Intrinsic value of Suncor Energy Inc. - SU

Previous Close

$45.02

  Intrinsic Value

$6.73

stock screener

  Rating & Target

str. sell

-85%

Previous close

$45.02

 
Intrinsic value

$6.73

 
Up/down potential

-85%

 
Rating

str. sell

We calculate the intrinsic value of SU 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 74.6

 

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, %
  -8.22
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
Revenue, $m
  26,807
  28,898
  31,071
  33,329
  35,676
  38,115
  40,651
  43,289
  46,033
  48,889
  51,864
  54,964
  58,195
  61,565
  65,081
  68,752
  72,586
  76,592
  80,779
  85,158
  89,738
  94,530
  99,546
  104,798
  110,298
  116,059
  122,096
  128,421
  135,051
  142,002
  149,289
Variable operating expenses, $m
 
  29,100
  31,289
  33,563
  35,926
  38,382
  40,936
  43,592
  46,355
  49,232
  52,227
  55,348
  58,602
  61,996
  65,537
  69,233
  73,094
  77,128
  81,345
  85,754
  90,366
  95,192
  100,243
  105,532
  111,070
  116,872
  122,950
  129,320
  135,997
  142,996
  150,334
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
  26,811
  29,100
  31,289
  33,563
  35,926
  38,382
  40,936
  43,592
  46,355
  49,232
  52,227
  55,348
  58,602
  61,996
  65,537
  69,233
  73,094
  77,128
  81,345
  85,754
  90,366
  95,192
  100,243
  105,532
  111,070
  116,872
  122,950
  129,320
  135,997
  142,996
  150,334
Operating income, $m
  -4
  -202
  -217
  -233
  -250
  -267
  -285
  -303
  -322
  -342
  -363
  -385
  -407
  -431
  -456
  -481
  -508
  -536
  -565
  -596
  -628
  -662
  -697
  -734
  -772
  -812
  -855
  -899
  -945
  -994
  -1,045
EBITDA, $m
  6,113
  6,406
  6,888
  7,388
  7,908
  8,449
  9,011
  9,596
  10,204
  10,837
  11,497
  12,184
  12,900
  13,647
  14,427
  15,240
  16,090
  16,978
  17,907
  18,877
  19,892
  20,955
  22,067
  23,231
  24,450
  25,727
  27,065
  28,467
  29,937
  31,478
  33,093
Interest expense (income), $m
  992
  982
  1,185
  1,396
  1,616
  1,844
  2,082
  2,328
  2,585
  2,852
  3,129
  3,419
  3,720
  4,034
  4,362
  4,704
  5,061
  5,434
  5,823
  6,231
  6,656
  7,102
  7,568
  8,056
  8,566
  9,101
  9,662
  10,249
  10,864
  11,508
  12,184
Earnings before tax, $m
  86
  -1,185
  -1,403
  -1,630
  -1,866
  -2,111
  -2,366
  -2,631
  -2,907
  -3,194
  -3,492
  -3,803
  -4,127
  -4,465
  -4,818
  -5,185
  -5,569
  -5,970
  -6,389
  -6,827
  -7,285
  -7,763
  -8,265
  -8,789
  -9,338
  -9,914
  -10,516
  -11,147
  -11,809
  -12,502
  -13,229
Tax expense, $m
  -359
  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
  434
  -1,185
  -1,403
  -1,630
  -1,866
  -2,111
  -2,366
  -2,631
  -2,907
  -3,194
  -3,492
  -3,803
  -4,127
  -4,465
  -4,818
  -5,185
  -5,569
  -5,970
  -6,389
  -6,827
  -7,285
  -7,763
  -8,265
  -8,789
  -9,338
  -9,914
  -10,516
  -11,147
  -11,809
  -12,502
  -13,229

