Intrinsic value of Imperial Oil Limited - IMO

Previous Close

$43.40

  Intrinsic Value

$40.36

stock screener

  Rating & Target

hold

-7%

Previous close

$43.40

 
Intrinsic value

$40.36

 
Up/down potential

-7%

 
Rating

hold

We calculate the intrinsic value of IMO 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 36.2

 

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, %
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.17
  5.15
  5.13
  5.12
  5.11
Revenue, $m
  27,304
  29,234
  31,240
  33,326
  35,495
  37,752
  40,101
  42,547
  45,096
  47,753
  50,523
  53,414
  56,432
  59,583
  62,876
  66,317
  69,916
  73,680
  77,618
  81,740
  86,056
  90,575
  95,309
  100,269
  105,466
  110,914
  116,624
  122,611
  128,890
  135,474
Variable operating expenses, $m
  5,077
  5,435
  5,806
  6,193
  6,595
  7,013
  7,448
  7,901
  8,373
  8,866
  9,360
  9,896
  10,455
  11,039
  11,649
  12,287
  12,953
  13,651
  14,380
  15,144
  15,943
  16,781
  17,658
  18,577
  19,540
  20,549
  21,607
  22,716
  23,879
  25,099
Fixed operating expenses, $m
  20,890
  21,349
  21,819
  22,299
  22,790
  23,291
  23,803
  24,327
  24,862
  25,409
  25,968
  26,539
  27,123
  27,720
  28,330
  28,953
  29,590
  30,241
  30,906
  31,586
  32,281
  32,991
  33,717
  34,459
  35,217
  35,992
  36,784
  37,593
  38,420
  39,265
Total operating expenses, $m
  25,967
  26,784
  27,625
  28,492
  29,385
  30,304
  31,251
  32,228
  33,235
  34,275
  35,328
  36,435
  37,578
  38,759
  39,979
  41,240
  42,543
  43,892
  45,286
  46,730
  48,224
  49,772
  51,375
  53,036
  54,757
  56,541
  58,391
  60,309
  62,299
  64,364
Operating income, $m
  1,337
  2,450
  3,615
  4,834
  6,111
  7,448
  8,850
  10,319
  11,860
  13,478
  15,195
  16,979
  18,853
  20,824
  22,897
  25,078
  27,373
  29,788
  32,332
  35,010
  37,831
  40,803
  43,934
  47,233
  50,710
  54,373
  58,234
  62,302
  66,590
  71,109
EBITDA, $m
  3,092
  4,328
  5,621
  6,973
  8,387
  9,868
  11,419
  13,044
  14,747
  16,534
  18,408
  20,376
  22,443
  24,614
  26,897
  29,296
  31,820
  34,475
  37,269
  40,209
  43,305
  46,564
  49,997
  53,611
  57,418
  61,428
  65,652
  70,102
  74,789
  79,727
Interest expense (income), $m
  73
  176
  217
  261
  306
  353
  402
  453
  506
  562
  619
  679
  742
  807
  875
  946
  1,021
  1,098
  1,180
  1,265
  1,353
  1,446
  1,544
  1,646
  1,753
  1,865
  1,982
  2,105
  2,234
  2,369
  2,511
Earnings before tax, $m
  1,161
  2,232
  3,354
  4,528
  5,758
  7,046
  8,396
  9,813
  11,299
  12,859
  14,516
  16,237
  18,046
  19,949
  21,951
  24,057
  26,274
  28,609
  31,067
  33,657
  36,385
  39,259
  42,288
  45,480
  48,845
  52,391
  56,129
  60,068
  64,221
  68,598
Tax expense, $m
  313
  603
  906
  1,223
  1,555
  1,902
  2,267
  2,649
  3,051
  3,472
  3,919
  4,384
  4,873
  5,386
  5,927
  6,495
  7,094
  7,724
  8,388
  9,087
  9,824
  10,600
  11,418
  12,280
  13,188
  14,146
  15,155
  16,218
  17,340
  18,522
Net income, $m
  847
  1,630
  2,448
  3,305
  4,203
  5,144
  6,129
  7,163
  8,248
  9,387
  10,596
  11,853
  13,174
  14,563
  16,024
  17,562
  19,180
  20,884
  22,679
  24,569
  26,561
  28,659
  30,870
  33,201
  35,657
  38,245
  40,974
  43,850
  46,881
  50,077

