Intrinsic value of Marathon Petroleum - MPC

Previous Close

$71.42

  Intrinsic Value

$347.97

stock screener

  Rating & Target

str. buy

+387%

Previous close

$71.42

 
Intrinsic value

$347.97

 
Up/down potential

+387%

 
Rating

str. buy

We calculate the intrinsic value of MPC 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 36.2

 

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, %
  19.00
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
Revenue, $m
  89,689
  105,474
  122,709
  141,368
  161,422
  182,837
  205,582
  229,628
  254,948
  281,523
  309,342
  338,399
  368,700
  400,255
  433,087
  467,225
  502,708
  539,580
  577,897
  617,722
  659,122
  702,175
  746,964
  793,581
  842,122
  892,692
  945,401
  1,000,368
  1,057,716
  1,117,576
Variable operating expenses, $m
  77,692
  91,303
  106,163
  122,252
  139,543
  158,009
  177,620
  198,353
  220,185
  243,100
  266,728
  291,782
  317,909
  345,117
  373,426
  402,861
  433,456
  465,249
  498,288
  532,625
  568,322
  605,444
  644,064
  684,259
  726,113
  769,716
  815,165
  862,559
  912,007
  963,621
Fixed operating expenses, $m
  6,300
  6,438
  6,580
  6,725
  6,873
  7,024
  7,178
  7,336
  7,498
  7,663
  7,831
  8,003
  8,179
  8,359
  8,543
  8,731
  8,923
  9,120
  9,320
  9,525
  9,735
  9,949
  10,168
  10,392
  10,620
  10,854
  11,093
  11,337
  11,586
  11,841
Total operating expenses, $m
  83,992
  97,741
  112,743
  128,977
  146,416
  165,033
  184,798
  205,689
  227,683
  250,763
  274,559
  299,785
  326,088
  353,476
  381,969
  411,592
  442,379
  474,369
  507,608
  542,150
  578,057
  615,393
  654,232
  694,651
  736,733
  780,570
  826,258
  873,896
  923,593
  975,462
Operating income, $m
  5,697
  7,733
  9,966
  12,391
  15,006
  17,805
  20,784
  23,938
  27,265
  30,761
  34,783
  38,614
  42,612
  46,779
  51,118
  55,633
  60,329
  65,212
  70,290
  75,571
  81,064
  86,781
  92,732
  98,930
  105,389
  112,121
  119,144
  126,472
  134,123
  142,114
EBITDA, $m
  9,590
  12,247
  15,159
  18,320
  21,725
  25,367
  29,242
  33,344
  37,668
  42,212
  46,971
  51,947
  57,139
  62,549
  68,182
  74,041
  80,135
  86,471
  93,059
  99,909
  107,034
  114,447
  122,163
  130,197
  138,568
  147,294
  156,393
  165,886
  175,797
  186,146
Interest expense (income), $m
  478
  699
  1,058
  1,454
  1,887
  2,355
  2,858
  3,395
  3,965
  4,569
  5,204
  5,870
  6,568
  7,297
  8,057
  8,849
  9,672
  10,529
  11,419
  12,344
  13,305
  14,304
  15,343
  16,423
  17,546
  18,715
  19,933
  21,202
  22,524
  23,903
  25,341
Earnings before tax, $m
  4,998
  6,675
  8,512
  10,505
  12,651
  14,947
  17,389
  19,973
  22,696
  25,557
  28,913
  32,046
  35,315
  38,722
  42,269
  45,960
  49,800
  53,793
  57,946
  62,266
  66,760
  71,439
  76,310
  81,384
  86,673
  92,188
  97,942
  103,948
  110,220
  116,773
Tax expense, $m
  1,349
  1,802
  2,298
  2,836
  3,416
  4,036
  4,695
  5,393
  6,128
  6,900
  7,806
  8,652
  9,535
  10,455
  11,413
  12,409
  13,446
  14,524
  15,645
  16,812
  18,025
  19,288
  20,604
  21,974
  23,402
  24,891
  26,444
  28,066
  29,759
  31,529
Net income, $m
  3,649
  4,873
  6,213
  7,669
  9,236
  10,912
  12,694
  14,580
  16,568
  18,657
  21,106
  23,393
  25,780
  28,267
  30,856
  33,551
  36,354
  39,269
  42,300
  45,454
  48,735
  52,150
  55,706
  59,411
  63,271
  67,297
  71,498
  75,882
  80,460
  85,244

