Intrinsic value of Halliburton - HAL

Previous Close

$39.16

  Intrinsic Value

$1.60

stock screener

  Rating & Target

str. sell

-96%

Previous close

$39.16

 
Intrinsic value

$1.60

 
Up/down potential

-96%

 
Rating

str. sell

We calculate the intrinsic value of HAL 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 0001), $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 34.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  24.00
  22.10
  20.39
  18.85
  17.47
  16.22
  15.10
  14.09
  13.18
  12.36
  11.62
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.10
  5.99
  5.89
Revenue, $m
  25,569
  31,220
  37,585
  44,670
  52,472
  60,983
  70,190
  80,078
  90,631
  101,834
  113,672
  126,134
  139,209
  152,893
  167,183
  182,082
  197,597
  213,738
  230,520
  247,963
  266,089
  284,925
  304,502
  324,855
  346,021
  368,042
  390,962
  414,830
  439,696
  465,616
Variable operating expenses, $m
  36,422
  44,412
  53,412
  63,430
  74,462
  86,496
  99,514
  113,495
  128,417
  144,257
  160,726
  178,346
  196,833
  216,181
  236,386
  257,453
  279,390
  302,212
  325,941
  350,604
  376,233
  402,867
  430,548
  459,325
  489,253
  520,389
  552,797
  586,544
  621,704
  658,353
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
  36,422
  44,412
  53,412
  63,430
  74,462
  86,496
  99,514
  113,495
  128,417
  144,257
  160,726
  178,346
  196,833
  216,181
  236,386
  257,453
  279,390
  302,212
  325,941
  350,604
  376,233
  402,867
  430,548
  459,325
  489,253
  520,389
  552,797
  586,544
  621,704
  658,353
Operating income, $m
  -10,853
  -13,192
  -15,827
  -18,760
  -21,990
  -25,513
  -29,324
  -33,417
  -37,785
  -42,423
  -47,054
  -52,212
  -57,624
  -63,288
  -69,204
  -75,371
  -81,793
  -88,475
  -95,421
  -102,642
  -110,145
  -117,942
  -126,046
  -134,470
  -143,232
  -152,347
  -161,835
  -171,715
  -182,008
  -192,737
EBITDA, $m
  -8,873
  -10,834
  -13,043
  -15,502
  -18,210
  -21,163
  -24,359
  -27,790
  -31,453
  -35,340
  -39,449
  -43,773
  -48,311
  -53,060
  -58,019
  -63,189
  -68,574
  -74,175
  -79,999
  -86,053
  -92,343
  -98,880
  -105,674
  -112,737
  -120,083
  -127,725
  -135,679
  -143,962
  -152,591
  -161,587
Interest expense (income), $m
  659
  591
  808
  1,056
  1,335
  1,646
  1,988
  2,362
  2,766
  3,200
  3,663
  4,154
  4,674
  5,221
  5,795
  6,395
  7,022
  7,676
  8,357
  9,065
  9,802
  10,567
  11,362
  12,189
  13,048
  13,941
  14,870
  15,837
  16,842
  17,890
  18,981
Earnings before tax, $m
  -11,444
  -14,000
  -16,883
  -20,095
  -23,636
  -27,501
  -31,686
  -36,183
  -40,985
  -46,085
  -51,208
  -56,886
  -62,845
  -69,083
  -75,599
  -82,393
  -89,469
  -96,831
  -104,487
  -112,443
  -120,712
  -129,304
  -138,235
  -147,519
  -157,173
  -167,217
  -177,671
  -188,557
  -199,898
  -211,718
Tax expense, $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
Net income, $m
  -11,444
  -14,000
  -16,883
  -20,095
  -23,636
  -27,501
  -31,686
  -36,183
  -40,985
  -46,085
  -51,208
  -56,886
  -62,845
  -69,083
  -75,599
  -82,393
  -89,469
  -96,831
  -104,487
  -112,443
  -120,712
  -129,304
  -138,235
  -147,519
  -157,173
  -167,217
  -177,671
  -188,557
  -199,898
  -211,718

