Chevron Corporation NYSE: CVX Student Investment Fund Stock Report Analysts: Billie Jean Bergmann & Jacob Krause Recommendation: BUY Market Cap: $132.3 B Recent Price: $66.87 (05/01/09) Target Price: $79.11 H IGHLIGHTS INVESTMENT THESIS 
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CVX is the world's largest producer of geothermal energy1. CVX is diversifying their sources of energy in order to meet the world's growing demand in an environmentally sound way. CVX is diversified geographically with operations in over 100 countries worldwide. CVX’s investment in new technology and renewable energy initiatives ensure future stability and growth in revenues and profits. CVX's efforts to protect the environment were recognized in 2008 with awards from the National Ocean Industries Association and the California Department of Oil, Gas and Geothermal Resources. 
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Sector: Energy Sub‐Sector: Integrated Oil & Gas
Growth in worldwide energy consumption is increasing the need to develop innovative sources of renewable energy and additional supplies of traditional energy. CVX is strategically positioned and diversified to meet the world’s growing demand for renewable and traditional energy. CVX has a strong historical and projected dividend growth compared to its key competitors, evidenced by its steady and consistent growth in free cash flow per share and 21 consecutive years of growing dividends. ROA, ROE, and ROIC are all sufficiently high to ensure CVX remains on pace for shareholder value creation in the long term, even if the company’s future operating environment becomes more challenging than it’s been in the recent past. Our conservative model projects a relatively small spread between the ROIC and WACC, but one that is consistent with long‐term value creation. ONE‐YEAR PRICE PERFORMANCE
CVX
BUSINESS SUMMARY Chevron Corporation is one of the world's largest integrated energy companies. The company is headquartered in San Ramon, California and conducts business in more than 100 countries. CVX is engaged in every aspect of the crude oil and natural gas industry, including exploration and production, manufacturing, marketing and transportation, chemical manufacturing and sales, geothermal and power generation. CVX is a world leader in renewable energy investment and advanced energy technology. Chevron’s commitment to technological development provides ways that help the business increase energy efficiency. CVX is taking steps to form partnerships to help improve the overall quality of life and health of people in emerging markets. 1.
S&P 500

CVX has outperformed the S&P 500 in the past year. FINANCIAL STATISTICS VS. SELECTED COMPETITORS & INDUSTRY Metric
ROA, 5‐Yr. Avg.
ROE, 5‐Yr. Avg.
ROIC, 5‐Yr. Avg.
DPS, 2008
FCF/share, 5‐Yr. Avg.
EPS, 2008
5‐YR Insider Selling
CVX
13.5%
26.4%
22.4%
$2.52
$3.67
$11.72
$262 M
XOM
17.7%
34.5%
25.4%
$1.55
$6.35
$9.14
$432 M
A renewable resource that generates reliable power while producing virtually no greenhouse gas emissions.
COP 5.8% 10.6% 11.9% $1.87 ($0.28) ($10.42) $96 M Industry
11.4%
22.1%
15.1%
‐ ‐ ‐ ‐ S&P 500
8.4%
20.4%
11.3%
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‐
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Chevron Billie Jean Bergmann Jacob Krause MACROECONOMIC THESIS Worldwide energy consumption is projected to rise more than 50% by 2030, fueled by growth in the global population. Higher energy demand will be driven by rapid growth rates in emerging economies such as China and India, which will continue to develop into more energy‐hungry economies (similar to the United States and Europe). Energy demand will rise with economic output and improved standards of living, which in turn will put added pressure on energy supplies. As economies become increasingly industrialized they drive their cars more each year and live in houses that are equipped with an increasing array of energy‐demanding appliances, computers and other conveniences. The combined aspects listed above will lead to an increase in the need to develop innovative, renewable energy sources and additional supplies of traditional energy. Even if the use of renewable energy supplies double or triple over the next 25 years, the world will still depend on fossil fuels for as much as 85% of its energy needs. (Projections reported by the National Petroleum Council) President Obama’s plan to cut $35 billion in U.S. oil preferences over the next 10 years will have little effect on Chevron’s revenues due to the company’s geographic diversification and strategic positioning, which is further discussed below in the global presence section. BUSINESS SEGMENTS CVX's Upstream segment (26.9% of 2008 total sales revenue) includes the exploration, production and sale of crude oil and natural gas. Earnings for the upstream segment closely follow industry price levels for crude oil and natural gas. Crude oil and natural gas prices are subject to external factors over which the company has no control, including product supply and demand connected with global economic conditions and industry inventory levels. Besides the impact of the fluctuation in prices for crude oil and natural gas, the longer‐term trend in earnings for the upstream segment is also a function of other factors, including the company’s ability to find, acquire and efficiently produce crude oil and natural gas; changes in fiscal terms of contracts; changes in tax rates on income; and the cost of goods and services. The United States accounted for 46.9% of upstream sales revenues in 2008; whereas, international sales accounted for 53.1% of upstream revenues. CVX's Downstream segment (71.8% of 2008 total sales revenues) includes refining and marketing of petroleum products and other products derived from crude oil. Additionally, it includes the transportation of products. Earnings for the downstream segment are closely tied to margins on the refining and marketing of products such as gasoline, diesel and jet fuel, lubricants, fuel oil and feedstock for chemical manufacturing. Chevron Billie Jean Bergmann Jacob Krause The energy industry's margins are often volatile, and can be affected by the global and regional supply and demand balance for refined products and by changes in the price of crude oil used for refinery feedstock. Industry margins can also be influenced by refined‐product inventory levels, geopolitical events, refinery maintenance programs and disruptions at refineries resulting from unplanned outages due to severe weather or other operational events. Other factors affecting profitability for downstream operations include the reliability and efficiency of CVX’s refining and marketing network, the effectiveness of the crude oil and product supply functions and the economic returns on invested capital. Profitability can also be affected by the volatility of tanker‐charter rates for the company’s shipping operations, which are driven by the industry’s demand for crude oil and product tankers. Other factors beyond the company’s control include the general level of inflation and energy costs to operate the company’s refinery and distribution network. The company’s most significant marketing areas are the West Coast of North America, the U.S. Gulf Coast, Latin America, Asia, Southern Africa and the United Kingdom. In 2008, 42.2% of downstream sales revenues were based in the United States with international sales accounting for 57.8% of downstream sales revenues. CVX's Chemicals segment (0.7% of 2008 total sales revenues) includes the manufacture and sale of additives for lubricants and fuel. Chevron’s 50‐50 joint venture, Chevron Phillips Chemical Company LLC, is one of the world’s leading manufacturers of commodity petrochemicals. Chevron Oronite markets more than 500 performances enhancing products and supplies, which is ¼ of the world’s fuel and lubricant additives. Earnings in the petrochemicals business are closely tied to global chemical demand, industry inventory levels and plant capacity utilization. Feedstock and fuel costs, which tend to follow crude oil and natural gas price movements, also influence earnings in this segment. In 2008, United States sales accounted for 26.4% of sales revenues in CVX’s chemicals segments, with 73.6% of the sales revenues driven by international markets. CVX's Other Businesses segment (0.6% of 2008 total sales revenues) includes coal mining operations, power generation businesses, insurance operations, real estate activities and technology companies. 95.3% of the other businesses revenues were based in the United States; 4.7% of the sales revenues were international. Other Business FY2008 Chemicals FY2008 Sales $2.17B 0.7% of Total Sales 10.8% Growth from 2007 Sales $1.82B 0.6% of Total Sales 13.1% Growth from 2007 Downstream FY2008 Sales $219.94B 71.8% of Total Sales 23.4% Growth from 2007 Upstream FY2008 Sales $82.32B 26.9% of Total Sales 26.2% Growth from 2007 Chevron Billie Jean Bergmann Jacob Krause GLOBAL PRESENCE Chevron has an impressive diversified portfolio with key operations in important oil and gas regions, as well as geothermal interests in Indonesia and the Philippines. Diversification into renewable energy helps shield against possible losses caused by traditional energy price movements, new legislation and losses of traditional energy reserves. Furthermore, investment in renewable energy resources ensures Chevron will remain an industry leader in the future. The map below show how geographically diversified Chevron’s production is. The graph highlights the main countries in which Chevron has upstream operations, exploring, producing and selling crude oil and/or natural gas. In addition to the upstream interests depicted on the above map, Chevron has downstream, chemical and renewable operations in over 100 countries worldwide. Broad geographic diversification buffers against possible losses due to regional civil unrest, natural disasters and war. In 2008 56.4% of total revenues were international and 43.6% of total revenues were domestic. Other than the United States, no single country accounted for 10% or more of the company’s total sales and other operating revenues in 2008. Chevron Billie Jean Bergmann Jacob Krause VALUATION Our valuation model analyzes CVX's historical financials (2004‐2008) and explicitly forecasts all income statement and balance sheet items as a percent of sales over a 10 year horizon (model shown in appendix). Using conservative assumptions, a discounted cash flow (DCF) model suggests that CVX is slightly undervalued. The model returns a fair value of $79.11 for 2009 and supports a 12‐month target price of $86.61. CVX’s closing price on May 01, 2009 was $66.87. Our model suggests that CVX’s DCF price could grow as high as $169.81 by 2018 (11.05% annual returns, in addition to the stock's 3.9% dividend yield). Inputs:  Revenue growth is modeled on a year‐by‐year basis to better reflect CVX’s prospects (see technical appendix). Despite CVX’s historical 5‐year growth rate average of 15.1%, the revenue growth forecast we used forecasted a decline in energy demand due to the global economic downturn and the volatility of prices in the industry. Our average 10‐year projected growth rate is therefore a conservative 5.26%. Revenues are projected to grow ‐30% in 2009, 10% in 2010, 6.5% in 2011, 6% in 2012, 5.5% in 2013, 5% in 2014, 4.5% in 2015, 4% in 2016 and then taper off to a long‐term sustainable rate of 3% in 2017 and beyond. Our long‐term forecasted growth rate of 3% is significantly more conservative than Thomson‐
Reuters and the analysts' consensus, both of whom project a long‐term growth of 7%.  Cost of Goods Sold was conservatively forecasted to be slightly higher than the 5‐year average of 74%, contrary to the historical decline in COGS and further predicted decline in costs (Argus Research). Our forecast assumes that higher input costs will accompany the global economic recovery.  Other Operating Expenses are adjusted 0.3% higher from the historical average. CVX has a historical trend of slightly increasing other expenses. By adjusting the expenses above the historical average to 7.2% our forecast continues a trend that offsets future increases in operating expenses.  Share Growth/Diluted Share Growth is set at ‐3.0%, which is lower than the historical average of ‐0.9%. CVX has historically bought back shares, as represented in the negative historical average. The ‐3.0%% rate ensures that earnings per share and intrinsic value per share are modeled conservatively.  Dividend growth is adjusted down 0.4% from the historical average. CVX has a recent trend of a slower dividend growth. The 12.0% dividend growth rate reflects CVX's historical commitment to growing dividends faster than peer firms such as Exxon‐Mobil and Conoco‐Phillips.  Net Property Plant and Equipment is modeled on a year‐by‐year basis to better reflect CVX’s net PPE as a percent of sales. We anticipate that future exploration of oil will be more capital intensive. Therefore, we based our PPE projections off of historic growth in PPE/Sales. The historic growth from 2005‐2008 in PPE/Sales is 13.0%. To keep our model conservative and account for the impact the projected ‐30.0% revenue growth in 2009 had on PPE/Sales we projected a 7.0% increase in Net PPE year‐by‐year out to 2015. Forecasted year‐by‐year PPE/Sales, 51.39% in 2009, 49.99% in 2010, 50.22% in 2001, 50.70% in 2012, 51.42% in 2013, 52.40% in 2014, 52.50% in 2015 and 2016, and holding the PPE/Sales at 53.00% in 2017 and 2018. The historical average of 32.5% compared to the forecasted average of 51.71% shows our large increase in Net PPE. 
