Intrinsic value of Imperial Oil - IMO

Previous Close

$31.70

  Intrinsic Value

$63.42

stock screener

  Rating & Target

str. buy

+100%

  Value-price divergence*

0%

Previous close

$31.70

 
Intrinsic value

$63.42

 
Up/down potential

+100%

 
Rating

str. buy

 
Value-price divergence*

0%

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

We calculate the intrinsic value of IMO 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 26.8

 

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, %
  -5.08
  12.30
  11.57
  10.91
  10.32
  9.79
  9.31
  8.88
  8.49
  8.14
  7.83
  7.55
  7.29
  7.06
  6.86
  6.67
  6.50
  6.35
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
Revenue, $m
  18,834
  21,151
  23,598
  26,173
  28,874
  31,701
  34,653
  37,730
  40,933
  44,266
  47,732
  51,333
  55,076
  58,965
  63,008
  67,210
  71,581
  76,128
  80,861
  85,790
  90,926
  96,279
  101,862
  107,688
  113,769
  120,120
  126,755
  133,691
  140,943
  148,528
  156,465
Variable operating expenses, $m
 
  3,932
  4,386
  4,863
  5,363
  5,887
  6,434
  7,004
  7,597
  8,215
  8,857
  9,510
  10,204
  10,924
  11,673
  12,452
  13,262
  14,104
  14,981
  15,894
  16,846
  17,837
  18,872
  19,951
  21,078
  22,254
  23,484
  24,769
  26,112
  27,517
  28,988
Fixed operating expenses, $m
 
  15,506
  15,894
  16,291
  16,698
  17,116
  17,544
  17,982
  18,432
  18,893
  19,365
  19,849
  20,345
  20,854
  21,375
  21,910
  22,458
  23,019
  23,595
  24,184
  24,789
  25,409
  26,044
  26,695
  27,362
  28,046
  28,748
  29,466
  30,203
  30,958
  31,732
Total operating expenses, $m
  18,389
  19,438
  20,280
  21,154
  22,061
  23,003
  23,978
  24,986
  26,029
  27,108
  28,222
  29,359
  30,549
  31,778
  33,048
  34,362
  35,720
  37,123
  38,576
  40,078
  41,635
  43,246
  44,916
  46,646
  48,440
  50,300
  52,232
  54,235
  56,315
  58,475
  60,720
Operating income, $m
  445
  1,712
  3,318
  5,019
  6,813
  8,698
  10,675
  12,743
  14,904
  17,159
  19,510
  21,974
  24,527
  27,187
  29,959
  32,848
  35,862
  39,005
  42,286
  45,712
  49,291
  53,033
  56,947
  61,042
  65,329
  69,819
  74,524
  79,456
  84,628
  90,053
  95,745
EBITDA, $m
  1,650
  3,071
  4,833
  6,698
  8,663
  10,728
  12,893
  15,157
  17,522
  19,988
  22,560
  25,239
  28,030
  30,937
  33,967
  37,124
  40,415
  43,847
  47,429
  51,169
  55,075
  59,157
  63,426
  67,891
  72,565
  77,460
  82,587
  87,960
  93,593
  99,500
  105,698
Interest expense (income), $m
  54
  130
  182
  237
  296
  357
  420
  487
  557
  629
  704
  782
  864
  948
  1,036
  1,127
  1,222
  1,321
  1,423
  1,530
  1,642
  1,758
  1,878
  2,004
  2,136
  2,273
  2,417
  2,566
  2,723
  2,887
  3,058
Earnings before tax, $m
  1,809
  1,582
  3,136
  4,781
  6,517
  8,342
  10,255
  12,256
  14,348
  16,530
  18,806
  21,191
  23,663
  26,239
  28,923
  31,721
  34,640
  37,684
  40,862
  44,182
  47,650
  51,276
  55,068
  59,037
  63,193
  67,546
  72,107
  76,889
  81,905
  87,166
  92,687
Tax expense, $m
  207
  427
  847
  1,291
  1,760
  2,252
  2,769
  3,309
  3,874
  4,463
  5,077
  5,722
  6,389
  7,084
  7,809
  8,565
  9,353
  10,175
  11,033
  11,929
  12,865
  13,844
  14,868
  15,940
  17,062
  18,237
  19,469
  20,760
  22,114
  23,535
  25,026
Net income, $m
  1,602
  1,155
  2,289
  3,490
  4,757
  6,089
  7,486
  8,947
  10,474
  12,067
  13,728
  15,470
  17,274
  19,154
  21,114
  23,156
  25,287
  27,509
  29,830
  32,253
  34,784
  37,431
  40,200
  43,097
  46,131
  49,308
  52,638
  56,129
  59,790
  63,631
  67,662

