  -46,214
  -54,180
  -62,804
  -72,071
  -80,846
  -91,353
  -102,461
  -114,157
  -126,432
  -139,282
  -152,703
  -166,698
  -181,274
  -196,439
  -212,207
  -228,596
  -245,629
  -263,328
  -281,725
  -300,849
  -320,738
  -341,429
  -362,964
  -385,390

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  23,528
  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
  263,316
  306,053
  383,606
  473,010
  574,591
  688,520
  814,829
  953,436
  1,104,169
  1,266,798
  1,441,055
  1,626,664
  1,823,363
  2,030,914
  2,249,128
  2,477,868
  2,717,060
  2,966,699
  3,226,850
  3,497,652
  3,779,315
  4,072,123
  4,376,427
  4,692,649
  5,021,277
  5,362,860
  5,718,013
  6,087,408
  6,471,778
  6,871,913
  7,288,659
Adjusted assets (=assets-cash), $m
  239,788
  306,053
  383,606
  473,010
  574,591
  688,520
  814,829
  953,436
  1,104,169
  1,266,798
  1,441,055
  1,626,664
  1,823,363
  2,030,914
  2,249,128
  2,477,868
  2,717,060
  2,966,699
  3,226,850
  3,497,652
  3,779,315
  4,072,123
  4,376,427
  4,692,649
  5,021,277
  5,362,860
  5,718,013
  6,087,408
  6,471,778
  6,871,913
  7,288,659
Revenue / Adjusted assets
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
  0.763
Average production assets, $m
  148,179
  189,150
  237,080
  292,334
  355,114
  425,526
  503,589
  589,252
  682,410
  782,919
  890,615
  1,005,327
  1,126,893
  1,255,166
  1,390,029
  1,531,397
  1,679,225
  1,833,509
  1,994,290
  2,161,654
  2,335,730
  2,516,694
  2,704,763
  2,900,198
  3,103,300
  3,314,408
  3,533,903
  3,762,201
  3,999,753
  4,247,048
  4,504,610
Working capital, $m
  9,459
  -9,574
  -12,000
  -14,797
  -17,975
  -21,539
  -25,490
  -29,826
  -34,542
  -39,629
  -45,081
  -50,887
  -57,040
  -63,533
  -70,359
  -77,515
  -84,998
  -92,807
  -100,946
  -109,417
  -118,228
  -127,388
  -136,908
  -146,800
  -157,081
  -167,766
  -178,877
  -190,432
  -202,457
  -214,974
  -228,011
Total debt, $m
  58,300
  96,243
  148,437
  208,606
  276,969
  353,644
  438,650
  531,932
  633,376
  742,825
  860,100
  985,015
  1,117,393
  1,257,075
  1,403,933
  1,557,875
  1,718,852
  1,886,858
  2,061,940
  2,244,190
  2,433,749
  2,630,808
  2,835,605
  3,048,423
  3,269,589
  3,499,475
  3,738,493
  3,987,096
  4,245,777
  4,515,068
  4,795,538
Total liabilities, $m
  168,030
  205,973
  258,167
  318,336
  386,699
  463,374
  548,380
  641,662
  743,106
  852,555
  969,830
  1,094,745
  1,227,123
  1,366,805
  1,513,663
  1,667,605
  1,828,582
  1,996,588
  2,171,670
  2,353,920
  2,543,479
  2,740,538
  2,945,335
  3,158,153
  3,379,319
  3,609,205
  3,848,223
  4,096,826
  4,355,507
  4,624,798
  4,905,268
Total equity, $m
  95,286
  100,079
  125,439
  154,674
  187,891
  225,146
  266,449
  311,774
  361,063
  414,243
  471,225
  531,919
  596,240
  664,109
  735,465
  810,263
  888,479
  970,111
  1,055,180
  1,143,732
  1,235,836
  1,331,584
  1,431,092
  1,534,496
  1,641,957
  1,753,655
  1,869,790
  1,990,582
  2,116,271
  2,247,116
  2,383,392
Total liabilities and equity, $m
  263,316
  306,052
  383,606
  473,010
  574,590
  688,520
  814,829
  953,436
  1,104,169
  1,266,798
  1,441,055
  1,626,664
  1,823,363
  2,030,914
  2,249,128
  2,477,868
  2,717,061
  2,966,699
  3,226,850
  3,497,652
  3,779,315
  4,072,122
  4,376,427
  4,692,649
  5,021,276
  5,362,860
  5,718,013
  6,087,408
  6,471,778
  6,871,914
  7,288,660
Debt-to-equity ratio
  0.612
  0.960
  1.180
  1.350
  1.470
  1.570
  1.650
  1.710
  1.750
  1.790
  1.830
  1.850
  1.870
  1.890
  1.910
  1.920
  1.930
  1.940
  1.950
  1.960
  1.970
  1.980
  1.980
  1.990
  1.990
  2.000
  2.000
  2.000
  2.010
  2.010
  2.010
Adjusted equity ratio
  0.299
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327
  0.327

