Intrinsic value of Tourmaline Oil Corp. - TOU

Previous Close

$26.25

  Intrinsic Value

$6.25

stock screener

  Rating & Target

str. sell

-76%

  Value-price divergence*

0%

Previous close

$26.25

 
Intrinsic value

$6.25

 
Up/down potential

-76%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of TOU 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 7.1

 

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, %
  -14.54
  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
  1,093
  1,749
  2,702
  4,041
  5,863
  8,272
  11,372
  15,264
  20,043
  25,790
  32,575
  40,450
  49,454
  59,609
  70,923
  83,393
  97,006
  111,743
  127,580
  144,491
  162,451
  181,436
  201,426
  222,407
  244,369
  267,309
  291,229
  316,139
  342,057
  369,006
  397,015
Variable operating expenses, $m
 
  1,467
  2,267
  3,390
  4,919
  6,940
  9,541
  12,806
  16,816
  21,638
  27,330
  33,938
  41,492
  50,012
  59,505
  69,967
  81,388
  93,752
  107,039
  121,228
  136,296
  152,225
  168,997
  186,600
  205,026
  224,272
  244,341
  265,241
  286,986
  309,596
  333,096
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
  1,080
  1,467
  2,267
  3,390
  4,919
  6,940
  9,541
  12,806
  16,816
  21,638
  27,330
  33,938
  41,492
  50,012
  59,505
  69,967
  81,388
  93,752
  107,039
  121,228
  136,296
  152,225
  168,997
  186,600
  205,026
  224,272
  244,341
  265,241
  286,986
  309,596
  333,096
Operating income, $m
  13
  282
  435
  651
  944
  1,332
  1,831
  2,457
  3,227
  4,152
  5,245
  6,513
  7,962
  9,597
  11,419
  13,426
  15,618
  17,991
  20,540
  23,263
  26,155
  29,211
  32,430
  35,808
  39,343
  43,037
  46,888
  50,898
  55,071
  59,410
  63,919
EBITDA, $m
  679
  1,351
  2,088
  3,122
  4,530
  6,391
  8,786
  11,794
  15,486
  19,927
  25,169
  31,255
  38,212
  46,058
  54,800
  64,435
  74,954
  86,340
  98,577
  111,643
  125,520
  140,189
  155,635
  171,847
  188,816
  206,540
  225,023
  244,270
  264,296
  285,118
  306,760
Interest expense (income), $m
  0
  49
  104
  184
  296
  449
  650
  910
  1,236
  1,636
  2,118
  2,686
  3,346
  4,100
  4,951
  5,898
  6,943
  8,083
  9,317
  10,644
  12,060
  13,565
  15,155
  16,829
  18,587
  20,426
  22,348
  24,351
  26,438
  28,609
  30,866
Earnings before tax, $m
  -36
  232
  331
  467
  648
  883
  1,180
  1,547
  1,991
  2,516
  3,127
  3,826
  4,616
  5,497
  6,468
  7,528
  8,675
  9,908
  11,223
  12,619
  14,094
  15,647
  17,275
  18,978
  20,757
  22,610
  24,540
  26,547
  28,633
  30,801
  33,054
Tax expense, $m
  -3
  63
  89
  126
  175
  238
  319
  418
  537
  679
  844
  1,033
  1,246
  1,484
  1,746
  2,033
  2,342
  2,675
  3,030
  3,407
  3,805
  4,225
  4,664
  5,124
  5,604
  6,105
  6,626
  7,168
  7,731
  8,316
  8,924
Net income, $m
  -32
  170
  242
  341
  473
  645
  862
  1,130
  1,453
  1,836
  2,282
  2,793
  3,370
  4,013
  4,722
  5,495
  6,333
  7,233
  8,193
  9,212
  10,289
  11,422
  12,611
  13,854
  15,152
  16,506
  17,914
  19,379
  20,902
  22,485
  24,129