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  289
  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
  30,830
  34,280
  38,246
  42,420
  46,798
  51,379
  56,163
  61,150
  66,343
  71,745
  77,361
  83,198
  89,264
  95,567
  102,119
  108,930
  116,014
  123,384
  131,056
  139,044
  147,368
  156,044
  165,093
  174,534
  184,390
  194,683
  205,438
  216,679
  228,432
  240,727
  253,591
Adjusted assets (=assets-cash), $m
  30,541
  34,280
  38,246
  42,420
  46,798
  51,379
  56,163
  61,150
  66,343
  71,745
  77,361
  83,198
  89,264
  95,567
  102,119
  108,930
  116,014
  123,384
  131,056
  139,044
  147,368
  156,044
  165,093
  174,534
  184,390
  194,683
  205,438
  216,679
  228,432
  240,727
  253,591
Revenue / Adjusted assets
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
Average production assets, $m
  27,560
  30,943
  34,523
  38,291
  42,243
  46,379
  50,697
  55,198
  59,886
  64,762
  69,831
  75,100
  80,576
  86,266
  92,180
  98,328
  104,723
  111,375
  118,300
  125,511
  133,025
  140,856
  149,024
  157,547
  166,444
  175,735
  185,443
  195,589
  206,199
  217,297
  228,909
Working capital, $m
  -38
  -190
  -212
  -236
  -260
  -285
  -312
  -340
  -368
  -398
  -430
  -462
  -496
  -531
  -567
  -605
  -644
  -685
  -728
  -772
  -818
  -867
  -917
  -969
  -1,024
  -1,081
  -1,141
  -1,203
  -1,268
  -1,337
  -1,408
Total debt, $m
  3,874
  5,206
  6,785
  8,446
  10,189
  12,012
  13,916
  15,901
  17,967
  20,117
  22,353
  24,676
  27,090
  29,599
  32,206
  34,917
  37,737
  40,670
  43,723
  46,903
  50,215
  53,669
  57,270
  61,028
  64,950
  69,047
  73,327
  77,801
  82,479
  87,372
  92,492
Total liabilities, $m
  12,311
  13,643
  15,222
  16,883
  18,626
  20,449
  22,353
  24,338
  26,404
  28,554
  30,790
  33,113
  35,527
  38,036
  40,643
  43,354
  46,174
  49,107
  52,160
  55,340
  58,652
  62,106
  65,707
  69,465
  73,387
  77,484
  81,764
  86,238
  90,916
  95,809
  100,929
Total equity, $m
  18,519
  20,636
  23,024
  25,537
  28,172
  30,930
  33,810
  36,812
  39,938
  43,190
  46,571
  50,085
  53,737
  57,532
  61,476
  65,576
  69,841
  74,277
  78,895
  83,705
  88,715
  93,939
  99,386
  105,070
  111,003
  117,199
  123,673
  130,440
  137,516
  144,917
  152,662
Total liabilities and equity, $m
  30,830
  34,279
  38,246
  42,420
  46,798
  51,379
  56,163
  61,150
  66,342
  71,744
  77,361
  83,198
  89,264
  95,568
  102,119
  108,930
  116,015
  123,384
  131,055
  139,045
  147,367
  156,045
  165,093
  174,535
  184,390
  194,683
  205,437
  216,678
  228,432
  240,726
  253,591
Debt-to-equity ratio
  0.209
  0.250
  0.290
  0.330
  0.360
  0.390
  0.410
  0.430
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.550
  0.560
  0.570
  0.570
  0.580
  0.580
  0.590
  0.590
  0.590
  0.600
  0.600
  0.600
  0.610
Adjusted equity ratio
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602
  0.602

