Intrinsic value of Cenovus Energy - CVE

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$9.61

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$9.61

 
Intrinsic value

$2.52

 
Up/down potential

-74%

 
Rating

str. sell

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

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 8.0

 

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, %
  -7.12
  24.60
  22.64
  20.88
  19.29
  17.86
  16.57
  15.42
  14.37
  13.44
  12.59
  11.83
  11.15
  10.54
  9.98
  9.48
  9.04
  8.63
  8.27
  7.94
  7.65
  7.38
  7.14
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
Revenue, $m
  8,981
  11,190
  13,724
  16,589
  19,789
  23,323
  27,188
  31,379
  35,890
  40,713
  45,840
  51,265
  56,981
  62,984
  69,271
  75,841
  82,694
  89,832
  97,260
  104,984
  113,013
  121,356
  130,027
  139,038
  148,405
  158,145
  168,278
  178,823
  189,802
  201,239
  213,159
Variable operating expenses, $m
 
  9,843
  12,068
  14,583
  17,392
  20,495
  23,889
  27,569
  31,530
  35,764
  40,266
  45,011
  50,030
  55,301
  60,821
  66,589
  72,605
  78,873
  85,395
  92,176
  99,226
  106,552
  114,164
  122,076
  130,300
  138,853
  147,749
  157,007
  166,647
  176,689
  187,155
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
  9,843
  12,068
  14,583
  17,392
  20,495
  23,889
  27,569
  31,530
  35,764
  40,266
  45,011
  50,030
  55,301
  60,821
  66,589
  72,605
  78,873
  85,395
  92,176
  99,226
  106,552
  114,164
  122,076
  130,300
  138,853
  147,749
  157,007
  166,647
  176,689
  187,155
Operating income, $m
  -253
  1,347
  1,656
  2,006
  2,396
  2,827
  3,299
  3,810
  4,360
  4,949
  5,574
  6,254
  6,951
  7,684
  8,451
  9,252
  10,088
  10,959
  11,865
  12,807
  13,787
  14,805
  15,862
  16,962
  18,104
  19,293
  20,529
  21,815
  23,155
  24,550
  26,004
EBITDA, $m
  856
  2,731
  3,349
  4,048
  4,829
  5,691
  6,634
  7,657
  8,758
  9,934
  11,185
  12,509
  13,904
  15,369
  16,903
  18,506
  20,178
  21,920
  23,732
  25,617
  27,576
  29,612
  31,728
  33,927
  36,212
  38,589
  41,062
  43,635
  46,314
  49,104
  52,013
Interest expense (income), $m
  0
  164
  252
  352
  465
  591
  731
  883
  1,049
  1,227
  1,417
  1,620
  1,834
  2,059
  2,296
  2,545
  2,804
  3,074
  3,356
  3,649
  3,954
  4,271
  4,601
  4,943
  5,299
  5,668
  6,053
  6,453
  6,869
  7,303
  7,754
Earnings before tax, $m
  -686
  1,183
  1,405
  1,654
  1,931
  2,236
  2,568
  2,927
  3,312
  3,722
  4,157
  4,634
  5,118
  5,624
  6,154
  6,708
  7,284
  7,884
  8,509
  9,158
  9,832
  10,533
  11,262
  12,019
  12,806
  13,624
  14,476
  15,362
  16,285
  17,247
  18,250
Tax expense, $m
  -283
  319
  379
  447
  521
  604
  693
  790
  894
  1,005
  1,122
  1,251
  1,382
  1,519
  1,662
  1,811
  1,967
  2,129
  2,297
  2,473
  2,655
  2,844
  3,041
  3,245
  3,458
  3,679
  3,908
  4,148
  4,397
  4,657
  4,927
Net income, $m
  -403
  864
  1,025
  1,207
  1,410
  1,632
  1,875
  2,137
  2,418
  2,717
  3,035
  3,383
  3,736
  4,106
  4,493
  4,897
  5,317
  5,756
  6,211
  6,685
  7,178
  7,689
  8,221
  8,774
  9,348
  9,946
  10,567
  11,214
  11,888
  12,590
  13,322

