Chevron Corporation, through its subsidiaries,
engages in petroleum, chemicals, mining, power generation, and energy
operations worldwide. The company operates in two segments, Upstream
and Downstream. The Upstream segment is involved in the exploration,
development, and production of crude oil and natural gas;
liquefaction, transportation, and regasification associated with
liquefied natural gas; transportation of crude oil through pipelines;
and processing, transportation, storage, and marketing of natural
gas, as well as holds interest in a gas-to-liquids project. The
Downstream segment engages in refining crude oil into petroleum
products; marketing crude oil and refined products; transporting
crude oil and refined products through pipeline, marine vessel, motor
equipment, and rail car; and manufacturing and marketing commodity
petrochemicals and fuel and lubricant additives, as well as plastics
for industrial uses. The company is also

involved in coal and
molybdenum mining operations; cash management and debt financing
activities; insurance operations; real estate activities; and energy
services, and alternative fuels and technology businesses, as well as
manages interests in 11 power assets with a total operating capacity
of approximately 2,200 megawatts. The company was formerly known as
ChevronTexaco Corporation and changed its name to Chevron Corporation
in 2005. Chevron Corporation was founded in 1879 and is headquartered
in San Ramon, California.## Analysis

### Current Yield and Dividend Growth

Chevron currently pays a dividend of $1.0 per quarter for a $4.0
annual dividend. At the close of market on Friday, December 20th
CVX’s price per share was $122.78. This gives the stock a current
dividend yield of 3.26%. Normally I look for a dividend yield of at
least 3%, so I would be satisfied with this dividend yield from CVX. In 2003, Chevron paid an annual dividend amount of $1.43 per share.
The dividend trend has been up each year as it now pays $4.0 annually
per share. This gives CVX a 10 year annual compound dividend growth
rate of 9.63%. Chevron has increased its dividend for more than two
decades. Chevron´s dividend growth rate has been as follows: 1 year
13.59%, 3 years 9.68%, 5 years 9.20% and 10 years 9.63%. Historical
dividend growth rates of Chevron looks very good.. Chevron normally
pay dividend in March, June, October and December.

### EPS Growth

Chevron's EPS has grown an average of 37.92% over the past 10 years,
8.72% in the past five years. The past three years, EPS has grown by
nice 36.48%, and in the past year growth has been negative, -0.89%.
Chevron's EPS of development in recent years has been very good,
except on year 2009 it dropped a lot. Also year 2012 it went a bit
down. Analyst estimates for 5 years earnigs growth rate per annum are
6.87% I think, that this are quite realistic estimate.(http://finance.yahoo.com/q/ae?s=CVX+Analyst+Estimates)

### Net Income

Chevron's net income has increased by an average of 36.9% over the
past 10 years, 6.97% in the past five years. Net income, is however
decreased in last year and was negative in year 2012 (-2.66%). Net
income trend looks similar to the EPS trend. Net income development
in last year makes me a bit suspicious, if Chevron is a good
investment for the future.

### Revenue Growth

Chevron's revenue has increased 9.34% over the past 10 years, 1.83%
in the last 5 years. In the last 3 years, profits have grown nicely
12.12%, only last year, revenue fell by -4.65%.

### Outstanding Shares

Chevron`s amount of shares has increased from 2003 to 2006.After that
those went nicely down until 2010 those increased again a bit, but
after that those has continue go down. That I like, because less
shares outstanding, my shares are giving me a larger portion of the
earnings.

### Payout Ratio

Chevron's dividend average payout ratio has been in the past 10 years
by about 30%. On year 2009 it jumped over 50%, but returned again
next year to near 30%. This means that Chevron will have good ability
to continue pay dividends, make new investments, as well as increases
the value of shares through share repurchases. It suits me very well.

### ROE

Chevron's ROE has been around 20% over the past 10 years, which are
okay for me.

### Current Ratio

Current ratio measures the company's ability to meet short-term
obligations. Chevron has current ratio 1.63 at the end of 2012. This
means that the funds will be able to cover 163% of current liability
obligations. I usually like the current ratio is greater than 1, so
Chevron looks good in this case.

### Net Profit to long term debt

This number tells me how many years it will take to pay off the
current long term debt of the company by using all net profit into
it. I want this ratio to be less than 5, because the company is able
to pay for all long-term debt from less than five years and on my
opinion then company don´t have too much debt. Chevron`s long term
debt has been clearly under 5 times net profit on last 10 years. In
the last 10-year average is 0.67, last year it was 0.76.

## Value

To found out share fair value I mainly use six different methods.(http://www.passive-income-pursuit.com/search/label/stock%20valuation%20method).

### Average P/E Ratio

Chevron`s current P/E are 10.04, which are pretty close to it`s
historical 5 years average high (10.21) but more near 10 years
average low (8.37) as 10 years average high (12.29). By calculating
using estimated EPS 12.14 for year 2013 and the average 5-year low
P/E ratio shares fair value will be $87.78. Using the 10-year average
low P/E ratio, fair value will be $101.60.

### Average Dividend Yield

Chevron`s current annual dividend are $4.0. At the close of market on
Friday, December 20th CVX’s price per share was $122.78. This gives
the stock a current dividend yield of 3.26%. Average 5 years high
dividend yields has been 4.16% and average 10 years high dividend
yields has been 3.69%. Those dividend yields gives share fair value
$96.25 for 5 and $108.45 for 10 years.

### Average P/S Ratio

Chevron`s current P/S ratio are 1.0 with revenue estimates for year
2013 (237.19B). Average 5 years low P/S ratio are 0.64 and average 10
years low P/S ratio are 0.66. By calculating using estimated revenue
for year 2013 and the average 5 years low P/S ratio fair value will
be $78.35. Using the 10 years average low P/S ratio, fair value will
be $81.83.

### Discounted Cash Flow

Analyst estimates for 5 years earnings growth rate per annum are
6.87%. I will use on my calculation 66% of that, which are 4.53%.
Then I assume that continue growth after 5 years will be 3%. Total I
calculate for next 20 years. I use discount rate 10% and EPS $12.22.
That will give me share fair value $139.96.

Discount Rates | 8% | 9% | 10% | 11% | 12% |

NPV of Future EPS | $164.28 | $151.38 | $139.96 | $129.81 | $120.77 |

### Dividend Discount Model

Chevron`s current annual dividend are $4.0. I assume that Chevron
will be able to grow dividends for the next 5 years at the lowest of
the 1, 3, 5, or 10 year growth rates or 15%. In this case that would
be 9.2%. Then I assume that after 5 years grow rate will be 5%. To
calculate the value I used a discount rate of 10%. Totally I
calculate again for next 20 years. That will give me share fair value
$60.25.

Discount Rate | 8% | 9% | 10% | 11% | 12% |

NPV of Future Dividends | $71.67 | $65.60 | $60.25 | $55.53 | $51.34 |

### Future Price

Chevron has EPS 12.22(ttm). When I calculate Chevron`s future price
with analyst estimate for 5 years EPS growth and using low P/E ratio
last 5 years, I came for price $123.20. That would give about 0%
upside to compare current price.

### Conclusion

Chevron are sure a great company and I would like to have some shares
of it in my portfolio. Based on my analysis, I think Chevron are
currently a bit overvalued, and I am not prepared at this time
to invest in it. If the price would fall down to near $110, then I
might be interested on it. Chevron´s payout ratio are anyway quite
low, so I suppose, it will be good investment also with current
prise. Also I believe, that Chevron´s EPS will continue grown up
faster as analyst estimates are.

Disclosure: I do not own any shares of CVX.

I just wanted to thank you for the great post, I'm looking forward to your next one :)

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