Intrinsic value of Husky Energy Inc. - HSE

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$15.45

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$15.45

 
Intrinsic value

$4.21

 
Up/down potential

-73%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of HSE 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 15.5

 

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, %
  -21.08
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  12,919
  13,177
  13,480
  13,827
  14,216
  14,647
  15,120
  15,635
  16,192
  16,793
  17,437
  18,126
  18,862
  19,645
  20,478
  21,361
  22,297
  23,288
  24,336
  25,443
  26,612
  27,846
  29,147
  30,518
  31,963
  33,485
  35,087
  36,773
  38,547
  40,414
  42,378
Variable operating expenses, $m
 
  17,314
  17,710
  18,164
  18,673
  19,237
  19,856
  20,530
  21,259
  22,045
  22,888
  23,723
  24,686
  25,711
  26,800
  27,956
  29,182
  30,478
  31,850
  33,299
  34,829
  36,443
  38,146
  39,940
  41,831
  43,823
  45,919
  48,126
  50,449
  52,892
  55,462
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
  11,613
  17,314
  17,710
  18,164
  18,673
  19,237
  19,856
  20,530
  21,259
  22,045
  22,888
  23,723
  24,686
  25,711
  26,800
  27,956
  29,182
  30,478
  31,850
  33,299
  34,829
  36,443
  38,146
  39,940
  41,831
  43,823
  45,919
  48,126
  50,449
  52,892
  55,462
Operating income, $m
  1,306
  -4,136
  -4,230
  -4,337
  -4,457
  -4,590
  -4,736
  -4,895
  -5,067
  -5,252
  -5,451
  -5,596
  -5,824
  -6,065
  -6,322
  -6,595
  -6,884
  -7,190
  -7,514
  -7,855
  -8,216
  -8,597
  -8,999
  -9,422
  -9,868
  -10,338
  -10,833
  -11,353
  -11,901
  -12,478
  -13,084
EBITDA, $m
  3,768
  -1,625
  -1,663
  -1,705
  -1,753
  -1,806
  -1,865
  -1,928
  -1,997
  -2,071
  -2,151
  -2,236
  -2,326
  -2,423
  -2,526
  -2,635
  -2,750
  -2,872
  -3,001
  -3,138
  -3,282
  -3,434
  -3,595
  -3,764
  -3,942
  -4,130
  -4,327
  -4,535
  -4,754
  -4,984
  -5,227
Interest expense (income), $m
  349
  276
  291
  309
  330
  353
  379
  407
  438
  471
  507
  546
  587
  631
  678
  727
  780
  836
  895
  958
  1,024
  1,094
  1,167
  1,245
  1,327
  1,413
  1,504
  1,600
  1,701
  1,807
  1,918
Earnings before tax, $m
  950
  -4,413
  -4,521
  -4,646
  -4,787
  -4,943
  -5,115
  -5,302
  -5,505
  -5,724
  -5,959
  -6,142
  -6,410
  -6,696
  -7,000
  -7,323
  -7,664
  -8,026
  -8,409
  -8,813
  -9,240
  -9,691
  -10,166
  -10,668
  -11,195
  -11,752
  -12,337
  -12,953
  -13,602
  -14,284
  -15,002
Tax expense, $m
  28
  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
  922
  -4,413
  -4,521
  -4,646
  -4,787
  -4,943
  -5,115
  -5,302
  -5,505
  -5,724
  -5,959
  -6,142
  -6,410
  -6,696
  -7,000
  -7,323
  -7,664
  -8,026
  -8,409
  -8,813
  -9,240
  -9,691
  -10,166
  -10,668
  -11,195
  -11,752
  -12,337
  -12,953
  -13,602
  -14,284
  -15,002

