Student Investment Fund Stock Report

Student Investment Fund Stock Report Analysts: Billie Jean Bergmann & Jacob Krause 

Recommendation: BUY 

Market Cap: $132.3 B 

HIGHLIGHTS 

� CVX is the world's largest producer of 

geothermal energy 1 . 

� 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. 

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. 

Recent Price: $66.87 (05/01/09) 

Target Price: $79.11 

INVESTMENT THESIS 

Chevron Corporation 

NYSE: CVX 

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 

S&P 500 

� CVX has outperformed the S&P 500 in the past year. 

FINANCIAL STATISTICS VS. SELECTED COMPETITORS & INDUSTRY 

Metric CVX XOM COP Industry S&P 500 

ROA, 5‐Yr. Avg. 13.5% 17.7% 5.8% 11.4% 8.4% 

ROE, 5‐Yr. Avg. 26.4% 34.5% 10.6% 22.1% 20.4% 

ROIC, 5‐Yr. Avg. 22.4% 25.4% 11.9% 15.1% 11.3% 

DPS, 2008 $2.52 $1.55 $1.87 ‐ ‐ 

FCF/share, 5‐Yr. Avg. $3.67 $6.35 ($0.28) ‐ ‐ 

EPS, 2008 $11.72 $9.14 ($10.42) ‐ ‐ 

5‐YR Insider Selling $262 M $432 M $96 M ‐ ‐ 

1. A renewable resource that generates reliable power while producing virtually no greenhouse gas emissions. 

CVX

MACROECONOMIC THESIS 

Chevron Billie Jean Bergmann 

Jacob Krause 

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.


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. 

Chemicals 

FY2008 

Sales $2.17B 

0.7% of Total Sales 

10.8% Growth from 2007 

Downstream 

FY2008 

Sales $219.94B 



Other Business 

FY2008 

Sales $1.82B 



Upstream 

FY2008 

Sales $82.32B 


26.2% Growth from 2007

GLOBAL PRESENCE 


Jacob Krause 

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.

VALUATION 


Jacob Krause 

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.


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 

� 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. 

� 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 

35% 

30% 

25% 

20% 

15% 

10% 

5% 

0% 

$10.00 

$8.00 

$6.00 

$4.00 

$2.00 

$0.00 

Gross Margin Operating Margin Net Margin 

Dividends Per Share 

XOM CVX COP

� 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. 


$3.67 $6.46 


Jacob Krause 

� 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% 

10% 

metrics compress to 13‐14% for ROE and 

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 

company’s future operating environment 

becomes more challenging than it’s been in 

the recent past. 


ROA 13.5% 8.8% 

ROE 26.4% 13.7% 

ROA 22.4% 12.9% 

$20 

$15 

$10 

$5 

$0 

($5) 

($10) 

Free Cash Flow Per Share 

XOM CVX COP 

Return on Assets Return on Equity Return on Invested Capital

VALUE CREATION METRICS 

� Net Operating Profit After Tax and Free Cash 

Flow. Historically, NOPAT and FCF both have 

steadily increased. In employing conservative 

modeling assumptions, the forecasted NOPAT 

and FCF drop far below their steadily 

increasing historic trend. Yet, CVX is still a 

compelling stock and has the potential to 

continue increasing NOPAT and FCF in the 

long‐run. Their FCF is increasing at a much 

lower rate than NOPAT due to the offset of 

higher PPE/Sales assumption discussed 

earlier. Both NOPAT and FCF depict CVX’s 

ability to enhance shareholder value through 

generating steady free cash flow. 


Jacob Krause 

� 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. 

Historically, CVX’s growing ROIC to WACC 30% 

spread has been a key value driver. There are 25% 

signs this will continue in the future. 

20% 

Although our conservative modeling 

15% 

assumptions compress the spread by 

10% 

approximately 10%, CVX maintains a positive 

5% Value Spread 

ROIC to WACC spread, suggesting the firm 

will continue to create shareholder value. 

0% 

� 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. 

NOPAT and Free Cash Flow 

Economic Value Added 

$30,000 

$25,000 

$20,000 

$15,000 

$10,000 

$5,000 

$0 

$15,000 

$13,000 

$11,000 

$9,000 

$7,000 

$5,000 

$3,000 

$1,000 

($1,000) 

NOPAT and Free Cash Flow (millions) vs. DCF Price 

NOPAT Free Cash Flow DCF Price 

Return on Invested Capital WACC 

$100,000 

$90,000 

$80,000 

$70,000 

$60,000 

$50,000 

$40,000 

$30,000 

Economic Value Added Market Value Added 

$220.00 

$170.00 

$120.00 

$70.00 

$20.00 

‐$30.00 

Market Value Added 

DCF Price


Jacob Krause 

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 

� 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 

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. 

� Current Price/Earnings, Price/Sales, Relative Valuation CVX XOM COP Industry 

Enterprise Value/EBITDA and P/E Ratio 6.53 8.94 ‐5.26 6.60 

Price/Book indicated that CVX is Price/Sales 0.57 0.88 0.34 0.63 

priced at a slightly lower premium Value/EBITDA 2.97 4.17 17.02 ‐ 

compared to XOM, suggesting 

favorable relative valuation 

Price/Book 1.54 2.93 ‐ 1.59 

compared to competitors and the industry. 

INSIDER SELLING 

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. 

Forecasted Value Per Share 

Net Insider Transactions 

$180 

$170 

$160 

$150 

$140 

$130 

$120 

$110 

$100 

$90 

$80 

$70 

$60 

$50 

$40 

$30 

$20 

$0 

($75,000) 

($150,000) 

($225,000) 

($300,000) 

($375,000) 

($450,000) 

($525,000) 

Forecasted Per Share Stock Values 

Low Price DCF Price High Price 

Net Insider Purchases (Sales) , $, in thousands 

XOM CVX

RISKS 


Jacob Krause 

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.

