Intrinsic value of Cenovus Energy Inc. - CVE

Previous Close

$12.64

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$12.64

 
Intrinsic value

$2.39

 
Up/down potential

-81%

 
Rating

str. sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of CVE 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 15.0

 

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, %
  -7.12
  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
  12,134
  19,414
  29,995
  44,858
  65,087
  91,828
  126,242
  169,454
  222,503
  286,308
  361,630
  449,062
  549,022
  661,756
  787,359
  925,794
  1,076,921
  1,240,522
  1,416,334
  1,604,073
  1,803,454
  2,014,218
  2,236,146
  2,469,068
  2,712,879
  2,967,541
  3,233,090
  3,509,635
  3,797,363
  4,096,535
  4,407,485
Variable operating expenses, $m
 
  17,070
  26,360
  39,410
  57,171
  80,649
  110,865
  148,805
  195,383
  251,404
  317,537
  394,279
  482,044
  581,025
  691,305
  812,852
  945,542
  1,089,185
  1,243,550
  1,408,385
  1,583,442
  1,768,495
  1,963,348
  2,167,855
  2,381,923
  2,605,518
  2,838,671
  3,081,479
  3,334,106
  3,596,781
  3,869,797
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
  12,476
  17,070
  26,360
  39,410
  57,171
  80,649
  110,865
  148,805
  195,383
  251,404
  317,537
  394,279
  482,044
  581,025
  691,305
  812,852
  945,542
  1,089,185
  1,243,550
  1,408,385
  1,583,442
  1,768,495
  1,963,348
  2,167,855
  2,381,923
  2,605,518
  2,838,671
  3,081,479
  3,334,106
  3,596,781
  3,869,797
Operating income, $m
  -342
  2,344
  3,635
  5,448
  7,916
  11,178
  15,377
  20,648
  27,120
  34,904
  44,093
  54,783
  66,978
  80,730
  96,053
  112,942
  131,378
  151,337
  172,785
  195,688
  220,011
  245,723
  272,797
  301,212
  330,956
  362,023
  394,419
  428,156
  463,257
  499,754
  537,689
EBITDA, $m
  1,156
  4,737
  7,319
  10,946
  15,882
  22,407
  30,805
  41,349
  54,293
  69,862
  88,242
  109,577
  133,968
  161,476
  192,125
  225,905
  262,781
  302,702
  345,603
  391,413
  440,064
  491,493
  545,646
  602,482
  661,975
  724,115
  788,912
  856,393
  926,602
  999,603
  1,075,479
Interest expense (income), $m
  0
  222
  510
  927
  1,514
  2,313
  3,368
  4,727
  6,433
  8,527
  11,046
  14,019
  17,470
  21,416
  25,867
  30,825
  36,290
  42,256
  48,714
  55,654
  63,066
  70,936
  79,257
  88,017
  97,212
  106,837
  116,890
  127,373
  138,290
  149,648
  161,458
Earnings before tax, $m
  -927
  2,123
  3,125
  4,521
  6,402
  8,866
  12,008
  15,921
  20,687
  26,377
  33,047
  40,764
  49,507
  59,314
  70,187
  82,117
  95,088
  109,081
  124,071
  140,033
  156,946
  174,787
  193,541
  213,195
  233,744
  255,186
  277,529
  300,783
  324,967
  350,106
  376,230
Tax expense, $m
  -382
  573
  844
  1,221
  1,729
  2,394
  3,242
  4,299
  5,586
  7,122
  8,923
  11,006
  13,367
  16,015
  18,950
  22,171
  25,674
  29,452
  33,499
  37,809
  42,375
  47,192
  52,256
  57,563
  63,111
  68,900
  74,933
  81,211
  87,741
  94,529
  101,582
Net income, $m
  -545
  1,550
  2,282
  3,300
  4,673
  6,472
  8,766
  11,623
  15,102
  19,255
  24,124
  29,758
  36,140
  43,299
  51,236
  59,945
  69,415
  79,629
  90,572
  102,224
  114,570
  127,594
  141,285
  155,632
  170,633
  186,286
  202,596
  219,572
  237,226
  255,578
  274,648

