Intrinsic value of Chevron - CVX

Previous Close

$117.66

  Intrinsic Value

$226.49

stock screener

  Rating & Target

str. buy

+92%

Previous close

$117.66

 
Intrinsic value

$226.49

 
Up/down potential

+92%

 
Rating

str. buy

We calculate the intrinsic value of CVX 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 223.4

 

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, %
  23.80
  21.92
  20.23
  18.71
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
Revenue, $m
  175,452
  213,911
  257,181
  305,287
  358,207
  415,883
  478,229
  545,142
  616,517
  692,246
  772,237
  856,408
  944,700
  1,037,080
  1,133,537
  1,234,090
  1,338,787
  1,447,701
  1,560,937
  1,678,625
  1,800,924
  1,928,017
  2,060,112
  2,197,444
  2,340,269
  2,488,868
  2,643,543
  2,804,620
  2,972,446
  3,147,389
Variable operating expenses, $m
  101,479
  123,624
  148,539
  176,238
  206,710
  239,920
  275,819
  314,348
  355,445
  399,051
  444,656
  493,122
  543,961
  597,154
  652,694
  710,593
  770,877
  833,590
  898,792
  966,557
  1,036,977
  1,110,158
  1,186,219
  1,265,295
  1,347,534
  1,433,098
  1,522,160
  1,614,908
  1,711,543
  1,812,276
Fixed operating expenses, $m
  52,433
  53,586
  54,765
  55,970
  57,201
  58,460
  59,746
  61,060
  62,404
  63,776
  65,180
  66,613
  68,079
  69,577
  71,107
  72,672
  74,271
  75,904
  77,574
  79,281
  81,025
  82,808
  84,630
  86,491
  88,394
  90,339
  92,326
  94,357
  96,433
  98,555
Total operating expenses, $m
  153,912
  177,210
  203,304
  232,208
  263,911
  298,380
  335,565
  375,408
  417,849
  462,827
  509,836
  559,735
  612,040
  666,731
  723,801
  783,265
  845,148
  909,494
  976,366
  1,045,838
  1,118,002
  1,192,966
  1,270,849
  1,351,786
  1,435,928
  1,523,437
  1,614,486
  1,709,265
  1,807,976
  1,910,831
Operating income, $m
  21,540
  36,701
  53,877
  73,079
  94,296
  117,504
  142,664
  169,734
  198,668
  229,419
  262,401
  296,672
  332,660
  370,350
  409,736
  450,826
  493,639
  538,206
  584,571
  632,787
  682,922
  735,051
  789,264
  845,658
  904,341
  965,432
  1,029,057
  1,095,354
  1,164,470
  1,236,558
EBITDA, $m
  44,837
  65,005
  87,815
  113,280
  141,388
  172,105
  205,383
  241,165
  279,391
  320,003
  362,946
  408,176
  455,660
  505,377
  557,322
  611,504
  667,949
  726,697
  787,805
  851,344
  917,402
  986,079
  1,057,491
  1,131,765
  1,209,044
  1,289,482
  1,373,247
  1,460,516
  1,551,482
  1,646,349
Interest expense (income), $m
  158
  2,093
  3,450
  4,998
  6,740
  8,677
  10,807
  13,129
  15,639
  18,333
  21,206
  24,255
  27,475
  30,864
  34,418
  38,137
  42,020
  46,068
  50,283
  54,668
  59,227
  63,965
  68,888
  74,005
  79,323
  84,851
  90,601
  96,583
  102,810
  109,295
  116,051
Earnings before tax, $m
  19,447
  33,251
  48,879
  66,339
  85,620
  106,697
  129,535
  154,096
  180,335
  208,213
  238,146
  269,197
  301,797
  335,931
  371,599
  408,805
  447,570
  487,923
  529,903
  573,560
  618,957
  666,163
  715,260
  766,336
  819,490
  874,831
  932,474
  992,544
  1,055,175
  1,120,507
Tax expense, $m
  5,251
  8,978
  13,197
  17,911
  23,117
  28,808
  34,975
  41,606
  48,690
  56,218
  64,299
  72,683
  81,485
  90,701
  100,332
  110,377
  120,844
  131,739
  143,074
  154,861
  167,118
  179,864
  193,120
  206,911
  221,262
  236,204
  251,768
  267,987
  284,897
  302,537
Net income, $m
  14,196
  24,273
  35,682
  48,427
  62,502
  77,888
  94,561
  112,490
  131,645
  151,996
  173,847
  196,514
  220,311
  245,230
  271,267
  298,428
  326,726
  356,184
  386,829
  418,699
  451,839
  486,299
  522,139
  559,425
  598,228
  638,626
  680,706
  724,557
  770,277
  817,970