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
  31,106
  37,980
  45,724
  54,343
  63,835
  74,189
  85,389
  97,419
  110,257
  123,886
  138,288
  153,447
  169,354
  186,001
  203,385
  221,511
  240,385
  260,022
  280,438
  301,658
  323,709
  346,624
  370,441
  395,201
  420,950
  447,740
  475,623
  504,659
  534,910
  566,443
Adjusted assets (=assets-cash), $m
  31,106
  37,980
  45,724
  54,343
  63,835
  74,189
  85,389
  97,419
  110,257
  123,886
  138,288
  153,447
  169,354
  186,001
  203,385
  221,511
  240,385
  260,022
  280,438
  301,658
  323,709
  346,624
  370,441
  395,201
  420,950
  447,740
  475,623
  504,659
  534,910
  566,443
Revenue / Adjusted assets
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
  0.822
Average production assets, $m
  12,145
  14,829
  17,853
  21,218
  24,924
  28,967
  33,340
  38,037
  43,050
  48,371
  53,994
  59,914
  66,124
  72,624
  79,412
  86,489
  93,858
  101,525
  109,497
  117,782
  126,392
  135,339
  144,639
  154,306
  164,360
  174,820
  185,707
  197,044
  208,856
  221,168
Working capital, $m
  4,986
  6,088
  7,329
  8,711
  10,232
  11,892
  13,687
  15,615
  17,673
  19,858
  22,166
  24,596
  27,146
  29,814
  32,601
  35,506
  38,531
  41,679
  44,951
  48,353
  51,887
  55,560
  59,378
  63,347
  67,474
  71,768
  76,238
  80,892
  85,741
  90,795
Total debt, $m
  14,958
  19,550
  24,723
  30,480
  36,821
  43,737
  51,219
  59,255
  67,831
  76,935
  86,555
  96,682
  107,307
  118,427
  130,040
  142,148
  154,756
  167,873
  181,512
  195,686
  210,416
  225,724
  241,633
  258,173
  275,374
  293,269
  311,895
  331,291
  351,499
  372,563
Total liabilities, $m
  20,779
  25,371
  30,544
  36,301
  42,642
  49,558
  57,040
  65,076
  73,652
  82,756
  92,376
  102,503
  113,128
  124,248
  135,861
  147,969
  160,577
  173,694
  187,333
  201,507
  216,237
  231,545
  247,454
  263,994
  281,195
  299,090
  317,716
  337,112
  357,320
  378,384
Total equity, $m
  10,327
  12,609
  15,180
  18,042
  21,193
  24,631
  28,349
  32,343
  36,605
  41,130
  45,912
  50,945
  56,226
  61,752
  67,524
  73,542
  79,808
  86,327
  93,105
  100,150
  107,471
  115,079
  122,986
  131,207
  139,756
  148,650
  157,907
  167,547
  177,590
  188,059
Total liabilities and equity, $m
  31,106
  37,980
  45,724
  54,343
  63,835
  74,189
  85,389
  97,419
  110,257
  123,886
  138,288
  153,448
  169,354
  186,000
  203,385
  221,511
  240,385
  260,021
  280,438
  301,657
  323,708
  346,624
  370,440
  395,201
  420,951
  447,740
  475,623
  504,659
  534,910
  566,443
Debt-to-equity ratio
  1.450
  1.550
  1.630
  1.690
  1.740
  1.780
  1.810
  1.830
  1.850
  1.870
  1.890
  1.900
  1.910
  1.920
  1.930
  1.930
  1.940
  1.940
  1.950
  1.950
  1.960
  1.960
  1.960
  1.970
  1.970
  1.970
  1.980
  1.980
  1.980
  1.980
Adjusted equity ratio
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -11,444
  -14,000
  -16,883
  -20,095
  -23,636
  -27,501
  -31,686
  -36,183
  -40,985
  -46,085
  -51,208
  -56,886
  -62,845
  -69,083
  -75,599
  -82,393
  -89,469
  -96,831
  -104,487
  -112,443
  -120,712
  -129,304
  -138,235
  -147,519
  -157,173
  -167,217
  -177,671
  -188,557
  -199,898
  -211,718
Depreciation, amort., depletion, $m
  1,980
  2,358
  2,784
  3,258
  3,780
  4,349
  4,965
  5,627
  6,333
  7,082
  7,605
  8,439
  9,313
  10,229
  11,185
  12,182
  13,220
  14,299
  15,422
  16,589
  17,802
  19,062
  20,372
  21,733
  23,149
  24,623
  26,156
  27,753
  29,416
  31,150
Funds from operations, $m
  -9,464
  -11,642
  -14,099
  -16,837
  -19,856
  -23,152
  -26,720
  -30,556
  -34,652
  -39,003
  -43,603
  -48,447
  -53,532
  -58,854
  -64,414
  -70,212
  -76,250
  -82,532
  -89,064
  -95,854
  -102,910
  -110,242
  -117,863
  -125,785
  -134,024
  -142,595
  -151,515
  -160,804
  -170,481
  -180,568
Change in working capital, $m
  965
  1,102
  1,241
  1,382
  1,521
  1,660
  1,795
  1,928
  2,058
  2,185
  2,308
  2,430
  2,550
  2,668
  2,787
  2,905
  3,025
  3,147
  3,273
  3,401
  3,535
  3,673
  3,818
  3,969
  4,127
  4,294