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
  0
Total assets, $m
  9,358
  14,947
  23,093
  34,536
  50,110
  70,697
  97,193
  130,461
  171,304
  220,426
  278,416
  345,730
  422,688
  509,481
  606,182
  712,762
  829,113
  955,069
  1,090,426
  1,234,964
  1,388,466
  1,550,732
  1,721,593
  1,900,918
  2,088,626
  2,284,689
  2,489,133
  2,702,043
  2,923,563
  3,153,893
  3,393,292
Adjusted assets (=assets-cash), $m
  9,358
  14,947
  23,093
  34,536
  50,110
  70,697
  97,193
  130,461
  171,304
  220,426
  278,416
  345,730
  422,688
  509,481
  606,182
  712,762
  829,113
  955,069
  1,090,426
  1,234,964
  1,388,466
  1,550,732
  1,721,593
  1,900,918
  2,088,626
  2,284,689
  2,489,133
  2,702,043
  2,923,563
  3,153,893
  3,393,292
Revenue / Adjusted assets
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
Average production assets, $m
  7,621
  12,194
  18,840
  28,176
  40,882
  57,678
  79,294
  106,436
  139,757
  179,833
  227,143
  282,061
  344,846
  415,655
  494,548
  581,501
  676,425
  779,185
  889,614
  1,007,534
  1,132,768
  1,265,151
  1,404,546
  1,550,847
  1,703,987
  1,863,943
  2,030,737
  2,204,437
  2,385,162
  2,573,075
  2,768,387
Working capital, $m
  -224
  -359
  -554
  -828
  -1,202
  -1,696
  -2,331
  -3,129
  -4,109
  -5,287
  -6,678
  -8,292
  -10,138
  -12,220
  -14,539
  -17,096
  -19,886
  -22,907
  -26,154
  -29,621
  -33,302
  -37,194
  -41,292
  -45,594
  -50,096
  -54,798
  -59,702
  -64,809
  -70,122
  -75,646
  -81,388
Total debt, $m
  1,407
  2,975
  5,256
  8,460
  12,821
  18,585
  26,004
  35,319
  46,755
  60,509
  76,747
  95,594
  117,143
  141,445
  168,521
  198,363
  230,942
  266,209
  304,109
  344,580
  387,561
  432,995
  480,836
  531,047
  583,605
  638,503
  695,747
  755,362
  817,388
  881,880
  948,912
Total liabilities, $m
  2,617
  4,185
  6,466
  9,670
  14,031
  19,795
  27,214
  36,529
  47,965
  61,719
  77,957
  96,804
  118,353
  142,655
  169,731
  199,573
  232,152
  267,419
  305,319
  345,790
  388,771
  434,205
  482,046
  532,257
  584,815
  639,713
  696,957
  756,572
  818,598
  883,090
  950,122
Total equity, $m
  6,741
  10,762
  16,627
  24,866
  36,079
  50,902
  69,979
  93,932
  123,339
  158,707
  200,460
  248,925
  304,335
  366,826
  436,451
  513,189
  596,962
  687,650
  785,107
  889,174
  999,696
  1,116,527
  1,239,547
  1,368,661
  1,503,811
  1,644,976
  1,792,176
  1,945,471
  2,104,965
  2,270,803
  2,443,170
Total liabilities and equity, $m
  9,358
  14,947
  23,093
  34,536
  50,110
  70,697
  97,193
  130,461
  171,304
  220,426
  278,417
  345,729
  422,688
  509,481
  606,182
  712,762
  829,114
  955,069
  1,090,426
  1,234,964
  1,388,467
  1,550,732
  1,721,593
  1,900,918
  2,088,626
  2,284,689
  2,489,133
  2,702,043
  2,923,563
  3,153,893
  3,393,292
Debt-to-equity ratio
  0.209
  0.280
  0.320
  0.340
  0.360
  0.370
  0.370
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
Adjusted equity ratio
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -32
  170
  242
  341
  473
  645
  862
  1,130
  1,453
  1,836
  2,282
  2,793
  3,370
  4,013
  4,722
  5,495
  6,333
  7,233
  8,193
  9,212
  10,289
  11,422
  12,611
  13,854
  15,152
  16,506
  17,914
  19,379
  20,902
  22,485
  24,129
Depreciation, amort., depletion, $m
  666
  1,070
  1,653
  2,472
  3,586
  5,059
  6,956
  9,336
  12,259
  15,775
  19,925
  24,742
  30,250
  36,461
  43,381
  51,009
  59,336
  68,350
  78,036
  88,380
  99,366
  110,978
  123,206
  136,039
  149,473
  163,504
  178,135
  193,372
  209,225
  225,708
  242,841
Funds from operations, $m
  662
  1,239
  1,894
  2,812
  4,059
  5,704
  7,817
  10,466
  13,713
  17,611
  22,207
  27,535
  33,620
  40,474
  48,103
  56,504
  65,668
  75,582
  86,229
  97,592
  109,654
  122,400
  135,816
  149,893
  164,625
  180,009
  196,049
  212,751
  230,127
  248,193
  266,970
Change in working capital, $m
  -35
  -134
  -195
  -274
  -374
  -494
  -635
  -798
  -980
  -1,178
  -1,391
  -1,615
  -1,846
  -2,082
  -2,319
  -2,556
  -2,791
  -3,021
  -3,247
  -3,467
  -3,682
  -3,892
  -4,098
  -4,301
  -4,502
  -4,703
  -4,904
  -5,107
  -5,313
  -5,524
  -5,742
Cash from operations, $m
  697
  1,374
  2,090
  3,087
  4,433
  6,198
  8,453
  11,264
  14,692
  18,789
  23,598
  29,150
  35,465
  42,556
  50,422
  59,061
  68,459
  78,603
  89,476
  101,059
  113,336
  126,292
  139,914
  154,194
  169,127
  184,712
  200,953
  217,858
  235,440
  253,718
  272,712
Maintenance CAPEX, $m
  0
  -669
  -1,070
  -1,653
  -2,472
  -3,586
  -5,059
  -6,956
  -9,336
  -12,259
  -15,775
  -19,925
  -24,742
  -30,250
  -36,461
  -43,381
  -51,009
  -59,336
  -68,350
  -78,036
  -88,380
  -99,366
  -110,978
  -123,206
  -136,039
  -149,473
  -163,504
  -178,135
  -193,372
  -209,225
  -225,708
New CAPEX, $m
  -1,981
  -4,573
  -6,646
  -9,335
  -12,706
  -16,796
  -21,616
  -27,142
  -33,321
  -40,076
  -47,311
  -54,917
  -62,786
  -70,809
  -78,892
  -86,953
  -94,924
  -102,760
  -110,430
  -117,920
  -125,233
  -132,383
  -139,395
  -146,301
  -153,140
  -159,956
  -166,794
  -173,701
  -180,725
  -187,913
  -195,311
Cash from investing activities, $m
  -1,998
  -5,242
  -7,716
  -10,988
  -15,178
  -20,382
  -26,675
  -34,098
  -42,657
  -52,335
  -63,086
  -74,842
  -87,528
  -101,059
  -115,353
  -130,334
  -145,933
  -162,096
  -178,780
  -195,956
  -213,613
  -231,749
  -250,373
  -269,507
  -289,179
  -309,429
  -330,298
  -351,836
  -374,097
  -397,138
  -421,019
Free cash flow, $m
  -1,301
  -3,868
  -5,626
  -7,901
  -10,745
  -14,185
  -18,223
  -22,833
  -27,965
  -33,546
  -39,487
  -45,692
  -52,062
  -58,503
  -64,931
  -71,273
  -77,474
  -83,492
  -89,303
  -94,898
  -100,277
  -105,457
  -110,459
  -115,312
  -120,052
  -124,716
  -129,345
  -133,978
  -138,656
  -143,420
  -148,307
Issuance/(repayment) of debt, $m
  140
  1,568
  2,281
  3,204
  4,361
  5,765
  7,419
  9,315
  11,436
  13,754
  16,237
  18,848
  21,548
  24,302
  27,076
  29,842
  32,578
  35,268
  37,900
  40,471
  42,981
  45,435
  47,841
  50,211
  52,558
  54,898
  57,244
  59,615
  62,026
  64,492
  67,032
Issuance/(repurchase) of shares, $m
  1,206
  3,851
  5,624
  7,898
  10,740
  14,179
  18,215
  22,824
  27,953
  33,532
  39,470
  45,673
  52,040
  58,478
  64,903
  71,242
  77,440
  83,455
  89,264
  94,855
  100,233
  105,410
  110,409
  115,260
  119,998
  124,659
  129,285
  133,916
  138,592
  143,353
  148,238
Cash from financing (excl. dividends), $m  
  1,301
  5,419
  7,905
  11,102
  15,101
  19,944
  25,634
  32,139
  39,389
  47,286
  55,707
  64,521
  73,588
  82,780
  91,979
  101,084
  110,018
  118,723
  127,164
  135,326
  143,214
  150,845
  158,250
  165,471
  172,556
  179,557
  186,529
  193,531
  200,618
  207,845
  215,270
Total cash flow (excl. dividends), $m
  0
  1,551
  2,279
  3,201
  4,356
  5,759
  7,411
  9,305
  11,424
  13,740
  16,220
  18,828
  21,526
  24,277
  27,048
  29,811
  32,545
  35,231
  37,860
  40,429
  42,936
  45,387
  47,791
  50,159
  52,504
  54,840
  57,185
  59,553
  61,961
  64,425
  66,962
Retained Cash Flow (-), $m
  -1,538
  -4,021
  -5,865
  -8,239
  -11,213
  -14,823
  -19,077
  -23,953
  -29,407
  -35,368
  -41,753
  -48,466
  -55,410
  -62,491
  -69,625
  -76,738
  -83,773
  -90,688
  -97,457
  -104,067
  -110,522
  -116,832
  -123,019
  -129,114
  -135,150
  -141,165
  -147,200
  -153,295
  -159,494
  -165,838
  -172,367
Prev. year cash balance 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
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
 