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
  314,430
  383,353
  460,897
  547,109
  641,949
  745,310
  857,041
  976,958
  1,104,868
  1,240,585
  1,383,937
  1,534,781
  1,693,012
  1,858,566
  2,031,428
  2,211,631
  2,399,259
  2,594,446
  2,797,378
  3,008,289
  3,227,462
  3,455,227
  3,691,957
  3,938,072
  4,194,031
  4,460,337
  4,737,533
  5,026,201
  5,326,964
  5,640,482
Adjusted assets (=assets-cash), $m
  314,430
  383,353
  460,897
  547,109
  641,949
  745,310
  857,041
  976,958
  1,104,868
  1,240,585
  1,383,937
  1,534,781
  1,693,012
  1,858,566
  2,031,428
  2,211,631
  2,399,259
  2,594,446
  2,797,378
  3,008,289
  3,227,462
  3,455,227
  3,691,957
  3,938,072
  4,194,031
  4,460,337
  4,737,533
  5,026,201
  5,326,964
  5,640,482
Revenue / Adjusted assets
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
Average production assets, $m
  228,438
  278,512
  334,849
  397,484
  466,386
  541,480
  622,654
  709,775
  802,705
  901,305
  1,005,452
  1,115,043
  1,230,000
  1,350,278
  1,475,865
  1,606,786
  1,743,100
  1,884,907
  2,032,340
  2,185,570
  2,344,803
  2,510,278
  2,682,266
  2,861,072
  3,047,031
  3,240,506
  3,441,894
  3,651,616
  3,870,124
  4,097,901
Working capital, $m
  -11,053
  -13,476
  -16,202
  -19,233
  -22,567
  -26,201
  -30,128
  -34,344
  -38,841
  -43,612
  -48,651
  -53,954
  -59,516
  -65,336
  -71,413
  -77,748
  -84,344
  -91,205
  -98,339
  -105,753
  -113,458
  -121,465
  -129,787
  -138,439
  -147,437
  -156,799
  -166,543
  -176,691
  -187,264
  -198,286
Total debt, $m
  63,884
  92,556
  124,814
  160,678
  200,132
  243,130
  289,610
  339,495
  392,706
  449,164
  508,799
  571,550
  637,374
  706,245
  778,155
  853,120
  931,173
  1,012,371
  1,096,790
  1,184,529
  1,275,705
  1,370,455
  1,468,935
  1,571,319
  1,677,798
  1,788,581
  1,903,895
  2,023,981
  2,149,098
  2,279,522
Total liabilities, $m
  130,803
  159,475
  191,733
  227,597
  267,051
  310,049
  356,529
  406,414
  459,625
  516,083
  575,718
  638,469
  704,293
  773,164
  845,074
  920,039
  998,092
  1,079,290
  1,163,709
  1,251,448
  1,342,624
  1,437,374
  1,535,854
  1,638,238
  1,744,717
  1,855,500
  1,970,814
  2,090,900
  2,216,017
  2,346,441
Total equity, $m
  183,627
  223,878
  269,164
  319,512
  374,898
  435,261
  500,512
  570,543
  645,243
  724,502
  808,219
  896,312
  988,719
  1,085,403
  1,186,354
  1,291,593
  1,401,167
  1,515,157
  1,633,669
  1,756,841
  1,884,838
  2,017,853
  2,156,103
  2,299,834
  2,449,314
  2,604,837
  2,766,719
  2,935,301
  3,110,947
  3,294,042
Total liabilities and equity, $m
  314,430
  383,353
  460,897
  547,109
  641,949
  745,310
  857,041
  976,957
  1,104,868
  1,240,585
  1,383,937
  1,534,781
  1,693,012
  1,858,567
  2,031,428
  2,211,632
  2,399,259
  2,594,447
  2,797,378
  3,008,289
  3,227,462
  3,455,227
  3,691,957
  3,938,072
  4,194,031
  4,460,337
  4,737,533
  5,026,201
  5,326,964
  5,640,483
Debt-to-equity ratio
  0.350
  0.410
  0.460
  0.500
  0.530
  0.560
  0.580
  0.600
  0.610
  0.620
  0.630
  0.640
  0.640
  0.650
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
Adjusted equity ratio
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14,196
  24,273
  35,682
  48,427
  62,502
  77,888
  94,561
  112,490
  131,645
  151,996
  173,847
  196,514
  220,311
  245,230
  271,267
  298,428
  326,726
  356,184
  386,829
  418,699
  451,839
  486,299
  522,139
  559,425
  598,228
  638,626
  680,706
  724,557
  770,277
  817,970
Depreciation, amort., depletion, $m
  23,297
  28,304
  33,938
  40,201
  47,092
  54,601
  62,718
  71,431
  80,724
  90,584
  100,545
  111,504
  123,000
  135,028
  147,587
  160,679
  174,310
  188,491
  203,234
  218,557
  234,480
  251,028
  268,227
  286,107
  304,703
  324,051
  344,189
  365,162
  387,012
  409,790
Funds from operations, $m
  37,493
  52,578
  69,620
  88,629
  109,594
  132,490
  157,279
  183,920
  212,368
  242,579
  274,392
  308,018
  343,311
  380,258
  418,853
  459,107
  501,036
  544,674
  590,063
  637,256
  686,319
  737,327
  790,366
  845,532
  902,931
  962,677
  1,024,895
  1,089,719
  1,157,290
