Intrinsic value of Cenovus Energy - CVE

Previous Close

$9.58

  Intrinsic Value

$1.71

stock screener

  Rating & Target

str. sell

-82%

Previous close

$9.58

 
Intrinsic value

$1.71

 
Up/down potential

-82%

 
Rating

str. sell

We calculate the intrinsic value of CVE 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 11.8

 

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, %
  -7.12
  47.00
  42.80
  39.02
  35.62
  32.56
  29.80
  27.32
  25.09
  23.08
  21.27
  19.64
  18.18
  16.86
  15.68
  14.61
  13.65
  12.78
  12.00
  11.30
  10.67
  10.11
  9.60
  9.14
  8.72
  8.35
  8.02
  7.71
  7.44
  7.20
  6.98
Revenue, $m
  8,981
  13,202
  18,853
  26,209
  35,544
  47,116
  61,156
  77,865
  97,400
  119,879
  145,379
  173,938
  205,560
  240,222
  277,879
  318,472
  361,936
  408,201
  457,203
  508,885
  563,201
  620,119
  679,623
  741,714
  806,410
  873,746
  943,779
  1,016,578
  1,092,235
  1,170,855
  1,252,560
Variable operating expenses, $m
 
  11,609
  16,571
  23,029
  31,226
  41,386
  53,714
  68,384
  85,535
  105,273
  127,662
  152,719
  180,484
  210,917
  243,980
  279,621
  317,782
  358,403
  401,427
  446,804
  494,494
  544,469
  596,714
  651,230
  708,033
  767,155
  828,644
  892,563
  958,990
  1,028,019
  1,099,756
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
  9,234
  11,609
  16,571
  23,029
  31,226
  41,386
  53,714
  68,384
  85,535
  105,273
  127,662
  152,719
  180,484
  210,917
  243,980
  279,621
  317,782
  358,403
  401,427
  446,804
  494,494
  544,469
  596,714
  651,230
  708,033
  767,155
  828,644
  892,563
  958,990
  1,028,019
  1,099,756
Operating income, $m
  -253
  1,593
  2,282
  3,179
  4,318
  5,730
  7,443
  9,481
  11,864
  14,607
  17,717
  21,219
  25,077
  29,305
  33,899
  38,851
  44,154
  49,798
  55,776
  62,080
  68,707
  75,650
  82,909
  90,484
  98,376
  106,591
  115,134
  124,016
  133,245
  142,836
  152,804
EBITDA, $m
  856
  3,221
  4,600
  6,395
  8,673
  11,497
  14,923
  19,000
  23,767
  29,252
  35,474
  42,443
  50,159
  58,617
  67,805
  77,711
  88,316
  99,605
  111,562
  124,173
  137,427
  151,316
  165,835
  180,986
  196,773
  213,203
  230,292
  248,056
  266,517
  285,701
  305,638
Interest expense (income), $m
  0
  164
  331
  554
  845
  1,213
  1,670
  2,224
  2,884
  3,655
  4,542
  5,549
  6,676
  7,925
  9,293
  10,780
  12,382
  14,098
  15,924
  17,858
  19,899
  22,043
  24,290
  26,639
  29,090
  31,644
  34,302
  37,067
  39,940
  42,927
  46,031
Earnings before tax, $m
  -686
  1,429
  1,951
  2,625
  3,474
  4,517
  5,773
  7,257
  8,980
  10,952
  13,175
  15,670
  18,401
  21,381
  24,606
  28,072
  31,772
  35,700
  39,851
  44,222
  48,808
  53,607
  58,620
  63,845
  69,287
  74,947
  80,832
  86,949
  93,305
  99,909
  106,773
Tax expense, $m
  -283
  386
  527
  709
  938
  1,220
  1,559
  1,959
  2,425
  2,957
  3,557
  4,231
  4,968
  5,773
  6,644
  7,579
  8,578
  9,639
  10,760
  11,940
  13,178
  14,474
  15,827
  17,238
  18,707
  20,236
  21,825
  23,476
  25,192
  26,975
  28,829
Net income, $m
  -403
  1,043
  1,424
  1,916
  2,536
  3,297
  4,214
  5,298
  6,556
  7,995
  9,618
  11,439
  13,432
  15,608
  17,963
  20,492
  23,193
  26,061
  29,092
  32,282
  35,630
  39,133
  42,792
  46,607
  50,579
  54,711
  59,008
  63,473
  68,112
  72,934
  77,944

