Intrinsic value of LyondellBasell Industries - LYB

Previous Close

$98.94

  Intrinsic Value

$314.94

stock screener

  Rating & Target

str. buy

+218%

  Value-price divergence*

+203%

Previous close

$98.94

 
Intrinsic value

$314.94

 
Up/down potential

+218%

 
Rating

str. buy

 
Value-price divergence*

+203%

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

We calculate the intrinsic value of LYB stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 39.5

 

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, %
  -10.85
  14.70
  13.73
  12.86
  12.07
  11.36
  10.73
  10.15
  9.64
  9.18
  8.76
  8.38
  8.04
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
Revenue, $m
  29,183
  33,473
  38,069
  42,963
  48,149
  53,621
  59,374
  65,403
  71,707
  78,287
  85,143
  92,280
  99,703
  107,420
  115,439
  123,773
  132,434
  141,436
  150,795
  160,531
  170,661
  181,206
  192,190
  203,635
  215,568
  228,014
  241,002
  254,563
  268,727
  283,527
  298,999
Variable operating expenses, $m
 
  23,825
  27,089
  30,565
  34,248
  38,134
  42,219
  46,501
  50,979
  55,652
  60,521
  65,537
  70,808
  76,289
  81,984
  87,902
  94,053
  100,446
  107,094
  114,007
  121,202
  128,691
  136,491
  144,620
  153,094
  161,933
  171,158
  180,788
  190,847
  201,359
  212,346
Fixed operating expenses, $m
 
  3,489
  3,576
  3,666
  3,757
  3,851
  3,948
  4,046
  4,147
  4,251
  4,357
  4,466
  4,578
  4,692
  4,810
  4,930
  5,053
  5,180
  5,309
  5,442
  5,578
  5,717
  5,860
  6,007
  6,157
  6,311
  6,469
  6,630
  6,796
  6,966
  7,140
Total operating expenses, $m
  24,107
  27,314
  30,665
  34,231
  38,005
  41,985
  46,167
  50,547
  55,126
  59,903
  64,878
  70,003
  75,386
  80,981
  86,794
  92,832
  99,106
  105,626
  112,403
  119,449
  126,780
  134,408
  142,351
  150,627
  159,251
  168,244
  177,627
  187,418
  197,643
  208,325
  219,486
Operating income, $m
  5,076
  6,159
  7,404
  8,733
  10,144
  11,636
  13,207
  14,855
  16,581
  18,384
  20,265
  22,277
  24,317
  26,439
  28,646
  30,941
  33,327
  35,810
  38,393
  41,081
  43,881
  46,798
  49,838
  53,009
  56,317
  59,770
  63,376
  67,144
  71,083
  75,203
  79,513
EBITDA, $m
  6,140
  7,377
  8,781
  10,281
  11,872
  13,555
  15,326
  17,184
  19,129
  21,162
  23,281
  25,489
  27,787
  30,177
  32,663
  35,248
  37,936
  40,732
  43,641
  46,668
  49,820
  53,104
  56,526
  60,095
  63,818
  67,705
  71,763
  76,003
  80,435
  85,070
  89,918
Interest expense (income), $m
  346
  344
  445
  554
  669
  791
  921
  1,056
  1,199
  1,347
  1,503
  1,665
  1,833
  2,008
  2,190
  2,380
  2,576
  2,781
  2,993
  3,214
  3,444
  3,683
  3,932
  4,191
  4,461
  4,743
  5,036
  5,343
  5,663
  5,997
  6,346
Earnings before tax, $m
  5,233
  5,815
  6,958
  8,179
  9,475
  10,844
  12,286
  13,799
  15,383
  17,037
  18,762
  20,613
  22,484
  24,431
  26,455
  28,561
  30,751
  33,029
  35,400
  37,868
  40,438
  43,115
  45,907
  48,818
  51,856
  55,027
  58,340
  61,802
  65,421
  69,206
  73,166
Tax expense, $m
  1,386
  1,570
  1,879
  2,208
  2,558
  2,928
  3,317
  3,726
  4,153
  4,600
  5,066
  5,565
  6,071
  6,596
  7,143
  7,711
  8,303
  8,918
  9,558
  10,224
  10,918
  11,641
  12,395
  13,181
  14,001
  14,857
  15,752
  16,686
  17,664
  18,686
  19,755
Net income, $m
  3,836
  4,245
  5,080
  5,971
  6,917
  7,916
  8,969
  10,073
  11,229
  12,437
  13,697
  15,047
  16,413
  17,834
  19,312
  20,850
  22,448
  24,111
  25,842
  27,643
  29,519
  31,474
  33,512
  35,637
  37,855
  40,170
  42,588
  45,115
  47,757
  50,520
  53,411

