Intrinsic value of Canadian Natural Resources Limited - CNQ

Previous Close

$46.57

  Intrinsic Value

$5.39

stock screener

  Rating & Target

str. sell

-88%

Previous close

$46.57

 
Intrinsic value

$5.39

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of CNQ stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 56.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  16,837
  26,013
  38,902
  56,445
  79,636
  109,481
  146,956
  192,962
  248,295
  313,617
  389,441
  476,129
  573,896
  682,823
  802,879
  933,941
  1,075,821
  1,228,291
  1,391,104
  1,564,014
  1,746,796
  1,939,258
  2,141,256
  2,352,697
  2,573,548
  2,803,841
  3,043,670
  3,293,197
  3,552,649
  3,822,315
Variable operating expenses, $m
  11,920
  18,417
  27,543
  39,963
  56,382
  77,513
  104,045
  136,617
  175,793
  222,041
  275,724
  337,100
  406,318
  483,439
  568,438
  661,230
  761,681
  869,630
  984,902
  1,107,322
  1,236,731
  1,372,995
  1,516,009
  1,665,709
  1,822,072
  1,985,119
  2,154,918
  2,331,583
  2,515,275
  2,706,199
Fixed operating expenses, $m
  4,557
  4,657
  4,760
  4,865
  4,972
  5,081
  5,193
  5,307
  5,424
  5,543
  5,665
  5,790
  5,917
  6,047
  6,180
  6,316
  6,455
  6,597
  6,742
  6,891
  7,042
  7,197
  7,355
  7,517
  7,683
  7,852
  8,024
  8,201
  8,381
  8,566
Total operating expenses, $m
  16,477
  23,074
  32,303
  44,828
  61,354
  82,594
  109,238
  141,924
  181,217
  227,584
  281,389
  342,890
  412,235
  489,486
  574,618
  667,546
  768,136
  876,227
  991,644
  1,114,213
  1,243,773
  1,380,192
  1,523,364
  1,673,226
  1,829,755
  1,992,971
  2,162,942
  2,339,784
  2,523,656
  2,714,765
Operating income, $m
  359
  2,938
  6,600
  11,617
  18,282
  26,888
  37,718
  51,038
  67,079
  86,033
  108,052
  133,240
  161,661
  193,337
  228,260
  266,394
  307,685
  352,064
  399,460
  449,801
  503,022
  559,066
  617,891
  679,470
  743,793
  810,870
  880,727
  953,413
  1,028,992
  1,107,550
EBITDA, $m
  8,160
  14,991
  24,624
  37,770
  55,180
  77,614
  105,808
  140,444
  182,122
  231,342
  288,493
  353,847
  427,566
  509,712
  600,261
  699,120
  806,148
  921,172
  1,044,005
  1,174,461
  1,312,371
  1,457,589
  1,610,007
  1,769,553
  1,936,204
  2,109,983
  2,290,961
  2,479,261
  2,675,053
  2,878,556
Interest expense (income), $m
  617
  587
  1,289
  2,306
  3,734
  5,678
  8,247
  11,554
  15,706
  20,803
  26,934
  34,171
  42,573
  52,177
  63,009
  75,078
  88,380
  102,901
  118,621
  135,514
  153,553
  172,711
  192,963
  214,287
  236,668
  260,095
  284,564
  310,080
  336,652
  364,299
  393,045
Earnings before tax, $m
  -228
  1,649
  4,294
  7,884
  12,605
  18,640
  26,165
  35,332
  46,275
  59,099
  73,880
  90,668
  109,483
  130,328
  153,182
  178,015
  204,783
  233,443
  263,946
  296,248
  330,311
  366,103
  403,604
  442,802
  483,699
  526,305
  570,647
  616,760
  664,693
  714,505
Tax expense, $m
  0
  445
  1,159
  2,129
  3,403
  5,033
  7,064
  9,540
  12,494
  15,957
  19,948
  24,480
  29,561
  35,188
  41,359
  48,064
  55,292
  63,030
  71,265
  79,987
  89,184
  98,848
  108,973
  119,557
  130,599
  142,102
  154,075
  166,525
  179,467
  192,916
Net income, $m
  -228
  1,204
  3,134
  5,755
  9,201
  13,608
  19,100
  25,792
  33,781
  43,142
  53,933
  66,187
  79,923
  95,139
  111,823
  129,951
  149,492
  170,413
  192,680
  216,261
  241,127
  267,256
  294,631
  323,246
  353,100
  384,203
  416,572
  450,235
  485,226
  521,588