  1,227,760
Change in working capital, $m
  -2,125
  -2,423
  -2,726
  -3,031
  -3,334
  -3,634
  -3,928
  -4,216
  -4,497
  -4,771
  -5,039
  -5,303
  -5,562
  -5,820
  -6,077
  -6,335
  -6,596
  -6,862
  -7,134
  -7,414
  -7,705
  -8,007
  -8,322
  -8,652
  -8,998
  -9,362
  -9,745
  -10,148
  -10,573
  -11,021
Cash from operations, $m
  39,618
  55,001
  72,346
  91,659
  112,928
  136,123
  161,207
  188,136
  216,865
  247,350
  279,431
  313,321
  348,874
  386,078
  424,930
  465,441
  507,632
  551,536
  597,197
  644,670
  694,024
  745,334
  798,688
  854,184
  911,929
  972,039
  1,034,640
  1,099,867
  1,167,863
  1,238,782
Maintenance CAPEX, $m
  -18,451
  -22,844
  -27,851
  -33,485
  -39,748
  -46,639
  -54,148
  -62,265
  -70,978
  -80,270
  -90,130
  -100,545
  -111,504
  -123,000
  -135,028
  -147,587
  -160,679
  -174,310
  -188,491
  -203,234
  -218,557
  -234,480
  -251,028
  -268,227
  -286,107
  -304,703
  -324,051
  -344,189
  -365,162
  -387,012
New CAPEX, $m
  -43,933
  -50,074
  -56,337
  -62,634
  -68,903
  -75,094
  -81,174
  -87,122
  -92,929
  -98,600
  -104,147
  -109,591
  -114,957
  -120,278
  -125,587
  -130,920
  -136,315
  -141,807
  -147,433
  -153,230
  -159,233
  -165,475
  -171,988
  -178,806
  -185,959
  -193,476
  -201,387
  -209,722
  -218,509
  -227,776
Cash from investing activities, $m
  -62,384
  -72,918
  -84,188
  -96,119
  -108,651
  -121,733
  -135,322
  -149,387
  -163,907
  -178,870
  -194,277
  -210,136
  -226,461
  -243,278
  -260,615
  -278,507
  -296,994
  -316,117
  -335,924
  -356,464
  -377,790
  -399,955
  -423,016
  -447,033
  -472,066
  -498,179
  -525,438
  -553,911
  -583,671
  -614,788
Free cash flow, $m
  -22,765
  -17,917
  -11,843
  -4,460
  4,277
  14,391
  25,885
  38,749
  52,958
  68,480
  85,154
  103,185
  122,412
  142,800
  164,315
  186,934
  210,639
  235,419
  261,273
  288,206
  316,234
  345,379
  375,672
  407,151
  439,863
  473,860
  509,202
  545,955
  584,193
  623,993
Issuance/(repayment) of debt, $m
  25,121
  28,672
  32,259
  35,864
  39,453
  42,998
  46,480
  49,885
  53,211
  56,458
  59,634
  62,751
  65,824
  68,871
  71,911
  74,964
  78,053
  81,198
  84,420
  87,739
  91,176
  94,750
  98,480
  102,384
  106,479
  110,783
  115,313
  120,086
  125,117
  130,424
Issuance/(repurchase) of shares, $m
  21,307
  15,978
  9,604
  1,920
  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  
  46,428
  44,650
  41,863
  37,784
  39,453
  42,998
  46,480
  49,885
  53,211
  56,458
  59,634
  62,751
  65,824
  68,871
  71,911
  74,964
  78,053
  81,198
  84,420
  87,739
  91,176
  94,750
  98,480
  102,384
  106,479
  110,783
  115,313
  120,086
  125,117
  130,424
Total cash flow (excl. dividends), $m
  23,662
  26,733
  30,020
  33,325
  43,730
  57,389
  72,365
  88,634
  106,169
  124,938
  144,788
  165,936
  188,236
  211,670
  236,226
  261,899
  288,692
  316,617
  345,692
  375,945
  407,410
  440,129
  474,152
  509,535
  546,342
  584,643
  624,515
  666,041
  709,310
  754,417
Retained Cash Flow (-), $m
  -35,503
  -40,251
  -45,286
  -50,348
  -55,386
  -60,363
  -65,250
  -70,032
  -74,700
  -79,258
  -83,717
  -88,093
  -92,407
  -96,684
  -100,952
  -105,239
  -109,575
  -113,989
  -118,512
  -123,172
  -127,997
  -133,014
  -138,251
  -143,731
  -149,480
  -155,523
  -161,882
  -168,582
  -175,645
  -183,095
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
  -11,841
  -13,518
  -15,266
  -17,023
  -11,656
  -2,974
  7,115
  18,603
  31,469
  45,679
  61,071
  77,843
  95,830
  114,986
  135,274
  156,660
  179,118
  202,628
  227,180
  252,773
  279,413
  307,114
  335,901
  365,804
  396,862
  429,121
  462,633
  497,459
  533,664
  571,322
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
  -11,353
  -12,376
  -13,286
  -14,017
  -9,035
  -2,158
  4,806
  11,627
  18,077
  23,948
  29,002
  33,218
  36,436
  38,603
  39,714
  39,811
  38,973
  37,316
  34,979
  32,120
  28,901
  25,482
  22,015
  18,631
  15,438
  12,520
  9,929
  7,696
  5,825
  4,302
Current shareholders' claim on cash, %
  91.3
  86.3
  83.9
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5
  83.5

