Intrinsic value of Canadian Natural Resources - CNQ

Previous Close

$31.72

  Intrinsic Value

$3.97

stock screener

  Rating & Target

str. sell

-87%

Previous close

$31.72

 
Intrinsic value

$3.97

 
Up/down potential

-87%

 
Rating

str. sell

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  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
  7,789
  12,462
  19,254
  28,795
  41,780
  58,946
  81,037
  108,775
  142,828
  183,785
  232,136
  288,260
  352,425
  424,791
  505,418
  594,281
  691,292
  796,310
  909,167
  1,029,679
  1,157,664
  1,292,957
  1,435,416
  1,584,932
  1,741,438
  1,904,910
  2,075,370
  2,252,888
  2,437,585
  2,629,628
  2,829,232
Variable operating expenses, $m
 
  8,836
  13,651
  20,416
  29,622
  41,792
  57,455
  77,121
  101,265
  130,304
  164,584
  204,376
  249,870
  301,177
  358,341
  421,345
  490,126
  564,584
  644,599
  730,042
  820,784
  916,707
  1,017,710
  1,123,717
  1,234,680
  1,350,581
  1,471,437
  1,597,298
  1,728,248
  1,864,407
  2,005,926
Fixed operating expenses, $m
 
  3,374
  3,459
  3,545
  3,634
  3,725
  3,818
  3,913
  4,011
  4,111
  4,214
  4,319
  4,427
  4,538
  4,652
  4,768
  4,887
  5,009
  5,134
  5,263
  5,394
  5,529
  5,667
  5,809
  5,954
  6,103
  6,256
  6,412
  6,572
  6,737
  6,905
Total operating expenses, $m
  8,735
  12,210
  17,110
  23,961
  33,256
  45,517
  61,273
  81,034
  105,276
  134,415
  168,798
  208,695
  254,297
  305,715
  362,993
  426,113
  495,013
  569,593
  649,733
  735,305
  826,178
  922,236
  1,023,377
  1,129,526
  1,240,634
  1,356,684
  1,477,693
  1,603,710
  1,734,820
  1,871,144
  2,012,831
Operating income, $m
  -947
  252
  2,144
  4,834
  8,524
  13,429
  19,764
  27,740
  37,552
  49,370
  63,337
  79,564
  98,128
  119,076
  142,425
  168,168
  196,279
  226,717
  259,433
  294,374
  331,486
  370,721
  412,039
  455,406
  500,804
  548,226
  597,677
  649,178
  702,765
  758,485
  816,401
EBITDA, $m
  2,649
  6,027
  11,066
  18,176
  27,882
  40,740
  57,311
  78,139
  103,729
  134,524
  170,894
  213,125
  261,419
  315,896
  376,602
  443,518
  516,577
  595,674
  680,680
  771,458
  867,871
  969,792
  1,077,115
  1,189,758
  1,307,671
  1,430,834
  1,559,265
  1,693,017
  1,832,179
  1,976,880
  2,127,279
Interest expense (income), $m
  457
  435
  954
  1,707
  2,764
  4,203
  6,104
  8,552
  11,625
  15,398
  19,936
  25,293
  31,512
  38,621
  46,639
  55,572
  65,418
  76,166
  87,802
  100,306
  113,658
  127,839
  142,829
  158,613
  175,179
  192,519
  210,631
  229,518
  249,186
  269,650
  290,928
Earnings before tax, $m
  -787
  -182
  1,190
  3,127
  5,760
  9,226
  13,660
  19,188
  25,927
  33,972
  43,401
  54,271
  66,617
  80,455
  95,786
  112,596
  130,861
  150,551
  171,631
  194,068
  217,828
  242,883
  269,210
  296,793
  325,626
  355,707
  387,046
  419,661
  453,579
  488,835
  525,474
Tax expense, $m
  -636
  0
  321
  844
  1,555
  2,491
  3,688
  5,181
  7,000
  9,172
  11,718
  14,653
  17,987
  21,723
  25,862
  30,401
  35,332
  40,649
  46,340
  52,398
  58,813
  65,578
  72,687
  80,134
  87,919
  96,041
  104,502
  113,308
  122,466
  131,986
  141,878
Net income, $m
  -151
  -182
  869
  2,283
  4,205
  6,735
  9,971
  14,007
  18,927
  24,800
  31,683
  39,618
  48,630
  58,732
  69,924
  82,195
  95,529
  109,902
  125,291
  141,669
  159,014
  177,304
  196,523
  216,659
  237,707
  259,666
  282,543
  306,352
  331,113
  356,850
  383,596