  -2,470
  -3,587
  -5,038
  -6,857
  -9,065
  -11,666
  -14,648
  -17,983
  -21,628
  -25,532
  -29,638
  -33,884
  -38,214
  -42,577
  -46,926
  -51,228
  -55,457
  -59,596
  -63,639
  -67,586
  -71,444
  -75,228
  -78,955
  -82,646
  -86,325
  -90,015
  -93,743
  -97,533
  -101,412
  -105,405
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  -2,366
  -3,277
  -4,371
  -5,621
  -6,986
  -8,405
  -9,808
  -11,121
  -12,270
  -13,193
  -13,841
  -14,186
  -14,219
  -13,949
  -13,405
  -12,627
  -11,664
  -10,571
  -9,401
  -8,206
  -7,030
  -5,910
  -4,875
  -3,944
  -3,129
  -2,432
  -1,851
  -1,379
  -1,005
  -715
Current shareholders' claim on cash, %
  100
  64.8
  43.3
  29.8
  21.1
  15.4
  11.5
  8.7
  6.8
  5.4
  4.4
  3.6
  3.0
  2.5
  2.2
  1.9
  1.6
  1.5
  1.3
  1.2
  1.0
  1.0
  0.9
  0.8
  0.7
  0.7
  0.6
  0.6
  0.6
  0.5
  0.5