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,016
  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
  88,702
  92,326
  99,269
  106,483
  113,981
  121,774
  129,876
  138,303
  147,070
  156,196
  165,700
  175,603
  185,926
  196,693
  207,927
  219,656
  231,905
  244,703
  258,081
  272,070
  286,702
  302,013
  318,039
  334,818
  352,390
  370,796
  390,082
  410,291
  431,474
  453,680
  476,962
Adjusted assets (=assets-cash), $m
  85,686
  92,326
  99,269
  106,483
  113,981
  121,774
  129,876
  138,303
  147,070
  156,196
  165,700
  175,603
  185,926
  196,693
  207,927
  219,656
  231,905
  244,703
  258,081
  272,070
  286,702
  302,013
  318,039
  334,818
  352,390
  370,796
  390,082
  410,291
  431,474
  453,680
  476,962
Revenue / Adjusted assets
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
Average production assets, $m
  69,282
  74,672
  80,288
  86,123
  92,187
  98,490
  105,043
  111,858
  118,949
  126,330
  134,017
  142,026
  150,376
  159,084
  168,170
  177,656
  187,563
  197,914
  208,734
  220,048
  231,882
  244,266
  257,228
  270,798
  285,010
  299,897
  315,495
  331,840
  348,973
  366,933
  385,763
Working capital, $m
  2,902
  1,300
  1,398
  1,500
  1,605
  1,715
  1,829
  1,948
  2,071
  2,200
  2,334
  2,473
  2,619
  2,770
  2,929
  3,094
  3,266
  3,447
  3,635
  3,832
  4,038
  4,254
  4,480
  4,716
  4,963
  5,223
  5,494
  5,779
  6,077
  6,390
  6,718
Total debt, $m
  17,430
  19,429
  22,893
  26,493
  30,235
  34,123
  38,166
  42,371
  46,746
  51,300
  56,042
  60,984
  66,135
  71,508
  77,114
  82,966
  89,078
  95,465
  102,140
  109,121
  116,422
  124,063
  132,060
  140,432
  149,201
  158,385
  168,009
  178,093
  188,664
  199,744
  211,362
Total liabilities, $m
  44,072
  46,071
  49,535
  53,135
  56,877
  60,765
  64,808
  69,013
  73,388
  77,942
  82,684
  87,626
  92,777
  98,150
  103,756
  109,608
  115,720
  122,107
  128,782
  135,763
  143,064
  150,705
  158,702
  167,074
  175,843
  185,027
  194,651
  204,735
  215,306
  226,386
  238,004
Total equity, $m
  44,630
  46,255
  49,734
  53,348
  57,105
  61,009
  65,068
  69,290
  73,682
  78,254
  83,016
  87,977
  93,149
  98,543
  104,172
  110,047
  116,184
  122,596
  129,299
  136,307
  143,638
  151,309
  159,338
  167,744
  176,547
  185,769
  195,431
  205,556
  216,168
  227,294
  238,958
Total liabilities and equity, $m
  88,702
  92,326
  99,269
  106,483
  113,982
  121,774
  129,876
  138,303
  147,070
  156,196
  165,700
  175,603
  185,926
  196,693
  207,928
  219,655
  231,904
  244,703
  258,081
  272,070
  286,702
  302,014
  318,040
  334,818
  352,390
  370,796
  390,082
  410,291
  431,474
  453,680
  476,962
Debt-to-equity ratio
  0.391
  0.420
  0.460
  0.500
  0.530
  0.560
  0.590
  0.610
  0.630
  0.660
  0.680
  0.690
  0.710
  0.730
  0.740
  0.750
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.850
  0.850
  0.860
  0.870
  0.870
  0.880
  0.880
Adjusted equity ratio
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  434
  -1,185
  -1,403
  -1,630
  -1,866
  -2,111
  -2,366
  -2,631
  -2,907
  -3,194
  -3,492
  -3,803
  -4,127
  -4,465
  -4,818
  -5,185
  -5,569
  -5,970
  -6,389
  -6,827
  -7,285
  -7,763
  -8,265
  -8,789
  -9,338
  -9,914
  -10,516
  -11,147
  -11,809
  -12,502
  -13,229
Depreciation, amort., depletion, $m
  6,117
  6,608
  7,105
  7,622
  8,158
  8,716
  9,296
  9,899
  10,526
  11,180
  11,860
  12,569
  13,308
  14,078
  14,882
  15,722
  16,598
  17,515
  18,472
  19,473
  20,521
  21,616
  22,763
  23,964
  25,222
  26,540
  27,920
  29,366
  30,883
  32,472
  34,138