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Chevron Billie Jean Bergmann Jacob Krause Cash is modeled slightly higher than the historical average. Although CVX’s cash/sales have been decreasing, we increased the cash to help keep our model conservative and compress forecasted ROIC. Receivables are modeled slightly lower than the historical average. CVX’s receivables/sales have declined significantly recently from 10.2% in 2007 to 5.8% in 2008. CVX is reducing the amount held in receivables; therefore, we forecasted receivables/sales lower than the historical average. WACC and Beta. The model uses a WACC at 10.40%. Our estimates of CVX's historical beta vs. the S&P 500 was 0.84. We used a much higher beta of 1.15 to allow for reversion to the mean and possible increases in the volatility of CVX’s stock price. The higher beta increases the cost of capital, which compresses the value of the stock price. The cost of capital was calculated using a risk‐free rate of 4%, which is higher than the current rate of 2.75%, and market risk premium of 6%. PROFITABILITY 
35%
Margins. The forecast model projects no growth in margins over the 10‐year forecast period. This helps to compensate for some of the current economic uncertainty. CVX has shown average Gross, Operating and Net Profit Margins for 2004‐
2008 of 27.9%, 14.5%, and 8.4%, respectively. When we employ conservative forecasting assumptions the average forecasted margins compress to 26% for Gross Margins, 12.3% for Operating Margins and 7.1% for Net Profit Margins. 30%
25%
20%
15%
10%
5%
0%
Gross Margin
Operating Margin
Net Margin

Dividends Per Share. One of the key factors in choosing a mega‐oil stock was the ability of a company to grow its dividends. CVX’s potential to grow DPS is substantially better than its key competitors due to CVX’s ability to steadily and consistently grow their FCF per share. Even with conservative assumptions, CVX has the ability to grow its dividend as high as $10 per share in the long term, whereas their key competitors cannot, which benefits the tax‐free status of the student investment fund. Historical Avg Forecasted Avg $2.01 $6.04 Dividends Per Share
$10.00 $8.00 $6.00 $4.00 $2.00 $0.00 XOM
CVX
COP
Chevron Billie Jean Bergmann Jacob Krause 
Free Cash Flow Per Share. The stability in FCF per share supports CVX’s ability to grow its dividends. XOM’s FCF/Share is higher historically, and COP’s has the chance to be higher in the future, but CVX’s FCF/Share has undeniable stability that suits our selection criteria for a big oil stock, as shown in the historic average of $3.67 per share and forecasted average of $6.46 per share. Historical Avg Forecasted Avg $3.67 $6.46 $20 Free Cash Flow Per Share
$15 $10 $5 $0 ($5)
($10)
XOM
CVX
COP
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Return on Assets, Return on Equity and Return on Invested Capital. CVX has earned 35%
strong and sustainable ROA, ROE and ROIC 30%
for 2004‐2008, with an average of 13.5%, 25%
26.4%, and 22.4%, respectively. In employing 20%
conservative forecasting assumptions, these 15%
metrics compress to 13‐14% for ROE and 10%
5%
ROIC and 9% for ROA. The forecasted 0%
averages are all sufficiently high enough to ensure CVX remains on pace for shareholder value creation in the long term, even if the Return on Assets
Return on Equity
Return on Invested Capital
company’s future operating environment becomes more challenging than it’s been in the recent past. Historical Avg Forecasted Avg ROA 13.5% 8.8% ROE 26.4% 13.7% ROA 22.4% 12.9% Chevron Billie Jean Bergmann Jacob Krause VALUE CREATION METRICS Net Operating Profit After Tax and Free Cash NOPAT and Free Cash Flow (millions) vs. DCF Price
$30,000 $220.00
Flow. Historically, NOPAT and FCF both have $25,000 steadily increased. In employing conservative $170.00
modeling assumptions, the forecasted NOPAT $20,000 $120.00
and FCF drop far below their steadily $15,000 increasing historic trend. Yet, CVX is still a $70.00
compelling stock and has the potential to $10,000 continue increasing NOPAT and FCF in the $20.00
$5,000 long‐run. Their FCF is increasing at a much $0 ‐$30.00
lower rate than NOPAT due to the offset of higher PPE/Sales assumption discussed earlier. Both NOPAT and FCF depict CVX’s NOPAT
Free Cash Flow
DCF Price
ability to enhance shareholder value through generating steady free cash flow. ROIC v. WACC value spread. Comparing a company's ROIC to its cost of capital reveals whether they are increasing the value of invested capital. 30%
Historically, CVX’s growing ROIC to WACC 25%
spread has been a key value driver. There are 20%
signs this will continue in the future. 15%
Although our conservative modeling 10%
assumptions compress the spread by Value Spread
5%
approximately 10%, CVX maintains a positive 0%
ROIC to WACC spread, suggesting the firm will continue to create shareholder value. NOPAT and Free Cash Flow

Economic Value Added and Market Value Added. Even with a compressed ROIC to WACC spread, CVX has significant potential to continue their trend of creating value for shareholders as shown through EVA and MVA. The large decrease in EVA is contributed to the revenue growth predictions mentioned earlier. In 2008 CVX created $13.7 billion of economic value. After the decline in 2009 we forecast a constant EVA overtime. The EVA is projected to grow from $2.7 billion in 2009 to $3.8 billion in 2018. Economic Value Added

Return on Invested Capital
WACC
$15,000 $100,000 $13,000 $90,000 $11,000 $80,000 $9,000 $70,000 $7,000 $60,000 $5,000 $3,000 $50,000 $1,000 $40,000 ($1,000)
$30,000 Economic Value Added
Market Value Added
Market Value Added

DCF Price
Chevron 
Billie Jean Bergmann Jacob Krause Forecasted Per Share Stock Values
Forecasted Value Per Share

CVX had a MVA of $61.2 billion in 2008. Our projections show steady increase overtime from $63.1 billion to $92.8 billion. This evidences CVX’s ability to create value for the market beyond the value of contributed capital as Chevron effectively controls and manages its assets. RELATIVE VALUATION 
$180 $170 $160 $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 We do not just rely on one valuation metric to measure the intrinsic market value of price. We also look at the historic valuation multiples which include: o Price/Sales o Price/EBITDA o Enterprise Value/EBITDA o Price/Earnings We compressed the historic multiples Low Price
DCF Price
High Price
and compare forecasted multiple prices to our estimated DCF valuation. Our DCF price tracks closer to the extrapolated multiples prices, which shows the DCF share price is consistent with the multiples value estimates, which often reflects the market price. Relative Valuation Current Price/Earnings, Price/Sales, P/E Ratio Enterprise Value/EBITDA and Price/Sales Price/Book indicated that CVX is Value/EBITDA priced at a slightly lower premium compared to XOM, suggesting Price/Book favorable relative valuation compared to competitors and the industry. INSIDER SELLING XOM 8.94 0.88 4.17 2.93 COP ‐5.26 0.34 17.02 ‐ Industry
6.60 0.63 ‐ 1.59 Net Insider Purchases (Sales) , $, in thousands
Net Insider Transactions An additional metric we look at is the pattern of net insider purchases/sales. We prefer companies where executives are heavily invested in their own stock. The net insider selling strongly favors CVX over XOM. Since 2004, XOM's insiders have divested roughly $432 million, whereas CVX's insiders have divested only $262 million. CVX 6.53 0.57 2.97 1.54 $0 ($75,000)
($150,000)
($225,000)
($300,000)
($375,000)
($450,000)
($525,000)
XOM
CVX
