Intrinsic value of Canadian Natural Resources - CNQ

Previous Close

$30.78

  Intrinsic Value

$4.45

stock screener

  Rating & Target

str. sell

-86%

  Value-price divergence*

-75%

Previous close

$30.78

 
Intrinsic value

$4.45

 
Up/down potential

-86%

 
Rating

str. sell

 
Value-price divergence*

-75%

*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 33.6

 

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, %
  -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
 
  9,783
  15,115
  22,604
  32,797
  46,272
  63,614
  85,388
  112,120
  144,271
  182,227
  226,284
  276,654
  333,461
  396,753
  466,511
  542,664
  625,103
  713,696
  808,298
  908,767
  1,014,972
  1,126,802
  1,244,172
  1,367,029
  1,495,354
  1,629,165
  1,768,517
  1,913,505
  2,064,258
  2,220,947
Fixed operating expenses, $m
 
  2,581
  2,645
  2,712
  2,779
  2,849
  2,920
  2,993
  3,068
  3,145
  3,223
  3,304
  3,386
  3,471
  3,558
  3,647
  3,738
  3,831
  3,927
  4,025
  4,126
  4,229
  4,335
  4,443
  4,554
  4,668
  4,785
  4,905
  5,027
  5,153
  5,282
Total operating expenses, $m
  8,575
  12,364
  17,760
  25,316
  35,576
  49,121
  66,534
  88,381
  115,188
  147,416
  185,450
  229,588
  280,040
  336,932
  400,311
  470,158
  546,402
  628,934
  717,623
  812,323
  912,893
  1,019,201
  1,131,137
  1,248,615
  1,371,583
  1,500,022
  1,633,950
  1,773,422
  1,918,532
  2,069,411
  2,226,229
Operating income, $m
  -787
  98
  1,494
  3,479
  6,203
  9,824
  14,503
  20,393
  27,640
  36,369
  46,686
  58,672
  72,385
  87,859
  105,107
  124,124
  144,890
  167,375
  191,544
  217,356
  244,772
  273,757
  304,280
  336,317
  369,855
  404,887
  441,420
  479,466
  519,054
  560,217
  603,003
EBITDA, $m
  2,809
  5,873
  10,415
  16,821
  25,561
  37,136
  52,050
  70,792
  93,817
  121,523
  154,242
  192,232
  235,675
  284,679
  339,284
  399,474
  465,188
  536,332
  612,791
  694,440
  781,156
  872,827
  969,356
  1,070,669
  1,176,721
  1,287,496
  1,403,007
  1,523,305
  1,648,468
  1,778,612
  1,913,881
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
  -336
  540
  1,773
  3,439
  5,622
  8,398
  11,841
  16,015
  20,971
  26,750
  33,379
  40,873
  49,238
  58,468
  68,552
  79,472
  91,209
  103,742
  117,049
  131,113
  145,918
  161,451
  177,704
  194,676
  212,368
  230,788
  249,949
  269,868
  290,567
  312,076
Tax expense, $m
  -636
  0
  146
  479
  929
  1,518
  2,268
  3,197
  4,324
  5,662
  7,222
  9,012
  11,036
  13,294
  15,786
  18,509
  21,457
  24,626
  28,010
  31,603
  35,401
  39,398
  43,592
  47,980
  52,563
  57,339
  62,313
  67,486
  72,864
  78,453
  84,260
Net income, $m
  -151
  -336
  394
  1,294
  2,511
  4,104
  6,131
  8,644
  11,691
  15,309
  19,527
  24,366
  29,838
  35,944
  42,682
  50,043
  58,014
  66,583
  75,731
  85,446
  95,713
  106,520
  117,859
  129,724
  142,114
  155,029
  168,476
  182,463
  197,003
  212,114
  227,815