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,602
  1,155
  2,289
  3,490
  4,757
  6,089
  7,486
  8,947
  10,474
  12,067
  13,728
  15,470
  17,274
  19,154
  21,114
  23,156
  25,287
  27,509
  29,830
  32,253
  34,784
  37,431
  40,200
  43,097
  46,131
  49,308
  52,638
  56,129
  59,790
  63,631
  67,662
Depreciation, amort., depletion, $m
  1,205
  1,359
  1,515
  1,679
  1,850
  2,030
  2,218
  2,414
  2,618
  2,830
  3,050
  3,265
  3,503
  3,751
  4,008
  4,275
  4,553
  4,842
  5,143
  5,457
  5,784
  6,124
  6,479
  6,850
  7,237
  7,641
  8,063
  8,504
  8,965
  9,448
  9,953
Funds from operations, $m
  1,752
  2,514
  3,804
  5,169
  6,608
  8,120
  9,704
  11,361
  13,091
  14,896
  16,778
  18,735
  20,777
  22,905
  25,122
  27,432
  29,840
  32,352
  34,973
  37,710
  40,568
  43,555
  46,679
  49,947
  53,367
  56,949
  60,701
  64,633
  68,756
  73,079
  77,614
Change in working capital, $m
  261
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
  -65
  -68
  -71
Cash from operations, $m
  1,491
  2,535
  3,826
  5,192
  6,632
  8,145
  9,730
  11,388
  13,120
  14,926
  16,809
  18,767
  20,811
  22,940
  25,158
  27,469
  29,879
  32,393
  35,016
  37,754
  40,614
  43,604
  46,729
  49,999
  53,422
  57,006
  60,761
  64,696
  68,821
  73,147
  77,686
Maintenance CAPEX, $m
  0
  -1,198
  -1,345
  -1,501
  -1,665
  -1,837
  -2,016
  -2,204
  -2,400
  -2,604
  -2,816
  -3,036
  -3,265
  -3,503
  -3,751
  -4,008
  -4,275
  -4,553
  -4,842
  -5,143
  -5,457
  -5,784
  -6,124
  -6,479
  -6,850
  -7,237
  -7,641
  -8,063
  -8,504
  -8,965
  -9,448
New CAPEX, $m
  -794
  -3,384
  -3,580
  -3,768
  -3,952
  -4,135
  -4,318
  -4,502
  -4,687
  -4,876
  -5,070
  -5,269
  -5,475
  -5,690
  -5,914
  -6,148
  -6,394
  -6,653
  -6,925
  -7,211
  -7,513
  -7,832
  -8,168
  -8,523
  -8,897
  -9,291
  -9,708
  -10,147
  -10,610
  -11,098
  -11,612
Cash from investing activities, $m
  1,441
  -4,582
  -4,925
  -5,269
  -5,617
  -5,972
  -6,334
  -6,706
  -7,087
  -7,480
  -7,886
  -8,305
  -8,740
  -9,193
  -9,665
  -10,156
  -10,669
  -11,206
  -11,767
  -12,354
  -12,970
  -13,616
  -14,292
  -15,002
  -15,747
  -16,528
  -17,349
  -18,210
  -19,114
  -20,063
  -21,060
Free cash flow, $m
  2,932
  -2,047
  -1,099
  -76
  1,015
  2,173
  3,396
  4,683
  6,033
  7,446
  8,924
  10,462
  12,070
  13,746
  15,493
  17,313
  19,210
  21,187
  23,249
  25,399
  27,644
  29,988
  32,437
  34,998
  37,676
  40,478
  43,412
  46,486
  49,707
  53,084
  56,626
Issuance/(repayment) of debt, $m
  -2,429
  1,482
  1,579
  1,661
  1,743
  1,823
  1,904
  1,985
  2,067
  2,150
  2,235
  2,323
  2,414
  2,509
  2,608
  2,711
  2,819
  2,933
  3,053
  3,180
  3,313
  3,453
  3,601
  3,758
  3,923
  4,097
  4,280
  4,474
  4,678
  4,893
  5,120
Issuance/(repurchase) of shares, $m
  0
  1,102
  98
  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 from financing (excl. dividends), $m  
  -2,429
  2,584
  1,677
  1,661
  1,743
  1,823
  1,904
  1,985
  2,067
  2,150
  2,235
  2,323
  2,414
  2,509
  2,608
  2,711
  2,819
  2,933
  3,053
  3,180
  3,313
  3,453
  3,601
  3,758
  3,923
  4,097
  4,280
  4,474
  4,678
  4,893
  5,120
Total cash flow (excl. dividends), $m
  503
  537
  578
  1,585
  2,758
  3,996
  5,300
  6,667
  8,100
  9,596
  11,159
  12,785
  14,484
  16,255
  18,101
  20,024
  22,029
  24,120
  26,302
  28,579
  30,957
  33,441
  36,039
  38,755
  41,598
  44,575
  47,693
  50,960
  54,385
  57,977
  61,746
Retained Cash Flow (-), $m
  -1,181
  -2,256
  -2,388
  -2,513
  -2,636
  -2,758
  -2,880
  -3,002
  -3,126
  -3,252
  -3,381
  -3,514
  -3,652
  -3,795
  -3,944
  -4,100
  -4,264
  -4,437
  -4,618
  -4,809
  -5,011
  -5,223
  -5,447
  -5,684
  -5,933
  -6,197
  -6,474
  -6,767
  -7,076
  -7,401
  -7,744
Prev. year cash balance distribution, $m
 
  139
  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
 
  -1,581
  -1,810
  -928
  122
  1,238
  2,420
  3,665
  4,974
  6,344
  7,778
  9,271
  10,833
  12,461
  14,157
  15,924
  17,765
  19,683
  21,684
  23,770
  25,946
  28,218
  30,591
  33,071
  35,665
  38,378
  41,218
  44,193
  47,309
  50,576
  54,002
Discount rate, %
 