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  115
  -12,475
  -16,454
  -21,070
  -26,344
  -32,291
  -38,915
  -46,214
  -54,180
  -62,804
  -72,071
  -80,846
  -91,353
  -102,461
  -114,157
  -126,432
  -139,282
  -152,703
  -166,698
  -181,274
  -196,439
  -212,207
  -228,596
  -245,629
  -263,328
  -281,725
  -300,849
  -320,738
  -341,429
  -362,964
  -385,390
Depreciation, amort., depletion, $m
  14,505
  18,315
  22,672
  27,695
  33,403
  39,804
  46,900
  54,688
  63,157
  72,294
  82,084
  91,393
  102,445
  114,106
  126,366
  139,218
  152,657
  166,683
  181,299
  196,514
  212,339
  228,790
  245,888
  263,654
  282,118
  301,310
  321,264
  342,018
  363,614
  386,095
  409,510
Funds from operations, $m
  6,190
  5,840
  6,218
  6,625
  7,058
  7,513
  7,986
  8,474
  8,976
  9,490
  10,014
  10,548
  11,091
  11,645
  12,209
  12,786
  13,375
  13,980
  14,601
  15,240
  15,901
  16,583
  17,291
  18,026
  18,790
  19,585
  20,415
  21,281
  22,185
  23,131
  24,120
Change in working capital, $m
  -4,501
  -2,071
  -2,426
  -2,797
  -3,178
  -3,564
  -3,951
  -4,336
  -4,715
  -5,087
  -5,451
  -5,806
  -6,153
  -6,493
  -6,826
  -7,156
  -7,483
  -7,809
  -8,138
  -8,471
  -8,811
  -9,160
  -9,520
  -9,892
  -10,280
  -10,686
  -11,110
  -11,556
  -12,024
  -12,517
  -13,037
Cash from operations, $m
  10,691
  7,911
  8,644
  9,422
  10,236
  11,077
  11,937
  12,810
  13,692
  14,577
  15,465
  16,354
  17,245
  18,138
  19,036
  19,941
  20,858
  21,789
  22,739
  23,712
  24,712
  25,743
  26,811
  27,918
  29,070
  30,271
  31,525
  32,836
  34,209
  35,648
  37,157
Maintenance CAPEX, $m
  0
  -13,471
  -17,195
  -21,553
  -26,576
  -32,283
  -38,684
  -45,781
  -53,568
  -62,037
  -71,174
  -80,965
  -91,393
  -102,445
  -114,106
  -126,366
  -139,218
  -152,657
  -166,683
  -181,299
  -196,514
  -212,339
  -228,790
  -245,888
  -263,654
  -282,118
  -301,310
  -321,264
  -342,018
  -363,614
  -386,095
New CAPEX, $m
  -16,701
  -40,971
  -47,931
  -55,254
  -62,780
  -70,412
  -78,063
  -85,663
  -93,158
  -100,509
  -107,696
  -114,712
  -121,565
  -128,273
  -134,863
  -141,368
  -147,828
  -154,284
  -160,781
  -167,364
  -174,076
  -180,964
  -188,069
  -195,435
  -203,102
  -211,109
  -219,495
  -228,297
  -237,552
  -247,295
  -257,562
Cash from investing activities, $m
  -14,753
  -54,442
  -65,126
  -76,807
  -89,356
  -102,695
  -116,747
  -131,444
  -146,726
  -162,546
  -178,870
  -195,677
  -212,958
  -230,718
  -248,969
  -267,734
  -287,046
  -306,941
  -327,464
  -348,663
  -370,590
  -393,303
  -416,859
  -441,323
  -466,756
  -493,227
  -520,805
  -549,561
  -579,570
  -610,909
  -643,657
Free cash flow, $m
  -4,062
  -46,531
  -56,482
  -67,384
  -79,120
  -91,618
  -104,810
  -118,634
  -133,035
  -147,969
  -163,405
  -179,323
  -195,714
  -212,580
  -229,933
  -247,793
  -266,188
  -285,152
  -304,725
  -324,951
  -345,878
  -367,560
  -390,049
  -413,404
  -437,686
  -462,956
  -489,280
  -516,725
  -545,361
  -575,261
  -606,500
Issuance/(repayment) of debt, $m
  5,808
  44,577
  52,194
  60,168
  68,364
  76,674
  85,006
  93,283
  101,444
  109,449
  117,275
  124,915
  132,378
  139,682
  146,858
  153,942
  160,976
  168,007
  175,082
  182,250
  189,559
  197,059
  204,797
  212,818
  221,166
  229,886
  239,018
  248,603
  258,681
  269,291
  280,470
Issuance/(repurchase) of shares, $m
  0
  34,162
  41,814
  50,305
  59,561
  69,546
  80,218
  91,538
  103,470
  115,983
  129,053
  141,540
  155,674
  170,330
  185,513
  201,230
  217,497
  234,335
  251,768
  269,826
  288,542
  307,955
  328,104
  349,033
  370,790
  393,422
  416,984
  441,530
  467,118
  493,809
  521,666
Cash from financing (excl. dividends), $m  
  6,588
  78,739
  94,008
  110,473
  127,925
  146,220
  165,224
  184,821
  204,914
  225,432
  246,328
  266,455
  288,052
  310,012
  332,371
  355,172
  378,473
  402,342
  426,850
  452,076
  478,101
  505,014
  532,901
  561,851
  591,956
  623,308
  656,002
  690,133
  725,799
  763,100
  802,136
Total cash flow (excl. dividends), $m
  1,706
  32,209
  37,526
  43,089
  48,805
  54,602
  60,414
  66,187
  71,879
  77,463
  82,922
  87,132
  92,338
  97,433
  102,438
  107,379
  112,286
  117,190
  122,125
  127,125
  132,223
  137,455
  142,852
  148,447
  154,270
  160,352
  166,722
  173,408
  180,438
  187,838
  195,636
Retained Cash Flow (-), $m
  1,930
  -34,162
  -41,814
  -50,305
  -59,561
  -69,546
  -80,218
  -91,538
  -103,470
  -115,983
  -129,053
  -141,540
  -155,674
  -170,330
  -185,513
  -201,230
  -217,497
  -234,335
  -251,768
  -269,826
  -288,542
  -307,955
  -328,104
  -349,033
  -370,790
  -393,422
  -416,984
  -441,530
  -467,118
  -493,809
  -521,666
Prev. year cash balance distribution, $m
 
