Intrinsic value of Canadian Natural Resources - CNQ

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$28.33

  Intrinsic Value

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  Value-price divergence*

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$28.33

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

We calculate the intrinsic value of CNQ 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 31.0

 

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, %
  -14.87
  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
  7,789
  12,610
  12,900
  13,232
  13,604
  14,016
  14,469
  14,962
  15,495
  16,070
  16,687
  17,346
  18,050
  18,800
  19,597
  20,442
  21,338
  22,286
  23,289
  24,348
  25,467
  26,648
  27,892
  29,205
  30,587
  32,043
  33,577
  35,190
  36,888
  38,675
  40,554
Variable operating expenses, $m
 
  1,828
  1,871
  1,919
  1,973
  2,032
  2,098
  2,169
  2,247
  2,330
  2,420
  2,515
  2,617
  2,726
  2,842
  2,964
  3,094
  3,231
  3,377
  3,531
  3,693
  3,864
  4,044
  4,235
  4,435
  4,646
  4,869
  5,103
  5,349
  5,608
  5,880
Fixed operating expenses, $m
 
  11,515
  11,803
  12,098
  12,400
  12,710
  13,028
  13,354
  13,688
  14,030
  14,380
  14,740
  15,108
  15,486
  15,873
  16,270
  16,677
  17,094
  17,521
  17,959
  18,408
  18,868
  19,340
  19,824
  20,319
  20,827
  21,348
  21,882
  22,429
  22,989
  23,564
Total operating expenses, $m
  8,575
  13,343
  13,674
  14,017
  14,373
  14,742
  15,126
  15,523
  15,935
  16,360
  16,800
  17,255
  17,725
  18,212
  18,715
  19,234
  19,771
  20,325
  20,898
  21,490
  22,101
  22,732
  23,384
  24,059
  24,754
  25,473
  26,217
  26,985
  27,778
  28,597
  29,444
Operating income, $m
  -787
  -733
  -773
  -785
  -769
  -726
  -657
  -561
  -439
  -290
  -113
  91
  325
  588
  882
  1,208
  1,567
  1,961
  2,391
  2,859
  3,366
  3,915
  4,508
  5,146
  5,833
  6,570
  7,360
  8,206
  9,111
  10,078
  11,110
EBITDA, $m
  2,809
  4,882
  4,972
  5,108
  5,289
  5,515
  5,786
  6,101
  6,461
  6,866
  7,317
  7,815
  8,362
  8,959
  9,608
  10,310
  11,069
  11,885
  12,761
  13,701
  14,707
  15,781
  16,928
  18,151
  19,453
  20,839
  22,312
  23,876
  25,537
  27,300
  29,168
Interest expense (income), $m
  457
  551
  575
  600
  629
  662
  698
  738
  781
  827
  878
  932
  989
  1,051
  1,116
  1,186
  1,260
  1,339
  1,422
  1,509
  1,602
  1,700
  1,803
  1,912
  2,027
  2,148
  2,275
  2,409
  2,551
  2,699
  2,856
Earnings before tax, $m
  -787
  -1,284
  -1,348
  -1,385
  -1,398
  -1,388
  -1,355
  -1,299
  -1,220
  -1,117
  -991
  -840
  -665
  -463
  -235
  21
  307
  622
  969
  1,349
  1,764
  2,215
  2,705
  3,234
  3,806
  4,422
  5,085
  5,797
  6,560
  7,379
  8,254
Tax expense, $m
  -636
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  6
  83
  168
  262
  364
  476
  598
  730
  873
  1,028
  1,194
  1,373
  1,565
  1,771
  1,992
  2,229
Net income, $m
  -151
  -1,284
  -1,348
  -1,385
  -1,398
  -1,388
  -1,355
  -1,299
  -1,220
  -1,117
  -991
  -840
  -665
  -463
  -235
  16
  224
  454
  708
  985
  1,288
  1,617
  1,974
  2,361
  2,778
  3,228
  3,712
  4,232
  4,789
  5,386
  6,026

