Intrinsic value of MEG Energy Corp. - MEG

Previous Close

$5.35

  Intrinsic Value

$2.79

stock screener

  Rating & Target

sell

-48%

Previous close

$5.35

 
Intrinsic value

$2.79

 
Up/down potential

-48%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MEG 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 1.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   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, %
  -3.32
  11.90
  11.21
  10.59
  10.03
  9.53
  9.07
  8.67
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
Revenue, $m
  1,862
  2,084
  2,317
  2,563
  2,820
  3,088
  3,368
  3,660
  3,964
  4,280
  4,609
  4,950
  5,304
  5,673
  6,056
  6,455
  6,869
  7,300
  7,749
  8,217
  8,705
  9,213
  9,743
  10,296
  10,874
  11,478
  12,108
  12,768
  13,457
  14,179
  14,934
Variable operating expenses, $m
 
  2,304
  2,563
  2,834
  3,118
  3,415
  3,725
  4,048
  4,384
  4,734
  5,097
  5,474
  5,867
  6,274
  6,698
  7,139
  7,597
  8,074
  8,571
  9,088
  9,627
  10,189
  10,776
  11,388
  12,027
  12,694
  13,392
  14,121
  14,884
  15,682
  16,517
Fixed operating expenses, $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 operating expenses, $m
  2,323
  2,304
  2,563
  2,834
  3,118
  3,415
  3,725
  4,048
  4,384
  4,734
  5,097
  5,474
  5,867
  6,274
  6,698
  7,139
  7,597
  8,074
  8,571
  9,088
  9,627
  10,189
  10,776
  11,388
  12,027
  12,694
  13,392
  14,121
  14,884
  15,682
  16,517
Operating income, $m
  -461
  -221
  -246
  -272
  -299
  -327
  -357
  -388
  -420
  -454
  -489
  -525
  -562
  -601
  -642
  -684
  -728
  -774
  -821
  -871
  -923
  -977
  -1,033
  -1,091
  -1,153
  -1,217
  -1,283
  -1,353
  -1,426
  -1,503
  -1,583
EBITDA, $m
  39
  337
  375
  414
  456
  499
  545
  592
  641
  692
  745
  800
  858
  917
  979
  1,044
  1,111
  1,181
  1,253
  1,329
  1,408
  1,490
  1,576
  1,665
  1,759
  1,856
  1,958
  2,065
  2,176
  2,293
  2,415
Interest expense (income), $m
  0
  177
  201
  226
  251
  279
  307
  337
  368
  400
  433
  468
  504
  542
  581
  621
  663
  707
  753
  800
  850
  901
  955
  1,011
  1,070
  1,131
  1,195
  1,262
  1,331
  1,404
  1,481
Earnings before tax, $m
  -636
  -398
  -446
  -497
  -550
  -606
  -664
  -725
  -788
  -853
  -922
  -993
  -1,066
  -1,143
  -1,223
  -1,305
  -1,391
  -1,481
  -1,574
  -1,671
  -1,773
  -1,878
  -1,988
  -2,103
  -2,223
  -2,348
  -2,478
  -2,615
  -2,758
  -2,907
  -3,064
Tax expense, $m
  -207
  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
Net income, $m
  -429
  -398
  -446
  -497
  -550
  -606
  -664
  -725
  -788
  -853
  -922
  -993
  -1,066
  -1,143
  -1,223
  -1,305
  -1,391
  -1,481
  -1,574
  -1,671
  -1,773
  -1,878
  -1,988
  -2,103
  -2,223
  -2,348
  -2,478
  -2,615
  -2,758
  -2,907
  -3,064