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
  68,475
  105,793
  158,214
  229,561
  323,877
  445,256
  597,664
  784,771
  1,009,809
  1,275,471
  1,583,846
  1,936,403
  2,334,017
  2,777,019
  3,265,281
  3,798,306
  4,375,330
  4,995,422
  5,657,575
  6,360,794
  7,104,162
  7,886,901
  8,708,420
  9,568,343
  10,466,538
  11,403,130
  12,378,507
  13,393,326
  14,448,508
  15,545,232
Adjusted assets (=assets-cash), $m
  42,720
  68,475
  105,793
  158,214
  229,561
  323,877
  445,256
  597,664
  784,771
  1,009,809
  1,275,471
  1,583,846
  1,936,403
  2,334,017
  2,777,019
  3,265,281
  3,798,306
  4,375,330
  4,995,422
  5,657,575
  6,360,794
  7,104,162
  7,886,901
  8,708,420
  9,568,343
  10,466,538
  11,403,130
  12,378,507
  13,393,326
  14,448,508
  15,545,232
Revenue / Adjusted assets
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
  0.182
Average production assets, $m
  37,890
  60,630
  93,673
  140,088
  203,260
  286,770
  394,243
  529,190
  694,859
  894,115
  1,129,340
  1,402,384
  1,714,549
  2,066,608
  2,458,856
  2,891,178
  3,363,134
  3,874,049
  4,423,096
  5,009,387
  5,632,038
  6,290,238
  6,983,299
  7,710,696
  8,472,098
  9,267,387
  10,096,673
  10,960,302
  11,858,853
  12,793,142
  13,764,215
Working capital, $m
  -560
  150
  231
  346
  501
  707
  972
  1,305
  1,714
  2,205
  2,786
  3,459
  4,229
  5,097
  6,065
  7,131
  8,296
  9,556
  10,910
  12,356
  13,892
  15,515
  17,225
  19,019
  20,897
  22,859
  24,904
  27,035
  29,251
  31,556
  33,951
Total debt, $m
  12,438
  25,790
  46,128
  74,698
  113,582
  164,984
  231,136
  314,198
  416,171
  538,817
  683,603
  851,667
  1,043,811
  1,260,510
  1,501,946
  1,768,049
  2,058,548
  2,373,026
  2,710,976
  3,071,849
  3,455,104
  3,860,239
  4,286,832
  4,734,560
  5,203,218
  5,692,734
  6,203,177
  6,734,757
  7,287,834
  7,862,908
  8,460,623
Total liabilities, $m
  23,967
  37,319
  57,657
  86,227
  125,111
  176,513
  242,665
  325,727
  427,700
  550,346
  695,132
  863,196
  1,055,340
  1,272,039
  1,513,475
  1,779,578
  2,070,077
  2,384,555
  2,722,505
  3,083,378
  3,466,633
  3,871,768
  4,298,361
  4,746,089
  5,214,747
  5,704,263
  6,214,706
  6,746,286
  7,299,363
  7,874,437
  8,472,152
Total equity, $m
  19,441
  31,156
  48,136
  71,987
  104,450
  147,364
  202,592
  271,937
  357,071
  459,463
  580,339
  720,650
  881,063
  1,061,978
  1,263,544
  1,485,703
  1,728,229
  1,990,775
  2,272,917
  2,574,197
  2,894,161
  3,232,394
  3,588,540
  3,962,331
  4,353,596
  4,762,275
  5,188,424
  5,632,221
  6,093,964
  6,574,071
  7,073,081
Total liabilities and equity, $m
  43,408
  68,475
  105,793
  158,214
  229,561
  323,877
  445,257
  597,664
  784,771
  1,009,809
  1,275,471
  1,583,846
  1,936,403
  2,334,017
  2,777,019
  3,265,281
  3,798,306
  4,375,330
  4,995,422
  5,657,575
  6,360,794
  7,104,162
  7,886,901
  8,708,420
  9,568,343
  10,466,538
  11,403,130
  12,378,507
  13,393,327
  14,448,508
  15,545,233
Debt-to-equity ratio
  0.640
  0.830
  0.960
  1.040
  1.090
  1.120
  1.140
  1.160
  1.170
  1.170
  1.180
  1.180
  1.180
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.190
  1.200
  1.200
  1.200
  1.200
  1.200
  1.200
  1.200
Adjusted equity ratio
  0.439
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -151
  -182
  869
  2,283
  4,205
  6,735
  9,971
  14,007
  18,927
  24,800
  31,683
  39,618
  48,630
  58,732
  69,924
  82,195
  95,529
  109,902
  125,291
  141,669
  159,014
  177,304
  196,523
  216,659
  237,707
  259,666
  282,543
  306,352
  331,113
  356,850
  383,596
Depreciation, amort., depletion, $m
  3,596
  5,774
  8,921
  13,342
  19,358
  27,311
  37,547
  50,399
  66,177
  85,154
  107,556
  133,560
  163,290
  196,820
  234,177
  275,350
  320,299
  368,957
  421,247
  477,084
  536,385
  599,070
  665,076
  734,352
  806,866
  882,608
  961,588
  1,043,838
  1,129,415
  1,218,395
  1,310,878
Funds from operations, $m
  2,154
  5,592
  9,790
  15,625
  23,563
  34,046