  16,894
  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
 
  14,941
  -4,288
  -7,216
  -10,756
  -14,944
  -19,804
  -25,351
  -31,591
  -38,520
  -46,130
  -54,408
  -63,336
  -72,898
  -83,075
  -93,851
  -105,212
  -117,145
  -129,643
  -142,701
  -156,319
  -170,500
  -185,252
  -200,587
  -216,520
  -233,070
  -250,262
  -268,122
  -286,680
  -305,970
  -326,029
Discount rate, %
 
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
 
  14,243
  -3,879
  -6,162
  -8,626
  -11,190
  -13,762
  -16,243
  -18,531
  -20,535
  -22,172
  -23,378
  -24,112
  -24,353
  -24,107
  -23,401
  -22,284
  -20,820
  -19,085
  -17,163
  -15,138
  -13,091
  -11,095
  -9,211
  -7,485
  -5,950
  -4,623
  -3,508
  -2,597
  -1,874
  -1,317
Current shareholders' claim on cash, %
  100
  75.4
  57.4
  44.2
  34.3
  26.8
  21.2
  16.8
  13.5
  10.9
  8.8
  7.2
  5.9
  4.9
  4.0
  3.3
  2.8
  2.3
  1.9
  1.6
  1.4
  1.2
  1.0
  0.8
  0.7
  0.6
  0.5
  0.4
  0.4
  0.3
  0.3

BP p.l.c. is an integrated oil and gas company. The Company owns an interest in OJSC Oil Company Rosneft (Rosneft), an oil and gas company. The Company's segments include Upstream, Downstream, Rosneft, and Other businesses and corporate. The Upstream segment is engaged in oil and natural gas exploration, field development and production, as well as midstream transportation, storage and processing. The Downstream segment has global manufacturing and marketing operations. The Rosneft segment has a resource base of hydrocarbons onshore and offshore. The Other businesses and corporate segment comprises the biofuels and wind businesses, shipping and treasury functions, and corporate activities around the world. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants to keep engines moving and the petrochemicals products used to make everyday items as diverse as paints, clothes and packaging.

FINANCIAL RATIOS  of  BP ADR (BP)

Valuation Ratios
P/E Ratio 6564
Price to Sales 4.1
Price to Book 7.9
Price to Tangible Book
Price to Cash Flow 70.6
Price to Free Cash Flow -125.6
Growth Rates
Sales Growth Rate -17.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.4%
Cap. Spend. - 3 Yr. Gr. Rate -7.4%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 54.2%
Total Debt to Equity 61.2%
Interest Coverage -1
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital 0.1%
Ret/ On T. Cap. - 3 Yr. Avg. -0.6%
Return On Equity 0.1%
Return On Equity - 3 Yr. Avg. -1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 15.1%
Gross Margin - 3 Yr. Avg. 13.7%
EBITDA Margin 7.3%
EBITDA Margin - 3 Yr. Avg. 5.4%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. -2%
Pre-Tax Margin -1.3%
Pre-Tax Margin - 3 Yr. Avg. -1.4%
Net Profit Margin 0.1%
Net Profit Margin - 3 Yr. Avg. -0.6%
Effective Tax Rate 107.5%
Eff/ Tax Rate - 3 Yr. Avg. 53.3%
Payout Ratio 4009.6%

BP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BP stock intrinsic value calculation we used $183008 million for the last fiscal year's total revenue generated by BP ADR. The default revenue input number comes from 2016 income statement of BP 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 BP stock valuation model: a) initial revenue growth rate of 27.6% 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 4.9%, whose default value for BP is calculated based on our internal credit rating of BP 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 BP 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 BP stock the variable cost ratio is equal to 104.7%.