Chevron Billie Jean Bergmann Jacob Krause RISKS There is no stock in the current environment where everything is positive. Some risks we are concerned with include:  Governmental policies regulating how companies are structured and where and how companies conduct their operations and formulate their products, which could hinder CVX’s ability to outperform their competitors. Government imposed price controls on refined products such as gasoline or diesel fuel could have an adverse effect on the operations of CVX. Strained relations between the government and CVX may also impact the company’s operations.  Change in prices, which are generally determined by the supply and demand of oil could adversely impact operations. OPEC production levels are the major factor in determining worldwide supply of oil. Demand driven by the condition of local, national, and global economies, weather patterns and taxation relative to other energy sources can have an adverse effect on the price of oil.  A longer recession than forecasted could continue to put downward pressure on oil and gas prices.  Production and distribution disruptions from either natural or human causes could have an adverse effect on the operations of CVX. Hurricanes, floods, fire, earthquakes, and other forms of severe weather would impact CVX’s ability to generate future revenues. Additionally, war, civil unrests, acts of violence, and other political events could adversely impact CVX’s operations.  If Chevron is not successful in replacing the crude oil and natural gas it produces with good prospects for future production, the company’s business will decline. Creating and maintaining new projects depends on many factors including: obtaining and renewing rights to explore, developing and producing hydrocarbons, drilling success, ability to bring long‐lead‐time, capital‐intensive projects to completion on budget and schedule, and efficient and profitable operation of mature properties.  Activities that could result in liability, either as a result of an accidental, unlawful discharge or as a result of new conclusions on the effects of the company’s operations on human health or the environment.  Regulation of greenhouse gas emissions could increase CVX’s operational costs and reduce the demand for CVX’s products.  The risk we are most concerned with is an ongoing environmental damage lawsuit filed by Ecuador. Chevron management cannot currently estimate a range of possible loss from the case, but believes the case lacks legal and factual merit and plans to fight it. Chevron has also recently hired William “Jim” Haynes II, who ran one of the largest law departments in the U.S. federal government. We feel the addition of his world‐class legal talent and leadership will ensure minimal loss to the company. Chevron Billie Jean Bergmann Jacob Krause OWNERSHIP CVX’s institutional & mutual fund ownership is 64%. Top holders summarized below. TOP INSTITUTIONAL HOLDERS
Holder
STATE STREET CORPORATION
Barclays Global Investors UK Holdings Ltd
VANGUARD GROUP, INC. (THE)
Capital World Investors
AXA
FMR LLC
Capital Research Global Investors
Bank of New York Mellon Corporation
WELLINGTON MANAGEMENT COMPANY, LLP
NORTHERN TRUST CORPORATION
Shares
103,764,672
84,863,132
67,001,647
57,122,806
47,709,066
39,225,546
36,181,589
30,293,763
28,269,935
25,520,500
% Out
5.18
4.23
3.34
2.85
2.38
1.96
1.8
1.51
1.41
1.27
Value
$7.68 B
$6.28 B
$4.96 B
$4.23 B
$3.53 B
$2.90 B
$2.68 B
$2.24 B
$2.09 B
$1.89 B
Reported
31-Dec-08
31-Dec-08
31-Dec-08
31-Dec-08
31-Dec-08
31-Dec-08
31-Dec-08
31-Dec-08
31-Dec-08
31-Dec-08
TOP MUTUAL FUND HOLDERS
Holder
WASHINGTON MUTUAL INVESTORS FUND
VANGUARD 500 INDEX FUND
SPDR TRUST SERIES 1
VANGUARD TOTAL STOCK MARKET INDEX FUND
INVESTMENT COMPANY OF AMERICA
INCOME FUND OF AMERICA INC
Shares
27,846,800
19,224,064
18,764,198
17,375,518
13,572,278
12,885,000
% Out
1.39
0.96
0.94
0.87
0.68
0.64
Value
$2.06 B
$1.42 B
$1.55 B
$1.29 B
$1.00 B
$953 M
Reported
31-Dec-08
31-Dec-08
30-Sep-08
31-Dec-08
31-Dec-08
31-Dec-08
VANGUARD INSTITUTIONAL INDEX FUND
AMERICAN BALANCED FUND
12,604,863
11,900,000
0.63
0.59
$932 M
$880 M
31-Dec-08
31-Dec-08
COLLEGE RETIREMENT EQUITIES FUND
VANGUARD/WELLINGTON FUND INC.
10,960,852
10,110,200
0.55
0.5
$811 M
$799 M
31-Dec-08
30-Nov-08
SHORT SELLING TRENDS IN CVX STOCK Days to Cover Ratio (Short Interest ÷ Volume)
14
Days to Cover Ratio
CVX’s downward trending days‐to‐cover indicates a general positive sentiment towards the stock. The short sellers have not set their sights on CVX throughout the economic downturn. If anything, CVX's days to cover ratio exhibits a slight downward trend. 12
10
8
6
4
2
0
Days to Cover
Chevron Billie Jean Bergmann Jacob Krause OTHER VALUATION MEASURES Piotroski’s Financial Fitness Scorecard Piotroski’s Financial Fitness Scorecard gives a company a maximum of 11 points based on items on the income statement and balance sheet. Historically, CVX’s scored an average 8 out of the 11. The forecasted average scored an average of 9 out of 11, which indicates we are projecting CVX to become more financially stable. Altman’s Probability of Bankruptcy Test The Altman Z‐Score uses eight different variables from a company’s income statement and balance sheet to predict a company’s probability of failure. In 2008, CVX scored a 4.55 indicating the company is well‐above the safe zone and should not go bankrupt in the near future. Analysts' Consensus Recommendations If analysts' recommendations were ranked on a scale of 1 to 5, 1 being a strong buy and 5 being a strong sell, CVX's mean recommendation would have averaged a steady 2.2 for the past two weeks indicating a buy, but not a strong buy, signal from analysts. Graham and Dodd Relative Valuation Graham and Dodd is a Thomson‐Reuters relative valuation metric. It measures the premium investors are paying for future earnings compared to all stocks in the S&P 500. CVX ranked in the 5th Decile of Graham and Dodd, indicating the stock sells for an average premium, and is not overvalued. Chevron Billie Jean Bergmann Jacob Krause Earnings Momentum When we began screening for stocks one of the criteria was for the company to have convincing earnings momentum, because growing profits in the current economic environment would be a sign of even stronger prospects when the global economy eventually recovers. CVX has better earnings momentum than 82% of the stocks in the S&P 500. Based on our forecasts, this strong earnings momentum is likely to continue. RECOMMENDATION: “BUY” We believe every portfolio has a place for a big energy stock. We like CVX in terms of its relative and discounted cash flow valuation, strong dividend per share growth, ability to create shareholder value and financial stability:  CVX is undervalued at its current price of $66.87 (05/01/2009), compared to our conservative DCF valuation of $79.11.  CVX’s has strong historical and projected DPS growth compared to its key competitors, evidenced by its steady and consistent growth in FCF per share and 21 consecutive years of growing dividends.  ROA, ROE, and ROIC are all sufficiently high enough to ensure CVX remains on pace for shareholder value creation in the long term, even if the company’s future operating environment becomes more challenging than it’s been in the recent past.  Our conservative model projects a relatively small spread between the ROIC and WACC, CVX is still able to create value, as evidenced by its increasing EVA and MVA.  CVX’s proven financial stability, evidenced by Piotroski’s Financial Fitness Scorecard, Altman’s Probability of Bankruptcy test, NOPAT and FCF.  The growth in worldwide energy consumption will lead to an increase in the need to develop innovate, renewable energy and develop additional supplies of traditional energy. CVX is strategically positioned through diversification to meet the world’s growing demand in renewable and traditional energy. CVX Valuation & Analysis Model Page 1 of 8
A
B
C
D
E
1
2
3
Enter Firm Ticker
CVX
4
values in millions
5
Historical Income Statements
6
Enter first financial statement year in cell B6
7
8
Total revenue
Cost of goods sold
9
Gross profit
F
G
H
I
J
K
L
M
Forecasting Percentages
2004
2005
2006
2007
2008
2004
155,300
114,237
198,200
148,750
210,118
149,034
220,904
155,575
273,005
192,700
41,063
49,450
61,084
65,329
80,305
Revenue Growth
COGS % of Sales
2005
2006
2007
2008
Average
73.6%
27.6%
75.1%
6.0%
70.9%
5.1%
70.4%
23.6%
70.6%
15.1%
72.1%
10
11
SG&A expense
Research & Development
4,557
697
4,828
743
5,093
1,364
5,841
1,323
5,734
1,169
SG&A % of Sales
R&D % of Sales
2.9%
0.4%
2.4%
0.4%
2.4%
0.6%
2.6%
0.6%
2.1%
0.4%
2.5%
0.5%
12
Depreciation/Amortization
4,935
5,913
7,506
8,708
9,528
D&A % of Sales
3.2%
3.0%
3.6%
3.9%
3.5%
3.4%
13
Interest expense (income), operating
0
0
0
0
0
Inc. Exp. Oper.
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
14
Non-recurring expenses
0
0
0
85
22
Exp. Non-rec
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
9,832
12,191
14,624
16,932
20,795
Other exp.
6.3%
6.2%
7.0%
7.7%
7.6%
6.9%
21,042
25,775
32,497
32,440
43,057
15
16
Other operating expenses
Operating Income
17
Interest income (expense), non-operating
0
0
0
0
0
Int. inc. non-oper.
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
18
19
Gain (loss) on sale of assets
Other income, net
0
0
0
0
0
0
0
0
0
0
Gain (loss) asset sales
Other income, net
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
21,042
25,775
32,497
32,440
43,057
7,517
11,098
14,838
13,479
19,026
35.7%
43.1%
45.7%
41.6%
44.2%
42.0%
13,525
14,677
17,659
18,961
24,031
0
0
0
0
0
0
0
0
0
0
Minority interest
Equity in affiliates
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
U.S. GAAP adjust.
