Intrinsic value of Petroleo Brasileiro ADR - PBR

Previous Close

$14.56

  Intrinsic Value

$134.40

stock screener

  Rating & Target

str. buy

+823%

Previous close

$14.56

 
Intrinsic value

$134.40

 
Up/down potential

+823%

 
Rating

str. buy

We calculate the intrinsic value of PBR 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 10.3

 

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, %
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.62
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
  5.24
  5.21
  5.19
Revenue, $m
  96,910
  105,332
  114,096
  123,211
  132,686
  142,533
  152,765
  163,399
  174,453
  185,947
  197,903
  210,344
  223,297
  236,789
  250,849
  265,509
  280,802
  296,762
  313,426
  330,834
  349,024
  368,041
  387,929
  408,736
  430,509
  453,302
  477,168
  502,164
  528,349
  555,787
Variable operating expenses, $m
  17,132
  18,600
  20,128
  21,718
  23,370
  25,087
  26,871
  28,725
  30,653
  32,657
  34,507
  36,677
  38,935
  41,288
  43,740
  46,296
  48,962
  51,745
  54,651
  57,686
  60,858
  64,174
  67,642
  71,269
  75,066
  79,040
  83,202
  87,560
  92,126
  96,910
Fixed operating expenses, $m
  60,070
  61,392
  62,742
  64,123
  65,533
  66,975
  68,448
  69,954
  71,493
  73,066
  74,674
  76,316
  77,995
  79,711
  81,465
  83,257
  85,089
  86,961
  88,874
  90,829
  92,827
  94,870
  96,957
  99,090
  101,270
  103,498
  105,775
  108,102
  110,480
  112,910
Total operating expenses, $m
  77,202
  79,992
  82,870
  85,841
  88,903
  92,062
  95,319
  98,679
  102,146
  105,723
  109,181
  112,993
  116,930
  120,999
  125,205
  129,553
  134,051
  138,706
  143,525
  148,515
  153,685
  159,044
  164,599
  170,359
  176,336
  182,538
  188,977
  195,662
  202,606
  209,820
Operating income, $m
  19,708
  25,340
  31,226
  37,371
  43,783
  50,471
  57,446
  64,720
  72,307
  80,224
  88,722
  97,351
  106,366
  115,790
  125,645
  135,956
  146,751
  158,056
  169,902
  182,318
  195,339
  208,998
  223,331
  238,376
  254,173
  270,764
  288,191
  306,502
  325,743
  345,966
EBITDA, $m
  34,392
  41,279
  48,472
  55,976
  63,801
  71,958
  80,458
  89,317
  98,553
  108,184
  118,230
  128,714
  139,661
  151,096
  163,048
  175,545
  188,620
  202,305
  216,635
  231,647
  247,380
  263,875
  281,173
  299,321
  318,364
  338,353
  359,339
  381,377
  404,523
  428,837
Interest expense (income), $m
  8,082
  7,103
  7,478
  7,865
  8,268
  8,688
  9,124
  9,577
  10,048
  10,537
  11,046
  11,574
  12,124
  12,697
  13,293
  13,914
  14,561
  15,235
  15,939
  16,673
  17,440
  18,241
  19,078
  19,953
  20,868
  21,825
  22,827
  23,876
  24,974
  26,124
  27,329
Earnings before tax, $m
  12,605
  17,862
  23,360
  29,103
  35,095
  41,347
  47,869
  54,672
  61,770
  69,179
  77,147
  85,226
  93,669
  102,497
  111,731
  121,396
  131,516
  142,117
  153,229
  164,879
  177,098
  189,920
  203,378
  217,509
  232,348
  247,937
  264,316
  281,528
  299,620
  318,638
Tax expense, $m
  3,403
  4,823
  6,307
  7,858
  9,476
  11,164
  12,925
  14,761
  16,678
  18,678
  20,830
  23,011
  25,291
  27,674
  30,167
  32,777
  35,509
  38,372
  41,372
  44,517
  47,817
  51,278
  54,912
  58,727
  62,734
  66,943
  71,365
  76,013
  80,897
  86,032
Net income, $m
  9,202
  13,039
  17,053
  21,245
  25,620
  30,184
  34,944
  39,911
  45,092
  50,500
  56,317
  62,215
  68,379
  74,823
  81,564
  88,619
  96,006
  103,746
  111,857
  120,361
  129,282
  138,642
  148,466
  158,781
  169,614
  180,994
  192,950
  205,515
  218,722
  232,606