Tourmaline Oil Corp. is a Canada-based intermediate crude oil and natural gas exploration and production company. The Company is engaged in the acquisition, exploration, development and production of petroleum and natural gas properties. The Company is focused on exploration and acquisition program in the Western Canadian Sedimentary Basin. Its core areas include the Alberta Deep Basin, north east British Columbia (NEBC) Montney and Peace River High Regional Charlie Lake. It holds interests in 13 natural gas plants in the Alberta Deep Basin, 10 of which, the Wild River 14-20, the Hinton 6-32, the Minehead 15-12, the Anderson 1-9, the Musreau 8-13, the Edson 4-17, the Ansell 1-34, the Brazeau 15-36, the Oldman 10-24 and the Sundance 15-7 are owned and operated by the Company. The Peace River High in NEBC is focused on liquids rich natural gas in the Triassic Montney formation. It has drilled approximately 200 Montney multi-stage fracture-stimulated horizontal natural gas wells in NEBC.

FINANCIAL RATIOS  of  Tourmaline Oil Corp. (TOU)

Valuation Ratios
P/E Ratio -220.3
Price to Sales 6.5
Price to Book 1
Price to Tangible Book
Price to Cash Flow 10.1
Price to Free Cash Flow -5.5
Growth Rates
Sales Growth Rate -14.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.4%
Cap. Spend. - 3 Yr. Gr. Rate 7.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 20.9%
Total Debt to Equity 20.9%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.4%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital -0.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.8%
Return On Equity -0.5%
Return On Equity - 3 Yr. Avg. 4.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 57.6%
EBITDA Margin - 3 Yr. Avg. 72.4%
Operating Margin 1.2%
Oper. Margin - 3 Yr. Avg. 24.1%
Pre-Tax Margin -3.3%
Pre-Tax Margin - 3 Yr. Avg. 20.8%
Net Profit Margin -2.9%
Net Profit Margin - 3 Yr. Avg. 13.7%
Effective Tax Rate 8.3%
Eff/ Tax Rate - 3 Yr. Avg. 28.8%
Payout Ratio 0%

TOU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TOU stock intrinsic value calculation we used $1093 million for the last fiscal year's total revenue generated by Tourmaline Oil Corp.. The default revenue input number comes from 2016 income statement of Tourmaline Oil 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 TOU 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 4.4%, whose default value for TOU is calculated based on our internal credit rating of Tourmaline Oil 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 Tourmaline Oil 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 TOU stock the variable cost ratio is equal to 83.9%.

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 TOU 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 Tourmaline Oil Corp..

Corporate tax rate of 27% is the nominal tax rate for Tourmaline Oil 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 TOU 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 TOU are equal to 697.3%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Tourmaline Oil 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 TOU is equal to -20.5%. 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 - $6741 million for Tourmaline Oil 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 269.854 million for Tourmaline Oil 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 Tourmaline Oil Corp. at the current share price and the inputted number of shares is $7.1 billion.

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Financial statements of TOU
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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