Funds from operations, $m
  5,372
  5,424
  5,702
  5,992
  6,292
  6,605
  6,930
  7,268
  7,620
  7,986
  8,368
  8,765
  9,180
  9,613
  10,065
  10,537
  11,029
  11,545
  12,083
  12,647
  13,236
  13,853
  14,499
  15,175
  15,884
  16,626
  17,404
  18,219
  19,073
  19,969
  20,909
Change in working capital, $m
  -308
  94
  98
  102
  106
  110
  114
  119
  123
  129
  134
  139
  145
  152
  158
  165
  173
  180
  188
  197
  206
  216
  226
  236
  247
  259
  272
  285
  298
  313
  328
Cash from operations, $m
  5,680
  5,330
  5,605
  5,890
  6,187
  6,495
  6,816
  7,149
  7,496
  7,857
  8,234
  8,626
  9,035
  9,461
  9,907
  10,371
  10,857
  11,364
  11,895
  12,450
  13,030
  13,637
  14,273
  14,939
  15,636
  16,367
  17,132
  17,934
  18,775
  19,657
  20,581
Maintenance CAPEX, $m
  0
  -6,131
  -6,608
  -7,105
  -7,622
  -8,158
  -8,716
  -9,296
  -9,899
  -10,526
  -11,180
  -11,860
  -12,569
  -13,308
  -14,078
  -14,882
  -15,722
  -16,598
  -17,515
  -18,472
  -19,473
  -20,521
  -21,616
  -22,763
  -23,964
  -25,222
  -26,540
  -27,920
  -29,366
  -30,883
  -32,472
New CAPEX, $m
  -6,582
  -5,390
  -5,615
  -5,835
  -6,064
  -6,303
  -6,553
  -6,815
  -7,091
  -7,381
  -7,687
  -8,009
  -8,349
  -8,708
  -9,086
  -9,486
  -9,907
  -10,351
  -10,820
  -11,314
  -11,835
  -12,383
  -12,962
  -13,571
  -14,212
  -14,887
  -15,598
  -16,346
  -17,132
  -17,960
  -18,831
Cash from investing activities, $m
  -7,507
  -11,521
  -12,223
  -12,940
  -13,686
  -14,461
  -15,269
  -16,111
  -16,990
  -17,907
  -18,867
  -19,869
  -20,918
  -22,016
  -23,164
  -24,368
  -25,629
  -26,949
  -28,335
  -29,786
  -31,308
  -32,904
  -34,578
  -36,334
  -38,176
  -40,109
  -42,138
  -44,266
  -46,498
  -48,843
  -51,303
Free cash flow, $m
  -1,827
  -6,192
  -6,619
  -7,050
  -7,499
  -7,966
  -8,453
  -8,962
  -9,494
  -10,050
  -10,633
  -11,243
  -11,883
  -12,554
  -13,258
  -13,997
  -14,772
  -15,585
  -16,440
  -17,336
  -18,278
  -19,267
  -20,305
  -21,395
  -22,540
  -23,743
  -25,005
  -26,331
  -27,724
  -29,186
  -30,721
Issuance/(repayment) of debt, $m
  -169
  3,326
  3,465
  3,600
  3,741
  3,889
  4,043
  4,205
  4,375
  4,554
  4,743
  4,941
  5,151
  5,373
  5,606
  5,852
  6,112
  6,386
  6,676
  6,980
  7,302
  7,640
  7,997
  8,373
  8,768
  9,185
  9,623
  10,085
  10,570
  11,081
  11,618
Issuance/(repurchase) of shares, $m
  2,915
  4,499
  4,881
  5,244
  5,622
  6,015
  6,425
  6,853
  7,299
  7,766
  8,254
  8,765
  9,299
  9,859
  10,446
  11,061
  11,706
  12,382
  13,091
  13,835
  14,615
  15,434
  16,294
  17,195
  18,142
  19,135
  20,178
  21,273
  22,422
  23,628
  24,894
Cash from financing (excl. dividends), $m  
  2,746
  7,825
  8,346
  8,844
  9,363
  9,904
  10,468
  11,058
  11,674
  12,320
  12,997
  13,706
  14,450
  15,232
  16,052
  16,913
  17,818
  18,768
  19,767
  20,815
  21,917
  23,074
  24,291
  25,568
  26,910
  28,320
  29,801
  31,358
  32,992
  34,709
  36,512
Total cash flow (excl. dividends), $m
  844
  1,632
  1,727
  1,794
  1,865
  1,938
  2,015
  2,096
  2,180
  2,270
  2,364
  2,463
  2,567
  2,678
  2,794
  2,917
  3,046
  3,183
  3,327
  3,479
  3,639
  3,808
  3,986
  4,173
  4,370
  4,578
  4,796
  5,026
  5,268
  5,523
  5,790
Retained Cash Flow (-), $m
  -5,591
  -4,499
  -4,881
  -5,244
  -5,622
  -6,015
  -6,425
  -6,853
  -7,299
  -7,766
  -8,254
  -8,765
  -9,299
  -9,859
  -10,446
  -11,061
  -11,706
  -12,382
  -13,091
  -13,835
  -14,615
  -15,434
  -16,294
  -17,195
  -18,142
  -19,135
  -20,178
  -21,273
  -22,422
  -23,628
  -24,894
Prev. year cash balance distribution, $m
 