  47,518
  64,406
  85,104
  109,953
  139,239
  173,178
  211,921
  255,552
  304,101
  357,545
  415,827
  478,859
  546,538
  618,754
  695,399
  776,375
  861,599
  951,011
  1,044,573
  1,142,274
  1,244,131
  1,350,191
  1,460,527
  1,575,244
  1,694,473
Change in working capital, $m
  -401
  56
  82
  114
  156
  206
  265
  333
  409
  491
  580
  673
  770
  868
  968
  1,066
  1,164
  1,260
  1,354
  1,446
  1,536
  1,624
  1,710
  1,794
  1,878
  1,962
  2,046
  2,130
  2,216
  2,305
  2,395
Cash from operations, $m
  2,555
  5,536
  9,709
  15,510
  23,407
  33,840
  47,253
  64,074
  84,695
  109,462
  138,659
  172,505
  211,151
  254,684
  303,133
  356,479
  414,663
  477,599
  545,184
  617,308
  693,863
  774,751
  859,890
  949,217
  1,042,695
  1,140,312
  1,242,086
  1,348,060
  1,458,311
  1,572,940
  1,692,078
Maintenance CAPEX, $m
  0
  -3,609
  -5,774
  -8,921
  -13,342
  -19,358
  -27,311
  -37,547
  -50,399
  -66,177
  -85,154
  -107,556
  -133,560
  -163,290
  -196,820
  -234,177
  -275,350
  -320,299
  -368,957
  -421,247
  -477,084
  -536,385
  -599,070
  -665,076
  -734,352
  -806,866
  -882,608
  -961,588
  -1,043,838
  -1,129,415
  -1,218,395
New CAPEX, $m
  -2,815
  -22,740
  -33,043
  -46,415
  -63,172
  -83,510
  -107,473
  -134,946
  -165,670
  -199,256
  -235,225
  -273,044
  -312,165
  -352,059
  -392,248
  -432,322
  -471,956
  -510,914
  -549,048
  -586,290
  -622,651
  -658,200
  -693,061
  -727,397
  -761,402
  -795,289
  -829,286
  -863,629
  -898,551
  -934,289
  -971,073
Cash from investing activities, $m
  -2,821
  -26,349
  -38,817
  -55,336
  -76,514
  -102,868
  -134,784
  -172,493
  -216,069
  -265,433
  -320,379
  -380,600
  -445,725
  -515,349
  -589,068
  -666,499
  -747,306
  -831,213
  -918,005
  -1,007,537
  -1,099,735
  -1,194,585
  -1,292,131
  -1,392,473
  -1,495,754
  -1,602,155
  -1,711,894
  -1,825,217
  -1,942,389
  -2,063,704
  -2,189,468
Free cash flow, $m
  -266
  -20,812
  -29,109
  -39,826
  -53,107
  -69,028
  -87,531
  -108,420
  -131,374
  -155,971
  -181,720
  -208,096
  -234,575
  -260,666
  -285,934
  -310,020
  -332,644
  -353,614
  -372,821
  -390,230
  -405,873
  -419,834
  -432,242
  -443,256
  -453,059
  -461,843
  -469,809
  -477,156
  -484,079
  -490,764
  -497,389
Issuance/(repayment) of debt, $m
  375
  14,040
  20,339
  28,569
  38,884
  51,402
  66,152
  83,062
  101,973
  122,646
  144,786
  168,064
  192,144
  216,699
  241,436
  266,103
  290,499
  314,478
  337,950
  360,874
  383,254
  405,136
  426,593
  447,728
  468,658
  489,516
  510,443
  531,581
  553,076
  575,074
  597,715
Issuance/(repurchase) of shares, $m
  414
  11,897
  16,111
  21,568
  28,258
  36,179
  45,256
  55,338
  66,207
  77,593
  89,193
  100,693
  111,783
  122,182
  131,642
  139,964
  146,998
  152,644
  156,851
  159,610
  160,950
  160,928
  159,623
  157,132
  153,558
  149,013
  143,606
  137,444
  130,630
  123,258
  115,414
Cash from financing (excl. dividends), $m  
  788
  25,937
  36,450
  50,137
  67,142
  87,581
  111,408
  138,400
  168,180
  200,239
  233,979
  268,757
  303,927
  338,881
  373,078
  406,067
  437,497
  467,122
  494,801
  520,484
  544,204
  566,064
  586,216
  604,860
  622,216
  638,529
  654,049
  669,025
  683,706
  698,332
  713,129
Total cash flow (excl. dividends), $m
  523
  5,125
  7,341
  10,312
  14,035
  18,553
  23,877
  29,981
  36,806
  44,268
  52,259
  60,661
  69,353
  78,216
  87,144
  96,047
  104,853
  113,508
  121,980
  130,254
  138,332
  146,230
  153,975
  161,603
  169,158
  176,686
  184,239
  191,869
  199,628
  207,568
  215,740
Retained Cash Flow (-), $m
  825
  -11,897
  -16,980
  -23,851
  -32,463
  -42,914
  -55,228
  -69,346
  -85,134
  -102,392
  -120,876
  -140,310
  -160,414
  -180,914
  -201,566
  -222,159
  -242,526
  -262,546
  -282,142
  -301,280
  -319,965
  -338,232
  -356,147
  -373,791
  -391,265
  -408,679
  -426,149
  -443,797
  -461,743
  -480,108
  -499,010
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
 