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,022
  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
  23,442
  24,576
  27,951
  31,544
  35,352
  39,369
  43,593
  48,020
  52,649
  57,479
  62,513
  67,753
  73,204
  78,869
  84,757
  90,876
  97,235
  103,844
  110,716
  117,864
  125,302
  133,044
  141,109
  149,512
  158,273
  167,411
  176,947
  186,904
  197,303
  208,170
  219,530
Adjusted assets (=assets-cash), $m
  21,420
  24,576
  27,951
  31,544
  35,352
  39,369
  43,593
  48,020
  52,649
  57,479
  62,513
  67,753
  73,204
  78,869
  84,757
  90,876
  97,235
  103,844
  110,716
  117,864
  125,302
  133,044
  141,109
  149,512
  158,273
  167,411
  176,947
  186,904
  197,303
  208,170
  219,530
Revenue / Adjusted assets
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
  1.362
Average production assets, $m
  10,159
  11,649
  13,248
  14,951
  16,756
  18,660
  20,662
  22,760
  24,954
  27,244
  29,630
  32,114
  34,697
  37,382
  40,173
  43,073
  46,087
  49,220
  52,477
  55,865
  59,390
  63,060
  66,882
  70,865
  75,018
  79,349
  83,869
  88,588
  93,517
  98,668
  104,052
Working capital, $m
  5,059
  4,151
  4,721
  5,327
  5,971
  6,649
  7,362
  8,110
  8,892
  9,708
  10,558
  11,443
  12,363
  13,320
  14,314
  15,348
  16,422
  17,538
  18,699
  19,906
  21,162
  22,470
  23,832
  25,251
  26,730
  28,274
  29,884
  31,566
  33,322
  35,157
  37,076
Total debt, $m
  8,981
  10,855
  13,500
  16,318
  19,303
  22,453
  25,764
  29,235
  32,864
  36,651
  40,598
  44,706
  48,979
  53,420
  58,037
  62,834
  67,819
  73,001
  78,388
  83,992
  89,823
  95,894
  102,216
  108,804
  115,673
  122,837
  130,314
  138,120
  146,273
  154,792
  163,698
Total liabilities, $m
  17,394
  19,268
  21,913
  24,731
  27,716
  30,866
  34,177
  37,648
  41,277
  45,064
  49,011
  53,119
  57,392
  61,833
  66,450
  71,247
  76,232
  81,414
  86,801
  92,405
  98,236
  104,307
  110,629
  117,217
  124,086
  131,250
  138,727
  146,533
  154,686
  163,205
  172,111
Total equity, $m
  6,048
  5,308
  6,037
  6,814
  7,636
  8,504
  9,416
  10,372
  11,372
  12,416
  13,503
  14,635
  15,812
  17,036
  18,308
  19,629
  21,003
  22,430
  23,915
  25,459
  27,065
  28,738
  30,479
  32,295
  34,187
  36,161
  38,221
  40,371
  42,617
  44,965
  47,418
Total liabilities and equity, $m
  23,442
  24,576
  27,950
  31,545
  35,352
  39,370
  43,593
  48,020
  52,649
  57,480
  62,514
  67,754
  73,204
  78,869
  84,758
  90,876
  97,235
  103,844
  110,716
  117,864
  125,301
  133,045
  141,108
  149,512
  158,273
  167,411
  176,948
  186,904
  197,303
  208,170
  219,529
Debt-to-equity ratio
  1.485
  2.040
  2.240
  2.390
  2.530
  2.640
  2.740
  2.820
  2.890
  2.950
  3.010
  3.050
  3.100
  3.140
  3.170
  3.200
  3.230
  3.250
  3.280
  3.300
  3.320
  3.340
  3.350
  3.370
  3.380
  3.400
  3.410
  3.420
  3.430
  3.440
  3.450
Adjusted equity ratio
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,836
  4,245
  5,080
  5,971
  6,917
  7,916
  8,969
  10,073
  11,229
  12,437
  13,697
  15,047
  16,413
  17,834
  19,312
  20,850
  22,448
  24,111
  25,842
  27,643
  29,519
  31,474
  33,512
  35,637
  37,855
  40,170
  42,588
  45,115
  47,757
  50,520
  53,411
Depreciation, amort., depletion, $m
  1,064
  1,218
  1,378
  1,548
  1,728
  1,919
  2,119
  2,329
  2,548
  2,777
  3,016
  3,211
  3,470
  3,738
  4,017
  4,307
  4,609
  4,922
  5,248