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
  44,252
  47,381
  50,632
  54,013
  57,529
  61,187
  64,994
  68,958
  73,089
  77,395
  81,885
  86,571
  91,461
  96,569
  101,906
  107,484
  113,316
  119,416
  125,799
  132,480
  139,475
  146,799
  154,472
  162,510
  170,934
  179,763
  189,018
  198,722
  208,897
  219,568
Adjusted assets (=assets-cash), $m
  44,252
  47,381
  50,632
  54,013
  57,529
  61,187
  64,994
  68,958
  73,089
  77,395
  81,885
  86,571
  91,461
  96,569
  101,906
  107,484
  113,316
  119,416
  125,799
  132,480
  139,475
  146,799
  154,472
  162,510
  170,934
  179,763
  189,018
  198,722
  208,897
  219,568
Revenue / Adjusted assets
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
Average production assets, $m
  39,945
  42,769
  45,704
  48,756
  51,930
  55,231
  58,668
  62,247
  65,975
  69,862
  73,915
  78,145
  82,560
  87,170
  91,987
  97,022
  102,287
  107,794
  113,555
  119,586
  125,900
  132,512
  139,437
  146,693
  154,297
  162,267
  170,621
  179,381
  188,566
  198,198
Working capital, $m
  -246
  -263
  -281
  -300
  -319
  -340
  -361
  -383
  -406
  -430
  -455
  -481
  -508
  -536
  -566
  -597
  -629
  -663
  -699
  -736
  -775
  -815
  -858
  -902
  -949
  -998
  -1,050
  -1,104
  -1,160
  -1,219
Total debt, $m
  6,213
  7,459
  8,753
  10,098
  11,497
  12,953
  14,469
  16,046
  17,690
  19,404
  21,191
  23,056
  25,003
  27,036
  29,159
  31,379
  33,701
  36,129
  38,669
  41,328
  44,112
  47,027
  50,081
  53,280
  56,633
  60,147
  63,830
  67,692
  71,742
  75,989
Total liabilities, $m
  17,612
  18,858
  20,152
  21,497
  22,896
  24,352
  25,868
  27,445
  29,089
  30,803
  32,590
  34,455
  36,402
  38,435
  40,558
  42,778
  45,100
  47,528
  50,068
  52,727
  55,511
  58,426
  61,480
  64,679
  68,032
  71,546
  75,229
  79,091
  83,141
  87,388
Total equity, $m
  26,640
  28,523
  30,481
  32,516
  34,632
  36,834
  39,126
  41,513
  44,000
  46,592
  49,295
  52,115
  55,060
  58,135
  61,347
  64,705
  68,216
  71,889
  75,731
  79,753
  83,964
  88,373
  92,992
  97,831
  102,902
  108,217
  113,789
  119,631
  125,756
  132,180
Total liabilities and equity, $m
  44,252
  47,381
  50,633
  54,013
  57,528
  61,186
  64,994
  68,958
  73,089
  77,395
  81,885
  86,570
  91,462
  96,570
  101,905
  107,483
  113,316
  119,417
  125,799
  132,480
  139,475
  146,799
  154,472
  162,510
  170,934
  179,763
  189,018
  198,722
  208,897
  219,568
Debt-to-equity ratio
  0.230
  0.260
  0.290
  0.310
  0.330
  0.350
  0.370
  0.390
  0.400
  0.420
  0.430
  0.440
  0.450
  0.470
  0.480
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
  0.560
  0.560
  0.570
  0.570
  0.570
Adjusted equity ratio
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  847
  1,630
  2,448
  3,305
  4,203
  5,144
  6,129
  7,163
  8,248
  9,387
  10,596
  11,853
  13,174
  14,563
  16,024
  17,562
  19,180
  20,884
  22,679
  24,569
  26,561
  28,659
  30,870
  33,201
  35,657
  38,245
  40,974
  43,850
  46,881
  50,077
Depreciation, amort., depletion, $m
  1,755
  1,878
  2,006
  2,138
  2,276
  2,420
  2,569
  2,725
  2,887
  3,056
  3,214
  3,398
  3,590
  3,790
  3,999
  4,218
  4,447
  4,687
  4,937
  5,199
  5,474
  5,761
  6,062
  6,378
  6,709
  7,055
  7,418
  7,799
  8,199
  8,617
Funds from operations, $m
  2,603
  3,508
  4,454
  5,444
  6,479
  7,563
  8,699
  9,888
  11,135
  12,443
  13,810
  15,251
  16,763
  18,353
  20,024
  21,780
  23,627
  25,571
  27,616
  29,769
  32,035
  34,421
  36,933
  39,579
  42,365
  45,300