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 BP 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 BP ADR.

Corporate tax rate of 27% is the nominal tax rate for BP 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 BP 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 BP are equal to 81%.

Life of production assets of 11 years is the average useful life of capital assets used in BP 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 BP is equal to -4.1%. 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 - $95286 million for BP 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 3275.75 million for BP 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 BP ADR at the current share price and the inputted number of shares is $127.2 billion.

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COMPANY NEWS

▶ [$$] BP: Oil Demand Is Going to Peak in the Next 20 Years   [Feb-20-18 11:33PM  The Wall Street Journal]
▶ BP CEO Says Rosneft Is a 'Very Good Partner'   [06:12AM  Bloomberg Video]
▶ [$$] BP says oil demand to peak by late 2030s   [Feb-19-18 09:30PM  Financial Times]
▶ Will Russia & OPEC's Production Curb Continue?   [Feb-13-18 07:24AM  Zacks]
▶ Top LSE Growth Stocks To Buy   [Feb-10-18 06:02AM  Simply Wall St.]
▶ Top Research Reports for Novartis, BP & Biogen   [Feb-08-18 03:23PM  Zacks]
▶ [$$] BPs Strong Performance Is Marred by One-Off Charges   [12:29AM  The Wall Street Journal]
▶ PRESS DIGEST- Financial Times - Feb 7   [Feb-06-18 08:09PM  Reuters]
▶ Jeff Auxier Comments on BP   [02:49PM  GuruFocus.com]
▶ [$$] BP's Strong Performance Is Marred by One-Off Charges   [10:03AM  The Wall Street Journal]
▶ BP posts 4Q profit   [09:59AM  Associated Press]
▶ Dudley Says BP Is `Firing on All Cylinders'   [05:15AM  Bloomberg Video]
▶ Why Kosmos Energy Ltd.'s Stock Is Plunging Today   [Feb-05-18 11:44AM  Motley Fool]
▶ What Is BP plcs (LON:BP.) Share Price Doing?   [08:15AM  Simply Wall St.]
▶ [$$] BP Faces Down Its Doubters   [Feb-04-18 08:56PM  The Wall Street Journal]
▶ [$$] BP Faces Down Its Doubters   [09:47AM  The Wall Street Journal]
▶ BP makes two discoveries in UK North Sea   [Jan-30-18 07:07PM  Reuters]
▶ Analysts Give Mixed Signals on Chevron Stock   [Jan-26-18 10:33AM  Market Realist]
▶ Forecasting Chevrons Stock Price   [09:04AM  Market Realist]
▶ Should You Buy BP plc (LON:BP.A) At £1.67?   [01:55AM  Simply Wall St.]
▶ BP names new Gulf of Mexico president   [Jan-25-18 03:40PM  American City Business Journals]
▶ Chevrons Segment-Wise Prospects in 4Q17   [03:10PM  Market Realist]
▶ Forecasting ExxonMobils Stock Price   [09:02AM  Market Realist]
▶ ExxonMobils 4Q17 Outlook: A Segment-Wise Review   [Jan-24-18 12:45PM  Market Realist]
▶ Could ExxonMobils Earnings Rise in 4Q17?   [11:10AM  Market Realist]
▶ BP Weighs Bid for $1.8 Billion Italian Solar Company   [Jan-22-18 08:36AM  Bloomberg]
▶ Royal Dutch Shell Joining the Renewable Energy Bandwagon   [Jan-20-18 06:46AM  Motley Fool]
▶ Can Anything Stop The Shale Surge?   [Jan-19-18 03:00PM  Oilprice.com]
▶ Are BP plcs (LON:BP.) Interest Costs Too High?   [05:25AM  Simply Wall St.]
▶ PRESS DIGEST- British Business - Jan 19   [Jan-18-18 08:16PM  Reuters]
▶ Shells 4Q17 Segmental Earnings Prospects   [02:50PM  Market Realist]
▶ What to Expect from Shells 4Q17 Earnings   [11:48AM  Market Realist]
▶ OPEC Raises 2018 U.S. Oil Production Forecast As Prices Climb   [08:36AM  Investor's Business Daily]
Financial statements of BP
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