  5,586
  5,939
  6,306
  6,688
  7,087
  7,502
  7,935
  8,387
  8,859
  9,352
  9,867
  10,405
Funds from operations, $m
  5,980
  5,463
  6,457
  7,519
  8,645
  9,835
  11,088
  12,402
  13,778
  15,214
  16,712
  18,259
  19,883
  21,573
  23,330
  25,157
  27,057
  29,033
  31,090
  33,230
  35,458
  37,780
  40,200
  42,723
  45,356
  48,105
  50,975
  53,974
  57,109
  60,387
  63,816
Change in working capital, $m
  374
  532
  570
  607
  643
  679
  713
  748
  782
  816
  850
  885
  920
  957
  994
  1,033
  1,074
  1,116
  1,161
  1,207
  1,256
  1,308
  1,362
  1,419
  1,480
  1,543
  1,611
  1,682
  1,756
  1,835
  1,918
Cash from operations, $m
  5,606
  4,931
  5,887
  6,912
  8,002
  9,157
  10,375
  11,654
  12,996
  14,398
  15,862
  17,374
  18,963
  20,616
  22,335
  24,123
  25,983
  27,917
  29,929
  32,023
  34,202
  36,472
  38,838
  41,304
  43,877
  46,561
  49,364
  52,292
  55,352
  58,552
  61,898
Maintenance CAPEX, $m
  0
  -1,016
  -1,165
  -1,325
  -1,495
  -1,676
  -1,866
  -2,066
  -2,276
  -2,495
  -2,724
  -2,963
  -3,211
  -3,470
  -3,738
  -4,017
  -4,307
  -4,609
  -4,922
  -5,248
  -5,586
  -5,939
  -6,306
  -6,688
  -7,087
  -7,502
  -7,935
  -8,387
  -8,859
  -9,352
  -9,867
New CAPEX, $m
  -2,243
  -1,490
  -1,599
  -1,703
  -1,805
  -1,904
  -2,002
  -2,098
  -2,194
  -2,290
  -2,386
  -2,484
  -2,583
  -2,685
  -2,791
  -2,900
  -3,014
  -3,133
  -3,257
  -3,388
  -3,525
  -3,670
  -3,822
  -3,983
  -4,152
  -4,331
  -4,520
  -4,719
  -4,929
  -5,151
  -5,384
Cash from investing activities, $m
  -2,297
  -2,506
  -2,764
  -3,028
  -3,300
  -3,580
  -3,868
  -4,164
  -4,470
  -4,785
  -5,110
  -5,447
  -5,794
  -6,155
  -6,529
  -6,917
  -7,321
  -7,742
  -8,179
  -8,636
  -9,111
  -9,609
  -10,128
  -10,671
  -11,239
  -11,833
  -12,455
  -13,106
  -13,788
  -14,503
  -15,251
Free cash flow, $m
  3,309
  2,425
  3,123
  3,884
  4,702
  5,577
  6,507
  7,490
  8,526
  9,613
  10,752
  11,927
  13,168
  14,461
  15,806
  17,206
  18,662
  20,176
  21,750
  23,387
  25,091
  26,864
  28,710
  30,633
  32,638
  34,728
  36,909
  39,186
  41,565
  44,049
  46,647
Issuance/(repayment) of debt, $m
  989
  2,470
  2,645
  2,817
  2,985
  3,150
  3,311
  3,471
  3,629
  3,787
  3,947
  4,108
  4,273
  4,442
  4,616
  4,797
  4,985
  5,182
  5,388
  5,604
  5,831
  6,070
  6,322
  6,588
  6,869
  7,164
  7,476
  7,806
  8,153
  8,520
  8,906
Issuance/(repurchase) of shares, $m
  -2,938
  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 from financing (excl. dividends), $m  
  -1,954
  2,470
  2,645
  2,817
  2,985
  3,150
  3,311
  3,471
  3,629
  3,787
  3,947
  4,108
  4,273
  4,442
  4,616
  4,797
  4,985
  5,182
  5,388
  5,604
  5,831
  6,070
  6,322
  6,588
  6,869
  7,164
  7,476
  7,806
  8,153
  8,520
  8,906
Total cash flow (excl. dividends), $m
  1,346
  4,895
  5,769
  6,701
  7,687
  8,727
  9,818
  10,961
  12,155
  13,401
  14,698
  16,035
  17,441
  18,903
  20,423
  22,003
  23,647
  25,357
  27,137
  28,991
  30,922
  32,934
  35,032
  37,221
  39,506
  41,893
  44,386
  46,992
  49,718
  52,569
  55,553
Retained Cash Flow (-), $m
  502
  -686
  -729
  -776
  -822
  -868
  -912
  -956
  -1,000
  -1,043
  -1,087
  -1,132
  -1,177
  -1,224
  -1,272
  -1,322
  -1,373
  -1,428
  -1,484
  -1,544
  -1,607
  -1,672
  -1,742
  -1,815
  -1,892
  -1,974
  -2,060
  -2,151
  -2,246
  -2,347
  -2,454
Prev. year cash balance distribution, $m
 