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
  19,876
  24,376
  29,465
  35,148
  41,426
  48,291
  55,736
  63,748
  72,314
  81,421
  91,056
  101,209
  111,873
  123,040
  134,709
  146,880
  159,559
  172,752
  186,472
  200,733
  215,553
  230,953
  246,958
  263,596
  280,897
  298,895
  317,624
  337,126
  357,440
  378,612
Adjusted assets (=assets-cash), $m
  15,942
  19,876
  24,376
  29,465
  35,148
  41,426
  48,291
  55,736
  63,748
  72,314
  81,421
  91,056
  101,209
  111,873
  123,040
  134,709
  146,880
  159,559
  172,752
  186,472
  200,733
  215,553
  230,953
  246,958
  263,596
  280,897
  298,895
  317,624
  337,126
  357,440
  378,612
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
  15,566
  19,090
  23,075
  27,526
  32,442
  37,819
  43,649
  49,923
  56,631
  63,763
  71,309
  79,260
  87,611
  96,356
  105,495
  115,027
  124,956
  135,288
  146,032
  157,200
  168,806
  180,867
  193,401
  206,431
  219,980
  234,074
  248,742
  264,014
  279,923
  296,504
Working capital, $m
  3,072
  403
  494
  597
  712
  840
  979
  1,130
  1,292
  1,466
  1,650
  1,846
  2,051
  2,267
  2,494
  2,730
  2,977
  3,234
  3,501
  3,779
  4,068
  4,369
  4,681
  5,005
  5,343
  5,693
  6,058
  6,438
  6,833
  7,245
  7,674
Total debt, $m
  4,687
  7,191
  10,049
  13,280
  16,889
  20,875
  25,235
  29,962
  35,050
  40,489
  46,272
  52,391
  58,838
  65,609
  72,700
  80,110
  87,839
  95,890
  104,268
  112,980
  122,035
  131,446
  141,225
  151,389
  161,954
  172,940
  184,368
  196,262
  208,645
  221,544
  234,989
Total liabilities, $m
  10,116
  12,621
  15,479
  18,710
  22,319
  26,305
  30,665
  35,392
  40,480
  45,919
  51,702
  57,821
  64,268
  71,039
  78,130
  85,540
  93,269
  101,320
  109,698
  118,410
  127,465
  136,876
  146,655
  156,819
  167,384
  178,370
  189,798
  201,692
  214,075
  226,974
  240,419
Total equity, $m
  8,578
  7,255
  8,897
  10,755
  12,829
  15,120
  17,626
  20,344
  23,268
  26,395
  29,719
  33,235
  36,941
  40,833
  44,909
  49,169
  53,611
  58,239
  63,055
  68,062
  73,267
  78,677
  84,298
  90,140
  96,213
  102,528
  109,097
  115,933
  123,051
  130,466
  138,193
Total liabilities and equity, $m
  18,694
  19,876
  24,376
  29,465
  35,148
  41,425
  48,291
  55,736
  63,748
  72,314
  81,421
  91,056
  101,209
  111,872
  123,039
  134,709
  146,880
  159,559
  172,753
  186,472
  200,732
  215,553
  230,953
  246,959
  263,597
  280,898
  298,895
  317,625
  337,126
  357,440
  378,612
Debt-to-equity ratio
  0.546
  0.990
  1.130
  1.230
  1.320
  1.380
  1.430
  1.470
  1.510
  1.530
  1.560
  1.580
  1.590
  1.610
  1.620
  1.630
  1.640
  1.650
  1.650
  1.660
  1.670
  1.670
  1.680
  1.680
  1.680
  1.690
  1.690
  1.690
  1.700
  1.700
  1.700
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
  864
  1,025
  1,207
  1,410
  1,632
  1,875
  2,137
  2,418
  2,717
  3,035
  3,383
  3,736
  4,106
  4,493
  4,897
  5,317
  5,756
  6,211
  6,685
  7,178
  7,689
  8,221
  8,774
  9,348
  9,946
  10,567
  11,214
  11,888
  12,590
  13,322
Depreciation, amort., depletion, $m
  1,109
  1,383
  1,692
  2,042
  2,432
  2,864
  3,335
  3,847
  4,397
  4,986
  5,611
  6,255
  6,953
  7,685
  8,452
  9,254
  10,090
  10,961
  11,867
  12,810
  13,790
  14,808
  15,866
  16,965
  18,108
  19,296
  20,533
  21,819
  23,159
  24,555
  26,009
Funds from operations, $m
