Stock Analysis on Net
Stock Analysis on Net

LyondellBasell Industries N.V. (NYSE:LYB)

This company has been moved to the archive! The financial data has not been updated since August 2, 2019.

Present Value of Free Cash Flow to Equity (FCFE)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

LyondellBasell Industries N.V., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 15.48%
01 FCFE0 3,782
1 FCFE1 5,139 = 3,782 × (1 + 35.88%) 4,450
2 FCFE2 6,529 = 5,139 × (1 + 27.05%) 4,896
3 FCFE3 7,719 = 6,529 × (1 + 18.23%) 5,012
4 FCFE4 8,445 = 7,719 × (1 + 9.40%) 4,748
5 FCFE5 8,494 = 8,445 × (1 + 0.58%) 4,136
5 Terminal value (TV5) 57,328 = 8,494 × (1 + 0.58%) ÷ (15.48% – 0.58%) 27,912
Intrinsic value of LyondellBasell Industries N.V. common stock 51,154
 
Intrinsic value of LyondellBasell Industries N.V. common stock (per share) $152.58
Current share price $76.14

Based on: 10-K (reporting date: 2018-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.80%
Expected rate of return on market portfolio2 E(RM) 13.50%
Systematic risk of LyondellBasell Industries N.V. common stock βLYB 1.23
 
Required rate of return on LyondellBasell Industries N.V. common stock3 rLYB 15.48%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rLYB = RF + βLYB [E(RM) – RF]
= 4.80% + 1.23 [13.50% – 4.80%]
= 15.48%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

LyondellBasell Industries N.V., PRAT model

Microsoft Excel
Average Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Dividends, common stock 1,554 1,415 1,395 1,410 1,403
Net income attributable to the Company shareholders 4,688 4,879 3,836 4,476 4,174
Sales and other operating revenues 39,004 34,484 29,183 32,735 45,608
Total assets 28,278 26,206 23,442 22,757 24,283
Total Company share of stockholders’ equity 10,257 8,949 6,048 6,550 8,314
Financial Ratios
Retention rate1 0.67 0.71 0.64 0.68 0.66
Profit margin2 12.02% 14.15% 13.14% 13.67% 9.15%
Asset turnover3 1.38 1.32 1.24 1.44 1.88
Financial leverage4 2.76 2.93 3.88 3.47 2.92
Averages
Retention rate 0.67
Profit margin 12.43%
Asset turnover 1.34
Financial leverage 3.19
 
FCFE growth rate (g)5 35.88%

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

1 Retention rate = (Net income attributable to the Company shareholders – Dividends, common stock) ÷ Net income attributable to the Company shareholders
= (4,688 – 1,554) ÷ 4,688
= 0.67

2 Profit margin = 100 × Net income attributable to the Company shareholders ÷ Sales and other operating revenues
= 100 × 4,688 ÷ 39,004
= 12.02%

3 Asset turnover = Sales and other operating revenues ÷ Total assets
= 39,004 ÷ 28,278
= 1.38

4 Financial leverage = Total assets ÷ Total Company share of stockholders’ equity
= 28,278 ÷ 10,257
= 2.76

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.67 × 12.43% × 1.34 × 3.19
= 35.88%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (25,526 × 15.48% – 3,782) ÷ (25,526 + 3,782)
= 0.58%

where:
Equity market value0 = current market value of LyondellBasell Industries N.V. common stock (US$ in millions)
FCFE0 = the last year LyondellBasell Industries N.V. free cash flow to equity (US$ in millions)
r = required rate of return on LyondellBasell Industries N.V. common stock

FCFE growth rate (g) forecast

LyondellBasell Industries N.V., H-model

Microsoft Excel
Year Value gt
1 g1 35.88%
2 g2 27.05%
3 g3 18.23%
4 g4 9.40%
5 and thereafter g5 0.58%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 35.88% + (0.58% – 35.88%) × (2 – 1) ÷ (5 – 1)
= 27.05%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 35.88% + (0.58% – 35.88%) × (3 – 1) ÷ (5 – 1)
= 18.23%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 35.88% + (0.58% – 35.88%) × (4 – 1) ÷ (5 – 1)
= 9.40%