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  688
  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
  43,408
  59,482
  60,850
  62,414
  64,170
  66,115
  68,250
  70,574
  73,090
  75,801
  78,710
  81,822
  85,143
  88,679
  92,437
  96,424
  100,650
  105,123
  109,853
  114,851
  120,128
  125,696
  131,568
  137,758
  144,280
  151,148
  158,380
  165,992
  174,002
  182,429
  191,293
Adjusted assets (=assets-cash), $m
  42,720
  59,482
  60,850
  62,414
  64,170
  66,115
  68,250
  70,574
  73,090
  75,801
  78,710
  81,822
  85,143
  88,679
  92,437
  96,424
  100,650
  105,123
  109,853
  114,851
  120,128
  125,696
  131,568
  137,758
  144,280
  151,148
  158,380
  165,992
  174,002
  182,429
  191,293
Revenue / Adjusted assets
  0.182
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
Average production assets, $m
  37,890
  56,153
  57,445
  58,921
  60,579
  62,415
  64,430
  66,625
  69,000
  71,559
  74,305
  77,243
  80,378
  83,716
  87,263
  91,028
  95,017
  99,240
  103,705
  108,423
  113,405
  118,662
  124,205
  130,049
  136,205
  142,690
  149,517
  156,703
  164,264
  172,220
  180,587
Working capital, $m
  -560
  151
  155
  159
  163
  168
  174
  180
  186
  193
  200
  208
  217
  226
  235
  245
  256
  267
  279
  292
  306
  320
  335
  350
  367
  385
  403
  422
  443
  464
  487
Total debt, $m
  12,438
  16,426
  17,151
  17,980
  18,910
  19,941
  21,073
  22,304
  23,638
  25,075
  26,616
  28,266
  30,026
  31,900
  33,891
  36,005
  38,244
  40,615
  43,122
  45,771
  48,568
  51,519
  54,631
  57,912
  61,368
  65,009
  68,842
  72,876
  77,121
  81,588
  86,285
Total liabilities, $m
  23,967
  31,526
  32,251
  33,080
  34,010
  35,041
  36,173
  37,404
  38,738
  40,175
  41,716
  43,366
  45,126
  47,000
  48,991
  51,105
  53,344
  55,715
  58,222
  60,871
  63,668
  66,619
  69,731
  73,012
  76,468
  80,109
  83,942
  87,976
  92,221
  96,688
  101,385
Total equity, $m
  19,441
  27,957
  28,600
  29,335
  30,160
  31,074
  32,078
  33,170
  34,353
  35,627
  36,994
  38,456
  40,017
  41,679
  43,445
  45,319
  47,305
  49,408
  51,631
  53,980
  56,460
  59,077
  61,837
  64,746
  67,811
  71,040
  74,439
  78,016
  81,781
  85,742
  89,908
Total liabilities and equity, $m
  43,408
  59,483
  60,851
  62,415
  64,170
  66,115
  68,251
  70,574
  73,091
  75,802
  78,710
  81,822
  85,143
  88,679
  92,436
  96,424
  100,649
  105,123
  109,853
  114,851
  120,128
  125,696
  131,568
  137,758
  144,279
  151,149
  158,381
  165,992
  174,002
  182,430
  191,293
Debt-to-equity ratio
  0.640
  0.590
  0.600
  0.610
  0.630
  0.640
  0.660
  0.670
  0.690
  0.700
  0.720
  0.740
  0.750
  0.770
  0.780
  0.790
  0.810
  0.820
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.920
  0.920
  0.930
  0.940
  0.950
  0.960
Adjusted equity ratio
  0.439
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -151
  -1,284
  -1,348
  -1,385
  -1,398
  -1,388
  -1,355
  -1,299
  -1,220
  -1,117
  -991
  -840
  -665
  -463
  -235
  16
  224
  454
  708
  985
  1,288
  1,617
  1,974
  2,361
  2,778
  3,228
  3,712
  4,232
  4,789
  5,386
  6,026
Depreciation, amort., depletion, $m
  3,596
  5,615
  5,745
  5,892
  6,058
  6,242
  6,443
  6,662
  6,900
  7,156
  7,431
  7,724
  8,038
  8,372
  8,726
  9,103
  9,502
  9,924
  10,370
  10,842
  11,341
  11,866
  12,421
  13,005
  13,621
  14,269
  14,952