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  92,510
  142,928
  213,748
  310,138
  437,560
  601,545
  807,449
  1,060,231
  1,364,260
  1,723,171
  2,139,788
  2,616,096
  3,153,275
  3,751,775
  4,411,421
  5,131,541
  5,911,105
  6,748,854
  7,643,428
  8,593,482
  9,597,778
  10,655,265
  11,765,143
  12,926,906
  14,140,375
  15,405,718
  16,723,460
  18,094,489
  19,520,047
  21,001,730
Adjusted assets (=assets-cash), $m
  92,510
  142,928
  213,748
  310,138
  437,560
  601,545
  807,449
  1,060,231
  1,364,260
  1,723,171
  2,139,788
  2,616,096
  3,153,275
  3,751,775
  4,411,421
  5,131,541
  5,911,105
  6,748,854
  7,643,428
  8,593,482
  9,597,778
  10,655,265
  11,765,143
  12,926,906
  14,140,375
  15,405,718
  16,723,460
  18,094,489
  19,520,047
  21,001,730
Revenue / Adjusted assets
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
Average production assets, $m
  81,911
  126,553
  189,259
  274,606
  387,429
  532,626
  714,939
  938,761
  1,207,957
  1,525,748
  1,894,632
  2,316,370
  2,792,004
  3,321,934
  3,906,004
  4,543,621
  5,233,870
  5,975,638
  6,767,721
  7,608,927
  8,498,161
  9,434,492
  10,417,211
  11,445,871
  12,520,312
  13,640,685
  14,807,453
  16,021,403
  17,283,636
  18,595,562
Working capital, $m
  202
  312
  467
  677
  956
  1,314
  1,763
  2,316
  2,980
  3,763
  4,673
  5,714
  6,887
  8,194
  9,635
  11,207
  12,910
  14,739
  16,693
  18,768
  20,962
  23,271
  25,695
  28,232
  30,883
  33,646
  36,524
  39,518
  42,632
  45,868
Total debt, $m
  34,842
  62,320
  100,917
  153,449
  222,894
  312,266
  424,484
  562,250
  727,946
  923,552
  1,150,608
  1,410,196
  1,702,959
  2,029,141
  2,388,648
  2,781,114
  3,205,976
  3,662,549
  4,150,092
  4,667,872
  5,215,213
  5,791,544
  6,396,427
  7,029,588
  7,690,928
  8,380,540
  9,098,710
  9,845,920
  10,622,850
  11,430,367
Total liabilities, $m
  50,418
  77,896
  116,493
  169,025
  238,470
  327,842
  440,060
  577,826
  743,522
  939,128
  1,166,184
  1,425,772
  1,718,535
  2,044,717
  2,404,224
  2,796,690
  3,221,552
  3,678,125
  4,165,668
  4,683,448
  5,230,789
  5,807,120
  6,412,003
  7,045,164
  7,706,504
  8,396,116
  9,114,286
  9,861,496
  10,638,426
  11,445,943
Total equity, $m
  42,092
  65,032
  97,256
  141,113
  199,090
  273,703
  367,389
  482,405
  620,738
  784,043
  973,603
  1,190,324
  1,434,740
  1,707,058
  2,007,196
  2,334,851
  2,689,553
  3,070,728
  3,477,760
  3,910,034
  4,366,989
  4,848,146
  5,353,140
  5,881,742
  6,433,871
  7,009,602
  7,609,174
  8,232,992
  8,881,622
  9,555,787
Total liabilities and equity, $m
  92,510
  142,928
  213,749
  310,138
  437,560
  601,545
  807,449
  1,060,231
  1,364,260
  1,723,171
  2,139,787
  2,616,096
  3,153,275
  3,751,775
  4,411,420
  5,131,541
  5,911,105
  6,748,853
  7,643,428
  8,593,482
  9,597,778
  10,655,266
  11,765,143
  12,926,906
  14,140,375
  15,405,718
  16,723,460
  18,094,488
  19,520,048
  21,001,730
Debt-to-equity ratio
  0.830
  0.960
  1.040
  1.090
  1.120
  1.140
  1.160
  1.170
  1.170
  1.180
  1.180
  1.180
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.200
  1.200
  1.200
  1.200
  1.200
  1.200
  1.200
Adjusted equity ratio
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -228
  1,204
  3,134
  5,755
  9,201
  13,608
  19,100
  25,792
  33,781
  43,142
  53,933
  66,187
  79,923
  95,139
  111,823
  129,951
  149,492
  170,413
  192,680
  216,261
  241,127
  267,256
  294,631
  323,246
  353,100
  384,203
  416,572
  450,235
  485,226
  521,588
Depreciation, amort., depletion, $m
  7,801
  12,053
  18,025
  26,153
  36,898
  50,726
  68,089
  89,406
  115,043
  145,309
  180,441
  220,607
  265,905
  316,375
  372,000
  432,726
  498,464
  569,108
  644,545
  724,660
  809,349
  898,523
  992,115
  1,090,083
  1,192,411
  1,299,113
  1,410,234
  1,525,848
  1,646,061
  1,771,006
Funds from operations, $m
  7,573
  13,257
  21,159
  31,908
  46,099
  64,334
  87,190
  115,198
  148,824
  188,452
  234,374
  286,794
  345,828
  411,514
  483,823
  562,676
  647,956
  739,522
  837,225
  940,921
  1,050,476
  1,165,779
  1,286,746
  1,413,329
  1,545,511
  1,683,316
  1,826,806
  1,976,083
  2,131,286
  2,292,594
Change in working capital, $m
  76
  110
  155
  211
  278
  358
  450
  552
  664
  784
  910
  1,040
  1,173
  1,307
  1,441
  1,573
  1,703
  1,830
  1,954
  2,075
  2,193
  2,310
  2,424
  2,537
  2,650
  2,764
