Intrinsic value of Valero Energy - VLO

Previous Close

$103.74

  Intrinsic Value

$32.19

stock screener

  Rating & Target

str. sell

-69%

Previous close

$103.74

 
Intrinsic value

$32.19

 
Up/down potential

-69%

 
Rating

str. sell

We calculate the intrinsic value of VLO 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 44.3

 

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, %
  39.40
  35.96
  32.86
  30.08
  27.57
  25.31
  23.28
  21.45
  19.81
  18.33
  16.99
  15.80
  14.72
  13.74
  12.87
  12.08
  11.37
  10.74
  10.16
  9.65
  9.18
  8.76
  8.39
  8.05
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
Revenue, $m
  131,008
  178,119
  236,656
  307,836
  392,706
  492,111
  606,682
  736,836
  882,789
  1,044,580
  1,222,101
  1,415,133
  1,623,378
  1,846,496
  2,084,133
  2,335,951
  2,601,651
  2,880,989
  3,173,792
  3,479,965
  3,799,504
  4,132,493
  4,479,110
  4,839,627
  5,214,406
  5,603,900
  6,008,648
  6,429,274
  6,866,485
  7,321,066
Variable operating expenses, $m
  124,851
  169,747
  225,533
  293,368
  374,249
  468,982
  578,168
  702,205
  841,298
  995,485
  1,164,663
  1,348,622
  1,547,080
  1,759,710
  1,986,178
  2,226,161
  2,479,374
  2,745,583
  3,024,624
  3,316,407
  3,620,927
  3,938,266
  4,268,592
  4,612,165
  4,969,329
  5,340,517
  5,726,241
  6,127,098
  6,543,761
  6,976,976
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
  124,851
  169,747
  225,533
  293,368
  374,249
  468,982
  578,168
  702,205
  841,298
  995,485
  1,164,663
  1,348,622
  1,547,080
  1,759,710
  1,986,178
  2,226,161
  2,479,374
  2,745,583
  3,024,624
  3,316,407
  3,620,927
  3,938,266
  4,268,592
  4,612,165
  4,969,329
  5,340,517
  5,726,241
  6,127,098
  6,543,761
  6,976,976
Operating income, $m
  6,157
  8,372
  11,123
  14,468
  18,457
  23,129
  28,514
  34,631
  41,491
  49,095
  57,439
  66,511
  76,299
  86,785
  97,954
  109,790
  122,278
  135,407
  149,168
  163,558
  178,577
  194,227
  210,518
  227,462
  245,077
  263,383
  282,406
  302,176
  322,725
  344,090
EBITDA, $m
  8,922
  12,130
  16,117
  20,965
  26,744
  33,514
  41,317
  50,181
  60,121
  71,139
  83,229
  96,375
  110,557
  125,752
  141,936
  159,085
  177,180
  196,204
  216,145
  236,996
  258,757
  281,435
  305,041
  329,593
  355,116
  381,642
  409,207
  437,852
  467,628
  498,586
Interest expense (income), $m
  427
  488
  1,100
  1,877
  2,842
  4,016
  5,416
  7,056
  8,945
  11,092
  13,500
  16,168
  19,096
  22,280
  25,715
  29,395
  33,315
  37,468
  41,851
  46,458
  51,288
  56,338
  61,608
  67,101
  72,818
  78,764
  84,946
  91,370
  98,046
  104,984
  112,195
Earnings before tax, $m
  5,669
  7,272
  9,246
  11,626
  14,441
  17,713
  21,458
  25,686
  30,399
  35,596
  41,271
  47,415
  54,019
  61,070
  68,559
  76,475
  84,809
  93,556
  102,710
  112,271
  122,239
  132,619
  143,418
  154,645
  166,313
  178,437
  191,036
  204,130
  217,741
  231,895
Tax expense, $m
  1,531
  1,963
  2,496
  3,139
  3,899
  4,783
  5,794
  6,935
  8,208
  9,611
  11,143
  12,802
  14,585
  16,489
  18,511
  20,648
  22,899
  25,260
  27,732
  30,313
  33,005
  35,807
  38,723
  41,754
  44,904
  48,178
  51,580
  55,115
  58,790
  62,612
Net income, $m
  4,139
  5,309
  6,750
  8,487
  10,542
  12,931
  15,665
  18,751
  22,191
  25,985
  30,128
  34,613
  39,434
  44,581
  50,048
  55,827
  61,911
  68,296
  74,978
  81,958
  89,234
  96,812
  104,695
  112,891
  121,408
  130,259
  139,456
  149,015
  158,951
  169,283