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,720
  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
  25,258
  34,484
  53,278
  79,677
  115,607
  163,104
  224,231
  300,983
  395,210
  508,539
  642,327
  797,624
  975,172
  1,175,410
  1,398,505
  1,644,394
  1,912,825
  2,203,414
  2,515,692
  2,849,152
  3,203,292
  3,577,652
  3,971,839
  4,385,556
  4,818,613
  5,270,943
  5,742,610
  6,233,810
  6,744,872
  7,276,261
  7,828,571
Adjusted assets (=assets-cash), $m
  21,538
  34,484
  53,278
  79,677
  115,607
  163,104
  224,231
  300,983
  395,210
  508,539
  642,327
  797,624
  975,172
  1,175,410
  1,398,505
  1,644,394
  1,912,825
  2,203,414
  2,515,692
  2,849,152
  3,203,292
  3,577,652
  3,971,839
  4,385,556
  4,818,613
  5,270,943
  5,742,610
  6,233,810
  6,744,872
  7,276,261
  7,828,571
Revenue / Adjusted assets
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
Average production assets, $m
  16,881
  27,005
  41,723
  62,397
  90,535
  127,732
  175,603
  235,710
  309,502
  398,254
  503,027
  624,646
  763,689
  920,502
  1,095,216
  1,287,779
  1,497,996
  1,725,566
  1,970,121
  2,231,265
  2,508,604
  2,801,777
  3,110,479
  3,434,473
  3,773,615
  4,127,850
  4,497,228
  4,881,902
  5,282,132
  5,698,280
  6,130,812
Working capital, $m
  4,151
  699
  1,080
  1,615
  2,343
  3,306
  4,545
  6,100
  8,010
  10,307
  13,019
  16,166
  19,765
  23,823
  28,345
  33,329
  38,769
  44,659
  50,988
  57,747
  64,924
  72,512
  80,501
  88,886
  97,664
  106,831
  116,391
  126,347
  136,705
  147,475
  158,669
Total debt, $m
  6,332
  14,561
  26,495
  43,259
  66,074
  96,235
  135,051
  183,788
  243,622
  315,586
  400,541
  499,155
  611,898
  739,049
  880,715
  1,036,854
  1,207,308
  1,391,832
  1,590,128
  1,801,875
  2,026,755
  2,264,473
  2,514,782
  2,777,492
  3,052,483
  3,339,713
  3,639,222
  3,951,133
  4,275,658
  4,613,090
  4,963,807
Total liabilities, $m
  13,668
  21,897
  33,831
  50,595
  73,410
  103,571
  142,387
  191,124
  250,958
  322,922
  407,877
  506,491
  619,234
  746,385
  888,051
  1,044,190
  1,214,644
  1,399,168
  1,597,464
  1,809,211
  2,034,091
  2,271,809
  2,522,118
  2,784,828
  3,059,819
  3,347,049
  3,646,558
  3,958,469
  4,282,994
  4,620,426
  4,971,143
Total equity, $m
  11,590
  12,587
  19,446
  29,082
  42,196
  59,533
  81,844
  109,859
  144,252
  185,617
  234,449
  291,133
  355,938
  429,025
  510,454
  600,204
  698,181
  804,246
  918,227
  1,039,940
  1,169,202
  1,305,843
  1,449,721
  1,600,728
  1,758,794
  1,923,894
  2,096,053
  2,275,341
  2,461,878
  2,655,835
  2,857,428
Total liabilities and equity, $m
  25,258
  34,484
  53,277
  79,677
  115,606
  163,104
  224,231
  300,983
  395,210
  508,539
  642,326
  797,624
  975,172
  1,175,410
  1,398,505
  1,644,394
  1,912,825
  2,203,414
  2,515,691
  2,849,151
  3,203,293
  3,577,652
  3,971,839
  4,385,556
  4,818,613
  5,270,943
  5,742,611
  6,233,810
  6,744,872
  7,276,261
  7,828,571
Debt-to-equity ratio
  0.546
  1.160
  1.360
  1.490
  1.570
  1.620
  1.650
  1.670
  1.690
  1.700
  1.710
  1.710
  1.720
  1.720
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.740
  1.740
  1.740
  1.740
  1.740
  1.740
  1.740
  1.740
Adjusted equity ratio
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -545
  1,550
  2,282
  3,300
  4,673
  6,472
  8,766
  11,623
  15,102
  19,255
  24,124
  29,758
  36,140
  43,299
  51,236
  59,945
  69,415
  79,629
  90,572
  102,224
  114,570
  127,594
  141,285
  155,632
  170,633
  186,286
  202,596
  219,572
  237,226
  255,578
  274,648
Depreciation, amort., depletion, $m
  1,498
  2,393
  3,684
  5,498
  7,966
  11,229
  15,428
  20,701
  27,174
  34,959
  44,149
  54,793
  66,990
  80,746
  96,072
  112,963
  131,403
  151,365
  172,818
  195,725
  220,053
  245,770
  272,849
  301,270
  331,019
  362,092
  394,494
  428,237
  463,345
  499,849
  537,791