OWNERSHIP 


Jacob Krause 

CVX’s institutional & mutual fund ownership is 64%. Top holders summarized below. 

TOP INSTITUTIONAL HOLDERS 

Holder Shares % Out Value Reported 

STATE STREET CORPORATION 103,764,672 5.18 $7.68 B 31-Dec-08 

Barclays Global Investors UK Holdings Ltd 84,863,132 4.23 $6.28 B 31-Dec-08 

VANGUARD GROUP, INC. (THE) 67,001,647 3.34 $4.96 B 31-Dec-08 

Capital World Investors 57,122,806 2.85 $4.23 B 31-Dec-08 

AXA 47,709,066 2.38 $3.53 B 31-Dec-08 

FMR LLC 39,225,546 1.96 $2.90 B 31-Dec-08 

Capital Research Global Investors 36,181,589 1.8 $2.68 B 31-Dec-08 

Bank of New York Mellon Corporation 30,293,763 1.51 $2.24 B 31-Dec-08 

WELLINGTON MANAGEMENT COMPANY, LLP 28,269,935 1.41 $2.09 B 31-Dec-08 

NORTHERN TRUST CORPORATION 25,520,500 1.27 $1.89 B 31-Dec-08 

TOP MUTUAL FUND HOLDERS 

Holder Shares % Out Value Reported 

WASHINGTON MUTUAL INVESTORS FUND 27,846,800 1.39 $2.06 B 31-Dec-08 

VANGUARD 500 INDEX FUND 19,224,064 0.96 $1.42 B 31-Dec-08 

SPDR TRUST SERIES 1 18,764,198 0.94 $1.55 B 30-Sep-08 

VANGUARD TOTAL STOCK MARKET INDEX FUND 17,375,518 0.87 $1.29 B 31-Dec-08 

INVESTMENT COMPANY OF AMERICA 13,572,278 0.68 $1.00 B 31-Dec-08 

INCOME FUND OF AMERICA INC 12,885,000 0.64 $953 M 31-Dec-08 

VANGUARD INSTITUTIONAL INDEX FUND 12,604,863 0.63 $932 M 31-Dec-08 

AMERICAN BALANCED FUND 11,900,000 0.59 $880 M 31-Dec-08 

COLLEGE RETIREMENT EQUITIES FUND 10,960,852 0.55 $811 M 31-Dec-08 

VANGUARD/WELLINGTON FUND INC. 10,110,200 0.5 $799 M 30-Nov-08 

SHORT SELLING TRENDS IN CVX STOCK 

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. 

Days to Cover Ratio 

14 

12 

10 

8 

6 

4 

2 

0 

Days to Cover Ratio (Short Interest ÷ Volume) 

Days to Cover

OTHER VALUATION MEASURES 

Piotroski’s Financial Fitness Scorecard 


Jacob Krause 

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 5 th Decile of Graham and Dodd, indicating the 

stock sells for an average premium, and is not overvalued.

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: 


Jacob Krause 

� 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.

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CVX Valuation & Analysis Model Page 1 of 8 

A B C D E F G H I J K L M N 

Forecasted income statement items are based on 5 years of historical average ratios unless a value is entered in 

Enter Firm Ticker CVX 

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. 

Enter first financial statement year in cell B6 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Average Manual 

Total revenue 155,300 198,200 210,118 220,904 273,005 Revenue Growth 27.6% 6.0% 5.1% 23.6% 15.1% 

Cost of goods sold 114,237 148,750 149,034 155,575 192,700 COGS % of Sales 73.6% 75.1% 70.9% 70.4% 70.6% 72.1% 74.0% 

Gross profit 41,063 49,450 61,084 65,329 80,305 

SG&A expense 4,557 4,828 5,093 5,841 5,734 SG&A % of Sales 2.9% 2.4% 2.4% 2.6% 2.1% 2.5% 

Research & Development 697 743 1,364 1,323 1,169 R&D % of Sales 0.4% 0.4% 0.6% 0.6% 0.4% 0.5% 

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% 

Interest expense (income), operating 0 0 0 0 0 Inc. Exp. Oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Non-recurring expenses 0 0 0 85 22 Exp. Non-rec 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Other operating expenses 9,832 12,191 14,624 16,932 20,795 Other exp. 6.3% 6.2% 7.0% 7.7% 7.6% 6.9% 7.2% 

Operating Income 21,042 25,775 32,497 32,440 43,057 

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% 

Gain (loss) on sale of assets 0 0 0 0 0 Gain (loss) asset sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Other income, net 0 0 0 0 0 Other income, net 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Income before tax 21,042 25,775 32,497 32,440 43,057 

Income tax 7,517 11,098 14,838 13,479 19,026 Tax rate 35.7% 43.1% 45.7% 41.6% 44.2% 42.0% 

Income after tax 13,525 14,677 17,659 18,961 24,031 

Minority interest 0 0 0 0 0 Minority interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Equity in affiliates 0 0 0 0 0 Equity in affiliates 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

U.S. GAAP adjustment 0 0 0 0 0 U.S. GAAP adjust. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Net income before extraordinary items 13,525 14,677 17,659 18,961 24,031 

Extraordinary items, total 294 0 0 0 0 Extrordinary items 

Too unpredictable to forecast, set to zero in the forecast 

Net income 13,819 14,677 17,659 18,961 24,031 

Total adjustments to net income 3 2 1 0 0 Adjustments to NI 

Too unpredictable to forecast, set to zero in the forecast 

Basic weighted average shares 2,116 2,144 2,186 2,118 2,038 Share growth 1.3% 1.9% -3.1% -3.8% -0.9% -3.0% 

