Stock Analysis on Net
Stock Analysis on Net

Chevron Corp. (NYSE:CVX)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Chevron Corp., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 12.86%
01 FCFF0 17,298
1 FCFF1 17,997 = 17,298 × (1 + 4.04%) 15,947
2 FCFF2 18,931 = 17,997 × (1 + 5.19%) 14,863
3 FCFF3 20,130 = 18,931 × (1 + 6.33%) 14,004
4 FCFF4 21,636 = 20,130 × (1 + 7.48%) 13,337
5 FCFF5 23,502 = 21,636 × (1 + 8.63%) 12,837
5 Terminal value (TV5) 603,434 = 23,502 × (1 + 8.63%) ÷ (12.86% – 8.63%) 329,599
Intrinsic value of Chevron Corp. capital 400,587
Less: Debt (fair value) 40,187
Intrinsic value of Chevron Corp. common stock 360,400
 
Intrinsic value of Chevron Corp. common stock (per share) $182.41
Current share price $204.45

Based on: 10-K (reporting date: 2025-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Chevron Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 403,946 0.91 13.83%
Debt (fair value) 40,187 0.09 3.11% = 4.52% × (1 – 31.14%)

Based on: 10-K (reporting date: 2025-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,975,771,274 × $204.45
= $403,946,436,969.30

   Debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (36.80% + 35.50% + 27.60% + 28.30% + 27.50%) ÷ 5
= 31.14%

WACC = 12.86%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Chevron Corp., PRAT model

Microsoft Excel
Average Dec 31, 2025 Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021
Selected Financial Data (US$ in millions)
Interest and debt expense 1,217 594 469 516 712
Net income attributable to Chevron Corporation 12,299 17,661 21,369 35,465 15,625
 
Effective income tax rate (EITR)1 36.80% 35.50% 27.60% 28.30% 27.50%
 
Interest and debt expense, after tax2 769 383 340 370 516
Add: Cash dividends 12,751 11,801 11,336 10,968 10,179
Interest expense (after tax) and dividends 13,520 12,184 11,676 11,338 10,695
 
EBIT(1 – EITR)3 13,068 18,044 21,709 35,835 16,141
 
Short-term debt 977 4,406 529 1,964 256
Long-term debt, excluding debt due within one year 39,781 20,135 20,307 21,375 31,113
Total Chevron Corporation stockholders’ equity 186,450 152,318 160,957 159,282 139,067
Total capital 227,208 176,859 181,793 182,621 170,436
Financial Ratios
Retention rate (RR)4 -0.03 0.32 0.46 0.68 0.34
Return on invested capital (ROIC)5 5.75% 10.20% 11.94% 19.62% 9.47%
Averages
RR 0.35
ROIC 11.40%
 
FCFF growth rate (g)6 4.04%

Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).

1 See details »

2025 Calculations

2 Interest and debt expense, after tax = Interest and debt expense × (1 – EITR)
= 1,217 × (1 – 36.80%)
= 769

3 EBIT(1 – EITR) = Net income attributable to Chevron Corporation + Interest and debt expense, after tax
= 12,299 + 769
= 13,068

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [13,068 – 13,520] ÷ 13,068
= -0.03

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 13,068 ÷ 227,208
= 5.75%

6 g = RR × ROIC
= 0.35 × 11.40%
= 4.04%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (444,133 × 12.86% – 17,298) ÷ (444,133 + 17,298)
= 8.63%

where:

Total capital, fair value0 = current fair value of Chevron Corp. debt and equity (US$ in millions)
FCFF0 = the last year Chevron Corp. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Chevron Corp. capital

FCFF growth rate (g) forecast

Chevron Corp., H-model

Microsoft Excel
Year Value gt
1 g1 4.04%
2 g2 5.19%
3 g3 6.33%
4 g4 7.48%
5 and thereafter g5 8.63%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 4.04% + (8.63% – 4.04%) × (2 – 1) ÷ (5 – 1)
= 5.19%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 4.04% + (8.63% – 4.04%) × (3 – 1) ÷ (5 – 1)
= 6.33%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 4.04% + (8.63% – 4.04%) × (4 – 1) ÷ (5 – 1)
= 7.48%