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
  58,353
  68,624
  79,837
  91,977
  105,024
  118,957
  133,756
  149,400
  165,874
  183,164
  201,263
  220,169
  239,883
  260,413
  281,774
  303,985
  327,071
  351,061
  375,991
  401,901
  428,836
  456,848
  485,988
  516,318
  547,900
  580,801
  615,095
  650,857
  688,169
  727,115
Adjusted assets (=assets-cash), $m
  58,353
  68,624
  79,837
  91,977
  105,024
  118,957
  133,756
  149,400
  165,874
  183,164
  201,263
  220,169
  239,883
  260,413
  281,774
  303,985
  327,071
  351,061
  375,991
  401,901
  428,836
  456,848
  485,988
  516,318
  547,900
  580,801
  615,095
  650,857
  688,169
  727,115
Revenue / Adjusted assets
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
  1.537
Average production assets, $m
  35,338
  41,557
  48,347
  55,699
  63,600
  72,038
  81,000
  90,473
  100,449
  110,920
  121,881
  133,329
  145,268
  157,701
  170,636
  184,087
  198,067
  212,595
  227,692
  243,382
  259,694
  276,657
  294,304
  312,671
  331,796
  351,721
  372,488
  394,145
  416,740
  440,325
Working capital, $m
  -3,946
  -4,641
  -5,399
  -6,220
  -7,103
  -8,045
  -9,046
  -10,104
  -11,218
  -12,387
  -13,611
  -14,890
  -16,223
  -17,611
  -19,056
  -20,558
  -22,119
  -23,742
  -25,427
  -27,180
  -29,001
  -30,896
  -32,866
  -34,918
  -37,053
  -39,278
  -41,598
  -44,016
  -46,539
  -49,173
Total debt, $m
  19,596
  26,929
  34,935
  43,603
  52,919
  62,867
  73,434
  84,604
  96,366
  108,711
  121,634
  135,133
  149,208
  163,867
  179,119
  194,977
  211,460
  228,589
  246,389
  264,889
  284,121
  304,121
  324,928
  346,583
  369,132
  392,624
  417,110
  442,644
  469,285
  497,092
Total liabilities, $m
  41,664
  48,997
  57,003
  65,671
  74,987
  84,935
  95,502
  106,672
  118,434
  130,779
  143,702
  157,201
  171,276
  185,935
  201,187
  217,045
  233,528
  250,657
  268,457
  286,957
  306,189
  326,189
  346,996
  368,651
  391,200
  414,692
  439,178
  464,712
  491,353
  519,160
Total equity, $m
  16,689
  19,626
  22,833
  26,305
  30,037
  34,022
  38,254
  42,728
  47,440
  52,385
  57,561
  62,968
  68,606
  74,478
  80,587
  86,940
  93,542
  100,403
  107,533
  114,944
  122,647
  130,658
  138,993
  147,667
  156,699
  166,109
  175,917
  186,145
  196,816
  207,955
Total liabilities and equity, $m
  58,353
  68,623
  79,836
  91,976
  105,024
  118,957
  133,756
  149,400
  165,874
  183,164
  201,263
  220,169
  239,882
  260,413
  281,774
  303,985
  327,070
  351,060
  375,990
  401,901
  428,836
  456,847
  485,989
  516,318
  547,899
  580,801
  615,095
  650,857
  688,169
  727,115
Debt-to-equity ratio
  1.170
  1.370
  1.530
  1.660
  1.760
  1.850
  1.920
  1.980
  2.030
  2.080
  2.110
  2.150
  2.170
  2.200
  2.220
  2.240
  2.260
  2.280
  2.290
  2.300
  2.320
  2.330
  2.340
  2.350
  2.360
  2.360
  2.370
  2.380
  2.380
  2.390
Adjusted equity ratio
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,649
  4,873
  6,213
  7,669
  9,236
  10,912
  12,694
  14,580
  16,568
  18,657
  21,106
  23,393
  25,780
  28,267
  30,856
  33,551
  36,354
  39,269
  42,300
  45,454
  48,735
  52,150
  55,706
  59,411
  63,271
  67,297
  71,498
  75,882
  80,460
  85,244
Depreciation, amort., depletion, $m
  3,892
  4,514
  5,193
  5,929
  6,719
  7,562
  8,459
  9,406
  10,404
  11,451
  12,188
  13,333
  14,527
  15,770
  17,064
  18,409
  19,807
  21,259
  22,769
  24,338
  25,969
  27,666
  29,430
  31,267
  33,180
  35,172
  37,249
  39,414
  41,674
  44,033
Funds from operations, $m
  7,541
  9,387
  11,407
  13,597
  15,954
  18,474
  21,152
  23,986
  26,972
  30,107
  33,294
  36,726
  40,307
  44,037
  47,920
  51,960
  56,161
  60,528
  65,070
  69,792
  74,704
  79,816
  85,136
  90,678