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  156
  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
  8,921
  9,828
  10,930
  12,087
  13,300
  14,567
  15,889
  17,266
  18,699
  20,189
  21,738
  23,348
  25,021
  26,760
  28,567
  30,446
  32,401
  34,436
  36,554
  38,760
  41,059
  43,456
  45,957
  48,568
  51,293
  54,140
  57,115
  60,225
  63,478
  66,882
  70,443
Adjusted assets (=assets-cash), $m
  8,765
  9,828
  10,930
  12,087
  13,300
  14,567
  15,889
  17,266
  18,699
  20,189
  21,738
  23,348
  25,021
  26,760
  28,567
  30,446
  32,401
  34,436
  36,554
  38,760
  41,059
  43,456
  45,957
  48,568
  51,293
  54,140
  57,115
  60,225
  63,478
  66,882
  70,443
Revenue / Adjusted assets
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
Average production assets, $m
  7,876
  8,814
  9,802
  10,839
  11,927
  13,063
  14,248
  15,483
  16,768
  18,105
  19,494
  20,938
  22,438
  23,997
  25,618
  27,303
  29,056
  30,880
  32,780
  34,758
  36,820
  38,970
  41,213
  43,553
  45,997
  48,550
  51,219
  54,008
  56,925
  59,977
  63,170
Working capital, $m
  97
  -48
  -53
  -59
  -65
  -71
  -77
  -84
  -91
  -98
  -106
  -114
  -122
  -130
  -139
  -148
  -158
  -168
  -178
  -189
  -200
  -212
  -224
  -237
  -250
  -264
  -278
  -294
  -310
  -326
  -343
Total debt, $m
  5,071
  5,737
  6,443
  7,185
  7,962
  8,774
  9,622
  10,504
  11,423
  12,378
  13,371
  14,403
  15,476
  16,590
  17,748
  18,953
  20,206
  21,510
  22,868
  24,282
  25,756
  27,293
  28,896
  30,569
  32,316
  34,141
  36,048
  38,042
  40,127
  42,308
  44,591
Total liabilities, $m
  5,634
  6,300
  7,006
  7,748
  8,525
  9,337
  10,185
  11,067
  11,986
  12,941
  13,934
  14,966
  16,039
  17,153
  18,311
  19,516
  20,769
  22,073
  23,431
  24,845
  26,319
  27,856
  29,459
  31,132
  32,879
  34,704
  36,611
  38,605
  40,690
  42,871
  45,154
Total equity, $m
  3,287
  3,528
  3,924
  4,339
  4,775
  5,229
  5,704
  6,198
  6,713
  7,248
  7,804
  8,382
  8,983
  9,607
  10,256
  10,930
  11,632
  12,362
  13,123
  13,915
  14,740
  15,601
  16,499
  17,436
  18,414
  19,436
  20,504
  21,621
  22,789
  24,010
  25,289
Total liabilities and equity, $m
  8,921
  9,828
  10,930
  12,087
  13,300
  14,566
  15,889
  17,265
  18,699
  20,189
  21,738
  23,348
  25,022
  26,760
  28,567
  30,446
  32,401
  34,435
  36,554
  38,760
  41,059
  43,457
  45,958
  48,568
  51,293
  54,140
  57,115
  60,226
  63,479
  66,881
  70,443
Debt-to-equity ratio
  1.543
  1.630
  1.640
  1.660
  1.670
  1.680
  1.690
  1.690
  1.700
  1.710
  1.710
  1.720
  1.720
  1.730
  1.730
  1.730
  1.740
  1.740
  1.740
  1.750
  1.750
  1.750
  1.750
  1.750
  1.750
  1.760
  1.760
  1.760
  1.760
  1.760
  1.760
Adjusted equity ratio
  0.357
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -429
  -398
  -446
  -497
  -550
  -606
  -664
  -725
  -788
  -853
  -922
  -993
  -1,066
  -1,143
  -1,223
  -1,305
  -1,391
  -1,481
  -1,574
  -1,671
  -1,773
  -1,878
  -1,988
  -2,103
  -2,223
  -2,348
  -2,478
  -2,615
  -2,758
  -2,907
  -3,064
Depreciation, amort., depletion, $m
  500
  558
  620
  686
  755
  827
  902
  980
  1,061
  1,146
  1,234
  1,325
  1,420