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
  -336
  394
  1,294
  2,511
  4,104
  6,131
  8,644
  11,691
  15,309
  19,527
  24,366
  29,838
  35,944
  42,682
  50,043
  58,014
  66,583
  75,731
  85,446
  95,713
  106,520
  117,859
  129,724
  142,114
  155,029
  168,476
  182,463
  197,003
  212,114
  227,815
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
  5,438
  9,315
  14,636
  21,869
  31,415
  43,678
  59,043
  77,868
  100,463
  127,083
  157,927
  193,128
  232,764
  276,858
  325,393
  378,313
  435,540
  496,979
  562,531
  632,097
  705,590
  782,935
  864,076
  948,980
  1,037,637
  1,130,063
  1,226,301
  1,326,418
  1,430,509
  1,538,693
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
  5,382
  9,234
  14,521
  21,713
  31,209
  43,413
  58,710
  77,459
  99,971
  126,503
  157,253
  192,358
  231,895
  275,891
  324,327
  377,149
  434,279
  495,624
  561,084
  630,561
  703,967
  781,226
  862,282
  947,102
  1,035,675
  1,128,018
  1,224,171
  1,324,202
  1,428,204
  1,536,298
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
  -20,966
  -29,583
  -40,815
  -54,801
  -71,659
  -91,372
  -113,783
  -138,610
  -165,462
  -193,876
  -223,347
  -253,367
  -283,454
  -313,177
  -342,172
  -370,158
  -396,933
  -422,380
  -446,453
  -469,174
  -490,618
  -510,906
  -530,191
  -548,652
  -566,480
  -583,877
  -601,046
  -618,188
  -635,500
  -653,169
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
  12,051
  16,586
  22,557
  29,952
  38,810
  49,097
  60,701
  73,443
  87,084
  101,349
  115,944
  130,576
  144,971
  158,884
  172,117
  184,512
  195,963
  206,410
  215,834
  224,252
  231,712
  238,288
  244,067
  249,151
  253,650
  257,674
  261,334
  264,739
  267,993
  271,194
Cash from financing (excl. dividends), $m  
  788
  26,091
  36,925
  51,126
  68,836
  90,212
  115,249
  143,763
  175,416
  209,730
  246,135
  284,008
  322,720
  361,670
  400,320
  438,220
  475,011
  510,441
  544,360
  576,708
  607,506
  636,848
  664,881
  691,795
  717,809
  743,166
  768,117
  792,915
  817,815
  843,067
  868,909
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
  -12,051
  -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
 
  -6,927
  -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
 
  -6,498
  -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
  73.6
  56.3
  44.3
  35.7
  29.4
  24.7
  21.0
  18.2
  15.9
  14.1
  12.7
  11.5
  10.5
  9.6
  8.9
  8.3
  7.8
  7.4
  7.0
  6.7
  6.4
  6.1
  5.9
  5.7
  5.5
  5.3
  5.2
  5.0
  4.9
  4.8

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 -226.5
Price to Sales 4.4
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 13.4
Price to Free Cash Flow -131.5
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 -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 $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 78.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2518 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 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 $33.6 billion.

RELATED COMPANIES Price Int.Val. Rating
IMO Imperial Oil 28.68 404.13  str.buy
CVE Cenovus Energy 7.50 2.62  str.sell
SU Suncor Energy 31.42 5.05  str.sell
PWE Penn West Petr 1.26 0.82  sell

COMPANY NEWS

▶ Canadian Natural Resources posts 2Q profit   [Aug-04-17 02:36AM  Associated Press]
▶ [$$] 8 Great Energy Stocks at Bargain Prices   [Jul-15-17 12:01AM  Barrons.com]
▶ Top Ranked Income Stocks to Buy for June 21st   [Jun-21-17 11:29AM  Zacks]
▶ ConocoPhillips' Most Brilliant Moves in 2017 So Far   [Jun-15-17 04:30PM  Motley Fool]
▶ [$$] Energy Shares Could Soon Heat Up   [Jun-10-17 12:58AM  Barrons.com]
▶ Why These 5 Oil Companies Fell More Than 10% in May   [Jun-08-17 09:44AM  Motley Fool]
▶ U.S. Crude Supplies Slump Amid Record Refining   [Jun-02-17 04:20PM  Zacks]
▶ Canadian Oil Sands Brace As Oil Majors Dump Shares   [May-30-17 06:00PM  Oilprice.com]
▶ Canadian Natural Resources posts 1Q profit   [05:48AM  Associated Press]
▶ What Does The Future Hold For Canadas Oil Sands?   [Apr-19-17 07:00PM  Oilprice.com]
▶ [$$] Danish pension fund PKA dumps Canadian oil   [Apr-15-17 12:01AM  Financial Times]
▶ ConocoPhillips to Sell $13.3 Billion in Oil Sands Assets   [Apr-05-17 02:23PM  Motley Fool]
▶ 3 Stocks for an Oil Rally   [Mar-30-17 03:50PM  Barrons.com]
▶ 3 Stocks for an Oil Rally   [03:50PM  at Barrons.com]
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.