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,753
  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
  18,695
  23,450
  33,486
  46,552
  63,133
  83,687
  108,626
  138,303
  173,001
  212,929
  258,223
  308,949
  365,116
  426,682
  493,568
  565,670
  642,869
  725,045
  812,083
  903,881
  1,000,357
  1,101,455
  1,207,146
  1,317,432
  1,432,344
  1,551,947
  1,676,339
  1,805,646
  1,940,027
  2,079,671
  2,224,796
Adjusted assets (=assets-cash), $m
  15,942
  23,450
  33,486
  46,552
  63,133
  83,687
  108,626
  138,303
  173,001
  212,929
  258,223
  308,949
  365,116
  426,682
  493,568
  565,670
  642,869
  725,045
  812,083
  903,881
  1,000,357
  1,101,455
  1,207,146
  1,317,432
  1,432,344
  1,551,947
  1,676,339
  1,805,646
  1,940,027
  2,079,671
  2,224,796
Revenue / Adjusted assets
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
Average production assets, $m
  12,494
  18,364
  26,224
  36,456
  49,442
  65,538
  85,068
  108,310
  135,483
  166,752
  202,223
  241,948
  285,935
  334,149
  386,530
  442,995
  503,452
  567,807
  635,969
  707,859
  783,413
  862,586
  945,356
  1,031,724
  1,121,716
  1,215,381
  1,312,796
  1,414,061
  1,519,299
  1,628,659
  1,742,311
Working capital, $m
  3,072
  475
  679
  944
  1,280
  1,696
  2,202
  2,803
  3,506
  4,316
  5,234
  6,262
  7,400
  8,648
  10,004
  11,465
  13,030
  14,695
  16,459
  18,320
  20,275
  22,324
  24,466
  26,702
  29,031
  31,455
  33,976
  36,597
  39,320
  42,151
  45,092
Total debt, $m
  4,687
  9,460
  15,834
  24,131
  34,659
  47,711
  63,547
  82,392
  104,426
  129,780
  158,541
  190,753
  226,419
  265,513
  307,986
  353,770
  402,792
  454,974
  510,243
  568,534
  629,797
  693,994
  761,108
  831,139
  904,108
  980,057
  1,059,045
  1,141,155
  1,226,487
  1,315,161
  1,407,315
Total liabilities, $m
  10,116
  14,890
  21,264
  29,561
  40,089
  53,141
  68,977
  87,822
  109,856
  135,210
  163,971
  196,183
  231,849
  270,943
  313,416
  359,200
  408,222
  460,404
  515,673
  573,964
  635,227
  699,424
  766,538
  836,569
  909,538
  985,487
  1,064,475
  1,146,585
  1,231,917
  1,320,591
  1,412,745
Total equity, $m
  8,578
  8,559
  12,222
  16,992
  23,044
  30,546
  39,648
  50,481
  63,145
  77,719
  94,251
  112,766
  133,267
  155,739
  180,152
  206,470
  234,647
  264,642
  296,410
  329,916
  365,130
  402,031
  440,608
  480,863
  522,806
  566,461
  611,864
  659,061
  708,110
  759,080
  812,051
Total liabilities and equity, $m
  18,694
  23,449
  33,486
  46,553
  63,133
  83,687
  108,625
  138,303
  173,001
  212,929
  258,222
  308,949
  365,116
  426,682
  493,568
  565,670
  642,869
  725,046
  812,083
  903,880
  1,000,357
  1,101,455
  1,207,146
  1,317,432
  1,432,344
  1,551,948
  1,676,339
  1,805,646
  1,940,027
  2,079,671
  2,224,796
Debt-to-equity ratio
  0.546
  1.110
  1.300
  1.420
  1.500
  1.560
  1.600
  1.630
  1.650
  1.670
  1.680
  1.690
  1.700
  1.700
  1.710
  1.710
  1.720
  1.720
  1.720
  1.720
  1.720
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
  1.730
Adjusted equity ratio
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -403
  1,043
  1,424
  1,916
  2,536
  3,297
  4,214
  5,298
  6,556
  7,995
  9,618
  11,439
  13,432
  15,608
  17,963
  20,492
  23,193
  26,061
  29,092
  32,282
  35,630
  39,133
  42,792
  46,607
  50,579
  54,711
  59,008
  63,473
  68,112
  72,934
  77,944
Depreciation, amort., depletion, $m
  1,109
  1,629
  2,318
  3,216
  4,355
  5,767
  7,480
  9,519
  11,902
  14,645
  17,757
  21,224
  25,082
  29,311
  33,906
  38,859
  44,162
  49,808
  55,787
  62,093
  68,720
  75,665
  82,926
  90,502
  98,396
  106,612
  115,158
  124,040