  1,519
  1,621
  1,728
  1,839
  1,954
  2,075
  2,200
  2,330
  2,466
  2,608
  2,757
  2,911
  3,073
  3,242
  3,418
  3,603
  3,796
  3,998
Funds from operations, $m
  -119
  160
  174
  189
  205
  221
  238
  255
  273
  292
  312
  332
  354
  376
  399
  423
  448
  473
  500
  529
  558
  588
  620
  654
  689
  725
  763
  803
  845
  889
  934
Change in working capital, $m
  -25
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
Cash from operations, $m
  -94
  165
  179
  195
  210
  227
  244
  262
  280
  300
  320
  340
  362
  384
  408
  432
  457
  483
  511
  539
  569
  600
  633
  667
  702
  739
  778
  818
  861
  905
  952
Maintenance CAPEX, $m
  0
  -498
  -558
  -620
  -686
  -755
  -827
  -902
  -980
  -1,061
  -1,146
  -1,234
  -1,325
  -1,420
  -1,519
  -1,621
  -1,728
  -1,839
  -1,954
  -2,075
  -2,200
  -2,330
  -2,466
  -2,608
  -2,757
  -2,911
  -3,073
  -3,242
  -3,418
  -3,603
  -3,796
New CAPEX, $m
  -140
  -938
  -988
  -1,038
  -1,087
  -1,136
  -1,185
  -1,235
  -1,285
  -1,336
  -1,389
  -1,444
  -1,500
  -1,559
  -1,621
  -1,685
  -1,753
  -1,824
  -1,899
  -1,978
  -2,062
  -2,150
  -2,243
  -2,341
  -2,444
  -2,553
  -2,668
  -2,789
  -2,917
  -3,052
  -3,194
Cash from investing activities, $m
  -131
  -1,436
  -1,546
  -1,658
  -1,773
  -1,891
  -2,012
  -2,137
  -2,265
  -2,397
  -2,535
  -2,678
  -2,825
  -2,979
  -3,140
  -3,306
  -3,481
  -3,663
  -3,853
  -4,053
  -4,262
  -4,480
  -4,709
  -4,949
  -5,201
  -5,464
  -5,741
  -6,031
  -6,335
  -6,655
  -6,990
Free cash flow, $m
  -225
  -1,271
  -1,367
  -1,464
  -1,563
  -1,664
  -1,768
  -1,875
  -1,985
  -2,098
  -2,215
  -2,337
  -2,464
  -2,595
  -2,732
  -2,875
  -3,024
  -3,180
  -3,343
  -3,514
  -3,693
  -3,880
  -4,077
  -4,283
  -4,499
  -4,725
  -4,963
  -5,213
  -5,475
  -5,749
  -6,038
Issuance/(repayment) of debt, $m
  -17
  683
  706
  742
  777
  812
  847
  883
  919
  955
  993
  1,032
  1,072
  1,114
  1,158
  1,205
  1,253
  1,304
  1,358
  1,414
  1,474
  1,537
  1,603
  1,673
  1,747
  1,825
  1,907
  1,994
  2,085
  2,181
  2,283
Issuance/(repurchase) of shares, $m
  0
  778
  842
  913
  986
  1,061
  1,139
  1,219
  1,302
  1,389
  1,478
  1,571
  1,667
  1,767
  1,871
  1,980
  2,093
  2,211
  2,335
  2,463
  2,598
  2,739
  2,886
  3,040
  3,201
  3,370
  3,547
  3,732
  3,926
  4,129
  4,342
Cash from financing (excl. dividends), $m  
  -17
  1,461
  1,548
  1,655
  1,763
  1,873
  1,986
  2,102
  2,221
  2,344
  2,471
  2,603
  2,739
  2,881
  3,029
  3,185
  3,346
  3,515
  3,693
  3,877
  4,072
  4,276
  4,489
  4,713
  4,948
  5,195
  5,454
  5,726
  6,011
  6,310
  6,625
Total cash flow (excl. dividends), $m
  -252
  190
  182
  191
  200
  209
  218
  227
  236
  246
  255
  265
  276
  287
  298
  310
  322
  335
  349
  364
  379
  395
  412
  430
  449
  469
  491
  513
  536
  561
  587
Retained Cash Flow (-), $m
  391
  -778
  -842
  -913
  -986
  -1,061
  -1,139
  -1,219
  -1,302
  -1,389
  -1,478
  -1,571
  -1,667
  -1,767
  -1,871
  -1,980
  -2,093
  -2,211
  -2,335
  -2,463
  -2,598
  -2,739
  -2,886
  -3,040
  -3,201
  -3,370
  -3,547
  -3,732
  -3,926
  -4,129
  -4,342
Prev. year cash balance distribution, $m
 