  1,689
  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
 
  -1,177
  -3,154
  -3,450
  -3,758
  -4,077
  -4,410
  -4,757
  -5,119
  -5,496
  -5,890
  -6,302
  -6,732
  -7,182
  -7,652
  -8,144
  -8,660
  -9,199
  -9,764
  -10,356
  -10,976
  -11,627
  -12,308
  -13,023
  -13,772
  -14,558
  -15,382
  -16,246
  -17,153
  -18,105
  -19,104
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
 
  -1,121
  -2,848
  -2,937
  -3,000
  -3,036
  -3,043
  -3,021
  -2,971
  -2,894
  -2,791
  -2,663
  -2,515
  -2,348
  -2,168
  -1,977
  -1,780
  -1,581
  -1,385
  -1,196
  -1,016
  -850
  -698
  -564
  -447
  -347
  -263
  -196
  -142
  -101
  -70
Current shareholders' claim on cash, %
  100
  94.1
  88.5
  83.3
  78.3
  73.7
  69.3
  65.2
  61.3
  57.7
  54.3
  51.0
  48.0
  45.2
  42.5
  39.9
  37.5
  35.3
  33.2
  31.2
  29.3
  27.5
  25.9
  24.3
  22.8
  21.4
  20.1
  18.9
  17.7
  16.6
  15.6

Suncor Energy Inc is a Canada-based integrated energy company. The Company is focused on developing Canada's petroleum resource basin, Athabasca oil sands. The Company operates in three business segments: Oil Sands, Exploration and Production (E&P), and Refining and Marketing. The Company's Oil Sands segment includes Oil Sands operations and Oil Sands ventures operations. Its E&P segment consists of offshore operations off the east coast of Canada and in the North Sea, and onshore assets in North America, Libya and Syria. The Company's Refining and Marketing segment is engaged in Refining and Supply, and Marketing operations. In addition, it explores for, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally. It transports and refines crude oil, and markets petroleum and petrochemical products primarily in Canada. It markets third-party petroleum products. The Company also conducts energy trading activities.

FINANCIAL RATIOS  of  Suncor Energy Inc. (SU)

Valuation Ratios
P/E Ratio 173
Price to Sales 2.8
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 13.2
Price to Free Cash Flow -83.2
Growth Rates
Sales Growth Rate -8.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.3%
Cap. Spend. - 3 Yr. Gr. Rate -0.6%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 36.1%
Total Debt to Equity 39.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 6.7%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 0.7%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity 1%
Return On Equity - 3 Yr. Avg. 0.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 63.2%
Gross Margin - 3 Yr. Avg. 59.8%
EBITDA Margin 26.8%
EBITDA Margin - 3 Yr. Avg. 25.8%
Operating Margin -0%
Oper. Margin - 3 Yr. Avg. 4%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. 1.6%
Net Profit Margin 1.6%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate -417.4%
Eff/ Tax Rate - 3 Yr. Avg. -124.9%
Payout Ratio 432.5%

SU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SU stock intrinsic value calculation we used $26807 million for the last fiscal year's total revenue generated by Suncor Energy Inc.. The default revenue input number comes from 2016 income statement of Suncor 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 SU stock valuation model: a) initial revenue growth rate of 7.8% 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 SU is calculated based on our internal credit rating of Suncor 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 Suncor 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 SU stock the variable cost ratio is equal to 100.7%.

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 SU 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 6.1% for Suncor Energy Inc..

Corporate tax rate of 27% is the nominal tax rate for Suncor 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 SU 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 SU are equal to 258.4%.

Life of production assets of 11.3 years is the average useful life of capital assets used in Suncor 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 SU is equal to 4.5%. 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 - $44630 million for Suncor 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 1656.81 million for Suncor 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 Suncor Energy Inc. at the current share price and the inputted number of shares is $74.6 billion.

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Financial statements of SU
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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