  96,451
  102,470
  108,747
  115,296
  122,134
  129,276
Change in working capital, $m
  -630
  -695
  -758
  -821
  -882
  -942
  -1,001
  -1,058
  -1,114
  -1,169
  -1,224
  -1,279
  -1,333
  -1,388
  -1,445
  -1,502
  -1,561
  -1,622
  -1,686
  -1,752
  -1,822
  -1,894
  -1,971
  -2,051
  -2,136
  -2,225
  -2,319
  -2,419
  -2,523
  -2,634
Cash from operations, $m
  8,171
  10,082
  12,165
  14,418
  16,836
  19,416
  22,153
  25,044
  28,086
  31,277
  34,518
  38,005
  41,640
  45,425
  49,365
  53,462
  57,722
  62,151
  66,756
  71,544
  76,526
  81,710
  87,107
  92,729
  98,587
  104,695
  111,066
  117,715
  124,658
  131,910
Maintenance CAPEX, $m
  -2,969
  -3,534
  -4,156
  -4,835
  -5,570
  -6,360
  -7,204
  -8,100
  -9,047
  -10,045
  -11,092
  -12,188
  -13,333
  -14,527
  -15,770
  -17,064
  -18,409
  -19,807
  -21,259
  -22,769
  -24,338
  -25,969
  -27,666
  -29,430
  -31,267
  -33,180
  -35,172
  -37,249
  -39,414
  -41,674
New CAPEX, $m
  -5,647
  -6,219
  -6,790
  -7,352
  -7,901
  -8,438
  -8,962
  -9,474
  -9,976
  -10,471
  -10,961
  -11,449
  -11,938
  -12,433
  -12,936
  -13,450
  -13,980
  -14,528
  -15,097
  -15,691
  -16,312
  -16,963
  -17,647
  -18,367
  -19,125
  -19,925
  -20,768
  -21,657
  -22,595
  -23,585
Cash from investing activities, $m
  -8,616
  -9,753
  -10,946
  -12,187
  -13,471
  -14,798
  -16,166
  -17,574
  -19,023
  -20,516
  -22,053
  -23,637
  -25,271
  -26,960
  -28,706
  -30,514
  -32,389
  -34,335
  -36,356
  -38,460
  -40,650
  -42,932
  -45,313
  -47,797
  -50,392
  -53,105
  -55,940
  -58,906
  -62,009
  -65,259
Free cash flow, $m
  -445
  328
  1,219
  2,232
  3,365
  4,618
  5,988
  7,470
  9,063
  10,761
  12,466
  14,368
  16,368
  18,466
  20,659
  22,948
  25,333
  27,816
  30,399
  33,085
  35,876
  38,778
  41,794
  44,931
  48,195
  51,590
  55,126
  58,809
  62,648
  66,651
Issuance/(repayment) of debt, $m
  6,650
  7,333
  8,006
  8,668
  9,316
  9,948
  10,566
  11,170
  11,762
  12,345
  12,923
  13,498
  14,076
  14,659
  15,252
  15,859
  16,483
  17,129
  17,800
  18,500
  19,232
  20,000
  20,807
  21,655
  22,549
  23,492
  24,486
  25,534
  26,640
  27,808
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  6,650
  7,333
  8,006
  8,668
  9,316
  9,948
  10,566
  11,170
  11,762
  12,345
  12,923
  13,498
  14,076
  14,659
  15,252
  15,859
  16,483
  17,129
  17,800
  18,500
  19,232
  20,000
  20,807
  21,655
  22,549
  23,492
  24,486
  25,534
  26,640
  27,808
Total cash flow (excl. dividends), $m
  6,205
  7,661
  9,225
  10,900
  12,681
  14,567
  16,554
  18,640
  20,825
  23,106
  25,389
  27,866
  30,444
  33,125
  35,911
  38,806
  41,816
  44,945
  48,199
  51,585
  55,108
  58,778
  62,601
  66,587
  70,744
  75,082
  79,612
  84,344
  89,289
  94,459
Retained Cash Flow (-), $m
  -2,656
  -2,937
  -3,207
  -3,472
  -3,732
  -3,985
  -4,232
  -4,474
  -4,711
  -4,945
  -5,176
  -5,407
  -5,638
  -5,872
  -6,109
  -6,352
  -6,602
  -6,861
  -7,130
  -7,410
  -7,704
  -8,011
  -8,334
  -8,674
  -9,032
  -9,410
  -9,808
  -10,228
  -10,671
  -11,139
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
  3,549
  4,724
  6,018
  7,428
  8,950
  10,582
  12,322
  14,166
  16,113
  18,161
  20,212
  22,460
  24,806
  27,253
  29,801
  32,454
  35,214
  38,084
  41,069
  44,174
  47,405
  50,767
  54,267
  57,912
  61,712
  65,672
  69,804
  74,116
  78,618
  83,320
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
  3,403
  4,325
  5,237
  6,116
  6,937
  7,680
  8,324
  8,854
  9,256
  9,521
  9,599
  9,584
  9,432
  9,149
  8,749
  8,247
  7,662
  7,014
  6,323
  5,613
  4,903
  4,212
  3,557
  2,950
  2,401
  1,916
  1,498
  1,147
  858
  627
Current shareholders' claim on cash, %
  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