Basic EPS excluding extraordinary items 6.39 6.85 8.08 8.95 11.79 

Basic EPS including extraordinary items 6.53 6.85 8.08 8.95 11.79 

Diluted weighted average shares 2,122 2,155 2,197 2,132 2,050 Diluted share growth 1.6% 2.0% -3.0% -3.8% -0.9% -3.0% 

Diluted EPS excluding extraordinary items 6.37 6.81 8.04 8.90 11.72 

Diluted EPS including extraordinary items 6.51 6.81 8.04 8.90 11.72 

Dividends per share -- common stock 1.53 1.76 2.01 2.26 2.53 

Gross dividends -- common stock 3,236 3,778 4,396 4,791 5,162 Dividend growth 16.7% 16.4% 9.0% 7.7% 12.4% 12.0% 

Retained earnings 10,583 10,899 13,263 14,170 18,869 

Data Source: Thomson/Reuters 

values in millions 

Historical Income Statements 

Forecasting Percentages

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O 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 

year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 

Total revenue 191,104 210,214 223,878 237,310 250,362 262,881 274,710 285,699 294,270 303,098 

Cost of goods sold 141,417 155,558 165,670 175,610 185,268 194,532 203,286 211,417 217,760 224,292 

Gross profit 49,687 54,656 58,208 61,701 65,094 68,349 71,425 74,282 76,510 78,805 

SG&A expense 4,792 5,272 5,614 5,951 6,278 6,592 6,889 7,165 7,379 7,601 

Research & Development 955 1,051 1,119 1,187 1,252 1,314 1,374 1,428 1,471 1,515 

Depreciation/Amortization 6,561 7,217 7,686 8,147 8,595 9,025 9,431 9,808 10,102 10,406 

Interest expense (income), operating 0 0 0 0 0 0 0 0 0 0 

Non-recurring expenses 18 20 21 22 23 24 26 27 27 28 

Other operating expenses 13,759 15,135 16,119 17,086 18,026 18,927 19,779 20,570 21,187 21,823 

Operating Income 23,601 25,961 27,649 29,308 30,920 32,466 33,926 35,284 36,342 37,432 

Interest income (expense), non-operating (558) (510) (467) (448) (462) (523) (457) (379) (361) (330) 

Gain (loss) on sale of assets 0 0 0 0 0 0 0 0 0 0 

Other income, net 0 0 0 0 0 0 0 0 0 0 

Income before tax 23,043 25,451 27,182 28,860 30,457 31,942 33,469 34,905 35,981 37,102 

Income tax 9,686 10,699 11,426 12,131 12,803 13,427 14,069 14,672 15,125 15,596 

Income after tax 13,357 14,753 15,756 16,728 17,654 18,515 19,400 20,232 20,856 21,506 

Minority interest 0 0 0 0 0 0 0 0 0 0 

Equity in affiliates 0 0 0 0 0 0 0 0 0 0 

U.S. GAAP adjustment 0 0 0 0 0 0 0 0 0 0 

Net income before extraordinary items 13,357 14,753 15,756 16,728 17,654 18,515 19,400 20,232 20,856 21,506 

Extraordinary items, total 0 0 0 0 0 0 0 0 0 0 

Net income 13,357 14,753 15,756 16,728 17,654 18,515 19,400 20,232 20,856 21,506 

Total adjustments to net income 0 0 0 0 0 0 0 0 0 0 

Basic weighted average shares 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 

Diluted weighted average shares 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 

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 

Gross dividends -- common stock 5,781 6,475 7,252 8,123 9,097 10,189 11,412 12,781 14,315 16,032 

Retained earnings 7,575 8,277 8,503 8,606 8,557 8,326 7,989 7,451 6,542 5,474

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AA AB AC AD AE AF AG AH AI AJ AK AL AM AN 


Forecasted balance balance sheet sheet items items are are based based on on 5 5 years years of of historical historical average average ratios ratios unless unless a a value value is is entered entered in in the 

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. 


Historical Balance Sheets 

Forecasting Percentages 

year 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Average Manual 

Assets PPE Growth 43.3% 8.1% 14.2% 16.8% 13.0% 

Cash & equivalents 9,291 10,043 10,493 7,362 9,347 Cash % of Sales 6.0% 5.1% 5.0% 3.3% 3.4% 4.6% 5.5% 

Short term investments 1,451 1,101 953 732 213 ST Invest. % of Sales 0.9% 0.6% 0.5% 0.3% 0.1% 0.5% 

Receivables, total 12,429 17,184 17,628 22,446 15,856 Receivables % Sales 8.0% 8.7% 8.4% 10.2% 5.8% 8.2% 6.0% 

Inventory, total 2,983 4,121 4,656 5,310 6,854 Inventory % of Sales 1.9% 2.1% 2.2% 2.4% 2.5% 2.2% 

Prepaid expenses 2,349 1,887 2,574 3,527 4,200 Pre. Exp. % of Sales 1.5% 1.0% 1.2% 1.6% 1.5% 1.4% 

Other current assets, total 0 0 0 0 0 Other CA % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Total Current Assets 28,503 34,336 36,304 39,377 36,470 

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% 

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% 

Intangibles 0 0 0 0 0 Intangibles % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Long term investments 14,389 17,057 18,552 20,477 20,920 LT Invest. % of Sales 9.3% 8.6% 8.8% 9.3% 7.7% 8.7% 

Notes receivable -- long term 1,419 1,686 2,203 2,194 2,413 Notes Rec. % of Sales 0.9% 0.9% 1.0% 1.0% 0.9% 0.9% 

Other long term assets, total 4,439 4,428 2,088 3,491 4,963 Other LT ass. % Sales 2.9% 2.2% 1.0% 1.6% 1.8% 1.9% 

Other assets, total 0 0 0 0 0 Other assets % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Total assets 

Liabilities and Shareholders' Equity 

93,208 125,833 132,628 148,786 161,165 

Accounts payable 10,747 16,074 16,675 21,756 16,580 Acc. Payable % Sales 6.9% 8.1% 7.9% 9.8% 6.1% 7.8% 

