DCF Studio

    BP.L · LSE · Energy

    BP p.l.c.

    Also onConsensus Drift

    Implied value per share

    GBp 1258.75

    Market price

    GBp 558.70

    Implied upside

    +125.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 0.7466

    AdjustedReports in USD, trades in GBp. Modelled in USD, converted at the end.
    AdjustedBeta of -0.220 is not usable in a cost of equity. Clamped to 0.30.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 1258.75+125.3%
    Exit multiple
    GBp 524.33-6.2%
    Market price
    GBp 558.70

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn10bn20bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 174.6bnUSD 161.0bnUSD 148.5bnUSD 137.0bnUSD 126.3bn-7.8%
    EBITUSD 20.7bnUSD 19.1bnUSD 17.6bnUSD 16.3bnUSD 15.0bn-7.8%
    NOPATUSD 15.5bnUSD 14.3bnUSD 13.2bnUSD 12.2bnUSD 11.2bn-7.8%
    Add depreciation & amortisationUSD 13.8bnUSD 12.8bnUSD 11.8bnUSD 10.9bnUSD 10.0bn-7.8%
    Less capital expenditureUSD -11.7bnUSD -10.8bnUSD -10.0bnUSD -9.2bnUSD -8.5bn-7.8%
    Less increase in working capitalUSD 2.8bnUSD 2.6bnUSD 2.4bnUSD 2.2bnUSD 2.0bn+7.8%
    Free cashflow to firmUSD 20.5bnUSD 18.9bnUSD 17.4bnUSD 16.0bnUSD 14.8bn-7.8%
    Discount factor0.97230.91920.86890.82150.7766-
    Present valueUSD 19.9bnUSD 17.3bnUSD 15.1bnUSD 13.2bnUSD 11.5bn-12.8%
    Present Value Of The ForecastUSD 77.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.300Clamped from a reported -0.220
    Cost of equity6.15%Risk-free + beta x equity risk premium
    Cost of debt7.12%Interest expense / average total debt
    Market capitalisationUSD 86.3bn54.3% of capital
    Total debtUSD 72.5bn45.7% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC5.78%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 16.86

    75% of EV

    Forecast FCFF, final year
    USD 14.8bn
    Capex at depreciation, working capital in reinvestment
    USD 11.2bn
    Less reinvestment at g/ROIC (16.8% of NOPAT)
    USD -1.9bn
    Capitalised
    USD 9.4bn
    ROIC (reported)
    14.9%
    Terminal value, undiscounted
    USD 292.4bn
    Terminal value, discounted
    USD 227.1bn
    Enterprise value
    USD 304.1bn
    Less net debt
    USD 35.8bn
    Equity value
    USD 268.3bn

    Exit at 3.6x EBITDA

    Value per shareUSD 7.02

    48% of EV

    Terminal value, undiscounted
    USD 90.8bn
    Terminal value, discounted
    USD 70.5bn
    Enterprise value
    USD 147.6bn
    Less net debt
    USD 35.8bn
    Equity value
    USD 111.8bn

    Spread between methods: 82%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    3.78%26.7432.4742.6565.87172.02
    4.78%18.6320.8924.1229.1638.12
    5.78%14.2915.4116.8618.8221.64
    6.78%11.5812.2112.9713.9315.18
    7.78%9.7310.1010.5411.0711.72

    Outlined: this model. Green text: above today's price of 7.48. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-7.8%-23.4%-15.6pp
    EBIT margin11.9%5.7%-6.2pp
    Discount rate5.8%9.9%+4.2pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.