Intrinsic value of Suncor Energy - SU

Previous Close

$33.63

  Intrinsic Value

$4.95

stock screener

  Rating & Target

str. sell

-85%

  Value-price divergence*

-28%

Previous close

$33.63

 
Intrinsic value

$4.95

 
Up/down potential

-85%

 
Rating

str. sell

 
Value-price divergence*

-28%

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

We calculate the intrinsic value of SU 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 56.1

 

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, %
  -8.22
  22.50
  20.75
  19.18
  17.76
  16.48
  15.33
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
Revenue, $m
  19,841
  24,305
  29,349
  34,976
  41,187
  47,975
  55,332
  63,244
  71,700
  80,686
  90,191
  100,204
  110,717
  121,725
  133,226
  145,221
  157,715
  170,715
  184,233
  198,284
  212,885
  228,059
  243,829
  260,222
  277,269
  295,003
  313,460
  332,677
  352,696
  373,561
  395,318
Variable operating expenses, $m
 
  24,475
  29,554
  35,221
  41,475
  48,311
  55,719
  63,687
  72,202
  81,251
  90,823
  100,906
  111,492
  122,577
  134,159
  146,238
  158,819
  171,910
  185,522
  199,672
  214,375
  229,655
  245,536
  262,044
  279,210
  297,068
  315,654
  335,006
  355,165
  376,176
  398,086
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
  19,844
  24,475
  29,554
  35,221
  41,475
  48,311
  55,719
  63,687
  72,202
  81,251
  90,823
  100,906
  111,492
  122,577
  134,159
  146,238
  158,819
  171,910
  185,522
  199,672
  214,375
  229,655
  245,536
  262,044
  279,210
  297,068
  315,654
  335,006
  355,165
  376,176
  398,086
Operating income, $m
  -3
  -170
  -205
  -245
  -288
  -336
  -387
  -443
  -502
  -565
  -631
  -701
  -775
  -852
  -933
  -1,017
  -1,104
  -1,195
  -1,290
  -1,388
  -1,490
  -1,596
  -1,707
  -1,822
  -1,941
  -2,065
  -2,194
  -2,329
  -2,469
  -2,615
  -2,767
EBITDA, $m
  4,524
  5,390
  6,508
  7,756
  9,134
  10,639
  12,270
  14,025
  15,900
  17,893
  20,001
  22,221
  24,553
  26,994
  29,544
  32,204
  34,975
  37,858
  40,856
  43,972
  47,210
  50,575
  54,072
  57,707
  61,488
  65,420
  69,513
  73,775
  78,214
  82,841
  87,666
Interest expense (income), $m
  734
  727
  1,161
  1,651
  2,199
  2,803
  3,463
  4,178
  4,948
  5,770
  6,644
  7,568
  8,542
  9,564
  10,635
  11,753
  12,920
  14,135
  15,399
  16,714
  18,080
  19,500
  20,976
  22,509
  24,104
  25,761
  27,486
  29,281
  31,150
  33,097
  35,126
Earnings before tax, $m
  64
  -897
  -1,366
  -1,896
  -2,487
  -3,138
  -3,850
  -4,621
  -5,449
  -6,335
  -7,275
  -8,270
  -9,317
  -10,416
  -11,567
  -12,770
  -14,024
  -15,330
  -16,689
  -18,102
  -19,570
  -21,096
  -22,682
  -24,331
  -26,044
  -27,826
  -29,680
  -31,610
  -33,619
  -35,711
  -37,893
Tax expense, $m
  -265
  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
Net income, $m
  321
  -897
  -1,366
  -1,896
  -2,487
  -3,138
  -3,850
  -4,621
  -5,449
  -6,335
  -7,275
  -8,270
  -9,317
  -10,416
  -11,567
  -12,770
  -14,024
  -15,330
  -16,689
  -18,102
  -19,570
  -21,096
  -22,682
  -24,331
  -26,044
  -27,826
  -29,680
  -31,610
  -33,619
  -35,711
  -37,893