  133,272
  142,865
  152,834
Funds from operations, $m
  221
  2,672
  3,742
  5,132
  6,891
  9,064
  11,694
  14,816
  18,458
  22,640
  27,375
  32,663
  38,514
  44,919
  51,869
  59,352
  67,356
  75,869
  84,878
  94,375
  104,350
  114,799
  125,718
  137,109
  148,975
  161,324
  174,165
  187,513
  201,384
  215,799
  230,779
Change in working capital, $m
  -416
  152
  203
  265
  336
  417
  505
  601
  703
  809
  918
  1,028
  1,138
  1,248
  1,356
  1,461
  1,565
  1,666
  1,764
  1,861
  1,955
  2,049
  2,142
  2,235
  2,329
  2,424
  2,521
  2,621
  2,724
  2,830
  2,941
Cash from operations, $m
  637
  2,520
  3,539
  4,867
  6,555
  8,648
  11,189
  14,215
  17,755
  21,831
  26,457
  31,635
  37,376
  43,671
  50,513
  57,890
  65,791
  74,203
  83,114
  92,514
  102,395
  112,750
  123,576
  134,874
  146,646
  158,900
  171,644
  184,892
  198,661
  212,968
  227,837
Maintenance CAPEX, $m
  0
  -1,096
  -1,611
  -2,300
  -3,198
  -4,337
  -5,749
  -7,462
  -9,501
  -11,884
  -14,627
  -17,739
  -21,224
  -25,082
  -29,311
  -33,906
  -38,859
  -44,162
  -49,808
  -55,787
  -62,093
  -68,720
  -75,665
  -82,926
  -90,502
  -98,396
  -106,612
  -115,158
  -124,040
  -133,272
  -142,865
New CAPEX, $m
  -765
  -5,870
  -7,860
  -10,233
  -12,985
  -16,096
  -19,531
  -23,241
  -27,173
  -31,269
  -35,471
  -39,726
  -43,986
  -48,214
  -52,381
  -56,465
  -60,457
  -64,355
  -68,162
  -71,890
  -75,554
  -79,173
  -82,770
  -86,368
  -89,991
  -93,665
  -97,415
  -101,265
  -105,238
  -109,360
  -113,652
Cash from investing activities, $m
  -799
  -6,966
  -9,471
  -12,533
  -16,183
  -20,433
  -25,280
  -30,703
  -36,674
  -43,153
  -50,098
  -57,465
  -65,210
  -73,296
  -81,692
  -90,371
  -99,316
  -108,517
  -117,970
  -127,677
  -137,647
  -147,893
  -158,435
  -169,294
  -180,493
  -192,061
  -204,027
  -216,423
  -229,278
  -242,632
  -256,517
Free cash flow, $m
  -162
  -4,446
  -5,932
  -7,665
  -9,628
  -11,786
  -14,091
  -16,489
  -18,919
  -21,323
  -23,642
  -25,830
  -27,834
  -29,625
  -31,179
  -32,481
  -33,525
  -34,314
  -34,855
  -35,162
  -35,252
  -35,144
  -34,860
  -34,420
  -33,847
  -33,162
  -32,383
  -31,530
  -30,618
  -29,664
  -28,680
Issuance/(repayment) of debt, $m
  0
  4,773
  6,373
  8,297
  10,529
  13,052
  15,836
  18,845
  22,033
  25,354
  28,761
  32,211
  35,666
  39,094
  42,473
  45,785
  49,022
  52,182
  55,269
  58,292
  61,263
  64,197
  67,114
  70,031
  72,969
  75,948
  78,988
  82,110
  85,332
  88,674
  92,154
Issuance/(repurchase) of shares, $m
  0
  1,691
  2,239
  2,853
  3,516
  4,205
  4,889
  5,535
  6,109
  6,579
  6,914
  7,076
  7,069
  6,864
  6,451
  5,825
  4,984
  3,933
  2,677
  1,224
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1
  6,464
  8,612
  11,150
  14,045
  17,257
  20,725
  24,380
  28,142
  31,933
  35,675
  39,287
  42,735
  45,958
  48,924
  51,610
  54,006
  56,115
  57,946
  59,516
  61,263
  64,197
  67,114
  70,031
  72,969
  75,948
  78,988
  82,110
  85,332
  88,674
  92,154
Total cash flow (excl. dividends), $m
  -162
  2,018
  2,681
  3,484
  4,417
  5,471
  6,634
  7,891
  9,223
  10,611
  12,034
  13,457
  14,901
  16,333
  17,745
  19,128
  20,481
  21,801
  23,091
  24,353
  26,011
  29,053
  32,254
  35,611
  39,122
  42,786
  46,605
  50,580
  54,714
  59,010
  63,475
Retained Cash Flow (-), $m
  593
  -2,734
  -3,663
  -4,769
  -6,052
  -7,502
  -9,103
  -10,832
  -12,665
  -14,574
  -16,532
  -18,515
  -20,501
  -22,472
  -24,413
  -26,317
  -28,178
  -29,994
  -31,769
  -33,506
  -35,214
  -36,901
  -38,577
  -40,254
  -41,943
  -43,655
  -45,403
  -47,197
  -49,049
  -50,970
  -52,971
Prev. year cash balance distribution, $m
 