  221
  2,247
  2,718
  3,250
  3,842
  4,496
  5,210
  5,983
  6,815
  7,703
  8,646
  9,638
  10,689
  11,791
  12,945
  14,150
  15,408
  16,717
  18,079
  19,495
  20,967
  22,497
  24,087
  25,739
  27,456
  29,242
  31,100
  33,034
  35,047
  37,145
  39,331
Change in working capital, $m
  -416
  80
  91
  103
  115
  127
  139
  151
  162
  174
  185
  195
  206
  216
  226
  237
  247
  257
  267
  278
  289
  300
  312
  324
  337
  351
  365
  380
  395
  412
  429
Cash from operations, $m
  637
  1,832
  2,627
  3,146
  3,727
  4,369
  5,071
  5,833
  6,652
  7,529
  8,461
  9,443
  10,483
  11,575
  12,719
  13,914
  15,161
  16,460
  17,811
  19,217
  20,678
  22,197
  23,774
  25,414
  27,119
  28,892
  30,735
  32,654
  34,652
  36,733
  38,902
Maintenance CAPEX, $m
  0
  -1,096
  -1,365
  -1,675
  -2,024
  -2,415
  -2,846
  -3,317
  -3,829
  -4,379
  -4,968
  -5,593
  -6,255
  -6,953
  -7,685
  -8,452
  -9,254
  -10,090
  -10,961
  -11,867
  -12,810
  -13,790
  -14,808
  -15,866
  -16,965
  -18,108
  -19,296
  -20,533
  -21,819
  -23,159
  -24,555
New CAPEX, $m
  -765
  -3,072
  -3,524
  -3,985
  -4,451
  -4,916
  -5,377
  -5,830
  -6,274
  -6,708
  -7,132
  -7,546
  -7,951
  -8,351
  -8,745
  -9,138
  -9,532
  -9,929
  -10,332
  -10,744
  -11,168
  -11,606
  -12,061
  -12,534
  -13,030
  -13,549
  -14,094
  -14,668
  -15,272
  -15,909
  -16,580
Cash from investing activities, $m
  -799
  -4,168
  -4,889
  -5,660
  -6,475
  -7,331
  -8,223
  -9,147
  -10,103
  -11,087
  -12,100
  -13,139
  -14,206
  -15,304
  -16,430
  -17,590
  -18,786
  -20,019
  -21,293
  -22,611
  -23,978
  -25,396
  -26,869
  -28,400
  -29,995
  -31,657
  -33,390
  -35,201
  -37,091
  -39,068
  -41,135
Free cash flow, $m
  -162
  -2,336
  -2,263
  -2,513
  -2,748
  -2,962
  -3,152
  -3,315
  -3,451
  -3,558
  -3,638
  -3,696
  -3,724
  -3,728
  -3,712
  -3,677
  -3,625
  -3,559
  -3,482
  -3,395
  -3,300
  -3,199
  -3,094
  -2,986
  -2,876
  -2,765
  -2,655
  -2,546
  -2,439
  -2,335
  -2,233
Issuance/(repayment) of debt, $m
  0
  2,504
  2,857
  3,231
  3,609
  3,986
  4,360
  4,727
  5,088
  5,439
  5,783
  6,118
  6,447
  6,771
  7,091
  7,410
  7,729
  8,051
  8,378
  8,712
  9,056
  9,411
  9,779
  10,163
  10,565
  10,986
  11,428
  11,893
  12,383
  12,900
  13,444
Issuance/(repurchase) of shares, $m
  0
  0
  1,048
  1,139
  1,213
  1,267
  1,298
  1,305
  1,288
  1,246
  1,179
  1,095
  982
  849
  697
  526
  339
  136
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1
  2,504
  3,905
  4,370
  4,822
  5,253
  5,658
  6,032
  6,376
  6,685
  6,962
  7,213
  7,429
  7,620
  7,788
  7,936
  8,068
  8,187
  8,378
  8,712
  9,056
  9,411
  9,779
  10,163
  10,565
  10,986
  11,428
  11,893
  12,383
  12,900
  13,444
Total cash flow (excl. dividends), $m
  -162
  168
  595
  718
  861
  1,024
  1,208
  1,412
  1,637
  1,881
  2,145
  2,422
  2,724
  3,043
  3,379
  3,733
  4,104
  4,492
  4,896
  5,317
  5,756
  6,212
  6,686
  7,178
  7,689
  8,221
  8,773
  9,347
  9,944
  10,565
  11,211
Retained Cash Flow (-), $m
  593
  -1,430
  -1,642
  -1,857
  -2,074
  -2,291
  -2,506
  -2,717
  -2,924
  -3,127
  -3,324
  -3,517
  -3,706
  -3,892
  -4,076
  -4,259
  -4,443
  -4,628
  -4,816
  -5,008
  -5,205
  -5,409
  -5,621
  -5,842
  -6,073
  -6,315
  -6,569
  -6,836
  -7,118
  -7,415
  -7,728
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
 