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
  155,554
  169,072
  183,140
  197,771
  212,980
  228,785
  245,209
  262,278
  280,021
  298,470
  317,661
  337,631
  358,422
  380,078
  402,647
  426,179
  450,725
  476,344
  503,092
  531,033
  560,232
  590,757
  622,680
  656,076
  691,026
  727,611
  765,919
  806,041
  848,073
  892,114
Adjusted assets (=assets-cash), $m
  155,554
  169,072
  183,140
  197,771
  212,980
  228,785
  245,209
  262,278
  280,021
  298,470
  317,661
  337,631
  358,422
  380,078
  402,647
  426,179
  450,725
  476,344
  503,092
  531,033
  560,232
  590,757
  622,680
  656,076
  691,026
  727,611
  765,919
  806,041
  848,073
  892,114
Revenue / Adjusted assets
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
  0.623
Average production assets, $m
  193,627
  210,453
  227,965
  246,177
  265,107
  284,781
  305,225
  326,472
  348,558
  371,522
  395,409
  420,267
  446,147
  473,104
  501,197
  530,488
  561,042
  592,931
  626,226
  661,006
  697,351
  735,347
  775,083
  816,654
  860,157
  905,697
  953,381
  1,003,323
  1,055,642
  1,110,463
Working capital, $m
  48,455
  52,666
  57,048
  61,606
  66,343
  71,267
  76,383
  81,700
  87,227
  92,974
  98,951
  105,172
  111,648
  118,394
  125,425
  132,755
  140,401
  148,381
  156,713
  165,417
  174,512
  184,021
  193,965
  204,368
  215,255
  226,651
  238,584
  251,082
  264,175
  277,894
Total debt, $m
  115,041
  121,003
  127,207
  133,659
  140,366
  147,336
  154,579
  162,107
  169,931
  178,067
  186,530
  195,337
  204,506
  214,057
  224,009
  234,387
  245,212
  256,510
  268,306
  280,628
  293,504
  306,966
  321,044
  335,772
  351,184
  367,319
  384,212
  401,906
  420,442
  439,864
Total liabilities, $m
  68,599
  74,561
  80,765
  87,217
  93,924
  100,894
  108,137
  115,665
  123,489
  131,625
  140,088
  148,895
  158,064
  167,615
  177,567
  187,945
  198,770
  210,068
  221,864
  234,186
  247,062
  260,524
  274,602
  289,330
  304,742
  320,877
  337,770
  355,464
  374,000
  393,422
Total equity, $m
  86,955
  94,511
  102,375
  110,554
  119,056
  127,891
  137,072
  146,614
  156,532
  166,845
  177,572
  188,736
  200,358
  212,464
  225,080
  238,234
  251,956
  266,276
  281,229
  296,848
  313,170
  330,233
  348,078
  366,747
  386,283
  406,735
  428,149
  450,577
  474,073
  498,692
Total liabilities and equity, $m
  155,554
  169,072
  183,140
  197,771
  212,980
  228,785
  245,209
  262,279
  280,021
  298,470
  317,660
  337,631
  358,422
  380,079
  402,647
  426,179
  450,726
  476,344
  503,093
  531,034
  560,232
  590,757
  622,680
  656,077
  691,025
  727,612
  765,919
  806,041
  848,073
  892,114
Debt-to-equity ratio
  1.320
  1.280
  1.240
  1.210
  1.180
  1.150
  1.130
  1.110
  1.090
  1.070
  1.050
  1.030
  1.020
  1.010
  1.000
  0.980
  0.970
  0.960
  0.950
  0.950
  0.940
  0.930
  0.920
  0.920
  0.910
  0.900
  0.900
  0.890
  0.890
  0.880
Adjusted equity ratio
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9,202
  13,039
  17,053
  21,245
  25,620
  30,184
  34,944
  39,911
  45,092
  50,500
  56,317
  62,215
  68,379
  74,823
  81,564
  88,619
  96,006
  103,746
  111,857
  120,361
  129,282
  138,642
  148,466
  158,781
  169,614
  180,994
  192,950
  205,515
  218,722
  232,606
Depreciation, amort., depletion, $m
  14,684
  15,939
  17,246
  18,605
  20,018
  21,486
  23,012
  24,598
  26,246
  27,960
  29,508
  31,363
  33,295
  35,306
  37,403
  39,589
  41,869
  44,249
  46,733
  49,329
  52,041
  54,877
  57,842
  60,944
  64,191
  67,589
  71,148
  74,875
  78,779
  82,870
Funds from operations, $m
  23,886
  28,979
  34,299
  39,850
  45,638
  51,670
  57,956
  64,508
  71,338
  78,460
  85,826
  93,578
  101,673
  110,129
  118,966
  128,208
  137,875
  147,994
  158,590
  169,690
  181,323
  193,518
  206,308
  219,726
  233,805
  248,583
  264,098
  280,390
  297,502
  315,476
Change in working capital, $m
