DCF Studio

    OXY · NYQ · Energy

    Occidental Petroleum Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 15.64

    Market price

    USD 58.84

    Implied upside

    -73.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 15.64-73.4%
    Exit multiple
    USD 17.55-70.2%
    Market price
    USD 58.84

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 18.1bnUSD 15.2bnUSD 12.7bnUSD 10.7bnUSD 8.9bn-16.2%
    EBITUSD 4.4bnUSD 3.7bnUSD 3.1bnUSD 2.6bnUSD 2.2bn-16.2%
    NOPATUSD 3.4bnUSD 2.9bnUSD 2.4bnUSD 2.0bnUSD 1.7bn-16.2%
    Add depreciation & amortisationUSD 5.1bnUSD 4.3bnUSD 3.6bnUSD 3.0bnUSD 2.5bn-16.2%
    Less capital expenditureUSD -4.3bnUSD -3.6bnUSD -3.0bnUSD -2.5bnUSD -2.1bn-16.2%
    Less increase in working capitalUSD 36.2mUSD 30.4mUSD 25.5mUSD 21.4mUSD 17.9m+16.2%
    Free cashflow to firmUSD 4.3bnUSD 3.6bnUSD 3.0bnUSD 2.5bnUSD 2.1bn-16.2%
    Discount factor0.96930.91070.85570.80400.7554-
    Present valueUSD 4.2bnUSD 3.3bnUSD 2.6bnUSD 2.0bnUSD 1.6bn-21.2%
    Present Value Of The ForecastUSD 13.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.440Reported 0.164, pulled toward 1.0 (Blume)
    Cost of equity7.42%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 58.8bn71.6% of capital
    Total debtUSD 23.4bn28.4% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC6.43%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 15.64

    63% of EV

    Forecast FCFF, final year
    USD 2.1bn
    Capex at depreciation, working capital in reinvestment
    USD 1.7bn
    Less reinvestment at g/ROIC (30.5% of NOPAT)
    USD -518.9m
    Capitalised
    USD 1.2bn
    ROIC (reported)
    8.2%
    Terminal value, undiscounted
    USD 30.9bn
    Terminal value, discounted
    USD 23.3bn
    Enterprise value
    USD 37.0bn
    Less net debt
    USD 21.4bn
    Equity value
    USD 15.6bn

    Exit at 7.1x EBITDA

    Value per shareUSD 17.55

    65% of EV

    Terminal value, undiscounted
    USD 33.4bn
    Terminal value, discounted
    USD 25.2bn
    Enterprise value
    USD 38.9bn
    Less net debt
    USD 21.4bn
    Equity value
    USD 17.5bn

    Spread between methods: 11%.

    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%
    4.43%32.5137.3244.5756.8382.17
    5.43%20.9022.7625.2228.6633.84
    6.43%13.9514.7115.6416.8218.37
    7.43%9.319.589.8910.2510.68
    8.43%6.056.126.196.266.33

    Outlined: this model. Green text: above today's price of 58.84. 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-16.2%0.6%+16.7pp
    EBIT margin24.1%54.5%+30.4pp
    Discount rate6.4%4.0%-2.4pp
    Download as Excel

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