  1,426
  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
 
  5,635
  5,040
  5,925
  6,865
  7,859
  8,906
  10,004
  11,155
  12,357
  13,611
  14,903
  16,264
  17,679
  19,151
  20,682
  22,274
  23,930
  25,653
  27,447
  29,315
  31,261
  33,290
  35,406
  37,614
  39,919
  42,326
  44,842
  47,471
  50,222
  53,099
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  5,387
  4,586
  5,108
  5,578
  5,987
  6,324
  6,582
  6,754
  6,838
  6,832
  6,731
  6,554
  6,300
  5,976
  5,594
  5,166
  4,704
  4,222
  3,734
  3,250
  2,784
  2,345
  1,941
  1,577
  1,257
  982
  751
  561
  410
  292
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

LyondellBasell Industries N.V. is a chemical company. The Company operates in five segments: Olefins and Polyolefins-Americas (O&P-Americas), Olefins and Polyolefins-Europe, Asia, International (O&P-EAI), Intermediates and Derivatives (I&D), Refining and Technology. The O&P-Americas segment produces and markets olefins and co-products, polyethylene and polypropylene. The O&P-EAI segment produces and markets olefins and co-products, polyethylene and polypropylene. The I&D segment produces and markets propylene oxide (PO) and its derivatives, oxyfuels and related products, and intermediate chemicals, such as styrene monomer (SM), acetyls and ethylene oxides. The primary product of the Refining segment is refined products made from sulfur crude oil and other crude oils of various types and sources available on the United States Gulf Coast. The Technology segment develops and licenses chemical and polyolefin process technologies and manufactures and sells polyolefin catalysts.

FINANCIAL RATIOS  of  LyondellBasell Industries (LYB)

Valuation Ratios
P/E Ratio 10.4
Price to Sales 1.4
Price to Book 6.6
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow 11.9
Growth Rates
Sales Growth Rate -10.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 55.8%
Cap. Spend. - 3 Yr. Gr. Rate 7.5%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 138.6%
Total Debt to Equity 148.5%
Interest Coverage 16
Management Effectiveness
Return On Assets 17.7%
Ret/ On Assets - 3 Yr. Avg. 18.3%
Return On Total Capital 25.9%
Ret/ On T. Cap. - 3 Yr. Avg. 26.9%
Return On Equity 60.9%
Return On Equity - 3 Yr. Avg. 53.8%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 20.6%
Gross Margin - 3 Yr. Avg. 19%
EBITDA Margin 22.8%
EBITDA Margin - 3 Yr. Avg. 20.5%
Operating Margin 17.4%
Oper. Margin - 3 Yr. Avg. 16.2%
Pre-Tax Margin 17.9%
Pre-Tax Margin - 3 Yr. Avg. 16.5%
Net Profit Margin 13.1%
Net Profit Margin - 3 Yr. Avg. 12%
Effective Tax Rate 26.5%
Eff/ Tax Rate - 3 Yr. Avg. 27.1%
Payout Ratio 36.4%