Marathon Petroleum Corporation is engaged in refining, marketing, retail and transportation businesses in the United States and the largest east of the Mississippi. The Company operates through three segments: Refining & Marketing; Speedway; and Midstream. The Refining & Marketing segment refines crude oil and other feedstocks at the Company's seven refineries in the Gulf Coast and Midwest regions of the United States. Its Speedway segment sells transportation fuels and convenience products in the retail market in the Midwest, East Coast and Southeast regions of the United States. The Company's Midstream is engaged in the operations of MPLX LP and certain other related operations. It gathers, processes and transports natural gas, natural gas liquids (NGLs), crude oil and refined products. MPLX is a limited partnership which owns, operates, develops and acquires midstream energy infrastructure assets.

FINANCIAL RATIOS  of  Marathon Petroleum (MPC)

Valuation Ratios
P/E Ratio 32.1
Price to Sales 0.6
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 34.5
Growth Rates
Sales Growth Rate -12.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 44.7%
Cap. Spend. - 3 Yr. Gr. Rate 19.1%
Financial Strength
Quick Ratio 32
Current Ratio 0
LT Debt to Equity 77.8%
Total Debt to Equity 78%
Interest Coverage 5
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11.4%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 18.6%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 10%
Gross Margin - 3 Yr. Avg. 9.5%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 6.9%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 4.3%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 33.4%
Eff/ Tax Rate - 3 Yr. Avg. 33.7%
Payout Ratio 61.2%

MPC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MPC stock intrinsic value calculation we used $75369 million for the last fiscal year's total revenue generated by Marathon Petroleum. The default revenue input number comes from 2017 income statement of Marathon Petroleum. 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 MPC stock valuation model: a) initial revenue growth rate of 19% 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 MPC is calculated based on our internal credit rating of Marathon Petroleum, 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 Marathon Petroleum.
    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 MPC stock the variable cost ratio is equal to 86.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6164 million in the base year in the intrinsic value calculation for MPC 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 Marathon Petroleum.

Corporate tax rate of 27% is the nominal tax rate for Marathon Petroleum. 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 MPC 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 MPC are equal to 39.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Marathon Petroleum 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 MPC is equal to -4.4%. 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 - $14033 million for Marathon Petroleum - 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 507 million for Marathon Petroleum 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 Marathon Petroleum at the current share price and the inputted number of shares is $36.2 billion.

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▶ Marathon Petroleum CEO visits San Antonio to meet Andeavor employees   [May-11-18 02:23PM  American City Business Journals]
▶ Marathon deal not expected to affect Andeavor's philanthropy, civic involvement   [May-10-18 03:00PM  American City Business Journals]
▶ CEO: Marathon to switch most Andeavor-owned gas stations to its brands   [06:20AM  American City Business Journals]
▶ Andeavor Reports First Quarter 2018 Results   [May-07-18 04:54PM  GlobeNewswire]
▶ The Keys to the Biggest Oil Refining Deal Ever   [May-03-18 07:04PM  Bloomberg Video]
▶ 21 Ohio companies make Forbes' 500 Best Employers (Countdown)   [03:40PM  American City Business Journals]
▶ Charts signal strength for energy and industrials   [May-01-18 07:19PM  CNBC Videos]
▶ Marathon, Andeavor to make bigger play in Mexican fuels market   [03:01PM  American City Business Journals]
▶ PRESS DIGEST- Financial Times - May 1   [Apr-30-18 08:01PM  Reuters]
▶ Business Highlights   [05:29PM  Associated Press]
▶ What Happened in the Stock Market Today   [05:03PM  Motley Fool]
▶ Marathon Petroleum, Walmart, Prologis Lead Busy Merger News   [04:04PM  Investor's Business Daily]
▶ Closing Bell: LIVE MARKETS BLOG   [04:04PM  TheStreet.com]
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