  2,878
  2,994
  3,113
  3,236
Cash from operations, $m
  7,497
  13,146
  21,005
  31,697
  45,821
  63,976
  86,740
  114,646
  148,160
  187,668
  233,464
  285,754
  344,655
  410,207
  482,383
  561,104
  646,253
  737,692
  835,271
  938,846
  1,048,282
  1,163,469
  1,284,322
  1,410,791
  1,542,861
  1,680,552
  1,823,928
  1,973,089
  2,128,173
  2,289,358
Maintenance CAPEX, $m
  -4,875
  -7,801
  -12,053
  -18,025
  -26,153
  -36,898
  -50,726
  -68,089
  -89,406
  -115,043
  -145,309
  -180,441
  -220,607
  -265,905
  -316,375
  -372,000
  -432,726
  -498,464
  -569,108
  -644,545
  -724,660
  -809,349
  -898,523
  -992,115
  -1,090,083
  -1,192,411
  -1,299,113
  -1,410,234
  -1,525,848
  -1,646,061
New CAPEX, $m
  -30,719
  -44,642
  -62,707
  -85,346
  -112,823
  -145,197
  -182,314
  -223,821
  -269,196
  -317,791
  -368,885
  -421,737
  -475,635
  -529,930
  -584,070
  -637,617
  -690,249
  -741,768
  -792,083
  -841,206
  -889,234
  -936,331
  -982,719
  -1,028,660
  -1,074,442
  -1,120,372
  -1,166,769
  -1,213,950
  -1,262,232
  -1,311,927
Cash from investing activities, $m
  -35,594
  -52,443
  -74,760
  -103,371
  -138,976
  -182,095
  -233,040
  -291,910
  -358,602
  -432,834
  -514,194
  -602,178
  -696,242
  -795,835
  -900,445
  -1,009,617
  -1,122,975
  -1,240,232
  -1,361,191
  -1,485,751
  -1,613,894
  -1,745,680
  -1,881,242
  -2,020,775
  -2,164,525
  -2,312,783
  -2,465,882
  -2,624,184
  -2,788,080
  -2,957,988
Free cash flow, $m
  -28,097
  -39,296
  -53,755
  -71,674
  -93,155
  -118,119
  -146,300
  -177,265
  -210,441
  -245,166
  -280,730
  -316,425
  -351,586
  -385,628
  -418,062
  -448,513
  -476,722
  -502,539
  -525,920
  -546,905
  -565,611
  -582,211
  -596,920
  -609,984
  -621,664
  -632,231
  -641,954
  -651,095
  -659,907
  -668,629
Issuance/(repayment) of debt, $m
  18,967
  27,478
  38,597
  52,532
  69,445
  89,371
  112,218
  137,766
  165,696
  195,607
  227,056
  259,588
  292,763
  326,182
  359,507
  392,466
  424,862
  456,573
  487,543
  517,779
  547,341
  576,331
  604,884
  633,161
  661,340
  689,612
  718,170
  747,211
  776,929
  807,517
Issuance/(repurchase) of shares, $m
  16,053
  21,736
  29,089
  38,102
  48,776
  61,005
  74,586
  89,224
  104,552
  120,162
  135,628
  150,533
  164,494
  177,178
  188,316
  197,704
  205,210
  210,762
  214,351
  216,014
  215,828
  213,901
  210,363
  205,356
  199,028
  191,528
  183,000
  173,583
  163,403
  152,577
Cash from financing (excl. dividends), $m  
  35,020
  49,214
  67,686
  90,634
  118,221
  150,376
  186,804
  226,990
  270,248
  315,769
  362,684
  410,121
  457,257
  503,360
  547,823
  590,170
  630,072
  667,335
  701,894
  733,793
  763,169
  790,232
  815,247
  838,517
  860,368
  881,140
  901,170
  920,794
  940,332
  960,094
Total cash flow (excl. dividends), $m
  6,923
  9,918
  13,931
  18,961
  25,066
  32,258
  40,504
  49,726
  59,806
  70,602
  81,954
  93,696
  105,670
  117,732
  129,761
  141,657
  153,350
  164,796
  175,974
  186,888
  197,558
  208,021
  218,327
  228,533
  238,705
  248,909
  259,217
  269,699
  280,425
  291,466
Retained Cash Flow (-), $m
  -16,053
  -22,940
  -32,223
  -43,857
  -57,977
  -74,613
  -93,686
  -115,016
  -138,333
  -163,305
  -189,561
  -216,720
  -244,417
  -272,317
  -300,139
  -327,655
  -354,702
  -381,176
  -407,031
  -432,275
  -456,955
  -481,157
  -504,994
  -528,602
  -552,128
  -575,731
  -599,573
  -623,818
  -648,629
  -674,166
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -9,130
  -13,022
  -18,292
  -24,896
  -32,911
  -42,355
  -53,182
  -65,291
  -78,527
  -92,702
  -107,607
  -123,024
  -138,747
  -154,585
  -170,378
  -185,998
  -201,351
  -216,380
  -231,057
  -245,387
  -259,397
  -273,136
  -286,667
  -300,069
  -313,424
  -326,822
  -340,356
  -354,119
  -368,204
  -382,700
Discount rate, %
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
  -8,565
  -11,389
  -14,817
  -18,545
  -22,376
  -26,071
  -29,385
  -32,085
  -33,989
  -34,974
  -34,997
  -34,088
  -32,346
  -29,922
  -26,999
  -23,772
  -20,430
  -17,140
  -14,038
  -11,222
  -8,755
  -6,663
  -4,944
  -3,575
  -2,517
  -1,724
  -1,148
  -742
  -466
  -283
Current shareholders' claim on cash, %
  77.9
  62.9
  52.1
  44.1
  38.0
  33.3
  29.6
  26.6
  24.2
  22.2
  20.5
  19.2
  18.0
  17.0
  16.2
  15.5
  14.9
  14.4
  13.9
  13.5
  13.2
  12.9
  12.6
  12.4
  12.2
  12.1
  11.9
  11.8
  11.7
  11.6

