Photo by Timothy Newman on Unsplash
 

Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: Chevron Corporation (CVX).
 

Profile

Chevron is one of the largest integrated oil and gas companies in the world, with operations spanning upstream exploration, downstream refining, and a growing renewable energy segment. The company has maintained robust free cash flow generation, driven by disciplined capital allocation, stable production, and strong energy prices.
 

DCF Analysis

Inputs
Discount Rate: 10%
Terminal Growth Rate: 3%
WACC: 10%

Forecasted Free Cash Flows (in billions)
2025: $16.1 → PV: $14.64
2026: $17.5 → PV: $14.46
2027: $19.0 → PV: $14.27
2028: $20.0 → PV: $13.66
2029: $21.0 → PV: $13.04

Total Present Value of FCFs: $70.07B

Terminal Value Calculation
Using the perpetuity growth model:

TV = (21.0 × 1.03) / (0.10 − 0.03) = 309.00B

Present Value of Terminal Value = $191.60B

Enterprise Value
Enterprise Value = 70.07B + 191.60B = 261.67B

Net Debt
Cash: $6.78B
Total Debt: $23.35B
Net Debt: $16.57B

Equity Value & Per-Share Value
Equity Value = 261.67B − 16.57B = 245.10B

Shares Outstanding: 1.77B
Intrinsic Value per Share: $138.41
 

Conclusion

DCF Value: $138.41
Current Price: $157.36
Margin of Safety: –14%

Chevron continues to generate strong free cash flows supported by high energy prices and disciplined capital allocation. However, at current levels, the stock trades slightly above our conservative intrinsic value estimate.

More By This Author:

GeoPark Limited: A Deep Value Energy Play?
Amazon.com, Inc.: Our Calculation Of Intrinsic Value
Value’s Resurgence: A Strong But Selective Rally