Funds from operations, $m
  299
  3,943
  5,966
  8,798
  12,639
  17,701
  24,194
  32,323
  42,275
  54,214
  68,274
  84,551
  103,130
  124,045
  147,308
  172,908
  200,818
  230,995
  263,389
  297,949
  334,623
  373,364
  414,134
  456,902
  501,652
  548,378
  597,090
  647,809
  700,571
  755,427
  812,439
Change in working capital, $m
  -562
  262
  381
  535
  728
  963
  1,239
  1,556
  1,910
  2,297
  2,712
  3,148
  3,599
  4,058
  4,522
  4,984
  5,441
  5,890
  6,329
  6,759
  7,178
  7,588
  7,989
  8,385
  8,777
  9,168
  9,560
  9,956
  10,358
  10,770
  11,194
Cash from operations, $m
  861
  3,226
  5,585
  8,263
  11,911
  16,738
  22,955
  30,768
  40,365
  51,917
  65,562
  81,404
  99,532
  119,987
  142,786
  167,925
  195,377
  225,105
  257,060
  291,191
  327,446
  365,777
  406,144
  448,517
  492,875
  539,210
  587,530
  637,853
  690,213
  744,657
  801,245
Maintenance CAPEX, $m
  0
  -1,481
  -2,369
  -3,660
  -5,473
  -7,942
  -11,205
  -15,404
  -20,676
  -27,149
  -34,935
  -44,125
  -54,793
  -66,990
  -80,746
  -96,072
  -112,963
  -131,403
  -151,365
  -172,818
  -195,725
  -220,053
  -245,770
  -272,849
  -301,270
  -331,019
  -362,092
  -394,494
  -428,237
  -463,345
  -499,849
New CAPEX, $m
  -1,034
  -10,125
  -14,718
  -20,674
  -28,138
  -37,197
  -47,870
  -60,107
  -73,792
  -88,752
  -104,773
  -121,618
  -139,043
  -156,813
  -174,714
  -192,563
  -210,217
  -227,570
  -244,555
  -261,144
  -277,339
  -293,173
  -308,701
  -323,995
  -339,141
  -354,235
  -369,378
  -384,675
  -400,230
  -416,148
  -432,532
Cash from investing activities, $m
  -1,079
  -11,606
  -17,087
  -24,334
  -33,611
  -45,139
  -59,075
  -75,511
  -94,468
  -115,901
  -139,708
  -165,743
  -193,836
  -223,803
  -255,460
  -288,635
  -323,180
  -358,973
  -395,920
  -433,962
  -473,064
  -513,226
  -554,471
  -596,844
  -640,411
  -685,254
  -731,470
  -779,169
  -828,467
  -879,493
  -932,381
Free cash flow, $m
  -218
  -8,380
  -11,502
  -16,071
  -21,700
  -28,401
  -36,120
  -44,744
  -54,103
  -63,984
  -74,146
  -84,340
  -94,305
  -103,817
  -112,673
  -120,710
  -127,803
  -133,868
  -138,860
  -142,770
  -145,619
  -147,450
  -148,327
  -148,327
  -147,536
  -146,043
  -143,940
  -141,315
  -138,254
  -134,837
  -131,137
Issuance/(repayment) of debt, $m
  0
  8,229
  11,934
  16,763
  22,816
  30,161
  38,815
  48,738
  59,834
  71,964
  84,955
  98,614
  112,743
  127,151
  141,666
  156,139
  170,454
  184,524
  198,296
  211,747
  224,879
  237,718
  250,309
  262,710
  274,991
  287,230
  299,509
  311,912
  324,525
  337,432
  350,717
Issuance/(repurchase) of shares, $m
  0
  1,147
  6,428
  8,943
  11,999
  15,576
  19,615
  24,020
  28,662
  33,385
  38,023
  42,410
  46,367
  49,752
  52,438
  54,321
  55,327
  55,409
  54,545
  52,736
  50,001
  46,372
  41,896
  36,624
  30,611
  23,914
  16,590
  8,691
  267
  0
  0
Cash from financing (excl. dividends), $m  
  -2
  9,376
  18,362
  25,706
  34,815
  45,737
  58,430
  72,758
  88,496
  105,349
  122,978
  141,024
  159,110
  176,903
  194,104
  210,460
  225,781
  239,933
  252,841
  264,483
  274,880
  284,090
  292,205
  299,334
  305,602
  311,144
  316,099
  320,603
  324,792
  337,432
  350,717
Total cash flow (excl. dividends), $m
  -219
  -150
  432
  692
  1,115
  1,760
  2,696
  3,994
  5,731
  7,980
  10,809
  14,274
  18,438
  23,334
  28,992
  35,429
  42,651
  50,656
  59,436
  68,977
  79,261
  90,269
  101,982
  114,383
  127,455
  141,186
  155,568
  170,597
  186,271
  202,595
  219,580
Retained Cash Flow (-), $m
  801
  -4,717
  -6,860
  -9,636
  -13,114
  -17,337
  -22,311
  -28,015
  -34,393
  -41,365
  -48,832
  -56,684
  -64,805
  -73,087
  -81,430
  -89,749
  -97,977
  -106,065
  -113,981
  -121,713
  -129,261
  -136,641
  -143,878
  -151,006
  -158,066
  -165,101
  -172,159
  -179,288
  -186,538
  -193,957
  -201,593
Prev. year cash balance distribution, $m
 