Payable/accrued 0 0 0 0 0 Pay/accured % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Accrued expenses 3,410 3,690 4,546 5,275 8,077 Acc. Exp. % of Sales 2.2% 1.9% 2.2% 2.4% 3.0% 2.3% 

Notes payable/short term debt 816 739 2,159 1,162 2,818 Notes payable % Sales 0.5% 0.4% 1.0% 0.5% 1.0% 0.7% 

Current portion of LT debt/Capital leases 0 0 0 0 0 Curr. debt % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

Other current liabilities 3,822 4,508 5,029 5,605 4,548 Other curr liab % Sales 2.5% 2.3% 2.4% 2.5% 1.7% 2.3% 

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 LT debt % of Sales 

LT debt is manually adjusted for AFN in the pro formas 

Deferred income tax 7,268 11,262 11,647 12,170 11,539 Def. inc. tax % Sales 4.7% 5.7% 5.5% 5.5% 4.2% 5.1% 

Minority interest 172 200 209 204 469 Min. Int. % of Sales 0.1% 0.1% 0.1% 0.1% 0.2% 0.1% 

Other liabilities, total 11,287 14,553 15,749 19,456 24,403 Other liab. % of Sales 7.3% 7.3% 7.5% 8.8% 8.9% 8.0% 

Total Liabilities 47,978 63,157 63,693 71,698 74,517 

Preferred stock (redeemable) 0 0 0 0 0 

Preferred stock (unredeemable) 0 0 0 0 0 

Common stock 1,706 1,832 1,832 1,832 1,832 

Additonal paid-in capital 4,160 13,891 14,124 14,288 14,448 

Retained earnings (accumluated deficit) 45,414 55,738 68,464 82,329 101,102 

Treasury stock -- common (5,124) (7,870) (12,395) (18,892) (26,376) 

Set to last historical year's level throughout the forecasts. 

ESOP Debt Guarantee 0 0 0 0 0 

Set to last historical year's level throughout the forecasts. 

Other equity, total 

Total Shareholders' Equity 

(926) 

45,230 

(915) 

62,676 

(3,090) 

68,935 

(2,469) 

77,088 

(4,358) 

86,648 

The model uses the more conservative diluted common shares 

number for total shares outstanding. 

Total Liabilities and Shareholders' Equity 93,208 125,833 132,628 148,786 161,165 

Diluted weighted average shares 2,122 2,155 2,197 2,132 2,050 Diluted share growth 1.6% 2.0% -3.0% -3.8% -0.9% -3.0% 

Total preferred shares outstanding 0 0 0 0 The 0 model Preferred uses the share more growth conservative diluted common shares 

number for total shares outstanding.


AO AP AQ AR AS AT AU AV AW AX AY AZ 

1 

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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 

3 

0.07 98,205 105,079 112,434 120,305 128,726 137,737 147,379 157,695 168,734 180,545 

4 Year-by-year PPE/Sales 51.39% 49.99% 50.22% 50.70% 51.42% 52.40% 52.50% 52.50% 53.00% 53.00% 

5 

Forecasted Balance Sheets -- 10 Years 

6 

year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 

7 

Assets 

8 Cash & equivalents 10,511 11,562 12,313 13,052 13,770 14,458 15,109 15,713 16,185 16,670 

9 Short term investments 899 989 1,053 1,117 1,178 1,237 1,293 1,344 1,385 1,426 

10 Receivables, total 11,466 12,613 13,433 14,239 15,022 15,773 16,483 17,142 17,656 18,186 

11 Inventory, total 4,254 4,679 4,984 5,283 5,573 5,852 6,115 6,360 6,551 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 

14 Total Current Assets 29,739 32,713 34,839 36,929 38,960 40,908 42,749 44,459 45,793 47,167 

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 Long term investments 16,677 18,345 19,537 20,709 21,848 22,941 23,973 24,932 25,680 26,450 

19 Notes receivable -- long term 1,793 1,972 2,100 2,226 2,348 2,466 2,577 2,680 2,760 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 

22 Total assets 153,222 165,598 176,886 188,624 200,803 213,418 223,309 232,242 240,680 247,901 

23 Liabilities and Shareholders' Equity 

24 Accounts payable 14,863 16,350 17,412 18,457 19,472 20,446 21,366 22,220 22,887 23,574 

25 Payable/accrued 0 0 0 0 0 0 0 0 0 0 

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 220 242 258 273 288 302 316 329 339 349 

34 Other liabilities, total 15,232 16,755 17,844 18,915 19,955 20,953 21,895 22,771 23,454 24,158 

35 Total Liabilities 58,999 63,097 65,882 69,015 72,636 76,925 78,828 80,309 82,206 83,952 

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 Common stock 1,832 1,832 1,832 1,832 1,832 1,832 1,832 1,832 1,832 1,832 

39 Additonal paid-in capital 14,448 14,448 14,448 14,448 14,448 14,448 14,448 14,448 14,448 14,448 

40 Retained earnings (accumluated deficit) 108,677 116,955 125,458 134,064 142,621 150,947 158,936 166,387 172,929 178,402 

41 Treasury stock -- common (26,376) (26,376) (26,376) (26,376) (26,376) (26,376) (26,376) (26,376) (26,376) (26,376) 

42 ESOP Debt Guarantee 0 0 0 0 0 0 0 0 0 0 

43 Other equity, total (4,358) (4,358) (4,358) (4,358) (4,358) (4,358) (4,358) (4,358) (4,358) (4,358) 

44 Total Shareholders' Equity 94,223 102,501 111,004 119,610 128,167 136,493 144,482 151,933 158,475 163,948 

45 Total Liabilities and Shareholders' Equity 153,222 165,598 176,886 188,624 200,803 213,418 223,309 232,242 240,680 247,901 