  2,753
  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
 
  2,037
  -983
  -1,285
  -1,635
  -2,031
  -2,469
  -2,941
  -3,442
  -3,963
  -4,498
  -5,058
  -5,600
  -6,138
  -6,669
  -7,189
  -7,697
  -8,193
  -8,678
  -9,153
  -9,203
  -7,847
  -6,323
  -4,643
  -2,821
  -869
  1,202
  3,383
  5,665
  8,040
  10,504
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,953
  -900
  -1,118
  -1,347
  -1,575
  -1,792
  -1,987
  -2,151
  -2,277
  -2,358
  -2,402
  -2,390
  -2,334
  -2,239
  -2,111
  -1,956
  -1,783
  -1,598
  -1,409
  -1,169
  -812
  -525
  -304
  -144
  -34
  35
  73
  88
  88
  79
Current shareholders' claim on cash, %
  100
  82.5
  69.3
  59.2
  51.4
  45.4
  40.6
  36.9
  33.9
  31.5
  29.6
  28.0
  26.8
  25.8
  25.1
  24.5
  24.1
  23.8
  23.6
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5

Cenovus Energy Inc is a Canada-based integrated oil company. It operates in the business of developing, producing and marketing crude oil, Natural Gas Liquids (NGLs) and natural gas in Canada. The Company also conducts marketing activities and owns refining interests in the United States (U.S.). Its segments include: Oil Sands, which includes the development and production of bitumen and natural gas in northeast Alberta; Conventional, which includes the development and production of conventional crude oil, NGLs and natural gas in Alberta and Saskatchewan, including the heavy oil assets at Pelican Lake, the carbon dioxide (CO2) enhanced oil recovery (EOR) project at Weyburn and emerging tight oil opportunities; Refining and Marketing, which includes transporting and selling crude oil and natural gas and joint ownership of refineries in the U.S., as well as Corporate and Eliminations.

FINANCIAL RATIOS  of  Cenovus Energy (CVE)

Valuation Ratios
P/E Ratio -19.8
Price to Sales 0.9
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 12.5
Price to Free Cash Flow -62.4
Growth Rates
Sales Growth Rate -7.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -39.7%
Cap. Spend. - 3 Yr. Gr. Rate -20.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 54.6%
Total Debt to Equity 54.6%
Interest Coverage 0
Management Effectiveness
Return On Assets -2.1%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital -3%
Ret/ On T. Cap. - 3 Yr. Avg. 1.8%
Return On Equity -4.5%
Return On Equity - 3 Yr. Avg. 2.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 42.4%
Gross Margin - 3 Yr. Avg. 43.3%
EBITDA Margin 4.7%
EBITDA Margin - 3 Yr. Avg. 13.7%
Operating Margin -2.8%
Oper. Margin - 3 Yr. Avg. 5.1%
Pre-Tax Margin -7.6%
Pre-Tax Margin - 3 Yr. Avg. 0.8%
Net Profit Margin -4.5%
Net Profit Margin - 3 Yr. Avg. 1.3%
Effective Tax Rate 41.3%
Eff/ Tax Rate - 3 Yr. Avg. 21.3%
Payout Ratio -30.5%