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,232
  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
  65,653
  77,652
  93,765
  111,745
  131,588
  153,276
  176,779
  202,058
  229,074
  257,784
  288,151
  320,141
  353,729
  388,899
  425,643
  463,965
  503,881
  545,415
  588,603
  633,494
  680,145
  728,622
  779,006
  831,381
  885,845
  942,502
  1,001,468
  1,062,865
  1,126,825
  1,193,486
  1,262,998
Adjusted assets (=assets-cash), $m
  63,421
  77,652
  93,765
  111,745
  131,588
  153,276
  176,779
  202,058
  229,074
  257,784
  288,151
  320,141
  353,729
  388,899
  425,643
  463,965
  503,881
  545,415
  588,603
  633,494
  680,145
  728,622
  779,006
  831,381
  885,845
  942,502
  1,001,468
  1,062,865
  1,126,825
  1,193,486
  1,262,998
Revenue / Adjusted assets
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
Average production assets, $m
  51,280
  62,829
  75,866
  90,413
  106,468
  124,016
  143,032
  163,486
  185,345
  208,575
  233,144
  259,028
  286,204
  314,660
  344,390
  375,397
  407,693
  441,298
  476,242
  512,563
  550,308
  589,532
  630,297
  672,674
  716,741
  762,583
  810,293
  859,970
  911,719
  965,655
  1,021,898
Working capital, $m
  2,148
  1,094
  1,321
  1,574
  1,853
  2,159
  2,490
  2,846
  3,227
  3,631
  4,059
  4,509
  4,982
  5,478
  5,995
  6,535
  7,097
  7,682
  8,290
  8,923
  9,580
  10,263
  10,972
  11,710
  12,477
  13,275
  14,106
  14,970
  15,871
  16,810
  17,789
Total debt, $m
  12,901
  19,030
  27,070
  36,042
  45,943
  56,766
  68,494
  81,108
  94,589
  108,915
  124,068
  140,031
  156,792
  174,341
  192,677
  211,800
  231,718
  252,443
  273,994
  296,395
  319,673
  343,864
  369,005
  395,140
  422,317
  450,590
  480,014
  510,651
  542,566
  575,830
  610,517
Total liabilities, $m
  32,620
  38,749
  46,789
  55,761
  65,662
  76,485
  88,213
  100,827
  114,308
  128,634
  143,787
  159,750
  176,511
  194,060
  212,396
  231,519
  251,437
  272,162
  293,713
  316,114
  339,392
  363,583
  388,724
  414,859
  442,036
  470,309
  499,733
  530,370
  562,285
  595,549
  630,236
Total equity, $m
  33,033
  38,904
  46,976
  55,984
  65,926
  76,791
  88,566
  101,231
  114,766
  129,150
  144,364
  160,391
  177,218
  194,838
  213,247
  232,447
  252,444
  273,253
  294,890
  317,381
  340,752
  365,040
  390,282
  416,522
  443,808
  472,194
  501,736
  532,496
  564,539
  597,936
  632,762
Total liabilities and equity, $m
  65,653
  77,653
  93,765
  111,745
  131,588
  153,276
  176,779
  202,058
  229,074
  257,784
  288,151
  320,141
  353,729
  388,898
  425,643
  463,966
  503,881
  545,415
  588,603
  633,495
  680,144
  728,623
  779,006
  831,381
  885,844
  942,503
  1,001,469
  1,062,866
  1,126,824
  1,193,485
  1,262,998
Debt-to-equity ratio
  0.391
  0.490
  0.580
  0.640
  0.700
  0.740
  0.770
  0.800
  0.820
  0.840
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.920
  0.930
  0.930
  0.940
  0.940
  0.950
  0.950
  0.950
  0.950
  0.960
  0.960
  0.960
  0.960
  0.960
Adjusted equity ratio
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501
  0.501