46 Total common shares (diluted) 1,989 1,929 1,871 1,815 1,760 1,708 1,656 1,607 1,558 1,512 

47 Total preferred shares outstanding 0 0 0 0 0 0 0 0 0 0 

48 AFN (interactive with 3 items below) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 

49 Adjustment to LT Debt (use Goal Seek) 2,716.7 (921.6) (803.8) (396.2) 193.0 1,000.5 (1,204.6) (1,405.4) (354.5) (572.2) 

50 Issue Common Stock to Fund AFN 

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Set Balance Sheet Cash Lower to Fund AFN


BA BB BC BD BE BF BG BH BI BJ BK BL BM BN BO BP 

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3 

Historical Ratios and Valuation Model 

Forecasted Ratios and Valuation Model -- 10 Years 

4 

2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 

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 

7 Quick 1.36 1.21 1.11 1.01 0.92 1.02 1.02 1.02 1.02 1.02 1.02 1.02 1.02 1.02 1.02 

8 Net Working Capital to Total Assets 0.10 0.07 0.06 0.04 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 

9 Asset Management 

10 Days Sales Outstanding 29.21 31.65 30.62 37.09 21.20 21.90 21.90 21.90 21.90 21.90 21.90 21.90 21.90 21.90 21.90 

11 Inventory Turnover 52.06 48.10 45.13 41.60 39.83 44.92 44.92 44.92 44.92 44.92 44.92 44.92 44.92 44.92 44.92 

12 Fixed Assets Turnover 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 

13 Total Assets Turnover 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 Debt Management 

15 Long-Term Debt to Equity 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% 

16 Total Debt to Total Assets 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% 2.6% 

17 Times Interest Earned N/A N/A N/A N/A N/A 42.3 50.9 59.2 65.4 66.9 62.0 74.2 93.1 100.8 113.4 

18 Profitability 

19 Gross Profit Margin 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% 

20 Operating Profit Margin 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% 

21 Net After-Tax Profit Margin 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% 

22 Total Assets Turnover 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 Return on Assets 14.8% 11.7% 13.3% 12.7% 14.9% 8.7% 8.9% 8.9% 8.9% 8.8% 8.7% 8.7% 8.7% 8.7% 8.7% 

24 Equity Multiplier 2.06 2.01 1.92 1.93 1.86 1.63 1.62 1.59 1.58 1.57 1.56 1.55 1.53 1.52 1.51 

25 Return on Equity 30.6% 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% 13.1% 

26 Free Cash Flow Per Share ($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 

27 EPS (using diluted shares, excluding extraordinary items) 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 

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DPS (dividends per share) 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 

30 

Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions) 

Forecasted Valuation Metrics -- 10 Years 

31 

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 

32 NOPAT (net operating profit after tax) 13,525 14,677 17,659 18,961 24,031 13,680 15,048 16,026 16,988 17,922 18,818 19,665 20,452 21,065 21,697 

33 ROIC (return on invested capital) 24.6% 19.5% 22.0% 21.9% 24.2% 13.0% 13.4% 13.3% 13.2% 13.0% 12.8% 12.8% 12.8% 12.6% 12.6% 

34 EVA (economic value added) 7,804 6,848 9,295 9,944 13,716 2,744 3,324 3,486 3,578 3,587 3,499 3,626 3,771 3,731 3,843 

35 FCF (free cash flow) N/A (5,593) 12,519 12,678 11,548 7,709 7,480 8,175 8,629 9,027 9,352 12,749 14,283 14,783 16,698 

36 Weighted Average Cost of Capital 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 10.4% 

37 Net Operating Working Capital (NOWC) 10,546 11,584 11,556 8,087 7,400 6,947 7,641 8,138 8,626 9,101 9,556 9,986 10,385 10,697 11,017 

38 Operating Long Term Assets 44,458 63,690 68,858 78,610 91,780 98,205 105,079 112,434 120,305 128,726 137,737 144,223 149,992 155,963 160,642 

39 

40 

Total Operating Capital 55,004 75,274 80,414 86,697 99,180 105,152 112,720 120,572 128,931 137,827 147,293 154,208 160,377 166,659 171,659 

41 Valuation (in millions) -- through year 2018 

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 

42 Long-term Horizon Value Growth Rate (user-supplied) 3.00% 

43 PV of Forecasted FCF, discounted at 10.40% $147,193 $154,793 $163,413 $172,235 $181,520 $191,373 $201,925 $210,177 $217,754 $225,619 $247,512 

44 Value of Non-Operating Assets $9,560 $11,410 $12,551 $13,367 $14,169 $14,948 $15,695 $16,402 $17,058 $17,570 $18,097 

45 Total Intrinsic Value of the Firm $156,753 $166,203 $175,964 $185,602 $195,689 $206,321 $217,620 $226,579 $234,811 $243,188 $265,609 

46 Intrinsic Market Value of the Equity $147,852 $157,302 $167,063 $176,701 $186,788 $197,420 $208,719 $217,678 $225,910 $234,287 $256,708 

47 Per Share Intrinsic Value of the Firm $72.12 $79.11 $86.61 $94.44 $102.92 $112.14 $122.23 $131.42 $140.61 $150.33 $169.81 

48 MVA (market value added) $61,204 $63,079 $64,563 $65,697 $67,178 $69,253 $72,226 $73,196 $73,977 $75,813 $92,759 

49 

Weighted Average Cost of Capital Calculations 

Capital Asset Pricing Model 

50 

Item Value Percent Cost Weighted Cost Risk Free Rate 4.00% 

51 ST Debt (from most recent balance sheet) 2,818 2.00% 3.78% 0.04% Beta 1.15 

52 LT Debt (from most recent balance sheet) 6,083 4.31% 5.77% 0.14% Market Risk Prem. 6.00% 

53 MV Equity (look up stock's mkt. cap and enter in cell BB53) 132,320 93.70% 10.90% 10.21% Cost of Equity 10.90% 

54 Weighted Average Cost of Capital 10.40% 

55 

Source: Yahoo (3/8/09) 

56 

http://finance.yahoo.com/bonds/composite_bond_rates


BQ BR BS BT BU BV BW BX BY BZ CA CB CC CD CE CF CG CH 

1 

2 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 

3 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 

4 assumptions may have to be adjusted. Second, Second, 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 

5 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. 