LYB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LYB stock intrinsic value calculation we used $29183 million for the last fiscal year's total revenue generated by LyondellBasell Industries. The default revenue input number comes from 2016 income statement of LyondellBasell Industries. 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 LYB stock valuation model: a) initial revenue growth rate of 14.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.6%, whose default value for LYB is calculated based on our internal credit rating of LyondellBasell Industries, 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 LyondellBasell Industries.
    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 LYB stock the variable cost ratio is equal to 71.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3404 million in the base year in the intrinsic value calculation for LYB 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 4.1% for LyondellBasell Industries.

Corporate tax rate of 27% is the nominal tax rate for LyondellBasell Industries. 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 LYB 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 LYB are equal to 34.8%.

Life of production assets of 10 years is the average useful life of capital assets used in LyondellBasell Industries 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 LYB is equal to 12.4%. 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 - $6048 million for LyondellBasell Industries - 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 399.069 million for LyondellBasell Industries 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 LyondellBasell Industries at the current share price and the inputted number of shares is $39.5 billion.

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COMPANY NEWS

▶ 5 Companies Reach 52-Week Highs   [Sep-26-17 12:19PM  GuruFocus.com]
▶ Houston-based drilling co. hires former LyondellBasell, Baker Hughes exec as CFO   [Sep-25-17 05:35PM  American City Business Journals]
▶ What Eastman Chemicals Valuations Suggest   [07:37AM  Market Realist]
▶ LyondellBasell Celebrates 18th Annual Global Care Day   [Sep-11-17 06:24PM  PR Newswire]
▶ LyondellBasell: Analysts Views and Recommendations   [Sep-08-17 03:06PM  Market Realist]
▶ Analyzing LyondellBasells 3Q17 Dividend   [12:01PM  Market Realist]
▶ IBD Rating Upgrades: Lyondellbasell Ind A Nv Flashes Improved Price Strength   [Sep-07-17 03:00AM  Investor's Business Daily]
▶ [$$] Judge Dismisses LyondellBasell Creditors Clawback Lawsuit   [Sep-06-17 12:19AM  The Wall Street Journal]
▶ [$$] Judge Dismisses LyondellBasell Creditors Clawback Lawsuit   [Sep-05-17 07:46PM  The Wall Street Journal]
▶ LyondellBasell Board Authorizes Quarterly Dividend   [Aug-23-17 06:45AM  PR Newswire]
▶ 6 Undervalued Stocks Based on the Peter Lynch Value   [Aug-03-17 06:26PM  GuruFocus.com]
▶ Analysts Views on LyondellBasell after Its 2Q17 Earnings   [Jul-31-17 03:35PM  Market Realist]
▶ Why Did LyondellBasells Revenue Rise in 2Q17?   [02:06PM  Market Realist]
▶ LyondellBasell beats 2Q profit forecasts   [Jul-28-17 10:07PM  Associated Press]
▶ LyondellBasell gives final green light to $2.4B chemical plant in Houston area   [Jul-21-17 09:30AM  American City Business Journals]
▶ Whos LyondellBasell Cooking up a License Deal with Now?   [Jul-18-17 10:37AM  Market Realist]
▶ Why Eastman Chemical Is Trading at a Premium to Its Peers   [Jul-10-17 09:06AM  Market Realist]
▶ LyondellBasells Debt Is on the Rise   [11:05AM  Market Realist]
▶ Will Pandora Shares Soar to $16 -- or Plummet to $3.50?   [Jun-26-17 11:18AM  TheStreet.com]
▶ What Analysts Recommend for LyondellBasell   [May-29-17 09:07AM  Market Realist]
▶ LyondellBasell Pleases Investors with Dividend Increase   [May-26-17 05:22PM  Market Realist]
▶ LyondellBasell to Build Hyperzone Polyethylene Plant   [May-22-17 05:39PM  Market Realist]
▶ LyondellBasell starts construction on Gulf Coast plant using new technology   [May-16-17 04:10PM  American City Business Journals]
▶ Material ETFs Rise on Solid Q1 Earnings   [May-08-17 10:21AM  Zacks]
▶ [$$] Chemical industry split about the case for more US plants   [May-02-17 01:00PM  Financial Times]
Financial statements of LYB
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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