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
20
21
22
23
24
25
26
27
Income before tax
Income tax
Income after tax
Minority interest
Equity in affiliates
U.S. GAAP adjustment
Net income before extraordinary items
Extraordinary items, total
28
Net income
29
Total adjustments to net income
30
Basic weighted average shares
31
Basic EPS excluding extraordinary items
32
Basic EPS including extraordinary items
33
Diluted weighted average shares
34
0
0
0
0
0
13,525
14,677
17,659
18,961
24,031
294
0
0
0
0
13,819
14,677
17,659
18,961
24,031
3
2
1
0
0
2,116
2,144
2,186
2,118
2,038
6.39
6.85
8.08
8.95
11.79
6.53
6.85
8.08
8.95
11.79
2,122
2,155
2,197
2,132
2,050
Diluted EPS excluding extraordinary items
6.37
6.81
8.04
8.90
11.72
35
Diluted EPS including extraordinary items
6.51
6.81
8.04
8.90
11.72
36
Dividends per share -- common stock
1.53
1.76
2.01
2.26
2.53
37
Gross dividends -- common stock
3,236
3,778
4,396
4,791
5,162
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Retained earnings
10,583
10,899
13,263
14,170
18,869
Data Source: Thomson/Reuters
N
Forecasted income statement items are based on 5 years of historical average ratios unless a value is entered in
the manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether
the historical average is truly representative of what the firm can achieve in the future.
Tax rate
Extrordinary items
Too unpredictable to forecast, set to zero in the forecast
Adjustments to NI
Too unpredictable to forecast, set to zero in the forecast
Manual
74.0%
7.2%
Share growth
1.3%
1.9%
-3.1%
-3.8%
-0.9%
-3.0%
Diluted share growth
1.6%
2.0%
-3.0%
-3.8%
-0.9%
-3.0%
12.4%
12.0%
Dividend growth
16.7%
16.4%
9.0%
7.7%
CVX Valuation & Analysis Model Page 2 of 8
O
1
2
3
4
P
Q
R
S
T
U
V
W
X
Y
Z
Revenues grow at the same rate each year unless a growth value is manually entered in the cell above the forecast year, in which case the year-by-year value
overrides the historical or manual average. It makes sense to start tapering the growth forecasts 5 or 6 years into the forecast period.
Year-by-year revenue growth
-30.00%
10.00%
6.50%
6.00%
5.50%
5.00%
4.50%
4.00%
3.00%
3.00%
Forecasted Income Statements -- 10 Years
5
6
year
7
8
Total revenue
Cost of goods sold
9
Gross profit
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
191,104
141,417
210,214
155,558
223,878
165,670
237,310
175,610
250,362
185,268
262,881
194,532
274,710
203,286
285,699
211,417
294,270
217,760
303,098
224,292
49,687
54,656
58,208
61,701
65,094
68,349
71,425
74,282
76,510
78,805
10
11
SG&A expense
Research & Development
4,792
955
5,272
1,051
5,614
1,119
5,951
1,187
6,278
1,252
6,592
1,314
6,889
1,374
7,165
1,428
7,379
1,471
7,601
1,515
12
Depreciation/Amortization
6,561
7,217
7,686
8,147
8,595
9,025
9,431
9,808
10,102
10,406
13
Interest expense (income), operating
0
0
0
0
0
0
0
0
0
0
14
Non-recurring expenses
18
20
21
22
23
24
26
27
27
28
13,759
15,135
16,119
17,086
18,026
18,927
19,779
20,570
21,187
21,823
23,601
25,961
27,649
29,308
30,920
32,466
33,926
35,284
36,342
37,432
15
16
Other operating expenses
Operating Income
17
Interest income (expense), non-operating
18
19
Gain (loss) on sale of assets
Other income, net
20
21
22
23
24
25
26
27
Income before tax
Income tax
Income after tax
Minority interest
Equity in affiliates
U.S. GAAP adjustment
Net income before extraordinary items
Extraordinary items, total
28
Net income
29
Total adjustments to net income
30
Basic weighted average shares
31
32
33
Diluted weighted average shares
34
35
(558)
(510)
(467)
(448)
(462)
(523)
(457)
(379)
(361)
(330)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
23,043
25,451
27,182
28,860
30,457
31,942
33,469
34,905
35,981
37,102
9,686
10,699
11,426
12,131
12,803
13,427
14,069
14,672
15,125
15,596
13,357
14,753
15,756
16,728
17,654
18,515
19,400
20,232
20,856
21,506
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
13,357
14,753
15,756
16,728
17,654
18,515
19,400
20,232
20,856
21,506
0
0
0
0
0
0
0
0
0
0
13,357
14,753
15,756
16,728
17,654
18,515
19,400
20,232
20,856
21,506
0
0
0
0
0
0
0
0
0
0
1,977
1,918
1,860
1,804
1,750
1,698
1,647
1,597
1,549
1,503
Basic EPS excluding extraordinary items
6.76
7.69
8.47
9.27
10.09
10.91
11.78
12.67
13.46
14.31
Basic EPS including extraordinary items
6.76
7.69
8.47
9.27
10.09
10.91
11.78
12.67
13.46
14.31
1,989
1,929
1,871
1,815
1,760
1,708
1,656
1,607
1,558
1,512
Diluted EPS excluding extraordinary items
6.72
7.65
8.42
9.22
10.03
10.84
11.71
12.59
13.38
14.23
Diluted EPS including extraordinary items
6.72
7.65
8.42
9.22
10.03
10.84
11.71
12.59
13.38
14.23
36
Dividends per share -- common stock
2.92
3.38
3.90
4.50
5.20
6.00
6.93
8.00
9.24
10.67
37
Gross dividends -- common stock
5,781
6,475
7,252
8,123
9,097
10,189
11,412
12,781
14,315
16,032
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Retained earnings
7,575
8,277
8,503
8,606
8,557
8,326
7,989
7,451
6,542
5,474
CVX Valuation & Analysis Model Page 3 of 8
AA
AB
AC
AD
AE
1
2
3
Enter Firm Ticker
CVX
4
values in millions
5
Historical Balance Sheets
6
year
AF
AG
2004
2006
2007
2008
2004
Assets
Cash & equivalents
9,291
10,043
10,493
7,362
9,347
9
Short term investments
1,451
1,101
953
732
10
11
Receivables, total
Inventory, total
12,429
2,983
17,184
4,121
17,628
4,656
12
Prepaid expenses
2,349
1,887
13
Other current assets, total
0
0
28,503
Total Current Assets
AI
AJ
AK
AL
AM
2005
2006
2007
2008
8.1%
5.0%
14.2%
3.3%
16.8%
3.4%
Average
13.0%
4.6%
PPE Growth
Cash % of Sales
6.0%
43.3%
5.1%
213
ST Invest. % of Sales
0.9%
0.6%
0.5%
0.3%
0.1%
0.5%
22,446
5,310
15,856
6,854
Receivables % Sales
Inventory % of Sales
8.0%
1.9%
8.7%
2.1%
8.4%
2.2%
10.2%
2.4%
5.8%
2.5%
8.2%
2.2%
2,574
3,527
4,200
Pre. Exp. % of Sales
1.5%
1.0%
1.2%
1.6%
1.5%
1.4%
0
0
0
Other CA % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
34,336
36,304
39,377
36,470
15
Property, plant and equipment (net)
44,458
63,690
68,858
78,610
91,780
Net PPE % of Sales
28.6%
32.1%
32.8%
35.6%
33.6%
32.5%
16
Goodwill
0
4,636
4,623
4,637
4,619
Goodwill % of Sales
0.0%
2.3%
2.2%
2.1%
1.7%
1.7%
17
Intangibles
0
0
0
0
0
Intangibles % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
18
19
Long term investments
Notes receivable -- long term
14,389
1,419
17,057
1,686
18,552
2,203
20,477
2,194
20,920
2,413
LT Invest. % of Sales
Notes Rec. % of Sales
9.3%
0.9%
8.6%
0.9%
8.8%
1.0%
9.3%
1.0%
7.7%
0.9%
8.7%
0.9%
20
Other long term assets, total
4,439
4,428
2,088
3,491
4,963
21
Other assets, total
0
0
0
0
0
93,208
125,833
132,628
148,786
161,165
10,747
16,074
16,675
21,756
0
0
0
0
3,410
3,690
4,546
816
739
2,159
22
Total assets
23
24
Liabilities and Shareholders' Equity
Accounts payable
25
Payable/accrued
26
Accrued expenses
27
Notes payable/short term debt
28
Current portion of LT debt/Capital leases
29
Other current liabilities
30
31
Other LT ass. % Sales
2.9%
2.2%
1.0%
1.6%
1.8%
1.9%
Other assets % Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
16,580
Acc. Payable % Sales
6.9%
8.1%
7.9%
9.8%
6.1%
7.8%
0
Pay/accured % Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
5,275
8,077
Acc. Exp. % of Sales
2.2%
1.9%
2.2%
2.4%
3.0%
2.3%
1,162
2,818
Notes payable % Sales
0.5%
0.4%
1.0%
0.5%
1.0%
0.7%
0
0
0
0
0
3,822
4,508
5,029
5,605
4,548
Total Current Liabilities
18,795
25,011
28,409
33,798
32,023
Long term debt, total
10,456
12,131
7,679
6,070
6,083
32
Deferred income tax
7,268
11,262
11,647
12,170
11,539
33
Minority interest
172
200
209
204
469
34
Other liabilities, total
11,287
14,553
15,749
19,456
24,403
35
47,978
63,157
63,693
71,698
74,517
36
Preferred stock (redeemable)
0
0
0
0
0
37
Preferred stock (unredeemable)
0
0
0
0
0
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Total Liabilities
Common stock
Additonal paid-in capital
Retained earnings (accumluated deficit)
Treasury stock -- common
ESOP Debt Guarantee
Other equity, total
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
Diluted weighted average shares
Total preferred shares outstanding
AN
Forecasting Percentages
2005
7
8
14
AH
Forecasted balance sheet items are based on 5 years of historical average ratios unless a value is entered in the
manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether the
historical average is truly representative of what the firm can achieve in the future.
