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https://stockrow.com/symbol/RDS.B/ev
https://finbox.com/NYSE:RDS.B/explorer/total_enterprise_value
Happy,
We obviously have differing views on this. But, you freely admit that you are someone who is very "Happy" with a calculation of Shell's capitalisation that is ERRONEOUS BY $5 BILLION & then fitting this ERROR into your pompous declarations of Shell's EV (And your calculations were based on a rising share price at the time).
At least you have had the decency to withdraw your assessments and "analysis" of Chevron and Exxon, as I have completely withdrawn my apology. This is because when you are pontificating to your appreciative audience the "******-Ometer" starts to smoke as it goes off the scale!
To add, I'm disappointed that your post, which is demonstrably wrong as well being needlessly rude got 5 recommendations. I was going to post more detailed comparisons with Exxon and Chevron, which I also own (the latter I recently purchased). However, I shall not bother now.
Best of luck to you all
Happy
Hi Getafgrip
Thanks for the apology and I've only noticed your post this morning. I've been following the boards sporadically lately.
However, my calculations are not incorrect although one may challenge the operating cashflow multiple applied to create what is a plausible stretch target. Let me address each of your points in turn.
First, the easiest one. You take a dig at my calculation of Shell current market capitalisation saying it is out by "$5m". I haven't checked but please note you are commenting a DAY after my post. RDSB's price and exchange rates are changing second by second, so a different of c.2% of MC is hardly unexpected or out of the ordinary. Also, note I use c.$xx, which explains it is approximate / rounded. So, with respect, your point is pedantic at best.
Second, you keep questioning my calculation of Enterprise Value (EV). I explained to you that what you proposed: Market "Capitalization + outstanding debt and then subtract available cash" is the the SAME as "Capitalisation plus NET debt". I think your point was that net debt includes current assets that are not cash (such as the value of stock which can be more illiquid). You are wrong because most calculations of net debt do NOT include current assets that are not liquid. What matters in this case is Shell's own calculation of net debt. So from the accounts, you can see the breakdown of net debt here (note this is 2020 accounts but the accounting method hasn't changed):
https://reports.shell.com/annual-report/2020/consolidated-financial-statements/notes/14-debt-and-lease-arrangements.php
Shell further breaks down "cash and cash equivalents", which are netted off gross debt to arrive at net debt:
https://reports.shell.com/annual-report/2020/consolidated-financial-statements/notes/13-cash-and-cash-equivalents.php
So to summarise for Shell (and all oil supermajors), Net Debt = Gross Debt less Cash and Cash Equivalents (there are other adjustments such as currency translation differences etc. which would take too long to explain but they are not material).
So, as I stated, there's is nothing wrong with my technical calculations. However I have applied a multiple of x10 to estimated 2022 operating cash flow and one can reasonably challenge whether this multiple is too high (I do not think it is).
I hope you are able to accept that, in this case, the error is yours. As mentioned, I do not have time for a protracted debate but I wish you the very best of luck. Please refer to Shell's accounts and the references cited for more details.
Best
Happy
The calculation methodology is somewhat over stated in my view, please take due consideration of getagrip’s points and take your own view. There are plenty of ‘broker’ views and other data to help us all form an opinion… the stock is solid and a cornerstone of many’s portfolio, but DYOH
Happy,
Mark is right. I apologise if I have caused offence - I certainly should have expressed my views on this more sympathetically.
Hi Happy
I hope all is well with you. Thanks for your calculations. Always good to consider your opinion and analysis. You have gone awol on the BP forum. We could do with some rational posts on BP forum to balance the BS. # open invitation.
All looking good moving forward for BP and Shell in 2022.
Have a great evening all.
Mark
I am quite shocked that you have two people sufficiently clueless to recommend your calculations of EV.
I had tried not to be offensive with this, but your calculations of EV & Shell's future share value, or more accurately estimate of future takeover value, are ludicrously inaccurate. They are based on a somewhat tenuous grip of the figures and facts, then using utterly useless DIY formulae. Baffling people with science albeit inaccurate.
Even your estimate of Shell's current capitalisation is wrong by $5 billion dollars, based on today's figures from this LSE Board. There is nothing clever about misinforming people, who might quite easily go on to invest in Shell labouring under a series of misapprehensions.
I hope the two recommenders take this on board rather than recommending posts in future that are well outside their orbit of knowledge or understanding.
My issue is you using Net Debt in your calculation.
Net Debt is defined as all short and long-term liabilities minus the current assets. As you know it reflects a company's ability to meet all of its obligations simultaneously using only those assets that are easily liquidated.
Current Assets do not just include Cash, they also include stock (that can easily be sold) & debtors. I think this skews your calculation, so I cannot agree with your EV forecasts.
Getafgrip
That's exactly the same as EV = Market Capitalisation + Net Debt (which is my calculation). My calculation is correct though one may disagree about the multiple that should be applied to operating cash flow.
Best
Happy
HI - Isn't EV - Market Capitalization + outstanding debt and then subtract available cash. The cash makes quite a difference when deducted. Still an exciting prospect though.
Sorry an error TP is even HIGHER.
Target EV: $500bn but assuming debt remains constant that's a Market Cap of:
$500bn - $57bn = $443bn
So TP =
Target MC / Current MC * Current Price
$443bn / $200bn * 1900 =
4,208p a share.
Of course just quick illustration but shows how cheap we are.
All IMHO DYOR
Happy
Assume a rerating to enterprise value (EV) x10 2022e operating cash flow - still a pretty conservative measure. What do we get? (back of fag packet).
We are looking at $50bn operating cash generated in 2022 so x10 is inferred EV of $500bn.
Current market cap: c.$200bn
Current net debt: c.$57bn (Q3)
Current total EV: $257bn
Calculated target price: target EV / current EV * current price
So:
$500bn / $257bn * 1,900 = 3,695
My 2-year stretch price target: 3,695p
All IMHO DYOR
Happy