  4,042
  4,211
  4,382
  4,558
  4,737
  4,923
  5,116
  5,317
  5,527
  5,747
  5,978
  6,221
  6,476
  6,746
  7,030
  7,330
  7,646
  7,980
  8,332
  8,704
  9,095
  9,509
  9,944
  10,403
  10,887
  11,396
  11,933
  12,498
  13,093
  13,719
Cash from operations, $m
  19,844
  24,768
  29,917
  35,293
  40,900
  46,747
  52,840
  59,191
  65,811
  72,713
  79,848
  87,358
  95,197
  103,383
  111,936
  120,878
  130,229
  140,014
  150,258
  160,987
  172,228
  184,010
  196,364
  209,322
  222,918
  237,187
  252,165
  267,892
  284,409
  301,757
Maintenance CAPEX, $m
  -13,244
  -14,450
  -15,705
  -17,012
  -18,371
  -19,784
  -21,252
  -22,778
  -24,364
  -26,012
  -27,726
  -29,508
  -31,363
  -33,295
  -35,306
  -37,403
  -39,589
  -41,869
  -44,249
  -46,733
  -49,329
  -52,041
  -54,877
  -57,842
  -60,944
  -64,191
  -67,589
  -71,148
  -74,875
  -78,779
New CAPEX, $m
  -16,164
  -16,826
  -17,512
  -18,212
  -18,931
  -19,674
  -20,444
  -21,247
  -22,086
  -22,964
  -23,887
  -24,858
  -25,880
  -26,957
  -28,093
  -29,291
  -30,555
  -31,888
  -33,295
  -34,780
  -36,345
  -37,996
  -39,736
  -41,571
  -43,503
  -45,540
  -47,684
  -49,942
  -52,319
  -54,821
Cash from investing activities, $m
  -29,408
  -31,276
  -33,217
  -35,224
  -37,302
  -39,458
  -41,696
  -44,025
  -46,450
  -48,976
  -51,613
  -54,366
  -57,243
  -60,252
  -63,399
  -66,694
  -70,144
  -73,757
  -77,544
  -81,513
  -85,674
  -90,037
  -94,613
  -99,413
  -104,447
  -109,731
  -115,273
  -121,090
  -127,194
  -133,600
Free cash flow, $m
  -9,563
  -6,508
  -3,300
  69
  3,598
  7,289
  11,144
  15,166
  19,362
  23,737
  28,235
  32,992
  37,954
  43,131
  48,537
  54,184
  60,086
  66,257
  72,714
  79,474
  86,554
  93,973
  101,751
  109,910
  118,470
  127,456
  136,892
  146,802
  157,215
  168,157
Issuance/(repayment) of debt, $m
  5,766
  5,961
  6,204
  6,452
  6,707
  6,970
  7,243
  7,527
  7,825
  8,136
  8,463
  8,807
  9,169
  9,550
  9,953
  10,377
  10,825
  11,298
  11,796
  12,322
  12,877
  13,461
  14,078
  14,728
  15,413
  16,134
  16,894
  17,694
  18,536
  19,422
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  
  5,766
  5,961
  6,204
  6,452
  6,707
  6,970
  7,243
  7,527
  7,825
  8,136
  8,463
  8,807
  9,169
  9,550
  9,953
  10,377
  10,825
  11,298
  11,796
  12,322
  12,877
  13,461
  14,078
  14,728
  15,413
  16,134
  16,894
  17,694
  18,536
  19,422
Total cash flow (excl. dividends), $m
  -3,797
  -547
  2,904
  6,521
  10,305
  14,259
  18,387
  22,694
  27,187
  31,873
  36,698
  41,799
  47,122
  52,682
  58,490
  64,561
  70,911
  77,555
  84,510
  91,796
  99,430
  107,434
  115,829
  124,638
  133,883
  143,591
  153,786
  164,496
  175,751
  187,579
Retained Cash Flow (-), $m
  -7,153
  -7,556
  -7,864
  -8,179
  -8,502
  -8,835
  -9,181
  -9,542
  -9,918
  -10,313
  -10,727
  -11,163
  -11,622
  -12,106
  -12,616
  -13,154
  -13,722
  -14,321
  -14,952
  -15,619
  -16,322
  -17,063
  -17,845
  -18,669
  -19,537
  -20,451
  -21,414
  -22,428
  -23,496
  -24,619
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
  -7,153
  -7,556
  -4,960
  -1,658
  1,803
  5,424
  9,206
  13,152
  17,268
  21,560
  25,970
  30,635
  35,500
  40,576
  45,874
  51,407
  57,189
  63,234
  69,558
  76,177
  83,108
  90,371
  97,984
  105,969
  114,346
  123,139
  132,372
  142,068
  152,255
  162,960
Discount rate, %
  6.40
  6.72
  7.06
  7.41
  7.78
  8.17
  8.58
  9.01
  9.46
  9.93
  10.42
  10.95
  11.49
  12.07
  12.67
  13.31
  13.97
  14.67
  15.40
  16.17
  16.98
  17.83
  18.72
  19.66
  20.64
  21.67
  22.76
  23.89
  25.09
  26.34
PV of cash for distribution, $m
  -6,723
  -6,635
  -4,043
  -1,246
  1,240
  3,386
  5,175
  6,598
  7,658
  8,366
  8,725
  8,808
  8,630
  8,232
  7,662
  6,967
  6,192
  5,382
  4,574
  3,800
  3,085
  2,446
  1,892
  1,428
  1,049
  751
  522
  352
  231
  146
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