Curr. debt % of Sales
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Other curr liab % Sales
2.5%
2.3%
2.4%
2.5%
1.7%
2.3%
LT debt % of Sales
LT debt is manually adjusted for AFN in the pro formas
Def. inc. tax % Sales
4.7%
5.7%
5.5%
5.5%
4.2%
Min. Int. % of Sales
0.1%
0.1%
0.1%
0.1%
0.2%
0.1%
Other liab. % of Sales
7.3%
7.3%
7.5%
8.8%
8.9%
8.0%
5.5%
6.0%
5.1%
1,706
1,832
1,832
1,832
1,832
4,160
13,891
14,124
14,288
14,448
45,414
55,738
68,464
82,329 101,102
(5,124)
(7,870) (12,395) (18,892) (26,376)
Set to last historical year's level throughout the forecasts.
0
0
0
0
0
Set to last historical year's level throughout the forecasts.
(926)
(915)
(3,090)
(2,469)
(4,358)
The model uses the more conservative diluted common shares
45,230
62,676
68,935
77,088
86,648
number for total shares outstanding.
93,208 125,833 132,628 148,786 161,165
2,122
2,155
2,197
2,132
2,050
Diluted share growth
1.6%
2.0%
-3.0%
-3.8%
-0.9%
0
0
0
0
0 model
Preferred
share
growth
The
uses the
more
conservative diluted common shares
number for total shares outstanding.
Manual
-3.0%
CVX Valuation & Analysis Model Page 4 of 8
AO
1
2
3
4
AP
AQ
AR
AS
AT
AU
AV
AW
AX
AY
AZ
Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49
0.07
Year-by-year PPE/Sales
98,205
105,079
112,434
120,305
128,726
137,737
147,379
157,695
168,734
180,545
51.39%
49.99%
50.22%
50.70%
51.42%
52.40%
52.50%
52.50%
53.00%
53.00%
Forecasted Balance Sheets -- 10 Years
5
6
year
7
8
Assets
Cash & equivalents
9
Short term investments
10
11
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
10,511
11,562
12,313
13,052
13,770
14,458
15,109
15,713
16,185
899
989
1,053
1,117
1,178
1,237
1,293
1,344
1,385
1,426
Receivables, total
Inventory, total
11,466
4,254
12,613
4,679
13,433
4,984
14,239
5,283
15,022
5,573
15,773
5,852
16,483
6,115
17,142
6,360
17,656
6,551
18,186
6,747
12
Prepaid expenses
2,608
2,869
3,056
3,239
3,417
3,588
3,750
3,900
4,017
4,137
13
Other current assets, total
0
0
0
0
0
0
0
0
0
0
29,739
32,713
34,839
36,929
38,960
40,908
42,749
44,459
45,793
47,167
14
Total Current Assets
16,670
15
Property, plant and equipment (net)
98,205
105,079
112,434
120,305
128,726
137,737
144,223
149,992
155,963
160,642
16
Goodwill
3,184
3,502
3,730
3,954
4,171
4,380
4,577
4,760
4,903
5,050
17
Intangibles
0
0
0
0
0
0
0
0
0
0
18
19
Long term investments
Notes receivable -- long term
16,677
1,793
18,345
1,972
19,537
2,100
20,709
2,226
21,848
2,348
22,941
2,466
23,973
2,577
24,932
2,680
25,680
2,760
26,450
2,843
20
Other long term assets, total
3,625
3,988
4,247
4,501
4,749
4,987
5,211
5,419
5,582
5,749
21
Other assets, total
0
0
0
0
0
0
0
0
0
0
153,222
165,598
176,886
188,624
200,803
213,418
223,309
232,242
240,680
247,901
14,863
16,350
17,412
18,457
19,472
20,446
21,366
22,220
22,887
23,574
0
0
0
0
0
0
0
0
0
0
22
Total assets
23
24
Liabilities and Shareholders' Equity
Accounts payable
25
Payable/accrued
26
Accrued expenses
4,421
4,863
5,179
5,490
5,792
6,082
6,355
6,610
6,808
7,012
27
Notes payable/short term debt
1,332
1,465
1,560
1,654
1,745
1,832
1,914
1,991
2,050
2,112
28
Current portion of LT debt/Capital leases
0
0
0
0
0
0
0
0
0
0
29
Other current liabilities
4,331
4,764
5,074
5,378
5,674
5,958
6,226
6,475
6,669
6,869
30
Total Current Liabilities
24,947
27,442
29,226
30,979
32,683
34,317
35,862
37,296
38,415
39,567
31
Long term debt, total
8,800
7,878
7,074
6,678
6,871
7,872
6,667
5,262
4,907
4,335
32
Deferred income tax
9,800
10,780
11,481
12,170
12,839
13,481
14,088
14,651
15,091
15,543
33
Minority interest
34
Other liabilities, total
35
242
258
273
288
302
316
329
339
349
16,755
17,844
18,915
19,955
20,953
21,895
22,771
23,454
24,158
83,952
58,999
63,097
65,882
69,015
72,636
76,925
78,828
80,309
82,206
36
Preferred stock (redeemable)
0
0
0
0
0
0
0
0
0
0
37
Preferred stock (unredeemable)
0
0
0
0
0
0
0
0
0
0
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Total Liabilities
220
15,232
Common stock
Additonal paid-in capital
Retained earnings (accumluated deficit)
Treasury stock -- common
ESOP Debt Guarantee
Other equity, total
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
Total common shares (diluted)
Total preferred shares outstanding
AFN (interactive with 3 items below)
Adjustment to LT Debt (use Goal Seek)
Issue Common Stock to Fund AFN
Set Balance Sheet Cash Lower to Fund AFN
1,832
14,448
108,677
(26,376)
0
(4,358)
94,223
153,222
1,989
0
0.0
2,716.7
1,832
14,448
116,955
(26,376)
0
(4,358)
102,501
165,598
1,929
0
0.0
(921.6)
1,832
14,448
125,458
(26,376)
0
(4,358)
111,004
176,886
1,871
0
0.0
(803.8)
1,832
14,448
134,064
(26,376)
0
(4,358)
119,610
188,624
1,815
0
0.0
(396.2)
1,832
14,448
142,621
(26,376)
0
(4,358)
128,167
200,803
1,760
0
0.0
193.0
1,832
14,448
150,947
(26,376)
0
(4,358)
136,493
213,418
1,708
0
0.0
1,000.5
1,832
14,448
158,936
(26,376)
0
(4,358)
144,482
223,309
1,656
0
0.0
(1,204.6)
1,832
14,448
166,387
(26,376)
0
(4,358)
151,933
232,242
1,607
0
0.0
(1,405.4)
1,832
14,448
172,929
(26,376)
0
(4,358)
158,475
240,680
1,558
0
0.0
(354.5)
1,832
14,448
178,402
(26,376)
0
(4,358)
163,948
247,901
1,512
0
0.0
(572.2)
CVX Valuation & Analysis Model Page 5 of 8
BA
1
Enter Firm Ticker
2
3
BB
CVX
BC
BD
BE
BF
BG
BH
BI
2005
2006
2007
2008
2009E
2010E
2011E
values in millions
Historical Ratios and Valuation Model
2004
4
BJ
BK
BL
BM
BN
BO
BP
2016E
2017E
2018E
Forecasted Ratios and Valuation Model -- 10 Years
2012E
2013E
2014E
2015E
5 Liquidity
6
Current
1.52
1.37
1.28
1.17
1.14
1.19
1.19
1.19
1.19
1.19
1.19
1.19
1.19
1.19
1.19
1.36
0.10
1.21
0.07
1.11
0.06
1.01
0.04
0.92
0.03
1.02
0.03
1.02
0.03
1.02
0.03
1.02
0.03
1.02
0.03
1.02
0.03
1.02
0.03
1.02
0.03
1.02
0.03
1.02
0.03
Days Sales Outstanding
Inventory Turnover
Fixed Assets Turnover
Total Assets Turnover
Debt Management
Long-Term Debt to Equity
Total Debt to Total Assets
29.21
52.06
31.65
48.10
30.62
45.13
37.09
41.60
21.20
39.83
21.90
44.92
21.90
44.92
21.90
44.92
21.90
44.92
21.90
44.92
21.90
44.92
21.90
44.92
21.90
44.92
21.90
44.92
21.90
44.92
3.49
3.11
3.05
2.81
2.97
1.95
2.00
1.99
1.97
1.94
1.91
1.90
1.90
1.89
1.89
1.67
1.58
1.58
1.48
1.69
1.25
1.27
1.27
1.26
1.25
1.23
1.23
1.23
1.22
1.22
23.1%
19.4%