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
  69,908
  95,047
  126,284
  164,267
  209,555
  262,599
  323,736
  393,189
  471,072
  557,407
  652,135
  755,140
  866,264
  985,323
  1,112,131
  1,246,505
  1,388,288
  1,537,348
  1,693,592
  1,856,972
  2,027,483
  2,205,172
  2,390,134
  2,582,512
  2,782,501
  2,990,341
  3,206,322
  3,430,776
  3,664,080
  3,906,652
Adjusted assets (=assets-cash), $m
  69,908
  95,047
  126,284
  164,267
  209,555
  262,599
  323,736
  393,189
  471,072
  557,407
  652,135
  755,140
  866,264
  985,323
  1,112,131
  1,246,505
  1,388,288
  1,537,348
  1,693,592
  1,856,972
  2,027,483
  2,205,172
  2,390,134
  2,582,512
  2,782,501
  2,990,341
  3,206,322
  3,430,776
  3,664,080
  3,906,652
Revenue / Adjusted assets
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
  1.874
Average production assets, $m
  37,599
  51,120
  67,920
  88,349
  112,707
  141,236
  174,118
  211,472
  253,360
  299,794
  350,743
  406,143
  465,910
  529,944
  598,146
  670,418
  746,674
  826,844
  910,878
  998,750
  1,090,458
  1,186,025
  1,285,505
  1,388,973
  1,496,535
  1,608,319
  1,724,482
  1,845,202
  1,970,681
  2,101,146
Working capital, $m
  3,537
  4,809
  6,390
  8,312
  10,603
  13,287
  16,380
  19,895
  23,835
  28,204
  32,997
  38,209
  43,831
  49,855
  56,272
  63,071
  70,245
  77,787
  85,692
  93,959
  102,587
  111,577
  120,936
  130,670
  140,789
  151,305
  162,233
  173,590
  185,395
  197,669
Total debt, $m
  19,993
  34,122
  51,676
  73,023
  98,475
  128,286
  162,645
  201,677
  245,447
  293,967
  347,205
  405,094
  467,545
  534,457
  605,722
  681,241
  760,923
  844,694
  932,504
  1,024,323
  1,120,151
  1,220,012
  1,323,960
  1,432,077
  1,544,470
  1,661,277
  1,782,658
  1,908,801
  2,039,918
  2,176,244
Total liabilities, $m
  39,288
  53,417
  70,971
  92,318
  117,770
  147,581
  181,940
  220,972
  264,742
  313,262
  366,500
  424,389
  486,840
  553,752
  625,017
  700,536
  780,218
  863,989
  951,799
  1,043,618
  1,139,446
  1,239,307
  1,343,255
  1,451,372
  1,563,765
  1,680,572
  1,801,953
  1,928,096
  2,059,213
  2,195,539
Total equity, $m
  30,620
  41,631
  55,312
  71,949
  91,785
  115,018
  141,797
  172,217
  206,330
  244,144
  285,635
  330,752
  379,424
  431,572
  487,113
  545,969
  608,070
  673,358
  741,793
  813,354
  888,038
  965,865
  1,046,879
  1,131,140
  1,218,735
  1,309,770
  1,404,369
  1,502,680
  1,604,867
  1,711,114
Total liabilities and equity, $m
  69,908
  95,048
  126,283
  164,267
  209,555
  262,599
  323,737
  393,189
  471,072
  557,406
  652,135
  755,141
  866,264
  985,324
  1,112,130
  1,246,505
  1,388,288
  1,537,347
  1,693,592
  1,856,972
  2,027,484
  2,205,172
  2,390,134
  2,582,512
  2,782,500
  2,990,342
  3,206,322
  3,430,776
  3,664,080
  3,906,653
Debt-to-equity ratio
  0.650
  0.820
  0.930
  1.010
  1.070
  1.120
  1.150
  1.170
  1.190
  1.200
  1.220
  1.220
  1.230
  1.240
  1.240
  1.250
  1.250
  1.250
  1.260
  1.260
  1.260
  1.260
  1.260
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
Adjusted equity ratio
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,139
  5,309
  6,750
  8,487
  10,542
  12,931
  15,665
  18,751
  22,191
  25,985
  30,128
  34,613
  39,434
  44,581
  50,048
  55,827
  61,911
  68,296
  74,978
  81,958
  89,234
  96,812
  104,695
  112,891
  121,408
  130,259
  139,456
  149,015
  158,951
  169,283
Depreciation, amort., depletion, $m
  2,765
  3,759
  4,994
  6,496
  8,287
  10,385
  12,803
  15,549
  18,629
  22,044
  25,790
  29,863
  34,258
  38,966
  43,981
  49,295
  54,902
  60,797
  66,976
  73,438
  80,181
  87,208
  94,522
  102,130
  110,039
  118,259
  126,800
  135,677
  144,903
  154,496
Funds from operations, $m
  6,903
  9,067
  11,744
  14,983
  18,829
  23,316
  28,467
  34,300
  40,821
  48,029
  55,917
  64,476
  73,692
  83,548
  94,029
  105,122
  116,813
  129,093
  141,955
  155,395
  169,415
  184,020
  199,217
  215,021
  231,448
  248,518
  266,257
  284,691
  303,854
  323,779