6 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. 

7 

8 

9 

10 

11 

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. 

12 

Historical Ratios and Valuation Forecasted Ratios and Valuation 

13 Inputs 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 

14 Per share value (hist. & DCF est.) $52.51 $56.77 $73.53 $93.35 $76.52 $79.11 $86.61 $94.44 $102.92 $112.14 $122.23 $131.42 $140.61 $150.33 $169.81 

15 Market capitalization $111,114 $121,726 $160,737 $197,675 $155,948 $156,381 $166,085 $175,666 $185,694 $196,264 $207,497 $216,404 $224,588 $232,916 $255,205 

16 EBITDA $26,271 $31,688 $40,003 $41,148 $52,585 $20,497 $22,500 $23,930 $25,344 $26,733 $28,084 $29,309 $30,440 $31,340 $32,263 

17 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 

18 Multiples 

19 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 0.84 

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 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 

23 Price/Earnings 8.24 8.33 9.15 10.49 6.53 11.78 11.32 11.22 11.17 11.18 11.27 11.22 11.17 11.23 11.94 

24 Dividend Yield 2.90% 3.09% 2.72% 2.41% 3.29% 3.68% 3.88% 4.10% 4.35% 4.61% 4.88% 5.24% 5.66% 6.11% 6.25% 

25 

Historical Override 

Forecasted Stock Prices Based on Historical Multiples -- 10 Years 

26 Valuation Estimates Based On: Average w/Manual 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 

27 Price/Sales 0.71 $68.44 $77.61 $85.21 $93.12 $101.28 $109.63 $118.11 $126.63 $134.47 $142.78 

28 Price/EBITDA 3.97 $41.18 $46.60 $51.10 $55.79 $60.67 $65.71 $70.69 $75.69 $80.34 $85.26 

29 Price/Free Cash Flow 5.31 15.00 $58.49 $58.51 $65.92 $71.74 $77.37 $82.64 $116.14 $134.14 $143.12 $166.66 

30 Enterprise Value/EBITDA 4.01 $41.53 $47.00 $51.53 $56.27 $61.18 $66.26 $71.29 $76.33 $81.02 $85.99 

31 Price/Earnings 8.55 $57.76 $65.77 $72.41 $79.26 $86.23 $93.24 $100.71 $108.28 $115.07 $122.33 

32 

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 

35 

DCF Price $79.11 $86.61 $94.44 $102.92 $112.14 $122.23 $131.42 $140.61 $150.33 $169.81 

36 

37 

Price/Sales and Enterprise Value/EBITDA vs. Price 

Forecasted Per Share Stock Values 

38 

39 

40 

41 

42 

43 

44 

45 

46 

47 

48 

49 

50 

51 

52 

53 

25 

20 

15 

10 

5 

0 

35 

30 

25 

20 

15 

10 

5 

0 

$180 

$180 $140 

$160 

$160 

$140 $120 

$140 

$120 $100 

$120 

$100 

$100 $80 

$80 

$60 

$60 

$40 

$40 

$20 

$20 

$180 

$170 $145 

$160 

$150 

$140 

$130 $120 

$120 

$110 

$100 $95 

$90 

$80 

$70 $70 

$60 

$50 

$40 

$30 

$45 

$20 

$20 

54 

55 

56 

Price/Sales Price/Sales Enterprise Enterprise Value/EBITDA Value/EBITDA DCF DCF Price 

Price 

Low Price Price DCF DCF Price Price High High Price 

Price 

P/S and Ent. Value/EBITDA 

DCF Price 

Forecasted Value Per Share

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

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 


CI CJ CK CL CM CN CO CP CQ CR CS CT CU CV CW CX CY CZ DA DB 

Price/Earnings Ratio 

Gross Margin 

Economic 

Economic 

Value 

Value 

Added 

Added 

35 

14 

30 

12 

25 

10 

20 

8 

15 

6 

10 

4 

5 

2 

0 

‐5 

35% 

50% 

30% 

25% 

40% 

20% 

30% 

15% 

10% 20% 

5% 

10% 

0% 

0% 

$15,000 $600 

$550 

$13,000 

$500 

$11,000 $450 

$400 $9,000 

$350 

$7,000 

$300 

$250 $5,000 

$200 $3,000 

$150 $1,000 

$100 

($1,000) 

$50 

$0 

Price/Earnings Ratio and Dividend Yield 

Price/Earnings Ratio Ratio Dividend Dividend Yield 

Gross, Operating and Net Profit Margins 

Gross Gross Margin Operating Operating Margin Margin Net Net Margin 

Margin 

Economic Value Added & Market Value Added (millions) 