11.1%
7.9%
7.0%
9.3%
7.7%
6.4%
5.6%
5.4%
5.8%
4.6%
3.5%
3.1%
2.6%
12.1%
10.2%
7.4%
4.9%
5.5%
6.6%
5.6%
4.9%
4.4%
4.3%
4.5%
3.8%
3.1%
2.9%
Times Interest Earned
Profitability
Gross Profit Margin
Operating Profit Margin
Net After-Tax Profit Margin
Total Assets Turnover
N/A
N/A
N/A
N/A
N/A
42.3
50.9
59.2
65.4
66.9
62.0
74.2
93.1
26.4%
24.9%
29.1%
29.6%
29.4%
26.0%
26.0%
26.0%
26.0%
26.0%
26.0%
26.0%
26.0%
26.0%
26.0%
13.5%
13.0%
15.5%
14.7%
15.8%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
12.3%
8.9%
7.4%
8.4%
8.6%
8.8%
7.0%
7.0%
7.0%
7.0%
7.1%
7.0%
7.1%
7.1%
7.1%
7.1%
1.67
1.58
1.58
1.48
1.69
1.25
1.27
1.27
1.26
1.25
1.23
1.23
1.23
1.22
1.22
14.8%
2.06
11.7%
2.01
13.3%
1.92
12.7%
1.93
14.9%
1.86
8.7%
1.63
8.9%
1.62
8.9%
1.59
8.9%
1.58
8.8%
1.57
8.7%
1.56
8.7%
1.55
8.7%
1.53
8.7%
1.52
8.7%
1.51
Quick
Net Working Capital to Total Assets
9 Asset Management
7
8
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Return on Assets
Equity Multiplier
Return on Equity
Free Cash Flow Per Share
EPS (using diluted shares, excluding extraordinary items)
DPS (dividends per share)
30.6%
100.8
2.6%
113.4
23.4%
25.6%
24.6%
27.7%
14.2%
14.4%
14.2%
14.0%
13.8%
13.6%
13.4%
13.3%
13.2%
($2.60)
$5.70
$5.95
$5.63
$3.88
$3.88
$4.37
$4.75
$5.13
$5.48
$7.70
$8.89
$9.49
$11.05
13.1%
6.37
6.81
8.04
8.90
11.72
6.72
7.65
8.42
9.22
10.03
10.84
11.71
12.59
13.38
14.23
1.53
1.75
2.00
2.25
2.52
2.91
3.36
3.88
4.48
5.17
5.97
6.89
7.95
9.19
10.61
29
30
Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions)
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
NOPAT (net operating profit after tax)
ROIC (return on invested capital)
EVA (economic value added)
FCF (free cash flow)
Weighted Average Cost of Capital
Net Operating Working Capital (NOWC)
Operating Long Term Assets
Total Operating Capital
Forecasted Valuation Metrics -- 10 Years
2004
13,525
24.6%
7,804
N/A
2005
14,677
19.5%
6,848
(5,593)
2006
17,659
22.0%
9,295
12,519
10,546
11,584
11,556
8,087
44,458
55,004
63,690
75,274
68,858
80,414
78,610
86,697
Valuation (in millions) -- through year 2018
Long-term Horizon Value Growth Rate (user-supplied)
PV of Forecasted FCF, discounted at 10.40%
Value of Non-Operating Assets
Total Intrinsic Value of the Firm
Intrinsic Market Value of the Equity
Per Share Intrinsic Value of the Firm
MVA (market value added)
Weighted Average Cost of Capital Calculations
Item
Value
Percent
ST Debt (from most recent balance sheet)
2,818
2.00%
LT Debt (from most recent balance sheet)
6,083
4.31%
MV Equity (look up stock's mkt. cap and enter in cell BB53)
132,320
93.70%
Weighted Average Cost of Capital
2007
18,961
21.9%
9,944
12,678
2008
24,031
24.2%
13,716
11,548
10.4%
7,400
91,780
99,180
2008
3.00%
$147,193
$9,560
$156,753
$147,852
$72.12
$61,204
2009
13,680
13.0%
2,744
7,709
10.4%
6,947
98,205
105,152
2010
15,048
13.4%
3,324
7,480
10.4%
7,641
105,079
112,720
2011
16,026
13.3%
3,486
8,175
10.4%
8,138
112,434
120,572
2012
16,988
13.2%
3,578
8,629
10.4%
8,626
120,305
128,931
2013
17,922
13.0%
3,587
9,027
10.4%
9,101
128,726
137,827
2014
18,818
12.8%
3,499
9,352
10.4%
9,556
137,737
147,293
2015
19,665
12.8%
3,626
12,749
10.4%
9,986
144,223
154,208
2016
20,452
12.8%
3,771
14,283
10.4%
10,385
149,992
160,377
2017
21,065
12.6%
3,731
14,783
10.4%
10,697
155,963
166,659
2018
21,697
12.6%
3,843
16,698
10.4%
11,017
160,642
171,659
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
$172,235
$13,367
$185,602
$176,701
$94.44
$65,697
Model
4.00%
1.15
6.00%
10.90%
$181,520
$14,169
$195,689
$186,788
$102.92
$67,178
$191,373
$14,948
$206,321
$197,420
$112.14
$69,253
$201,925
$15,695
$217,620
$208,719
$122.23
$72,226
$210,177
$16,402
$226,579
$217,678
$131.42
$73,196
$217,754
$17,058
$234,811
$225,910
$140.61
$73,977
$225,619
$17,570
$243,188
$234,287
$150.33
$75,813
$247,512
$18,097
$265,609
$256,708
$169.81
$92,759
$154,793 $163,413
$11,410
$12,551
$166,203 $175,964
$157,302 $167,063
$79.11
$86.61
$63,079
$64,563
Capital Asset Pricing
Risk Free Rate
Beta
Market Risk Prem.
Cost of Equity
Cost Weighted Cost
3.78%
0.04%
5.77%
0.14%
10.90%
10.21%
10.40%
Source: Yahoo (3/8/09)
http://finance.yahoo.com/bonds/composite_bond_rates
CVX Valuation & Analysis Model Page 6 of 8
BQ
BR
BS
BT
BU
BV
BW
BX
BY
BZ
CA
CB
CC
CD
CE
CF
CG
1
2
3
4
5
6
7
8
9
In this section we are going to examine historical and forecasted ratios (or "multiples") typically used to value stocks ‐‐ P/CF, Enterprise Value/EBITDA, etc. We first want to compare the historical trends in these ratios to the trends in their forecasted values. If our forecasted multiples are systematically increasing or decreasing our forecasts may be too optimistic or pessimistic, and our forecast assumptions may have to be adjusted. Second, we want to compare our discounted cash flow valuation estimates with those derived from the various multiples. Once again, if there is a large discrepancy between our DCF valuation estimate of the company's stock and the range of values obtained from the various multiples, we may want to adjust our forecast assumptions. 1. You will need to look up the company's year‐end stock prices and enter them in the first 5 (historical) years of the "per share value" category.
2. Use the estimated DCF price per share in the forecasted period (link to your forecasted prices in cells BG47‐BP47.
3. Market capitalization will be calculated as basic weighted shares x historical year‐end prices and then forecasted basic weighted shares x DCF forecasted prices.
4. As with previous calculations, historical multiples use actual historical values and forecasted multiples use forecasted values. 10
11
12
Historical Ratios and Valuation
2005
$56.77
$121,726
$31,688
2006
$73.53
$160,737
$40,003
2007
$93.35
$197,675
$41,148
2008
$76.52
$155,948
$52,585
2009E
$79.11
$156,381
$20,497
2010E
$86.61
$166,085
$22,500
2011E
$94.44
$175,666
$23,930
Forecasted Ratios and Valuation
2012E
2013E
2014E
2015E
$102.92
$112.14
$122.23
$131.42
$185,694 $196,264 $207,497 $216,404
$25,344
$26,733
$28,084
$29,309
2016E
$140.61
$224,588
$30,440
2017E
$150.33
$232,916
$31,340
2018E
$169.81
$255,205
$32,263
14
Per share value (hist. & DCF est.)