Change in working capital, $m
  1,000
  1,272
  1,580
  1,922
  2,291
  2,684
  3,093
  3,514
  3,941
  4,368
  4,793
  5,212
  5,623
  6,024
  6,416
  6,799
  7,174
  7,542
  7,906
  8,267
  8,628
  8,991
  9,359
  9,734
  10,119
  10,516
  10,928
  11,357
  11,805
  12,274
Cash from operations, $m
  5,904
  7,795
  10,163
  13,061
  16,538
  20,632
  25,374
  30,786
  36,880
  43,660
  51,124
  59,265
  68,069
  77,524
  87,613
  98,323
  109,639
  121,551
  134,049
  147,128
  160,788
  175,029
  189,859
  205,287
  221,329
  238,002
  255,328
  273,334
  292,049
  311,505
Maintenance CAPEX, $m
  -1,984
  -2,765
  -3,759
  -4,994
  -6,496
  -8,287
  -10,385
  -12,803
  -15,549
  -18,629
  -22,044
  -25,790
  -29,863
  -34,258
  -38,966
  -43,981
  -49,295
  -54,902
  -60,797
  -66,976
  -73,438
  -80,181
  -87,208
  -94,522
  -102,130
  -110,039
  -118,259
  -126,800
  -135,677
  -144,903
New CAPEX, $m
  -10,623
  -13,521
  -16,800
  -20,429
  -24,358
  -28,529
  -32,882
  -37,354
  -41,889
  -46,434
  -50,949
  -55,400
  -59,766
  -64,035
  -68,202
  -72,272
  -76,256
  -80,170
  -84,034
  -87,872
  -91,708
  -95,568
  -99,479
  -103,468
  -107,562
  -111,785
  -116,163
  -120,720
  -125,480
  -130,465
Cash from investing activities, $m
  -12,607
  -16,286
  -20,559
  -25,423
  -30,854
  -36,816
  -43,267
  -50,157
  -57,438
  -65,063
  -72,993
  -81,190
  -89,629
  -98,293
  -107,168
  -116,253
  -125,551
  -135,072
  -144,831
  -154,848
  -165,146
  -175,749
  -186,687
  -197,990
  -209,692
  -221,824
  -234,422
  -247,520
  -261,157
  -275,368
Free cash flow, $m
  -6,703
  -8,490
  -10,396
  -12,361
  -14,316
  -16,185
  -17,893
  -19,371
  -20,558
  -21,403
  -21,868
  -21,926
  -21,561
  -20,769
  -19,555
  -17,930
  -15,912
  -13,522
  -10,783
  -7,720
  -4,358
  -720
  3,172
  7,296
  11,637
  16,178
  20,907
  25,814
  30,893
  36,138
Issuance/(repayment) of debt, $m
  11,121
  14,128
  17,555
  21,346
  25,452
  29,811
  34,359
  39,032
  43,770
  48,520
  53,238
  57,889
  62,451
  66,911
  71,266
  75,519
  79,682
  83,772
  87,809
  91,819
  95,827
  99,861
  103,948
  108,117
  112,394
  116,807
  121,381
  126,143
  131,117
  136,326
Issuance/(repurchase) of shares, $m
  4,490
  5,702
  6,932
  8,150
  9,294
  10,303
  11,114
  11,670
  11,922
  11,830
  11,364
  10,503
  9,238
  7,567
  5,493
  3,029
  190
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  15,611
  19,830
  24,487
  29,496
  34,746
  40,114
  45,473
  50,702
  55,692
  60,350
  64,602
  68,392
  71,689
  74,478
  76,759
  78,548
  79,872
  83,772
  87,809
  91,819
  95,827
  99,861
  103,948
  108,117
  112,394
  116,807
  121,381
  126,143
  131,117
  136,326
Total cash flow (excl. dividends), $m
  8,908
  11,340
  14,091
  17,135
  20,430
  23,929
  27,580
  31,331
  35,134
  38,946
  42,733
  46,467
  50,129
  53,709
  57,204
  60,618
  63,960
  70,250
  77,027
  84,100
  91,470
  99,141
  107,120
  115,413
  124,030
  132,984
  142,288
  151,957
  162,010
  172,463
Retained Cash Flow (-), $m
  -8,629
  -11,011
  -13,682
  -16,637
  -19,836
  -23,233
  -26,778
  -30,420
  -34,113
  -37,815
  -41,491
  -45,116
  -48,672
  -52,148
  -55,542
  -58,856
  -62,101
  -65,288
  -68,435
  -71,560
  -74,684
  -77,828
  -81,013
  -84,262
  -87,595
  -91,034
  -94,600
  -98,311
  -102,187
  -106,247
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
  279
  330
  410
  498
  594
  695
  802
  911
  1,021
  1,132
  1,242
  1,350
  1,457
  1,561
  1,663
  1,762
  1,859
  4,962
  8,592
  12,539
  16,786
  21,314
  26,107
  31,151
  36,435
  41,950
  47,689
  53,647
  59,823
  66,217
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
  268
  302
  356
  410
  460
  505
  542
  569
  587
  593
  590
  576
  554
  524
  488
  448
  404
  914
  1,323
  1,593
  1,736
  1,768
  1,711
  1,587
  1,417
  1,224
  1,024
  830
  653
  499
Current shareholders' claim on cash, %
  90.8
  83.1
  76.8
  71.6
  67.2
  63.7
  60.8
  58.4
  56.5
  54.9
  53.7
  52.7
  52.0
  51.5
  51.2
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0