Economic Economic Value Value Added Added Market Market Value Value Added 

10% 

9% 8% 

8% 7% 

7% 6% 

6% 5% 

5% 4% 

4% 3% 

3% 2% 

2% 1% 

1% 0% 

0% 

Dividend Yield 

$100,000 $7,000 

$90,000 

$6,000 

$80,000 

Market Value Added 

$70,000 $5,000 

$60,000 

$4,000 

$50,000 

$40,000 

$3,000 

$30,000 

$2,000 

EPS and DPS 

ROA, ROE and ROIC 

NOPAT and Free Cash Flow 

$16.00 $12.00 

$16.00 

$14.00 

$14.00 $10.00 

$12.00 

$12.00 

$8.00 

$10.00 

$8.00 

$6.00 

$6.00 

$6.00 

$4.00 

$4.00 

$4.00 

$2.00 

$2.00 

$0.00 

$2.00 

$0.00 

40% 

35% 

35% 

30% 

30% 

25% 

25% 

20% 

20% 

15% 

15% 

10% 

10% 

5% 

5% 

0% 

0% 

$30,000 $8,000 

$30,000 

$7,000 

$25,000 

$25,000 

$6,000 

$20,000 

$5,000 

$15,000 $4,000 

$10,000 $3,000 

$10,000 

$2,000 $5,000 

$5,000 

$1,000 

$0 

$0 

Earnings and Dividends Per Share 

Earnings Earnings Per Per Share Dividends Dividends Per Per Share 

Share 

Return on on Assets, Equity and Invested Capital 

Return Return on on Assets Assets Return Return on on Equity Equity Return Return on on Invested Invested Capital 

NOPAT and Free Cash Flow (millions) 

NOPAT Free Cash Flow Flow

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

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 


DC DD DE DF DG DH DI DJ DK DL DM DN DO DP DQ DR DS DT DU DV 

Short Interst (thousands) 

Days to Cover Ratio 

Historical P/E Ratio 

27,000 80,000 

24,000 70,000 

60,000 

21,000 

21,000 50,000 

18,000 

18,000 40,000 

15,000 30,000 

15,000 

12,000 20,000 

12,000 10,000 9,000 

0 

9,000 6,000 

6,000 3,000 

14 55 

12 

4 

10 

8 

3 

36 

24 

22 

1 

0 

1 

0 

0 

3,000 

18.0 26.0 

16.0 

24.0 

14.0 

12.0 

22.0 

22.0 

10.0 20.0 

20.0 

8.0 

18.0 

18.0 

6.0 

16.0 4.0 

16.0 14.0 2.0 

14.0 12.0 

12.0 

Short Interest (thousands of shares) 

Short Short Interest Interest (thousands (thousands of shares) 

Days Days to Cover Ratio (Short Interest ÷Volume) ÷ Volume) 

Days Days to to Cover Cover 

Historical Trends: Price/Earnings Ratio 

ConocoPhillips Yum Brands Chevron McDonalds Exxon Mobil 

Avg. Daily Volume 

Net Insider Transactions 

Historical P/S Ratio 

20,000 29,000 

18,000 

24,000 

16,000 

16,000 

14,000 19,000 

14,000 

12,000 

12,000 14,000 

10,000 

10,000 8,000 9,000 

8,000 6,000 

4,000 

6,000 4,000 

2,000 

4,000 

2,000 

($25,000) 

($75,000) 

($125,000) 

($175,000) 

($225,000) 

($275,000) 

1.1 1.8 

1.7 1.6 

1.6 

1.4 

1.2 

1.5 

1.0 

1.4 0.8 

1.3 0.6 

1.2 0.4 

1.0 1.1 0.2 

0.0 

1.0 

0.9 

0.9 

$25,000 

Average Daily Trading Volume (thousands) 

Average Average Daily Daily Volume Volume (thousands (thousands of of shares) 

Net Insider Purchases (Sales) , $, in thousands 

Net Insider Transactions, $, in thousands 

Historical Trends: Price/Sales Ratio 

ConocoPhillips YUM Brands BrandsChevron McDonalds Exxon Mobil

Enter Firm Ticker 

CVX Enhanced Scorecard Page 1 of 2 

CVX Historical Score 140 Forecasted Score 226 Total Score 366 Grade (%) 47% 

Historical Max 231 Forecast Max 540 Max Points 771 

Accept. Hist. Range HS > 113 Accept. Forec. Range FS > 270 Acceptible Range TS > 383 

1 Scorecard Criterion Acceptable Superior Year 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 

Historical Forecasted 

Total Score Total Score 

EPS Growth 5.0% 10.0% Criterion Value 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 8 20 

Points 2 4 Scorecard Value 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 14 22 36 


Net Income Growth 5.0% 10.0% Criterion Value 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 8 20 



Dividend Yield 2.5% 5.0% Criterion Value 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 8 20 


Scorecard Criterion Acceptable Superior Year 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 

4 Dividend Growth 5.0% 10.0% Criterion Value 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 8 20 



EVA Growth 5.0% 10.0% Criterion Value -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 8 20 



MVA / Mkt Cap. 50.0% 100.0% Criterion Value 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 8 20 



Value Spread 4.0% 8.0% Criterion Value 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 8 20 



Undervalue % 15.0% 30.0% Criterion Value -6.1% 5 5 

Points 5 10 Scorecard Value 0.0 10 0 0 0 


Financial Fitness 6 9 Criterion Value 6 10 7 9 9 10 9 8 8 8 9 8 9 9 28 8 20 


Grand 

Total

CVX Enhanced Scorecard Page 2 of 2 


Bankruptcy Score 1.2 2.9 Criterion Value 4.55 5 5 

Points 5 10 Scorecard Value 10.0 10 10 0 10 


Price / FCF 25.0 15.0 Criterion Value 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 4 10 



Price / Sales 2.0 1.0 Criterion Value 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 4 10 



Price / EBITDA 10.0 5.0 Criterion Value 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 4 10 



Enterprise / EBITDA 8.0 4.0 Criterion Value 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 4 10 



Cash / Sales 5.0% 2.5% Criterion Value 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 4 10 



LT Debt / Equity 100.0% 50.0% Criterion Value 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 8 20 



FCF Yield 5.0% 10.0% Criterion Value 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 8 20 

Points 2 4 Scorecard Value - 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 6 8 14 


FCF Growth 5.0% 10.0% Criterion Value N/A 1.3% -8.9% -33.2% -3.0% 9.3% 5.6% 4.6% 3.6% 36.3% 12.0% 3.5% 13.0% 28 8 20 

