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 15.00%
01 FCFF0 15,538
1 FCFF1 16,218 = 15,538 × (1 + 4.37%) 14,103
2 FCFF2 17,127 = 16,218 × (1 + 5.61%) 12,951
3 FCFF3 18,298 = 17,127 × (1 + 6.84%) 12,032
4 FCFF4 19,774 = 18,298 × (1 + 8.07%) 11,308
5 FCFF5 21,614 = 19,774 × (1 + 9.30%) 10,748
5 Terminal value (TV5) 414,867 = 21,614 × (1 + 9.30%) ÷ (15.00% – 9.30%) 206,295
Intrinsic value of Chevron Corp. capital 267,436
Less: Debt (fair value) 22,993
Intrinsic value of Chevron Corp. common stock 244,443
 
Intrinsic value of Chevron Corp. common stock (per share) $138.84
Current share price $156.34

Based on: 10-K (reporting date: 2024-12-31).

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) 275,252 0.92 16.08%
Debt (fair value) 22,993 0.08 2.07% = 2.91% × (1 – 28.86%)

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,760,598,537 × $156.34
= $275,251,975,274.58

   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
= (35.50% + 27.60% + 28.30% + 27.50% + 25.40%) ÷ 5
= 28.86%

WACC = 15.00%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Chevron Corp., PRAT model

Microsoft Excel
Average Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Interest and debt expense 594 469 516 712 697
Net income (loss) attributable to Chevron Corporation 17,661 21,369 35,465 15,625 (5,543)
 
Effective income tax rate (EITR)1 35.50% 27.60% 28.30% 27.50% 25.40%
 
Interest and debt expense, after tax2 383 340 370 516 520
Add: Cash dividends 11,801 11,336 10,968 10,179 9,651
Interest expense (after tax) and dividends 12,184 11,676 11,338 10,695 10,171
 
EBIT(1 – EITR)3 18,044 21,709 35,835 16,141 (5,023)
 
Short-term debt 4,406 529 1,964 256 1,548
Long-term debt, excluding debt due within one year 20,135 20,307 21,375 31,113 42,767
Total Chevron Corporation stockholders’ equity 152,318 160,957 159,282 139,067 131,688
Total capital 176,859 181,793 182,621 170,436 176,003
Financial Ratios
Retention rate (RR)4 0.32 0.46 0.68 0.34 —
Return on invested capital (ROIC)5 10.20% 11.94% 19.62% 9.47% -2.85%
Averages
RR 0.45
ROIC 9.68%
 
FCFF growth rate (g)6 4.37%

Based on: 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), 10-K (reporting date: 2020-12-31).

1 See details »

2024 Calculations

2 Interest and debt expense, after tax = Interest and debt expense × (1 – EITR)
= 594 × (1 – 35.50%)
= 383

3 EBIT(1 – EITR) = Net income (loss) attributable to Chevron Corporation + Interest and debt expense, after tax
= 17,661 + 383
= 18,044

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [18,044 – 12,184] ÷ 18,044
= 0.32

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 18,044 ÷ 176,859
= 10.20%

6 g = RR × ROIC
= 0.45 × 9.68%
= 4.37%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (298,245 × 15.00% – 15,538) ÷ (298,245 + 15,538)
= 9.30%

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 4.37%
2 g2 5.61%
3 g3 6.84%
4 g4 8.07%
5 and thereafter g5 9.30%

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)
= 4.37% + (9.30% – 4.37%) × (2 – 1) ÷ (5 – 1)
= 5.61%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 4.37% + (9.30% – 4.37%) × (3 – 1) ÷ (5 – 1)
= 6.84%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 4.37% + (9.30% – 4.37%) × (4 – 1) ÷ (5 – 1)
= 8.07%