  4,469
  4,654
  4,849
  5,054
Cash from operations, $m
  -10,429
  -12,744
  -15,340
  -18,219
  -21,377
  -24,811
  -28,516
  -32,484
  -36,710
  -41,188
  -45,912
  -50,877
  -56,081
  -61,523
  -67,201
  -73,117
  -79,275
  -85,680
  -92,337
  -99,255
  -106,445
  -113,915
  -121,681
  -129,754
  -138,151
  -146,889
  -155,985
  -165,458
  -175,330
  -185,622
Maintenance CAPEX, $m
  -1,381
  -1,711
  -2,089
  -2,515
  -2,989
  -3,510
  -4,080
  -4,696
  -5,357
  -6,063
  -6,813
  -7,605
  -8,439
  -9,313
  -10,229
  -11,185
  -12,182
  -13,220
  -14,299
  -15,422
  -16,589
  -17,802
  -19,062
  -20,372
  -21,733
  -23,149
  -24,623
  -26,156
  -27,753
  -29,416
New CAPEX, $m
  -2,342
  -2,684
  -3,024
  -3,365
  -3,706
  -4,043
  -4,373
  -4,697
  -5,013
  -5,321
  -5,623
  -5,919
  -6,211
  -6,500
  -6,788
  -7,077
  -7,369
  -7,667
  -7,972
  -8,285
  -8,610
  -8,947
  -9,299
  -9,668
  -10,054
  -10,460
  -10,887
  -11,337
  -11,812
  -12,312
Cash from investing activities, $m
  -3,723
  -4,395
  -5,113
  -5,880
  -6,695
  -7,553
  -8,453
  -9,393
  -10,370
  -11,384
  -12,436
  -13,524
  -14,650
  -15,813
  -17,017
  -18,262
  -19,551
  -20,887
  -22,271
  -23,707
  -25,199
  -26,749
  -28,361
  -30,040
  -31,787
  -33,609
  -35,510
  -37,493
  -39,565
  -41,728
Free cash flow, $m
  -14,152
  -17,139
  -20,453
  -24,099
  -28,072
  -32,364
  -36,969
  -41,877
  -47,080
  -52,573
  -58,348
  -64,401
  -70,731
  -77,335
  -84,217
  -91,379
  -98,826
  -106,566
  -114,608
  -122,963
  -131,643
  -140,664
  -150,042
  -159,793
  -169,939
  -180,498
  -191,494
  -202,951
  -214,894
  -227,350
Issuance/(repayment) of debt, $m
  4,016
  4,592
  5,173
  5,758
  6,340
  6,916
  7,482
  8,036
  8,576
  9,104
  9,620
  10,127
  10,626
  11,120
  11,613
  12,108
  12,608
  13,117
  13,638
  14,175
  14,730
  15,307
  15,910
  16,540
  17,201
  17,895
  18,626
  19,396
  20,208
  21,064
Issuance/(repurchase) of shares, $m
  13,449
  16,282
  19,454
  22,957
  26,787
  30,938
  35,404
  40,176
  45,247
  50,610
  55,989
  61,919
  68,126
  74,610
  81,370
  88,411
  95,735
  103,351
  111,265
  119,488
  128,033
  136,912
  146,142
  155,739
  165,722
  176,111
  186,929
  198,197
  209,941
  222,187
Cash from financing (excl. dividends), $m  
  17,465
  20,874
  24,627
  28,715
  33,127
  37,854
  42,886
  48,212
  53,823
  59,714
  65,609
  72,046
  78,752
  85,730
  92,983
  100,519
  108,343
  116,468
  124,903
  133,663
  142,763
  152,219
  162,052
  172,279
  182,923
  194,006
  205,555
  217,593
  230,149
  243,251
Total cash flow (excl. dividends), $m
  3,313
  3,736
  4,174
  4,616
  5,055
  5,490
  5,917
  6,335
  6,743
  7,142
  7,262
  7,644
  8,021
  8,394
  8,766
  9,140
  9,517
  9,902
  10,295
  10,700
  11,119
  11,555
  12,010
  12,485
  12,984
  13,509
  14,060
  14,642
  15,254
  15,900
Retained Cash Flow (-), $m
  -13,449
  -16,282
  -19,454
  -22,957
  -26,787
  -30,938
  -35,404
  -40,176
  -45,247
  -50,610
  -55,989
  -61,919
  -68,126
  -74,610
  -81,370
  -88,411
  -95,735
  -103,351
  -111,265
  -119,488
  -128,033
  -136,912
  -146,142
  -155,739
  -165,722
  -176,111
  -186,929
  -198,197
  -209,941
  -222,187
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
  -10,136
  -12,547
  -15,280
  -18,341
  -21,731
  -25,448
  -29,487
  -33,841
  -38,504
  -43,469
  -48,727
  -54,274
  -60,105
  -66,215
  -72,604
  -79,271
  -86,218
  -93,449
  -100,970
  -108,788
  -116,913
  -125,357
  -134,132
  -143,254
  -152,738
  -162,603
  -172,868
  -183,555
  -194,687
  -206,286
Discount rate, %
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
  -9,509
  -10,973
  -12,377
  -13,662
  -14,775
  -15,665
  -16,292
  -16,630
  -16,666
  -16,400
  -15,848
  -15,038
  -14,012
  -12,817
  -11,505
  -10,131
  -8,748
  -7,402
  -6,134
  -4,975
  -3,946
  -3,058
  -2,313
  -1,707
  -1,227
  -858
  -583
  -385
  -246
  -153
Current shareholders' claim on cash, %
  71.9
  52.1
  37.9
  27.8
  20.5
  15.1
  11.2
  8.4
  6.3
  4.7
  3.5
  2.7
  2.0
  1.5
  1.2
  0.9
  0.7
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0