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,319
  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
  32,260
  31,525
  32,250
  33,079
  34,009
  35,040
  36,172
  37,403
  38,737
  40,174
  41,715
  43,365
  45,125
  46,999
  48,990
  51,103
  53,343
  55,714
  58,220
  60,869
  63,666
  66,617
  69,729
  73,010
  76,466
  80,107
  83,939
  87,974
  92,219
  96,685
  101,383
Adjusted assets (=assets-cash), $m
  30,941
  31,525
  32,250
  33,079
  34,009
  35,040
  36,172
  37,403
  38,737
  40,174
  41,715
  43,365
  45,125
  46,999
  48,990
  51,103
  53,343
  55,714
  58,220
  60,869
  63,666
  66,617
  69,729
  73,010
  76,466
  80,107
  83,939
  87,974
  92,219
  96,685
  101,383
Revenue / Adjusted assets
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
Average production assets, $m
  26,114
  26,631
  27,244
  27,944
  28,730
  29,601
  30,557
  31,598
  32,724
  33,938
  35,240
  36,634
  38,120
  39,703
  41,386
  43,171
  45,063
  47,066
  49,183
  51,421
  53,784
  56,277
  58,906
  61,677
  64,597
  67,672
  70,910
  74,318
  77,904
  81,677
  85,646
Working capital, $m
  1,125
  422
  431
  442
  455
  469
  484
  500
  518
  537
  558
  580
  604
  629
  655
  684
  714
  745
  779
  814
  852
  891
  933
  977
  1,023
  1,072
  1,123
  1,177
  1,234
  1,293
  1,356
Total debt, $m
  5,627
  5,295
  5,624
  6,001
  6,423
  6,891
  7,405
  7,964
  8,570
  9,222
  9,922
  10,671
  11,470
  12,320
  13,225
  14,184
  15,201
  16,277
  17,415
  18,618
  19,887
  21,227
  22,640
  24,129
  25,699
  27,351
  29,091
  30,923
  32,850
  34,878
  37,011
Total liabilities, $m
  14,644
  14,312
  14,641
  15,018
  15,440
  15,908
  16,422
  16,981
  17,587
  18,239
  18,939
  19,688
  20,487
  21,337
  22,242
  23,201
  24,218
  25,294
  26,432
  27,635
  28,904
  30,244
  31,657
  33,146
  34,716
  36,368
  38,108
  39,940
  41,867
  43,895
  46,028
Total equity, $m
  17,616
  17,213
  17,608
  18,061
  18,569
  19,132
  19,750
  20,422
  21,150
  21,935
  22,777
  23,677
  24,638
  25,661
  26,749
  27,902
  29,125
  30,420
  31,788
  33,235
  34,762
  36,373
  38,072
  39,863
  41,751
  43,738
  45,831
  48,034
  50,351
  52,790
  55,355
Total liabilities and equity, $m
  32,260
  31,525
  32,249
  33,079
  34,009
  35,040
  36,172
  37,403
  38,737
  40,174
  41,716
  43,365
  45,125
  46,998
  48,991
  51,103
  53,343
  55,714
  58,220
  60,870
  63,666
  66,617
  69,729
  73,009
  76,467
  80,106
  83,939
  87,974
  92,218
  96,685
  101,383
Debt-to-equity ratio
  0.319
  0.310
  0.320
  0.330
  0.350
  0.360
  0.370
  0.390
  0.410
  0.420
  0.440
  0.450
  0.470
  0.480
  0.490
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.610
  0.620
  0.630
  0.630
  0.640
  0.650
  0.660
  0.670
Adjusted equity ratio
  0.533
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  922
  -4,413
  -4,521
  -4,646
  -4,787
  -4,943
  -5,115
  -5,302
  -5,505
  -5,724
  -5,959
  -6,142
  -6,410
  -6,696
  -7,000
  -7,323
  -7,664
  -8,026
  -8,409
  -8,813
  -9,240
  -9,691
  -10,166
  -10,668
  -11,195
  -11,752
  -12,337
  -12,953
  -13,602
  -14,284
  -15,002
Depreciation, amort., depletion, $m
  2,462
  2,511
  2,567
  2,632
  2,704
  2,784
  2,871
  2,967
  3,070
  3,181
  3,301
  3,361
  3,497
  3,643
  3,797
  3,961
  4,134
  4,318
  4,512
  4,718
  4,934
  5,163
  5,404
  5,658
  5,926
  6,208
  6,506
  6,818
  7,147
  7,493
  7,857
Funds from operations, $m
  1,953
  -1,902
  -1,954
  -2,015
  -2,083
  -2,160
  -2,244
  -2,336
  -2,435
  -2,542
  -2,658
  -2,781
  -2,913
  -3,054
  -3,203
  -3,362
  -3,530
  -3,708
  -3,897
  -4,096
  -4,306
  -4,528
  -4,762
  -5,009
  -5,269
  -5,543
  -5,832
  -6,135
  -6,455
  -6,791
  -7,145
Change in working capital, $m
  -18
  8
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  35
  37
  39
  42
  44
  46
  49
  51
  54
  57
  60
  63
Cash from operations, $m
  1,971
  -3,430
  -1,964
  -2,026
  -2,096
  -2,173
  -2,259
  -2,352
  -2,453
  -2,562
  -2,678
  -2,803
  -2,937
  -3,079
  -3,230
  -3,390
  -3,560
  -3,740
  -3,930
  -4,131
  -4,344
  -4,568
  -4,804
  -5,053
  -5,315
  -5,592
  -5,883
  -6,189
  -6,512
  -6,851
  -7,208
Maintenance CAPEX, $m
  0
  -2,396
  -2,443
  -2,499
  -2,564
  -2,636
  -2,716
  -2,803
  -2,899
  -3,002
  -3,114
  -3,233
  -3,361
  -3,497
  -3,643
  -3,797
  -3,961
  -4,134
  -4,318
  -4,512
  -4,718
  -4,934
  -5,163
  -5,404
  -5,658
  -5,926
  -6,208
  -6,506
  -6,818
  -7,147
  -7,493
New CAPEX, $m
  -1,705
  -518
  -613
  -700
  -786
  -871
  -956
  -1,041
  -1,126
  -1,214
  -1,302
  -1,393
  -1,487
  -1,583
  -1,682
  -1,785
  -1,892
  -2,003
  -2,118
  -2,238
  -2,363
  -2,493
  -2,629
  -2,771
  -2,920
  -3,075
  -3,238
  -3,408
  -3,586
  -3,773
  -3,968
Cash from investing activities, $m
  632
  -2,914
  -3,056
  -3,199
  -3,350
  -3,507
  -3,672
  -3,844
  -4,025
  -4,216
  -4,416
  -4,626
  -4,848
  -5,080
  -5,325
  -5,582
  -5,853
  -6,137
  -6,436
  -6,750
  -7,081
  -7,427
  -7,792
  -8,175
  -8,578
  -9,001
  -9,446
  -9,914
  -10,404
  -10,920
  -11,461
Free cash flow, $m
  2,603
  -6,344
  -5,019
  -5,225
  -5,446
  -5,680
  -5,930
  -6,196
  -6,478
  -6,777
  -7,094
  -7,430
  -7,784
  -8,159
  -8,555
  -8,972
  -9,413
  -9,877
  -10,366
  -10,881
  -11,424
  -11,995
  -12,596
  -13,228
  -13,894
  -14,593
  -15,329
  -16,103
  -16,916
  -17,771
  -18,669
Issuance/(repayment) of debt, $m
  -1,288
  271
  329
  376
  422
  468
  514
  559
  605
  652
  700
  749
  799
  851
  904
  959
  1,017
  1,076
  1,138
  1,203
  1,270
  1,340
  1,413
  1,489
  1,569
  1,653
  1,740
  1,832
  1,927
  2,028
  2,133
Issuance/(repurchase) of shares, $m
  0
  5,669
  5,086
  5,302
  5,531
  5,775
  6,034
  6,309
  6,601
  6,910
  7,236
  7,581
  7,946
  8,331
  8,738
  9,167
  9,619
  10,095
  10,597
  11,125
  11,681
  12,266
  12,882
  13,530
  14,212
  14,928
  15,682
  16,474
  17,307
  18,182
  19,102
Cash from financing (excl. dividends), $m  
  -1,335
  5,940
  5,415
  5,678
  5,953
  6,243
  6,548
  6,868
  7,206
  7,562
  7,936
  8,330
  8,745
  9,182
  9,642
  10,126
  10,636
  11,171
  11,735
  12,328
  12,951
  13,606
  14,295
  15,019
  15,781
  16,581
  17,422
  18,306
  19,234
  20,210
  21,235
Total cash flow (excl. dividends), $m
  1,276
  -6,073
  -4,690
  -4,849
  -5,023
  -5,212
  -5,417
  -5,637
  -5,873
  -6,125
  -6,394
  -6,681
  -6,985
  -7,308
  -7,651
  -8,013
  -8,396
  -8,801
  -9,228
  -9,679
  -10,154
  -10,655
  -11,183
  -11,739
  -12,325
  -12,941
  -13,589
  -14,271
  -14,989
  -15,743
  -16,537
Retained Cash Flow (-), $m
  -1,030
  -313
  -396
  -453
  -508
  -563
  -618
  -673
  -728
  -784
  -842
  -901
  -961
  -1,023
  -1,087
  -1,154
  -1,223
  -1,294
  -1,369
  -1,446
  -1,527
  -1,611
  -1,699
  -1,791
  -1,887
  -1,988
  -2,093
  -2,203
  -2,318
  -2,439
  -2,565
Prev. year cash balance distribution, $m
 