15
Market capitalization
16
EBITDA
2004
$52.51
$111,114
$26,271
Enterprise Value
$113,267
$124,753
$160,291
$197,749
$155,971
$156,222
$164,108
$172,245
$181,247
$191,398
$203,045
$210,192
$216,456
$224,027
$245,330
0.84
13
17
18
19
Inputs
Multiples
Price/Sales
0.72
0.61
0.76
0.89
0.57
0.82
0.79
0.78
0.78
0.78
0.79
0.79
0.79
0.79
20
Price/EBITDA
4.23
3.84
4.02
4.80
2.97
7.63
7.38
7.34
7.33
7.34
7.39
7.38
7.38
7.43
7.91
21
Price/Free Cash Flow
N/A
-21.48
12.59
16.10
14.03
20.29
22.21
21.49
21.52
21.74
22.19
16.97
15.72
15.76
15.28
22
Enterprise Value/EBITDA
23
24
Price/Earnings
Dividend Yield
25
26
4.31
3.94
4.01
4.81
2.97
7.62
7.29
7.20
7.15
7.16
7.23
7.17
7.11
7.15
7.60
8.24
2.90%
8.33
3.09%
9.15
2.72%
10.49
2.41%
6.53
3.29%
11.78
3.68%
11.32
3.88%
11.22
4.10%
11.17
4.35%
11.18
4.61%
11.27
4.88%
11.22
5.24%
11.17
5.66%
11.23
6.11%
11.94
6.25%
Override
Average w/Manual
0.71
3.97
5.31
15.00
4.01
2009E
$68.44
$41.18
$58.49
$41.53
2010E
$77.61
$46.60
$58.51
$47.00
2011E
$85.21
$51.10
$65.92
$51.53
2012E
$93.12
$55.79
$71.74
$56.27
2013E
$101.28
$60.67
$77.37
$61.18
2014E
$109.63
$65.71
$82.64
$66.26
2015E
$118.11
$70.69
$116.14
$71.29
2016E
$126.63
$75.69
$134.14
$76.33
2017E
$134.47
$80.34
$143.12
$81.02
2018E
$142.78
$85.26
$166.66
$85.99
$122.33
Historical
Valuation Estimates Based On:
27
Price/Sales
28
Price/EBITDA
29
Price/Free Cash Flow
30
Enterprise Value/EBITDA
31
Price/Earnings
Forecasted Stock Prices Based on Historical Multiples -- 10 Years
$57.76
$65.77
$72.41
$79.26
$86.23
$93.24
$100.71
$108.28
$115.07
32
8.55
Low Price
$41.18
$46.60
$51.10
$55.79
$60.67
$65.71
$70.69
$75.69
$80.34
$85.26
33
High Price
$68.44
$77.61
$85.21
$93.12
$101.28
$109.63
$118.11
$134.14
$143.12
$166.66
34
DCF Price
$79.11
$86.61
$94.44
$102.92
$112.14
$122.23
$131.42
$140.61
$150.33
$169.81
35
36
35
20
15
10
30
25
20
15
$80
$80
$60
$60
$60
$40
$40
$40
$20
$20
10
5
0
5
0
Forecasted Value Per Share
Forecasted Value Per Share
$180
$180
$140
$160
$160
$120
$140
$140
$120
$100
$120
$100
$100
$80
25
DCF Price
DCF Price
P/S and Ent. Value/EBITDA
P/S and Ent. Value/EBITDA
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
Forecasted Per Share Stock Values
Forecasted Per Share Stock Values
Price/Sales and Enterprise Value/EBITDA vs. Price
37
$180 $170 $145 $160 $150 $140 $120 $130 $120 $110 $95 $100 $90 $80 $70 $70 $60 $50 $40 $45 $30 $20 $20 Price/Sales
Price/Sales
Enterprise Value/EBITDA
Enterprise Value/EBITDA
DCF Price
DCF Price
Low Price
Low Price
DCF Price
DCF Price
High Price
High Price
CH
CVX Valuation & Analysis Model Page 7 of 8
CI
CJ
CK
CL
CM
CN
CO
CP
CQ
CR
CS
CT
CU
CV
CW
CX
CY
CZ
DA
5
6
7
8
9
10
11
12
Price/Earnings Ratio
4
13
14
Price/Earnings Ratio and Dividend Yield
35
14
30
12
25
10
20
8
15
6
10
4
5
2
0
0
‐5
10%
8%
9%
7%
8%
6%
7%
Dividend Yield
2
3
5%
6%
4%
5%
4%
3%
3%
2%
2%
1%
1%
0%
0%
EPS and DPS
1
Earnings and Dividends Per Share
$16.00 $12.00 $16.00 $14.00 $10.00 $14.00 $12.00 $12.00 $8.00 $10.00 $10.00 $8.00 $8.00 $6.00 $6.00 $6.00 $4.00 $4.00 $4.00 $2.00 $2.00 $2.00 $0.00 $0.00 15
16
Price/Earnings Ratio
Price/Earnings Ratio
17
Earnings Per Share
Earnings Per Share
Dividend Yield
Dividend Yield
Dividends Per Share
Dividends Per Share
18
19
Gross, Operating and Net Profit Margins
20
23
24
25
26
27
28
Gross Margin
Gross Margin
22
35%
50%
30%
40%
25%
ROA, ROE and ROIC
ROA, ROE and ROIC
21
20%
30%
15%
20%
10%
5%
10%
0%
0%
29
30
31
40%
35%
35%
30%
30%
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
Return on Assets, Equity and Invested Capital
Return on Assets, Equity and Invested Capital
32
33
34
Gross Margin
Gross Margin
Operating Margin
Operating Margin
Return on Assets
Return on Assets
Net Margin
Net Margin
Return on Equity
Return on Equity
Return on Invested Capital
Return on Invested Capital
35
36
37
$7,000 $100,000 Market Value Added
$600 $15,000 $550 $13,000 $500 $11,000 $450 $400 $9,000 $350 $7,000 $300 $5,000 $250 $90,000 $6,000 $80,000 $70,000 $5,000 $60,000 $4,000 $50,000 $3,000 $200 $150 $1,000 $100 ($1,000)
$50 $0 $40,000 $3,000 $30,000 $2,000 Economic Value Added
Economic Value Added
Market Value Added
Market Value Added
NOPAT and Free Cash Flow
Economic Value Added & Market Value Added (millions)
Economic Value Added
Economic Value Added
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
$8,000 $30,000 $30,000 $7,000 $25,000 $25,000 $6,000 $20,000 $20,000 $5,000 NOPAT and Free Cash Flow (millions)
$15,000 $4,000 $15,000 $3,000 $10,000 $10,000 $2,000 $5,000 $5,000 $1,000 $0 $0 NOPAT
NOPAT
Free Cash Flow
Free Cash Flow
DB
CVX Valuation & Analysis Model Page 8 of 8
DC
DD
DE
DF
DG
DH
DI
DJ
DK
DL
DM
DN
DO
DP
DQ
DR
DS
DT
1
2
3
3,000
6,000
6
7
8
9
10
11
12
20,000
29,000
Avg. Daily Volume 14
5
Short Interst (thousands)
13
80,000
27,000
70,000
24,000
24,000
60,000
21,000
21,000
50,000
18,000
40,000
18,000
15,000
30,000
15,000
12,000
20,000
12,000
10,000
9,000
0
6,000
9,000
4
Average Daily Trading Volume (thousands)
Short Interest (thousands of shares)
15
6,000
8,000
4,000
4,000
6,000
2,000
4,000
2,000
3,000
16
18,000
18,000
24,000
16,000
16,000
14,000
19,000
14,000
12,000
14,000
12,000
10,000
10,000
8,000
9,000
Average Daily Volume (thousands of shares)
Average Daily Volume (thousands of shares)
Short Interest (thousands of shares)
Short Interest (thousands of shares)
17
18
19
Days to Cover Ratio (Short Interest ÷ Volume)
20
21
25
26
27
28
29
30
31
32
33
Net Insider Purchases (Sales) , $, in thousands
Net Insider Transactions 23
24
Days to Cover Ratio
22
5
14
12
4
4
10
8
3
36
24
22
1
0
1
0
$25,000 ($25,000)
($75,000)
($125,000)
($175,000)
($225,000)
($275,000)
0
Days to Cover
Days to Cover
34
Net Insider Transactions, $, in thousands
35
36
37
Historical Trends: Price/Sales Ratio
Historical Trends: Price/Earnings Ratio
Historical P/S Ratio
18.0
26.0
Historical P/E Ratio
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
16.0
24.0
24.0
14.0
22.0
12.0
22.0
10.0
20.0
20.0
8.0
18.0
6.0
18.0
16.0
4.0
16.0
2.0
14.0
12.0
14.0
1.8
1.1
1.6
1.7
1.4
1.6
1.2
1.5
1.0
1.0
1.4
0.8
1.3
0.6
0.4
1.2
0.2
1.1
1.0
0.0
1.0
0.9
12.0
0.9
Yum Brands Chevron
McDonalds
ConocoPhillips
Exxon Mobil
YUM Brands ChevronMcDonalds
ConocoPhillips
Exxon Mobil
DU
DV
CVX Enhanced Scorecard Page 1 of 2
Enter Firm Ticker
CVX
Historical Score
140
Forecasted Score
226
Historical Max
231
Forecast Max
540
Accept. Hist. Range
HS > 113
Accept. Forec. Range
Total Score
Max Points
FS > 270
Acceptible Range
366
Grade (%)
47%
771
TS > 383
Historical Forecasted
Total Score Total Score
1
Scorecard Criterion
EPS Growth
Points
2
Scorecard Criterion
Net Income Growth
Points
3
Scorecard Criterion
Dividend Yield
Points
Scorecard Criterion
4
Dividend Growth
Points
5
Scorecard Criterion
EVA Growth
Points
6
Scorecard Criterion
MVA / Mkt Cap.