Canadian Natural Resources Limited is an independent crude oil and natural gas exploration, development and production company. The Company's segments include Exploration and Production, Oil Sands Mining and Upgrading, and Midstream. The Exploration and Production segment includes exploration, development, production and marketing of crude oil, natural gas liquids (NGLs) and natural gas. The Company's exploration and production operations are focused in North America in Western Canada, the United Kingdom portion of the North Sea, and Cote d'Ivoire, Gabon and South Africa in Offshore Africa. The Horizon Oil Sands Mining and Upgrading segment (Horizon) produces synthetic crude oil (SCO) through bitumen mining and upgrading operations. Midstream activities include the Company's pipeline operations, an electricity co-generation system and an investment in the North West Redwater Partnership (Redwater Partnership).

FINANCIAL RATIOS  of  Canadian Natural Resources Limited (CNQ)

Valuation Ratios
P/E Ratio -253.6
Price to Sales 4.9
Price to Book 2
Price to Tangible Book
Price to Cash Flow 15
Price to Free Cash Flow -147.4
Growth Rates
Sales Growth Rate -14.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.7%
Cap. Spend. - 3 Yr. Gr. Rate -12.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 57.1%
Total Debt to Equity 64%
Interest Coverage -1
Management Effectiveness
Return On Assets -0.1%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital -0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity -0.8%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 42%
Gross Margin - 3 Yr. Avg. 46.5%
EBITDA Margin 41.9%
EBITDA Margin - 3 Yr. Avg. 47.1%
Operating Margin -12.2%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin -10.1%
Pre-Tax Margin - 3 Yr. Avg. 4%
Net Profit Margin -1.9%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 80.8%
Eff/ Tax Rate - 3 Yr. Avg. 36.4%
Payout Ratio -371.6%

CNQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNQ stock intrinsic value calculation we used $10523 million for the last fiscal year's total revenue generated by Canadian Natural Resources Limited. The default revenue input number comes from 2016 income statement of Canadian Natural Resources Limited. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CNQ stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.6%, whose default value for CNQ is calculated based on our internal credit rating of Canadian Natural Resources Limited, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Canadian Natural Resources Limited.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CNQ stock the variable cost ratio is equal to 70.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4459 million in the base year in the intrinsic value calculation for CNQ stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.7% for Canadian Natural Resources Limited.

Corporate tax rate of 27% is the nominal tax rate for Canadian Natural Resources Limited. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CNQ stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CNQ are equal to 486.5%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Canadian Natural Resources Limited operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CNQ is equal to 1.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $26267 million for Canadian Natural Resources Limited - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1218.17 million for Canadian Natural Resources Limited is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Canadian Natural Resources Limited at the current share price and the inputted number of shares is $56.7 billion.

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