  48,392
  51,649
  55,080
  58,694
Change in working capital, $m
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
Cash from operations, $m
  2,619
  3,525
  4,472
  5,463
  6,499
  7,584
  8,720
  9,910
  11,158
  12,467
  13,835
  15,277
  16,791
  18,381
  20,053
  21,811
  23,660
  25,605
  27,652
  29,806
  32,074
  34,461
  36,975
  39,623
  42,412
  45,349
  48,444
  51,703
  55,136
  58,753
Maintenance CAPEX, $m
  -1,619
  -1,737
  -1,860
  -1,987
  -2,120
  -2,258
  -2,401
  -2,551
  -2,706
  -2,868
  -3,037
  -3,214
  -3,398
  -3,590
  -3,790
  -3,999
  -4,218
  -4,447
  -4,687
  -4,937
  -5,199
  -5,474
  -5,761
  -6,062
  -6,378
  -6,709
  -7,055
  -7,418
  -7,799
  -8,199
New CAPEX, $m
  -2,711
  -2,824
  -2,935
  -3,052
  -3,174
  -3,302
  -3,437
  -3,579
  -3,729
  -3,887
  -4,053
  -4,229
  -4,415
  -4,611
  -4,817
  -5,035
  -5,265
  -5,507
  -5,762
  -6,031
  -6,314
  -6,612
  -6,926
  -7,256
  -7,604
  -7,970
  -8,354
  -8,759
  -9,185
  -9,633
Cash from investing activities, $m
  -4,330
  -4,561
  -4,795
  -5,039
  -5,294
  -5,560
  -5,838
  -6,130
  -6,435
  -6,755
  -7,090
  -7,443
  -7,813
  -8,201
  -8,607
  -9,034
  -9,483
  -9,954
  -10,449
  -10,968
  -11,513
  -12,086
  -12,687
  -13,318
  -13,982
  -14,679
  -15,409
  -16,177
  -16,984
  -17,832
Free cash flow, $m
  -1,710
  -1,036
  -323
  424
  1,206
  2,024
  2,882
  3,781
  4,723
  5,712
  6,744
  7,834
  8,978
  10,181
  11,446
  12,777
  14,177
  15,651
  17,203
  18,838
  20,560
  22,375
  24,288
  26,305
  28,430
  30,671
  33,034
  35,525
  38,152
  40,922
Issuance/(repayment) of debt, $m
  1,181
  1,245
  1,294
  1,345
  1,399
  1,456
  1,515
  1,578
  1,644
  1,714
  1,787
  1,865
  1,947
  2,033
  2,124
  2,220
  2,321
  2,428
  2,540
  2,659
  2,784
  2,915
  3,054
  3,199
  3,353
  3,514
  3,684
  3,862
  4,050
  4,247
Issuance/(repurchase) of shares, $m
  960
  254
  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 from financing (excl. dividends), $m  
  2,141
  1,499
  1,294
  1,345
  1,399
  1,456
  1,515
  1,578
  1,644
  1,714
  1,787
  1,865
  1,947
  2,033
  2,124
  2,220
  2,321
  2,428
  2,540
  2,659
  2,784
  2,915
  3,054
  3,199
  3,353
  3,514
  3,684
  3,862
  4,050
  4,247
Total cash flow (excl. dividends), $m
  432
  463
  971
  1,769
  2,605
  3,480
  4,397
  5,359
  6,367
  7,425
  8,531
  9,698
  10,925
  12,214
  13,570
  14,997
  16,498
  18,079
  19,744
  21,497
  23,344
  25,291
  27,342
  29,504
  31,783
  34,185
  36,718
  39,387
  42,202
  45,170
Retained Cash Flow (-), $m
  -1,808
  -1,883
  -1,958
  -2,035
  -2,116
  -2,202
  -2,292
  -2,387
  -2,487
  -2,592
  -2,703
  -2,821
  -2,944
  -3,075
  -3,213
  -3,358
  -3,511
  -3,672
  -3,843
  -4,022
  -4,211
  -4,409
  -4,619
  -4,839
  -5,071
  -5,315
  -5,572
  -5,842
  -6,126
  -6,424
Prev. year cash balance distribution, $m
  189
  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
  -1,187
  -1,420
  -986
  -266
  488
  1,278
  2,105
  2,972
  3,880
  4,833
  5,828
  6,878
  7,980
  9,139
  10,357
  11,639
  12,987
  14,406
  15,901
  17,475
  19,134
  20,881
  22,723
  24,665
  26,712
  28,870
  31,146
  33,546
  36,077
  38,745
Discount rate, %
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
  -1,131
  -1,282
  -839
  -212
  364
  882
  1,337
  1,725
  2,043
  2,290
  2,463
  2,569
  2,609
  2,589
  2,514
  2,392
  2,232
  2,044
  1,836
  1,618
  1,399
  1,185
  984
  800
  636
  495
  376
  278
  201
  141
Current shareholders' claim on cash, %
  97.4
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8
  96.8