  716
  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
  0
  0
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
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
  0
  0
Current shareholders' claim on cash, %
  100
  72.5
  54.3
  40.5
  30.0
  22.2
  16.4
  12.0
  8.8
  6.4
  4.7
  3.4
  2.5
  1.8
  1.3
  0.9
  0.7
  0.5
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Husky Energy Inc., together with its subsidiaries, operates as an integrated energy company. It operates through two segments, Upstream and Downstream. The Upstream segment engages in the exploration for, and development and production of crude oil, bitumen, natural gas, and natural gas liquids; marketing of the company’s and other producers’ crude oil, natural gas, natural gas liquids, sulphur, and petroleum coke; pipeline transportation and blending of crude oil and natural gas; and storage of crude oil, diluent, and natural gas. This segment’s operations are located primarily in Western Canada, offshore East Coast of Canada, offshore China, offshore Indonesia, and offshore Indonesia. The Downstream segment is involved in upgrading heavy crude oil feedstock into synthetic crude oil; refining crude oil; marketing refined petroleum products, including gasoline, diesel, ethanol blended fuels, asphalt, and ancillary products in Canada; producing ethanol; and refining crude oil to produce and market gasoline, jet fuel, and diesel fuels in the United States. The company also markets its refined petroleum products. Husky Energy Inc. was founded in 1982 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Husky Energy Inc. (HSE)