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
 
  -1,505
  -1,634
  -790
  97
  922
  1,670
  2,328
  2,887
  3,341
  3,685
  3,918
  4,047
  4,074
  4,010
  3,865
  3,651
  3,383
  3,076
  2,744
  2,402
  2,063
  1,736
  1,432
  1,156
  914
  706
  533
  392
  282
  197
Current shareholders' claim on cash, %
  100
  96.0
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7
  95.7

Imperial Oil Limited is an integrated oil company. The Company is engaged in all the phases of the petroleum industry in Canada, including exploration for, and production and sale of, crude oil and natural gas. Its operations are conducted in three segments: Upstream, Downstream and Chemical. The Upstream operations include the exploration for, and production of, crude oil, natural gas, synthetic oil and bitumen. It holds an interest in the Kearl oil sands project. The Downstream operations consist of the transportation and refining of crude oil, blending of refined products and the distribution and marketing of those products. The Chemical operations consist of the manufacturing and marketing of various petrochemicals. The Company is involved in the exploration for and development of crude oil and natural gas in Canada. The Company transports its crude oil production and third-party crude oil required to supply refineries by contracted pipelines, common carrier pipelines and rail.

FINANCIAL RATIOS  of  Imperial Oil (IMO)

Valuation Ratios
P/E Ratio 16.8
Price to Sales 1.4
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 18
Price to Free Cash Flow 38.5
Growth Rates
Sales Growth Rate -5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -64.2%
Cap. Spend. - 3 Yr. Gr. Rate -29.8%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 20.1%
Total Debt to Equity 20.9%
Interest Coverage 35
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 8.1%
Return On Equity 8.9%
Return On Equity - 3 Yr. Avg. 10.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 13.6%
Gross Margin - 3 Yr. Avg. 16.3%
EBITDA Margin 16.3%
EBITDA Margin - 3 Yr. Avg. 15.4%
Operating Margin 2.4%
Oper. Margin - 3 Yr. Avg. 7.2%
Pre-Tax Margin 9.6%
Pre-Tax Margin - 3 Yr. Avg. 10.2%
Net Profit Margin 8.5%
Net Profit Margin - 3 Yr. Avg. 7.7%
Effective Tax Rate 11.4%
Eff/ Tax Rate - 3 Yr. Avg. 25.9%
Payout Ratio 22.7%

IMO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IMO stock intrinsic value calculation we used $18834 million for the last fiscal year's total revenue generated by Imperial Oil. The default revenue input number comes from 2016 income statement of Imperial Oil. 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 IMO stock valuation model: a) initial revenue growth rate of 12.3% 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 5%, whose default value for IMO is calculated based on our internal credit rating of Imperial Oil, 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 Imperial Oil.
    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 IMO stock the variable cost ratio is equal to 18.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15128 million in the base year in the intrinsic value calculation for IMO 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 Imperial Oil.

Corporate tax rate of 27% is the nominal tax rate for Imperial Oil. 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 IMO 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 IMO are equal to 146.3%.

Life of production assets of 23 years is the average useful life of capital assets used in Imperial Oil 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 IMO is equal to -0.9%. 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 - $18519 million for Imperial Oil - 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 844.156 million for Imperial Oil 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 Imperial Oil at the current share price and the inputted number of shares is $26.8 billion.

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COMPANY NEWS

▶ Imperial to hold 2017 Update Call   [Oct-18-17 04:30PM  CNW Group]
▶ These Integrated Energy Stocks Are Losing This Week   [Oct-05-17 01:07PM  Market Realist]
▶ Russia's Gazprom knocks US ExxonMobil to #9   [Sep-25-17 01:53PM  Yahoo Finance Video]
▶ Imperial Oil reports 2Q loss   [Jul-28-17 11:45PM  Associated Press]
▶ Third quarter dividend declaration   [07:56AM  CNW Group]
▶ Canada's Imperial Oil Posts Unexpected 2Q Loss   [Jul-27-17 08:00PM  Rigzone.com]
▶ ETFs with exposure to Imperial Oil Ltd. : June 1, 2017   [Jun-01-17 01:53PM  Capital Cube]
▶ These 3 Big Energy Stocks Could Be Turning Toxic   [May-26-17 11:29AM  TheStreet.com]
▶ ETFs with exposure to Imperial Oil Ltd. : May 18, 2017   [May-18-17 01:47PM  Capital Cube]
▶ Imperial provides update on Syncrude incident response   [Mar-27-17 07:55AM  PR Newswire]
▶ Imperial appoints senior vice-president, upstream   [Jan-31-17 03:10PM  PR Newswire]
▶ First quarter dividend declaration   [07:56AM  CNW Group]
▶ Is Imperial Oil Limited (USA) (IMO) A Good Stock To Buy?   [Dec-15-16 06:40PM  at Insider Monkey]
▶ Fourth quarter dividend declaration   [07:56AM  CNW Group]
Financial statements of IMO
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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