CVE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVE stock intrinsic value calculation we used $8981 million for the last fiscal year's total revenue generated by Cenovus Energy. The default revenue input number comes from 2016 income statement of Cenovus Energy. 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 CVE stock valuation model: a) initial revenue growth rate of 47% 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 4.3%, whose default value for CVE is calculated based on our internal credit rating of Cenovus Energy, 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 Cenovus Energy.
    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 CVE stock the variable cost ratio is equal to 88%.

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 CVE 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 Cenovus Energy.

Corporate tax rate of 27% is the nominal tax rate for Cenovus Energy. 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 CVE 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 CVE are equal to 139.1%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Cenovus Energy 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 CVE is equal to 3.6%. 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 - $8578 million for Cenovus Energy - 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 1227.04 million for Cenovus Energy 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 Cenovus Energy at the current share price and the inputted number of shares is $11.8 billion.

RELATED COMPANIES Price Int.Val. Rating
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STO Statoil ADR 20.21 16.36  hold
CNQ Canadian Natur 34.61 4.00  str.sell
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COMPANY NEWS

▶ Why Oil Prices Bounced Back   [Dec-08-17 03:00PM  Oilprice.com]
▶ These Stocks Are the Top Integrated Energy Losers This Week   [Dec-01-17 10:35AM  Market Realist]
▶ Analyzing Wall Street Targets for DK, ANDV, and CVE   [Nov-29-17 09:03AM  Market Realist]
▶ Integrated Energy Losers Last Week: CVE, IMO   [07:34AM  Market Realist]
▶ Oil Major: 70% Of Crude Can Be Left In The Ground   [Nov-24-17 01:00PM  Oilprice.com]
▶ Stock Market News For Nov 14, 2017   [Nov-14-17 10:28AM  Zacks]
▶ What Wall Street Analysts Recommend for HFC, PARR, and CVE   [Nov-10-17 10:33AM  Market Realist]
▶ Cenovus Energy Earns Technical Rating Upgrade   [03:00AM  Investor's Business Daily]
▶ Cenovus reports 3Q loss   [Nov-02-17 11:47AM  Associated Press]
▶ Cenovus reports solid third quarter results   [06:00AM  GlobeNewswire]
▶ 3 Value Stocks for Smart Investors   [07:37AM  Motley Fool]
▶ Cenovus Energy Gets Quantitative Upgrade; Improving Charts   [Sep-25-17 02:37PM  TheStreet.com]
▶ Which Integrated Energy Stocks Are Gaining This Week?   [Sep-22-17 07:39AM  Market Realist]
▶ Analyst Ratings for Cenovus: No. 5 with the Most BuyRatings   [Sep-19-17 11:36AM  Market Realist]
▶ How Are Integrated Energy Stocks Performing This Week?   [Sep-18-17 08:07AM  Market Realist]
▶ The Boring Truth About Oil Prices   [Sep-13-17 07:00PM  Oilprice.com]
▶ Behind Cenovuss Dividend Yield: Last Place in the Top 10   [Sep-06-17 03:36PM  Market Realist]
▶ Oil Markets Rebound After Hurricane Harvey   [03:00PM  Oilprice.com]
▶ Canadas Oil Industry Doomed If Prices Fall Lower   [Aug-20-17 07:00PM  Oilprice.com]
▶ Morningstar Runs the Numbers   [Aug-19-17 06:00AM  Morningstar]
▶ The Best Energy Stocks from July 2428, 2017   [08:18AM  Market Realist]
▶ Cenovus beats 2Q profit forecasts   [01:32AM  Associated Press]
▶ 5 Must-See Numbers From ConocoPhillips' Q2 Report   [Jul-27-17 05:17PM  Motley Fool]
Financial statements of CVE
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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