  1,491
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  80
  310
  551
  802
  1,064
  1,336
  1,616
  1,906
  2,204
  2,511
  2,826
  3,150
  3,484
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
 
  1,430
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  15
  48
  70
  83
  88
  88
  82
  74
  64
  54
  44
  34
  26
Current shareholders' claim on cash, %
  100
  100.0
  86.6
  76.2
  68.0
  61.5
  56.3
  52.2
  48.9
  46.2
  44.1
  42.4
  41.1
  40.2
  39.4
  38.9
  38.7
  38.6
  38.6
  38.6
  38.6
  38.6
  38.6
  38.6
  38.6
  38.6
  38.6
  38.6
  38.6
  38.6
  38.6

Cenovus Energy Inc. develops, produces, and markets crude oil, natural gas liquids (NGLs), and natural gas in Canada. Its Oil Sands segment develops and produces bitumen assets at Foster Creek, Christina Lake, Narrows Lake, and the Athabasca natural gas assets, as well as projects in the early stages of development, such as Grand Rapids and Telephone Lake. The company’s Conventional segment engages in the development and production of conventional crude oil, NGLs, and natural gas in Alberta and Saskatchewan in Canada, including the heavy oil assets at Pelican Lake. This segment also includes the carbon dioxide enhanced oil recovery project at Weyburn. Its Refining and Marketing segment transports, sells, and refines crude oil into petroleum and chemical products. This segment also owns 50% interest ownership in two refineries in the United States. The company is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Cenovus Energy (CVE)

Valuation Ratios
P/E Ratio -19.9
Price to Sales 0.9
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 12.6
Price to Free Cash Flow -62.6
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 24.6% 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 834.513 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 $8.0 billion.


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COMPANY NEWS

▶ ConocoPhillips Completes Canadian Divestitures on Schedule   [May-22-17 01:24PM  Market Realist]
▶ Here's Why the Best Is Yet to Come for ConocoPhillips   [May-18-17 02:30PM  Motley Fool]
▶ ETFs with exposure to Cenovus Energy, Inc. : May 11, 2017   [May-11-17 04:28PM  Capital Cube]
▶ Stocks That Fell to 3-Year Lows   [May-05-17 11:18PM  GuruFocus.com]
▶ The Market Is Missing Cenovus' Potential   [May-03-17 07:00AM  Morningstar]
▶ ETFs with exposure to Cenovus Energy, Inc. : May 1, 2017   [May-01-17 03:50PM  Capital Cube]
▶ Canadian Oil Patch Shrugs Off Trumps Trade War Threat   [Apr-30-17 04:00PM  Oilprice.com]
▶ Cenovus posts 1Q profit   [07:44AM  Associated Press]
▶ Cenovus CEO Defends Conoco Deal   [Apr-21-17 06:46PM  Bloomberg]
▶ Why ConocoPhillips Is Divesting San Juan Basin Assets   [Apr-18-17 09:26AM  Market Realist]
▶ 3 Stocks the Market Is Wrong About   [Apr-17-17 08:44AM  Motley Fool]
▶ Big Oil Is Set To Disappoint Again With Q1 Results   [Apr-16-17 07:00PM  Oilprice.com]
▶ ConocoPhillips' Asset Exodus Continues   [Apr-13-17 01:07PM  Motley Fool]
▶ Cenovus achieves key acquisition financing milestones   [Apr-06-17 08:02PM  Marketwired]
▶ ConocoPhillips to Sell $13.3 Billion in Oil Sands Assets   [Apr-05-17 02:23PM  Motley Fool]
▶ Cenovus prices $2.9 bln debt offering   [Apr-04-17 06:10PM  Reuters]
▶ First Solar, Rite Aid Dip into Mondays 52-Week Low Club   [Apr-03-17 04:04PM  24/7 Wall St.]
▶ [$$] Goodbye to the Great White North   [Apr-01-17 12:01AM  at Barrons.com]
▶ Conoco's Winning with Oil Sands Sale to Cenovus   [11:30AM  at Investopedia]
▶ The Hot Stock: ConocoPhillips Jumps 8.8%   [05:12PM  at Barrons.com]
▶ [$$] Cenovus/Conoco: filthy lucre   [12:22PM  at Financial Times]
Stock chart of CVE 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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