  15,670
  16,426
  17,222
  18,059
Funds from operations, $m
  2,154
  4,331
  4,397
  4,507
  4,660
  4,854
  5,088
  5,364
  5,680
  6,039
  6,439
  6,884
  7,373
  7,908
  8,492
  9,118
  9,726
  10,378
  11,078
  11,827
  12,628
  13,483
  14,395
  15,366
  16,399
  17,497
  18,664
  19,902
  21,216
  22,608
  24,084
Change in working capital, $m
  -401
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
Cash from operations, $m
  2,555
  3,340
  4,393
  4,503
  4,655
  4,849
  5,083
  5,358
  5,674
  6,032
  6,432
  6,876
  7,365
  7,899
  8,482
  9,108
  9,715
  10,367
  11,066
  11,815
  12,615
  13,469
  14,380
  15,350
  16,382
  17,480
  18,645
  19,883
  21,195
  22,587
  24,062
Maintenance CAPEX, $m
  0
  -5,505
  -5,615
  -5,745
  -5,892
  -6,058
  -6,242
  -6,443
  -6,662
  -6,900
  -7,156
  -7,431
  -7,724
  -8,038
  -8,372
  -8,726
  -9,103
  -9,502
  -9,924
  -10,370
  -10,842
  -11,341
  -11,866
  -12,421
  -13,005
  -13,621
  -14,269
  -14,952
  -15,670
  -16,426
  -17,222
New CAPEX, $m
  -2,815
  -1,104
  -1,292
  -1,476
  -1,657
  -1,837
  -2,015
  -2,194
  -2,375
  -2,559
  -2,746
  -2,938
  -3,135
  -3,338
  -3,547
  -3,764
  -3,989
  -4,223
  -4,465
  -4,718
  -4,982
  -5,257
  -5,544
  -5,843
  -6,157
  -6,484
  -6,827
  -7,186
  -7,562
  -7,955
  -8,368
Cash from investing activities, $m
  -2,821
  -6,609
  -6,907
  -7,221
  -7,549
  -7,895
  -8,257
  -8,637
  -9,037
  -9,459
  -9,902
  -10,369
  -10,859
  -11,376
  -11,919
  -12,490
  -13,092
  -13,725
  -14,389
  -15,088
  -15,824
  -16,598
  -17,410
  -18,264
  -19,162
  -20,105
  -21,096
  -22,138
  -23,232
  -24,381
  -25,590
Free cash flow, $m
  -266
  -3,269
  -2,514
  -2,718
  -2,894
  -3,046
  -3,174
  -3,280
  -3,364
  -3,427
  -3,470
  -3,493
  -3,495
  -3,476
  -3,437
  -3,382
  -3,377
  -3,358
  -3,323
  -3,274
  -3,209
  -3,128
  -3,030
  -2,914
  -2,779
  -2,625
  -2,451
  -2,255
  -2,037
  -1,795
  -1,528
Issuance/(repayment) of debt, $m
  375
  675
  725
  829
  931
  1,031
  1,131
  1,232
  1,334
  1,437
  1,542
  1,649
  1,760
  1,874
  1,992
  2,113
  2,240
  2,371
  2,507
  2,649
  2,797
  2,951
  3,112
  3,281
  3,456
  3,640
  3,833
  4,034
  4,245
  4,466
  4,698
Issuance/(repurchase) of shares, $m
  414
  3,170
  2,432
  2,624
  2,789
  2,929
  3,046
  3,140
  3,213
  3,265
  3,296
  3,306
  3,295
  3,264
  3,212
  3,143
  3,124
  3,089
  3,040
  2,974
  2,893
  2,794
  2,677
  2,542
  2,388
  2,213
  2,017
  1,798
  1,556
  1,289
  996
Cash from financing (excl. dividends), $m  
  788
  3,845
  3,157
  3,453
  3,720
  3,960
  4,177
  4,372
  4,547
  4,702
  4,838
  4,955
  5,055
  5,138
  5,204
  5,256
  5,364
  5,460
  5,547
  5,623
  5,690
  5,745
  5,789
  5,823
  5,844
  5,853
  5,850
  5,832
  5,801
  5,755
  5,694
Total cash flow (excl. dividends), $m
  523
  -2,595
  -1,789
  -1,889
  -1,964
  -2,015
  -2,043
  -2,048
  -2,030
  -1,991
  -1,928
  -1,843
  -1,735
  -1,602
  -1,445
  -1,269
  -1,138
  -987
  -816
  -625
  -412
  -177
  83
  367
  677
  1,015
  1,382
  1,779
  2,208
  2,671
  3,170
Retained Cash Flow (-), $m
  825
  -576
  -643
  -735
  -825
  -914
  -1,003
  -1,092
  -1,183
  -1,274
  -1,367
  -1,463
  -1,561
  -1,662
  -1,766
  -1,874
  -1,986
  -2,102
  -2,223
  -2,349
  -2,480
  -2,617
  -2,760
  -2,909
  -3,065
  -3,228
  -3,399
  -3,578
  -3,765
  -3,961
  -4,166
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
 