Halliburton Company provides services and products to the upstream oil and natural gas industry throughout the lifecycle of the reservoir, from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the field. It operates through two segments: the Completion and Production segment, and the Drilling and Evaluation segment. The Completion and Production segment delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift and completion services. The Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation and wellbore placement solutions that enable customers to model, measure, drill and optimize their well construction activities. It serves national and independent oil and natural gas companies. As of December 31, 2016, it had conducted business in approximately 70 countries around the world.

FINANCIAL RATIOS  of  Halliburton (HAL)

Valuation Ratios
P/E Ratio -5.9
Price to Sales 2.1
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow -19.9
Price to Free Cash Flow -13.6
Growth Rates
Sales Growth Rate -32.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -63.5%
Cap. Spend. - 3 Yr. Gr. Rate -22.9%
Financial Strength
Quick Ratio 25
Current Ratio 0.2
LT Debt to Equity 129.8%
Total Debt to Equity 131.5%
Interest Coverage -11
Management Effectiveness
Return On Assets -16.5%
Ret/ On Assets - 3 Yr. Avg. -1.8%
Return On Total Capital -21.9%
Ret/ On T. Cap. - 3 Yr. Avg. -3%
Return On Equity -46.3%
Return On Equity - 3 Yr. Avg. -9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 5.4%
Gross Margin - 3 Yr. Avg. 10.7%
EBITDA Margin -34.4%
EBITDA Margin - 3 Yr. Avg. -2.3%
Operating Margin -42.7%
Oper. Margin - 3 Yr. Avg. -9.3%
Pre-Tax Margin -48%
Pre-Tax Margin - 3 Yr. Avg. -12.5%
Net Profit Margin -36.3%
Net Profit Margin - 3 Yr. Avg. -9.5%
Effective Tax Rate 24.4%
Eff/ Tax Rate - 3 Yr. Avg. 26.9%
Payout Ratio -10.8%

HAL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HAL stock intrinsic value calculation we used $20620 million for the last fiscal year's total revenue generated by Halliburton. The default revenue input number comes from 0001 income statement of Halliburton. 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 HAL stock valuation model: a) initial revenue growth rate of 24% 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 6.6%, whose default value for HAL is calculated based on our internal credit rating of Halliburton, 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 Halliburton.
    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 HAL stock the variable cost ratio is equal to 142.7%.

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 HAL 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 Halliburton.

Corporate tax rate of 27% is the nominal tax rate for Halliburton. 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 HAL 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 HAL are equal to 47.5%.

Life of production assets of 7.1 years is the average useful life of capital assets used in Halliburton 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 HAL is equal to 19.5%. 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 - $8322 million for Halliburton - 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 879.896 million for Halliburton 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 Halliburton at the current share price and the inputted number of shares is $34.5 billion.

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