  -6,773
  -9,639
  -13,540
  -18,428
  -24,361
  -31,351
  -39,365
  -48,327
  -58,125
  -68,617
  -79,649
  -91,061
  -102,699
  -114,422
  -126,112
  -137,674
  -149,038
  -160,162
  -171,026
  -181,632
  -192,003
  -202,172
  -212,188
  -222,107
  -231,992
  -241,910
  -251,928
  -262,115
  -272,540
  -283,270
Discount rate, %
 
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
 
  -6,353
  -8,430
  -10,967
  -13,727
  -16,562
  -19,298
  -21,750
  -23,749
  -25,158
  -25,887
  -25,904
  -25,231
  -23,942
  -22,148
  -19,984
  -17,596
  -15,122
  -12,687
  -10,391
  -8,307
  -6,480
  -4,932
  -3,660
  -2,646
  -1,863
  -1,276
  -850
  -550
  -345
  -209
Current shareholders' claim on cash, %
  100
  76.5
  60.8
  49.7
  41.5
  35.4
  30.6
  27.0
  24.0
  21.7
  19.7
  18.2
  16.9
  15.8
  14.8
  14.1
  13.4
  12.8
  12.3
  11.9
  11.6
  11.2
  11.0
  10.7
  10.5
  10.4
  10.2
  10.1
  10.0
  9.9
  9.8

Canadian Natural Resources Limited is an independent crude oil and natural gas exploration, development and production company. The Company's segments include Exploration and Production, Oil Sands Mining and Upgrading, and Midstream. The Exploration and Production segment includes exploration, development, production and marketing of crude oil, natural gas liquids (NGLs) and natural gas. The Company's exploration and production operations are focused in North America in Western Canada, the United Kingdom portion of the North Sea, and Cote d'Ivoire, Gabon and South Africa in Offshore Africa. The Horizon Oil Sands Mining and Upgrading segment (Horizon) produces synthetic crude oil (SCO) through bitumen mining and upgrading operations. Midstream activities include the Company's pipeline operations, an electricity co-generation system and an investment in the North West Redwater Partnership (Redwater Partnership).

FINANCIAL RATIOS  of  Canadian Natural Resources (CNQ)

Valuation Ratios
P/E Ratio -233.4
Price to Sales 4.5
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 13.8
Price to Free Cash Flow -135.5
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 -12.1%
Oper. Margin - 3 Yr. Avg. 3.1%
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 $7789 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 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 6.6%, 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 70.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3292 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 3.7% 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 486.5%.

Life of production assets of 10.5 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 - $19441 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 1223.68 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 $38.8 billion.

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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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