  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, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
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
  0
  0
Current shareholders' claim on cash, %
  100
  90.7
  84.2
  77.9
  71.9
  66.2
  60.9
  56.1
  51.6
  47.6
  44.0
  40.8
  37.9
  35.4
  33.1
  31.1
  29.3
  27.7
  26.3
  25.0
  23.9
  22.9
  22.0
  21.2
  20.6
  20.0
  19.5
  19.1
  18.8
  18.5
  18.3

Canadian Natural Resources Limited acquires, explores for, develops, produces, markets, and sells crude oil, natural gas, and natural gas liquids (NGLs). The company offers light and medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen, and synthetic crude oil (SCO). Its midstream assets include three crude oil pipeline systems; and a 50% working interest in an 84-megawatt cogeneration plant at Primrose. As of December 31, 2015, the company’s gross proved crude oil, bitumen, SCO, and NGLs reserves totaled 4,695 million barrels; gross proved plus probable crude oil, bitumen, SCO, and NGLs reserves totaled 7,623 million barrels; proved natural gas reserves totaled 6,106 billion cubic feet; and gross proved plus probable natural gas reserves totaled 8,508 billion cubic feet. It operates primarily in Western Canada; the United Kingdom sector of the North Sea; and Côte d’Ivoire, Gabon, and South Africa in Offshore Africa. The company was formerly known as AEX Minerals Corporation and changed its name to Canadian Natural Resources Limited in December 1975. Canadian Natural Resources Limited was founded in 1973 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Canadian Natural Resources (CNQ)

Valuation Ratios
P/E Ratio -208.4
Price to Sales 4
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 12.3
Price to Free Cash Flow -121.1
Growth Rates
Sales Growth Rate -14.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.7%
Cap. Spend. - 3 Yr. Gr. Rate -12.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 57.1%
Total Debt to Equity 64%
Interest Coverage -1
Management Effectiveness
Return On Assets -0.1%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital -0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity -0.8%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 42%
Gross Margin - 3 Yr. Avg. 46.5%
EBITDA Margin 41.9%
EBITDA Margin - 3 Yr. Avg. 47.1%
Operating Margin -10.1%
Oper. Margin - 3 Yr. Avg. 4%
Pre-Tax Margin -10.1%
Pre-Tax Margin - 3 Yr. Avg. 4%
Net Profit Margin -1.9%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 80.8%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio -371.5%

CNQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNQ stock intrinsic value calculation we used $12363 million for the last fiscal year's total revenue generated by Canadian Natural Resources. The default revenue input number comes from 2016 income statement of Canadian Natural Resources. 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 CNQ 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 6%, whose default value for CNQ is calculated based on our internal credit rating of Canadian Natural Resources, 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 Canadian Natural Resources.
    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 CNQ stock the variable cost ratio is equal to 14.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11234 million in the base year in the intrinsic value calculation for CNQ 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 Canadian Natural Resources.

Corporate tax rate of 27% is the nominal tax rate for Canadian Natural Resources. 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 CNQ 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 CNQ are equal to 445.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Canadian Natural Resources 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 CNQ is equal to 1.2%. 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 - $27381 million for Canadian Natural Resources - 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 1092.99 million for Canadian Natural Resources 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 Canadian Natural Resources at the current share price and the inputted number of shares is $31.0 billion.


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Stock chart of CNQ Financial statements of CNQ
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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