Petroleo Brasileiro S.A.-Petrobras specializes in the oil, natural gas and energy industry. The Company is engaged in prospecting, drilling, refining, processing, trading and transporting crude oil from producing onshore and offshore oil fields and from shale or other rocks. Its segments include Exploration and Production, which covers the activities of exploration, development and production of crude oil, natural gas liquid and natural gas; Refining, Transportation and Marketing, which covers the refining, logistics, transport and trading of crude oil and oil products activities, exporting of ethanol, and extraction and processing of shale; Gas and Power, which is engaged in transportation and trading of natural gas produced in Brazil and imported natural gas; Biofuels, which covers the activities of production of biodiesel and its co-products, and ethanol-related activities; Distribution, which includes the activities of its subsidiary Petrobras Distribuidora S.A., and Corporate.

FINANCIAL RATIOS  of  Petroleo Brasileiro ADR (PBR)

Valuation Ratios
P/E Ratio -40.5
Price to Sales 2.1
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 14.9
Growth Rates
Sales Growth Rate -12.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -30.9%
Cap. Spend. - 3 Yr. Gr. Rate -19.8%
Financial Strength
Quick Ratio 3
Current Ratio 0.3
LT Debt to Equity 141.4%
Total Debt to Equity 152.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.9%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital -2.2%
Ret/ On T. Cap. - 3 Yr. Avg. -3.2%
Return On Equity -5.9%
Return On Equity - 3 Yr. Avg. -7.5%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 31.8%
Gross Margin - 3 Yr. Avg. 28.8%
EBITDA Margin 22.4%
EBITDA Margin - 3 Yr. Avg. 11.7%
Operating Margin 6.1%
Oper. Margin - 3 Yr. Avg. -1%
Pre-Tax Margin -3.8%
Pre-Tax Margin - 3 Yr. Avg. -7.6%
Net Profit Margin -5.2%
Net Profit Margin - 3 Yr. Avg. -7.1%
Effective Tax Rate -21.9%
Eff/ Tax Rate - 3 Yr. Avg. 2.6%
Payout Ratio -1.6%

PBR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PBR stock intrinsic value calculation we used $88827 million for the last fiscal year's total revenue generated by Petroleo Brasileiro ADR. The default revenue input number comes from 0001 income statement of Petroleo Brasileiro ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PBR stock valuation model: a) initial revenue growth rate of 9.1% 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 6.4%, whose default value for PBR is calculated based on our internal credit rating of Petroleo Brasileiro ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Petroleo Brasileiro ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PBR stock the variable cost ratio is equal to 17.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $58777 million in the base year in the intrinsic value calculation for PBR 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 6.5% for Petroleo Brasileiro ADR.

Corporate tax rate of 27% is the nominal tax rate for Petroleo Brasileiro ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PBR 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 PBR are equal to 199.8%.

Life of production assets of 13.4 years is the average useful life of capital assets used in Petroleo Brasileiro ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PBR is equal to 50%. 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 - $79802 million for Petroleo Brasileiro ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 705.782 million for Petroleo Brasileiro ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Petroleo Brasileiro ADR at the current share price and the inputted number of shares is $10.3 billion.

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