Chevron Corporation (Chevron) manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in integrated energy and chemicals operations. The Company operates through two business segments: Upstream and Downstream. Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas; transporting crude oil by international oil export pipelines; processing, transporting, storage and marketing of natural gas, and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products, and manufacturing and marketing of commodity petrochemicals.

FINANCIAL RATIOS  of  Chevron (CVX)

Valuation Ratios
P/E Ratio -447.8
Price to Sales 2
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 17.3
Price to Free Cash Flow -42.3
Growth Rates
Sales Growth Rate -14.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -38.6%
Cap. Spend. - 3 Yr. Gr. Rate -13.8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 24.2%
Total Debt to Equity 31.7%
Interest Coverage -13
Management Effectiveness
Return On Assets -0.2%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital -0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity -0.3%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 46.3%
Gross Margin - 3 Yr. Avg. 42.9%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 19.9%
Operating Margin -3.9%
Oper. Margin - 3 Yr. Avg. 2.6%
Pre-Tax Margin -2%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin -0.4%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 80%
Eff/ Tax Rate - 3 Yr. Avg. 40.3%
Payout Ratio -1616.1%

CVX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVX stock intrinsic value calculation we used $141722 million for the last fiscal year's total revenue generated by Chevron. The default revenue input number comes from 2017 income statement of Chevron. 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 CVX stock valuation model: a) initial revenue growth rate of 23.8% 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 CVX is calculated based on our internal credit rating of Chevron, 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 Chevron.
    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 CVX stock the variable cost ratio is equal to 57.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $51304 million in the base year in the intrinsic value calculation for CVX 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 5.4% for Chevron.

Corporate tax rate of 27% is the nominal tax rate for Chevron. 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 CVX 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 CVX are equal to 130.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Chevron 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 CVX is equal to -6.3%. 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 - $148124 million for Chevron - 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 1899 million for Chevron 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 Chevron at the current share price and the inputted number of shares is $223.4 billion.

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