  3,720
  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
 
  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
  8,638
  17,987
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for 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
  94
  135
Current shareholders' claim on cash, %
  100
  89.9
  64.4
  47.6
  36.1
  28.1
  22.4
  18.2
  15.2
  12.9
  11.1
  9.7
  8.7
  7.8
  7.2
  6.6
  6.2
  5.8
  5.5
  5.3
  5.1
  5.0
  4.8
  4.7
  4.7
  4.6
  4.6
  4.6
  4.6
  4.6
  4.6

Cenovus Energy Inc. develops, produces, and markets crude oil, natural gas liquids (NGLs), and natural gas in Canada. Its Oil Sands segment develops and produces bitumen assets at Foster Creek, Christina Lake, Narrows Lake, and the Athabasca natural gas assets, as well as projects in the early stages of development, such as Grand Rapids and Telephone Lake. The company’s Conventional segment engages in the development and production of conventional crude oil, NGLs, and natural gas in Alberta and Saskatchewan in Canada, including the heavy oil assets at Pelican Lake. This segment also includes the carbon dioxide enhanced oil recovery project at Weyburn. Its Refining and Marketing segment transports, sells, and refines crude oil into petroleum and chemical products. This segment also owns 50% interest ownership in two refineries in the United States. The company is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Cenovus Energy Inc. (CVE)

Valuation Ratios
P/E Ratio -19.3
Price to Sales 0.9
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 12.2
Price to Free Cash Flow -60.9
Growth Rates
Sales Growth Rate -7.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -39.7%
Cap. Spend. - 3 Yr. Gr. Rate -20.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 54.6%
Total Debt to Equity 54.6%
Interest Coverage 0
Management Effectiveness
Return On Assets -2.1%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital -3%
Ret/ On T. Cap. - 3 Yr. Avg. 1.8%
Return On Equity -4.5%
Return On Equity - 3 Yr. Avg. 2.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 42.4%
Gross Margin - 3 Yr. Avg. 43.3%
EBITDA Margin 4.7%
EBITDA Margin - 3 Yr. Avg. 13.7%
Operating Margin -2.8%
Oper. Margin - 3 Yr. Avg. 5.1%
Pre-Tax Margin -7.6%
Pre-Tax Margin - 3 Yr. Avg. 0.9%
Net Profit Margin -4.5%
Net Profit Margin - 3 Yr. Avg. 1.3%
Effective Tax Rate 41.2%
Eff/ Tax Rate - 3 Yr. Avg. 21.3%
Payout Ratio -30.5%

CVE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVE stock intrinsic value calculation we used $12134 million for the last fiscal year's total revenue generated by Cenovus Energy Inc.. The default revenue input number comes from 2016 income statement of Cenovus Energy Inc.. 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 CVE 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 4.3%, whose default value for CVE is calculated based on our internal credit rating of Cenovus Energy Inc., 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 Cenovus Energy Inc..
    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 CVE stock the variable cost ratio is equal to 88%.

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 CVE 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 Cenovus Energy Inc..

Corporate tax rate of 27% is the nominal tax rate for Cenovus Energy Inc.. 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 CVE 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 CVE are equal to 139.1%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Cenovus Energy Inc. 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 CVE is equal to 3.6%. 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 - $11590 million for Cenovus Energy Inc. - 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 1186.8 million for Cenovus Energy Inc. 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 Cenovus Energy Inc. at the current share price and the inputted number of shares is $15.0 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
SU Suncor Energy 42.58 prem.  prem.
HSE Husky Energy I 16.15 prem.  prem.
IMO Imperial Oil L 38.76 prem.  prem.
CNQ Canadian Natur 40.00 prem.  prem.
MEG MEG Energy Cor 5.55 prem.  prem.
GEI Gibson Energy 18.40 prem.  prem.
TOU Tourmaline Oil 27.57 prem.  prem.
Stock chart of CVE Financial statements of CVE
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.