Points
7
Scorecard Criterion
Value Spread
Points
8
Scorecard Criterion
Undervalue %
Points
9
Scorecard Criterion
Financial Fitness
Points
Acceptable Superior
5.0%
10.0%
2
4
Acceptable Superior
5.0%
10.0%
2
4
Acceptable Superior
2.5%
5.0%
2
4
Acceptable Superior
5.0%
10.0%
2
4
Acceptable Superior
5.0%
10.0%
2
4
Acceptable Superior
50.0%
2
Year
Criterion Value
Scorecard Value
Year
Criterion Value
Scorecard Value
Year
Criterion Value
Scorecard Value
Year
Criterion Value
Scorecard Value
Year
Criterion Value
Scorecard Value
Year
100.0% Criterion Value
4
Acceptable Superior
4.0%
8.0%
2
4
Acceptable Superior
15.0%
30.0%
5
10
Acceptable Superior
Scorecard Value
Year
Criterion Value
Scorecard Value
Year
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
7.1%
18.0%
10.8%
31.7%
-42.7%
13.9%
10.1%
9.5%
8.8%
8.1%
8.0%
7.5%
6.3%
6.3%
28
2.0
4.0
4.0
4.0
0.0
4.0
4.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
56
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
6.2%
20.3%
7.4%
26.7%
-44.4%
10.5%
6.8%
6.2%
5.5%
4.9%
4.8%
4.3%
3.1%
3.1%
28
2.0
4.0
2.0
4.0
0.0
4.0
2.0
2.0
2.0
0.0
0.0
0.0
0.0
0.0
56
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
3.09%
2.72%
2.41%
3.29%
3.7%
3.9%
4.1%
4.3%
4.6%
4.9%
5.2%
5.7%
6.1%
6.2%
28
2.0
2.0
0.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
4.0
4.0
4.0
4.0
56
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
4.6%
18.0%
10.7%
31.8%
-42.7%
13.9%
10.1%
9.5%
8.8%
8.1%
8.0%
7.5%
6.3%
6.3%
28
0.0
4.0
4.0
4.0
0.0
4.0
4.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
56
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
-12.3%
35.7%
7.0%
37.9%
-80.0%
21.2%
4.9%
2.6%
0.3%
-2.5%
3.6%
4.0%
-1.1%
3.0%
28
0.0
4.0
2.0
4.0
0.0
4.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
56
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
N/A
N/A
N/A
39.2%
40.3%
38.9%
37.4%
36.2%
35.3%
34.8%
33.8%
32.9%
32.5%
36.3%
28
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
56
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
14.2%
9.1%
11.6%
11.5%
13.8%
2.6%
2.9%
2.9%
2.8%
2.6%
2.4%
2.4%
2.4%
2.2%
28
4.0
4.0
4.0
4.0
4.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
56
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
Criterion Value
Scorecard Value
Year
6
9
Criterion Value
2
4
Scorecard Value
-6.1%
5
0.0
10
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
6
10
7
9
9
10
9
8
8
8
9
8
9
9
28
0.0
4.0
2.0
2.0
2.0
4.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
56
8
14
20
36
22
8
12
20
22
10
8
6
20
34
28
8
12
20
34
22
8
10
20
14
4
8
0
20
0
0
8
16
Grand
Total
20
4
20
0
0
5
0
2018E
8
8
20
22
30
CVX Enhanced Scorecard Page 2 of 2
10
Scorecard Criterion
Bankruptcy Score
Points
11
Scorecard Criterion
Price / FCF
Points
12
Scorecard Criterion
Price / Sales
Points
13
Scorecard Criterion
Price / EBITDA
Points
14
Scorecard Criterion
Enterprise / EBITDA
Points
15
Scorecard Criterion
Cash / Sales
Points
16
Scorecard Criterion
LT Debt / Equity
Points
17
Scorecard Criterion
FCF Yield
Points
18
Scorecard Criterion
FCF Growth
Points
Acceptable Superior
Year
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
1.2
2.9
Criterion Value
4.55
5
5
5
10
Scorecard Value
10.0
10
10
Acceptable Superior
25.0
15.0
1
2
Acceptable Superior
2.0
1.0
1
2
Acceptable Superior
10.0
5.0
1
2
Acceptable Superior
8.0
4.0
1
2
Acceptable Superior
5.0%
2.5%
1
2
Acceptable Superior
100.0%
50.0%
2
4
Acceptable Superior
5.0%
10.0%
2
4
Acceptable Superior
5.0%
10.0%
2
4
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
Criterion Value
Year
N/A
12.9
15.7
13.6
20.4
22.3
21.6
21.6
21.9
22.3
17.1
15.8
15.8
15.4
14
Scorecard Value
0.0
2.0
1.0
2.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
28
2018E
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
Criterion Value
Year
0.6
0.8
0.9
0.6
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
14
Scorecard Value
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
28
2018E
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
Criterion Value
Year
3.9
4.0
4.8
3.0
7.7
7.4
7.4
7.4
7.4
7.4
7.4
7.4
7.5
8.0
14
Scorecard Value
2.0
2.0
2.0
2.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
28
2018E
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
Criterion Value
Year
3.9
4.0
4.8
3.0
7.6
7.3
7.2
7.2
7.2
7.2
7.2
7.1
7.1
7.6
14
Scorecard Value
2.0
1.0
1.0
2.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
28
Year
Criterion Value
Scorecard Value
Year
Criterion Value
Scorecard Value
Year
Criterion Value
Scorecard Value
Year
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
5.1%
5.0%
3.3%
3.4%
5.5%
5.5%
5.5%
5.5%
5.5%
5.5%
5.5%
5.5%
5.5%
5.5%
14
0.0
1.0
1.0
1.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
28
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
19.4%
11.1%
7.9%
7.0%
9.3%
7.7%
6.4%
5.6%
5.4%
5.8%
4.6%
3.5%
3.1%
2.6%
28
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
4.0
56
2005
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
N/A
7.8%
6.4%
7.4%
4.9%
4.5%
4.7%
4.6%
4.6%
4.5%
5.9%
6.4%
6.3%
6.5%
28
-
2.0
2.0
2.0
0.0
0.0
0.0
0.0
0.0
0.0
2.0
2.0
2.0
2.0
56
2005
4
5
10
4
10
4
10
4
10
4
10
8
20
8
2008
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
-33.2%
-3.0%
9.3%
5.6%
4.6%
3.6%
36.3%
12.0%
3.5%
13.0%
28
Scorecard Value
0.0
0.0
0.0
0.0
0.0
2.0
2.0
0.0
0.0
4.0
4.0
0.0
4.0
56
0
388
140
56
40
6
-8.9%
3
0
16
2007
16
10
3
1.3%
18
10
6
N/A
28
20
8
2006
15
10
8
Criterion Value
10
0
20
14
8
8
20
16
16
118
270
226
366
CVX Piotroski Scorecard Page 1 of 2
Enter Firm Ticker
Piotroski's Financial Fitness Evaluator
Net Income
Free Cash Flow
ROA (% change NI ÷ % change TA)
Earnings Quality (EBIT ÷ NI)
Total Assets to Total Liabilities
Working Capital (Current Ratio)
% Change Shares Outstanding (Diluted)
Gross Margin
Asset Turnover (% change sales ÷ % change assets)
Total Liabilities to EBITDA
Total Liabilities to Operating Cash Flow (EBIT)
Total Score (11 = maximum)
CVX
2005
Value
Score
14,677
1
(5,593)
0
0.18
0
1.76
1
1.11
1
1.37
0
1.6%
1
24.9%
0
0.79
0
1.44
1
2.45
1
6
2006
Value
Score
17,659
1
12,519
1
3.76
1
1.84
1
6.36
1
1.28
0
2.0%
1
29.1%
1
1.11
1
1.17
1
1.96
1
10
2007
Value
Score
18,961
1
12,678
1
0.61
0
1.71
1
0.97
0
1.17
0
-3.0%
1
29.6%
1
0.42
0
1.23
1
2.21
1
2008
Value
Score
24,031
1
11,548
1
3.21
1
1.79
1
2.12
1
1.14
0
-3.8%
1
29.4%
0
2.83
1
1.02
1
1.73
1
7
9
Historical Average
(2005 - 2008)
8
Forecasted Average
(2009 - 2018)
9
2009
Value
Score
13,357
1
7,709
1
9.01
0
1.77
1
0.24
1
1.19
1
-3.0%
1
26.0%
0
6.09
1
1.34
1
2.50
1
9
2010
Value
Score
14,753
1
7,480
1
1.29
1
1.76
1
1.16
1
1.19
1
-3.0%
1
26.0%
0
1.24
1
1.31
1
2.43
1
10
2011
Value
Score
15,756
1
8,175
1
1.00
1
1.75
1
1.54
1
1.19
1
-3.0%
1
26.0%
0
0.95
0
1.28
1
2.38
1
9
CVX Piotroski Scorecard Page 2 of 2
2012
Value
Score
16,728
1
8,629
1
0.91
0
1.75
1
1.40
1
1.19
1
-3.0%
1
26.0%
0
0.90
0
1.26
1
2.35
1
8
2013
Value
Score
17,654
1
9,027
1
0.86
0
1.75
1
1.23
1
1.19
1
-3.0%
1
26.0%
0
0.85
0
1.26
1
2.35
1
8
2014
Value
Score
18,515
1
9,352
1
0.78
0
1.75
1
1.06
1
1.19
1
-3.0%
1
26.0%
0
0.80
0
1.27
1
2.37
1
8
2015
Value
Score
19,400
1
12,749
1
1.03
1
1.75
1
1.87
1
1.19
1
-3.0%
1
26.0%
0
0.97
0
1.25
1
2.32
1
9
2016
Value
Score
20,232
1
14,283
1
1.07
1
1.74
1
2.13
1
1.19
1
-3.0%
1
26.0%
0
1.00
0
1.22
1
2.28
1
9
2017
Value
Score
20,856
1
14,783
1
0.85
0
1.74
1
1.54
1
1.19
1
-3.0%
1
26.0%
0
0.83
0
1.21
1
2.26
1
8
2018
Value
Score
21,506
1
16,698
1
1.04
1
1.74
1
1.41
1
1.19
1
-3.0%
1
26.0%
0
1.00
0
1.20
1
2.24
1
9
Rationale
Score 1 point for positive net income.
Score 1 point for positive free cash flow.
Score 1 point if % increase in NI > % increase in total assets.
Score 1 point if EBIT > NI.
Score 1 point if % increase in TA > % increase in TL.
Award 1 point if Current Ratio at least as large as last year.
Award 1 point if total diluted shares increased by less than 2%.
Award 1 point if gross margin increased over last year.
Award 1 point if sales increased faster than total assets.
Award 1 point if ratio less than 5.0.
Award 1 point if ratio less than 4.0.
CVX ROIC Analysis Page 1 of 2
Historical ROIC: Decomposition and Drivers
Enter Firm Ticker
percent
ROIC
2003
24.6%
24.2%
2007
CVX
Pre-tax ROIC
2003
38.3%
43.4%
2007
Cash tax rate
2003
35.7%
44.2%
2007
Gross Margin
2003
26.4%
29.4%
2007
Operating Margin
2003
13.5%
15.8%
2007
SG&A/Revenues
2003
2.9%
2.1%
2007
Depreciation/Revenues
2003
3.2%
3.5%
2007
Average Capital Turns
2003
2.8
2.8
2007
Oper. Working Capital/Revenues
2003
6.8%
2.7%
2007
Fixed Assets/Revenues
2003
28.6%
33.6%
2007
Data Source: Thomson/Reuters
CVX ROIC Analysis Page 2 of 2
Forecasted ROIC: Decomposition and Drivers
Enter Firm Ticker
percent
ROIC
2008
13.0%
12.6%
2017
CVX
Pre-tax ROIC
2008
22.4%
21.8%
2017
Cash tax rate
2008
42.0%
42.0%
2017
Gross Margin
2008
26.0%
26.0%
2017
Operating Margin
2008
12.3%
12.3%
2017
SG&A/Revenues
2008
2.5%
2.5%
2017
Depreciation/Revenues
2008
3.4%
3.4%
2017
Average Capital Turns
2008
1.8
1.8
2017
Oper. Working Capital/Revenues
2008
3.6%
3.6%
2017
Fixed Assets/Revenues
2008
51.4%
53.0%
2017
Data Source: Thomson/Reuters