Points 2 4 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 16 16 

118 270 

388 140 226 366


CVX Piotroski Scorecard Page 1 of 2 

Piotroski's Financial Fitness Evaluator 

2005 2006 2007 2008 

2009 

2010 

2011 

Value Score Value Score Value Score Value Score Value Score Value Score Value Score 

Net Income 14,677 1 17,659 1 18,961 1 24,031 1 13,357 1 14,753 1 15,756 1 

Free Cash Flow (5,593) 0 12,519 1 12,678 1 11,548 1 7,709 1 7,480 1 8,175 1 

ROA (% change NI ÷ % change TA) 0.18 0 3.76 1 0.61 0 3.21 1 9.01 0 1.29 1 1.00 1 

Earnings Quality (EBIT ÷ NI) 1.76 1 1.84 1 1.71 1 1.79 1 1.77 1 1.76 1 1.75 1 

Total Assets to Total Liabilities 1.11 1 6.36 1 0.97 0 2.12 1 0.24 1 1.16 1 1.54 1 

Working Capital (Current Ratio) 1.37 0 1.28 0 1.17 0 1.14 0 1.19 1 1.19 1 1.19 1 

% Change Shares Outstanding (Diluted) 1.6% 1 2.0% 1 -3.0% 1 -3.8% 1 -3.0% 1 -3.0% 1 -3.0% 1 

Gross Margin 24.9% 0 29.1% 1 29.6% 1 29.4% 0 26.0% 0 26.0% 0 26.0% 0 

Asset Turnover (% change sales ÷ % change assets) 0.79 0 1.11 1 0.42 0 2.83 1 6.09 1 1.24 1 0.95 0 

Total Liabilities to EBITDA 1.44 1 1.17 1 1.23 1 1.02 1 1.34 1 1.31 1 1.28 1 

Total Liabilities to Operating Cash Flow (EBIT) 2.45 1 1.96 1 2.21 1 1.73 1 2.50 1 2.43 1 2.38 1 

Total Score (11 = maximum) 6 10 7 9 9 10 9 

Historical Average 8 

(2005 - 2008) 

Forecasted Average 9 

(2009 - 2018)

CVX Piotroski Scorecard Page 2 of 2 

2012 2013 2014 2015 2016 

2017 2018 

Value Score Value Score Value Score Value Score Value Score Value Score Value Score Rationale 

16,728 1 17,654 1 18,515 1 19,400 1 20,232 1 20,856 1 21,506 1 Score 1 point for positive net income. 

8,629 1 9,027 1 9,352 1 12,749 1 14,283 1 14,783 1 16,698 1 Score 1 point for positive free cash flow. 

0.91 0 0.86 0 0.78 0 1.03 1 1.07 1 0.85 0 1.04 1 Score 1 point if % increase in NI > % increase in total assets. 

1.75 1 1.75 1 1.75 1 1.75 1 1.74 1 1.74 1 1.74 1 Score 1 point if EBIT > NI. 

1.40 1 1.23 1 1.06 1 1.87 1 2.13 1 1.54 1 1.41 1 Score 1 point if % increase in TA > % increase in TL. 

1.19 1 1.19 1 1.19 1 1.19 1 1.19 1 1.19 1 1.19 1 Award 1 point if Current Ratio at least as large as last year. 

-3.0% 1 -3.0% 1 -3.0% 1 -3.0% 1 -3.0% 1 -3.0% 1 -3.0% 1 Award 1 point if total diluted shares increased by less than 2%. 

26.0% 0 26.0% 0 26.0% 0 26.0% 0 26.0% 0 26.0% 0 26.0% 0 Award 1 point if gross margin increased over last year. 

0.90 0 0.85 0 0.80 0 0.97 0 1.00 0 0.83 0 1.00 0 Award 1 point if sales increased faster than total assets. 

1.26 1 1.26 1 1.27 1 1.25 1 1.22 1 1.21 1 1.20 1 Award 1 point if ratio less than 5.0. 

2.35 1 2.35 1 2.37 1 2.32 1 2.28 1 2.26 1 2.24 1 Award 1 point if ratio less than 4.0. 

8 8 8 9 9 8 9

CVX ROIC Analysis Page 1 of 2 

Historical ROIC: Decomposition and Drivers 

Enter Firm Ticker CVX Gross Margin 

percent 2003 

26.4% 

29.4% 

2007 

Operating Margin SG&A/Revenues 

2003 2003 

Pre-tax ROIC 13.5% 2.9% 

2003 15.8% 2.1% 

38.3% 2007 2007 

ROIC 43.4% 

2003 2007 Depreciation/Revenues 

24.6% 2003 

24.2% 3.2% 

2007 Cash tax rate 3.5% 

2003 

35.7% 

2007 

44.2% Average Capital Turns Oper. Working Capital/Revenues 

2007 2003 2003 

2.8 6.8% 

2.8 2.7% 

2007 2007 


Fixed Assets/Revenues 

2003 

28.6% 

33.6% 

2007

CVX ROIC Analysis Page 2 of 2 

Forecasted ROIC: Decomposition and Drivers 

Enter Firm Ticker CVX Gross Margin 

percent 2008 

26.0% 

26.0% 

2017 

Operating Margin SG&A/Revenues 

2008 2008 

Pre-tax ROIC 12.3% 2.5% 

2008 12.3% 2.5% 

22.4% 2017 2017 

ROIC 21.8% 

2008 2017 Depreciation/Revenues 

13.0% 2008 

12.6% 3.4% 

2017 Cash tax rate 3.4% 

2008 

42.0% 

2017 

42.0% Average Capital Turns Oper. Working Capital/Revenues 

2017 2008 2008 

1.8 3.6% 

1.8 3.6% 

2017 2017 


Fixed Assets/Revenues 

2008 

51.4% 

53.0% 

2017

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