Valero Energy Corporation (Valero) is an independent petroleum refiner and ethanol producer. The Company's segments include refining, ethanol and Valero Energy Partners LP (VLP). The refining segment includes its refining operations and the associated marketing activities. The ethanol segment includes its ethanol operations and the associated marketing activities, and logistics assets that support its ethanol operations. The Company owns logistics assets (crude oil pipelines, refined petroleum product pipelines, terminals, tanks, marine docks, truck rack bays and other assets) that support its refining operations. Some of these assets are owned by VLP, which is a midstream master limited partnership owned by the Company. VLP's assets include crude oil and refined petroleum products pipeline and terminal systems in the United States Gulf Coast and the United States Mid-Continent regions. Its refineries produce conventional gasolines, premium gasolines and lubricants, among others.

FINANCIAL RATIOS  of  Valero Energy (VLO)

Valuation Ratios
P/E Ratio 20.5
Price to Sales 0.6
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 9.7
Price to Free Cash Flow 13.2
Growth Rates
Sales Growth Rate -13.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21%
Cap. Spend. - 3 Yr. Gr. Rate -9.6%
Financial Strength
Quick Ratio 42
Current Ratio 0
LT Debt to Equity 39.4%
Total Debt to Equity 40%
Interest Coverage 8
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 7.9%
Return On Total Capital 8.2%
Ret/ On T. Cap. - 3 Yr. Avg. 12.1%
Return On Equity 11.3%
Return On Equity - 3 Yr. Avg. 16.2%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 13.7%
Gross Margin - 3 Yr. Avg. 13.2%
EBITDA Margin 7.3%
EBITDA Margin - 3 Yr. Avg. 7.5%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 5.5%
Pre-Tax Margin 4.2%
Pre-Tax Margin - 3 Yr. Avg. 5.1%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 3.4%
Effective Tax Rate 24%
Eff/ Tax Rate - 3 Yr. Avg. 29.1%
Payout Ratio 48.5%

VLO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VLO stock intrinsic value calculation we used $93980 million for the last fiscal year's total revenue generated by Valero Energy. The default revenue input number comes from 0001 income statement of Valero Energy. 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 VLO stock valuation model: a) initial revenue growth rate of 39.4% 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 VLO is calculated based on our internal credit rating of Valero Energy, 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 Valero Energy.
    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 VLO stock the variable cost ratio is equal to 95.3%.

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 VLO 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 5.5% for Valero Energy.

Corporate tax rate of 27% is the nominal tax rate for Valero Energy. 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 VLO 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 VLO are equal to 28.7%.

Life of production assets of 13.6 years is the average useful life of capital assets used in Valero Energy 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 VLO is equal to 2.7%. 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 - $21991 million for Valero Energy - 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 427.398 million for Valero Energy 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 Valero Energy at the current share price and the inputted number of shares is $44.3 billion.

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