  139
  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
 
  -449
  -660
  -722
  -786
  -852
  -921
  -992
  -1,066
  -1,143
  -1,222
  -1,305
  -1,391
  -1,481
  -1,573
  -1,670
  -1,771
  -1,876
  -1,985
  -2,100
  -2,219
  -2,343
  -2,473
  -2,609
  -2,752
  -2,900
  -3,056
  -3,219
  -3,389
  -3,568
  -3,755
Discount rate, %
 
  10.80
  11.34
  11.91
  12.50
  13.13
  13.78
  14.47
  15.20
  15.96
  16.75
  17.59
  18.47
  19.40
  20.37
  21.38
  22.45
  23.58
  24.75
  25.99
  27.29
  28.66
  30.09
  31.59
  33.17
  34.83
  36.57
  38.40
  40.32
  42.34
  44.45
PV of cash for distribution, $m
 
  -406
  -533
  -515
  -490
  -460
  -424
  -385
  -344
  -302
  -260
  -220
  -182
  -148
  -117
  -91
  -69
  -51
  -37
  -26
  -18
  -12
  -8
  -5
  -3
  -2
  -1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  73.9
  55.1
  41.4
  31.2
  23.7
  18.1
  13.9
  10.7
  8.2
  6.4
  4.9
  3.9
  3.0
  2.4
  1.8
  1.4
  1.1
  0.9
  0.7
  0.6
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1

MEG Energy Corp (MEG) is a Canada-based oil sands company. It is focused on sustainable in situ oil sands development and production in the southern Athabasca oil sands region of Alberta, Canada. MEG is engaged in developing enhanced oil recovery projects that utilize steam-assisted gravity drainage (SAGD) extraction methods. The Company has the following commercial SAGD projects: the Christina Lake Project and the Surmont Project. The Christina Lake Project is situated on over 80 square miles of oil sands leases in the southern Athabasca oil sands region of Alberta. MEG owns working interest in the oil sands leases associated with the Christina Lake Project. The Surmont Project comprises over 30 square miles of lands in the southern Athabasca oil sands region of Alberta. The Surmont Project is located approximately 50 miles south of Fort McMurray. MEG owns working interest in the oil sands leases associated with the Surmont Project. MEG also holds interest in the Access Pipeline.

FINANCIAL RATIOS  of  MEG Energy Corp. (MEG)

Valuation Ratios
P/E Ratio -2.8
Price to Sales 0.7
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow -12.9
Price to Free Cash Flow -5.2
Growth Rates
Sales Growth Rate -3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -55.4%
Cap. Spend. - 3 Yr. Gr. Rate -42.5%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 153.8%
Total Debt to Equity 154.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -4.7%
Ret/ On Assets - 3 Yr. Avg. -6%
Return On Total Capital -5%
Ret/ On T. Cap. - 3 Yr. Avg. -6.4%
Return On Equity -12.3%
Return On Equity - 3 Yr. Avg. -14.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 34.5%
Gross Margin - 3 Yr. Avg. 41.4%
EBITDA Margin -7.3%
EBITDA Margin - 3 Yr. Avg. -12%
Operating Margin -24.8%
Oper. Margin - 3 Yr. Avg. -5.4%
Pre-Tax Margin -34.2%
Pre-Tax Margin - 3 Yr. Avg. -33.5%
Net Profit Margin -23%
Net Profit Margin - 3 Yr. Avg. -29.2%
Effective Tax Rate 32.5%
Eff/ Tax Rate - 3 Yr. Avg. -130.1%
Payout Ratio 0%

MEG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MEG stock intrinsic value calculation we used $1862 million for the last fiscal year's total revenue generated by MEG Energy Corp.. The default revenue input number comes from 2016 income statement of MEG Energy Corp.. 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 MEG stock valuation model: a) initial revenue growth rate of 11.9% 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 10.8%, whose default value for MEG is calculated based on our internal credit rating of MEG Energy Corp., 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 MEG Energy Corp..
    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 MEG stock the variable cost ratio is equal to 110.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MEG 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 MEG Energy Corp..

Corporate tax rate of 27% is the nominal tax rate for MEG Energy Corp.. 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 MEG 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 MEG are equal to 423%.

Life of production assets of 15.8 years is the average useful life of capital assets used in MEG Energy Corp. 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 MEG is equal to -2.3%. 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 - $3287 million for MEG Energy Corp. - 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 294.606 million for MEG Energy Corp. 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 MEG Energy Corp. at the current share price and the inputted number of shares is $1.6 billion.

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Financial statements of MEG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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