Valuation Ratios
P/E Ratio 16.8
Price to Sales 1.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 58.4
Growth Rates
Sales Growth Rate -21.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -43.3%
Cap. Spend. - 3 Yr. Gr. Rate -19.4%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 28.5%
Total Debt to Equity 31.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.9%
Ret/ On Assets - 3 Yr. Avg. -0.8%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. -2.2%
Return On Equity 5.4%
Return On Equity - 3 Yr. Avg. -3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 22%
Gross Margin - 3 Yr. Avg. 24.5%
EBITDA Margin 29.1%
EBITDA Margin - 3 Yr. Avg. 25.4%
Operating Margin 10.1%
Oper. Margin - 3 Yr. Avg. -4.4%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. -6%
Net Profit Margin 7.1%
Net Profit Margin - 3 Yr. Avg. -3.7%
Effective Tax Rate 2.9%
Eff/ Tax Rate - 3 Yr. Avg. 20.3%
Payout Ratio 2.9%

HSE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HSE stock intrinsic value calculation we used $12919 million for the last fiscal year's total revenue generated by Husky Energy Inc.. The default revenue input number comes from 2016 income statement of Husky 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 HSE stock valuation model: a) initial revenue growth rate of 2% 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 4.6%, whose default value for HSE is calculated based on our internal credit rating of Husky 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 Husky 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 HSE stock the variable cost ratio is equal to 131.4%.

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 HSE 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 5.5% for Husky Energy Inc..

Corporate tax rate of 27% is the nominal tax rate for Husky 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 HSE 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 HSE are equal to 202.1%.

Life of production assets of 10.9 years is the average useful life of capital assets used in Husky 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 HSE is equal to 3.2%. 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 - $17616 million for Husky 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 1005.99 million for Husky 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 Husky Energy Inc. at the current share price and the inputted number of shares is $15.5 billion.


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