Imperial Oil Limited is an integrated oil company. The Company is engaged in all the phases of the petroleum industry in Canada, including exploration for, and production and sale of, crude oil and natural gas. Its operations are conducted in three segments: Upstream, Downstream and Chemical. The Upstream operations include the exploration for, and production of, crude oil, natural gas, synthetic oil and bitumen. It holds an interest in the Kearl oil sands project. The Downstream operations consist of the transportation and refining of crude oil, blending of refined products and the distribution and marketing of those products. The Chemical operations consist of the manufacturing and marketing of various petrochemicals. The Company is involved in the exploration for and development of crude oil and natural gas in Canada. The Company transports its crude oil production and third-party crude oil required to supply refineries by contracted pipelines, common carrier pipelines and rail.

FINANCIAL RATIOS  of  Imperial Oil Limited (IMO)

Valuation Ratios
P/E Ratio 17
Price to Sales 1.4
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 39.1
Growth Rates
Sales Growth Rate -5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -64.2%
Cap. Spend. - 3 Yr. Gr. Rate -29.8%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 20.1%
Total Debt to Equity 20.9%
Interest Coverage 34
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 8.1%
Return On Equity 8.9%
Return On Equity - 3 Yr. Avg. 10.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 13.6%
Gross Margin - 3 Yr. Avg. 16.7%
EBITDA Margin 16.3%
EBITDA Margin - 3 Yr. Avg. 15.3%
Operating Margin 2.4%
Oper. Margin - 3 Yr. Avg. 7.7%
Pre-Tax Margin 9.6%
Pre-Tax Margin - 3 Yr. Avg. 10.1%
Net Profit Margin 8.5%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 11.4%
Eff/ Tax Rate - 3 Yr. Avg. 25.9%
Payout Ratio 22.7%

IMO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IMO stock intrinsic value calculation we used $25446 million for the last fiscal year's total revenue generated by Imperial Oil Limited. The default revenue input number comes from 2016 income statement of Imperial Oil 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 IMO stock valuation model: a) initial revenue growth rate of 7.3% 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 5%, whose default value for IMO is calculated based on our internal credit rating of Imperial Oil 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 Imperial Oil 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 IMO stock the variable cost ratio is equal to 18.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $20440 million in the base year in the intrinsic value calculation for IMO 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 3.5% for Imperial Oil Limited.

Corporate tax rate of 27% is the nominal tax rate for Imperial Oil 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 IMO 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 IMO are equal to 146.3%.

Life of production assets of 23 years is the average useful life of capital assets used in Imperial Oil 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 IMO is equal to -0.9%. 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 - $25021 million for Imperial Oil 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 834.056 million for Imperial Oil 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 Imperial Oil Limited at the current share price and the inputted number of shares is $36.2 billion.

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