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  321
  -897
  -1,366
  -1,896
  -2,487
  -3,138
  -3,850
  -4,621
  -5,449
  -6,335
  -7,275
  -8,270
  -9,317
  -10,416
  -11,567
  -12,770
  -14,024
  -15,330
  -16,689
  -18,102
  -19,570
  -21,096
  -22,682
  -24,331
  -26,044
  -27,826
  -29,680
  -31,610
  -33,619
  -35,711
  -37,893
Depreciation, amort., depletion, $m
  4,527
  5,560
  6,714
  8,001
  9,422
  10,975
  12,658
  14,468
  16,402
  18,458
  20,632
  22,923
  25,328
  27,846
  30,477
  33,221
  36,079
  39,053
  42,145
  45,360
  48,700
  52,171
  55,779
  59,529
  63,428
  67,485
  71,707
  76,104
  80,683
  85,456
  90,433
Funds from operations, $m
  3,976
  4,663
  5,348
  6,105
  6,935
  7,837
  8,808
  9,847
  10,953
  12,123
  13,357
  14,653
  16,011
  17,430
  18,910
  20,451
  22,055
  23,723
  25,457
  27,258
  29,130
  31,075
  33,096
  35,198
  37,384
  39,659
  42,027
  44,494
  47,065
  49,745
  52,541
Change in working capital, $m
  -228
  201
  227
  253
  279
  305
  331
  356
  381
  404
  428
  451
  473
  495
  518
  540
  562
  585
  608
  632
  657
  683
  710
  738
  767
  798
  831
  865
  901
  939
  979
Cash from operations, $m
  4,204
  4,462
  5,121
  5,852
  6,656
  7,531
  8,477
  9,491
  10,572
  11,719
  12,929
  14,203
  15,538
  16,934
  18,392
  19,911
  21,493
  23,138
  24,848
  26,626
  28,473
  30,392
  32,386
  34,460
  36,617
  38,861
  41,197
  43,629
  46,164
  48,806
  51,561
Maintenance CAPEX, $m
  0
  -4,538
  -5,560
  -6,714
  -8,001
  -9,422
  -10,975
  -12,658
  -14,468
  -16,402
  -18,458
  -20,632
  -22,923
  -25,328
  -27,846
  -30,477
  -33,221
  -36,079
  -39,053
  -42,145
  -45,360
  -48,700
  -52,171
  -55,779
  -59,529
  -63,428
  -67,485
  -71,707
  -76,104
  -80,683
  -85,456
New CAPEX, $m
  -4,872
  -11,550
  -13,037
  -14,547
  -16,055
  -17,548
  -19,016
  -20,454
  -21,858
  -23,230
  -24,570
  -25,883
  -27,176
  -28,456
  -29,730
  -31,007
  -32,296
  -33,605
  -34,944
  -36,321
  -37,745
  -39,224
  -40,765
  -42,377
  -44,067
  -45,842
  -47,710
  -49,677
  -51,750
  -53,936
  -56,242
Cash from investing activities, $m
  -5,556
  -16,088
  -18,597
  -21,261
  -24,056
  -26,970
  -29,991
  -33,112
  -36,326
  -39,632
  -43,028
  -46,515
  -50,099
  -53,784
  -57,576
  -61,484
  -65,517
  -69,684
  -73,997
  -78,466
  -83,105
  -87,924
  -92,936
  -98,156
  -103,596
  -109,270
  -115,195
  -121,384
  -127,854
  -134,619
  -141,698
Free cash flow, $m
  -1,352
  -11,626
  -13,476
  -15,409
  -17,401
  -19,439
  -21,514
  -23,621
  -25,754
  -27,913
  -30,098
  -32,313
  -34,561
  -36,849
  -39,184
  -41,573
  -44,024
  -46,546
  -49,149
  -51,841
  -54,632
  -57,532
  -60,550
  -63,695
  -66,979
  -70,410
  -73,998
  -77,755
  -81,690
  -85,813
  -90,137
Issuance/(repayment) of debt, $m
  -125
  7,111
  8,040
  8,972
  9,902
  10,822
  11,728
  12,615
  13,481
  14,326
  15,153
  15,963
  16,761
  17,550
  18,335
  19,123
  19,918
  20,725
  21,551
  22,400
  23,279
  24,190
  25,141
  26,135
  27,177
  28,272
  29,424
  30,637
  31,916
  33,264
  34,686
Issuance/(repurchase) of shares, $m
  2,158
  8,018
  9,439
  10,904
  12,428
  14,004
  15,625
  17,286
  18,984
  20,719
  22,489
  24,297
  26,145
  28,036
  29,976
  31,969
  34,021
  36,138
  38,326
  40,592
  42,942
  45,384
  47,924
  50,571
  53,331
  56,212
  59,222
  62,369
  65,662
  69,109
  72,718
Cash from financing (excl. dividends), $m  
  2,032
  15,129
  17,479
  19,876
  22,330
  24,826
  27,353
  29,901
  32,465
  35,045
  37,642
  40,260
  42,906
  45,586
  48,311
  51,092
  53,939
  56,863
  59,877
  62,992
  66,221
  69,574
  73,065
  76,706
  80,508
  84,484
  88,646
  93,006
  97,578
  102,373
  107,404
Total cash flow (excl. dividends), $m
  624
  3,503
  4,003
  4,466
  4,929
  5,388
  5,838
  6,280
  6,711
  7,132
  7,543
  7,947
  8,344
  8,737
  9,128
  9,520
  9,915
  10,318
  10,729
  11,151
  11,589
  12,043
  12,516
  13,011
  13,529
  14,075
  14,648
  15,252
  15,888
  16,559
  17,268
Retained Cash Flow (-), $m
  -4,138
  -8,018
  -9,439
  -10,904
  -12,428
  -14,004
  -15,625
  -17,286
  -18,984
  -20,719
  -22,489
  -24,297
  -26,145
  -28,036
  -29,976
  -31,969
  -34,021
  -36,138
  -38,326
  -40,592
  -42,942
  -45,384
  -47,924
  -50,571
  -53,331
  -56,212
  -59,222
  -62,369
  -65,662
  -69,109
  -72,718
Prev. year cash balance distribution, $m
 
  1,250
  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
 
  -3,265
  -5,436
  -6,438
  -7,499
  -8,616
  -9,787
  -11,006
  -12,273
  -13,587
  -14,945
  -16,350
  -17,801
  -19,300
  -20,849
  -22,450
  -24,106
  -25,821
  -27,598
  -29,440
  -31,354
  -33,341
  -35,409
  -37,560
  -39,801
  -42,137
  -44,574
  -47,118
  -49,774
  -52,549
  -55,451
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
 
  -3,109
  -4,907
  -5,480
  -5,988
  -6,415
  -6,752
  -6,990
  -7,124
  -7,154
  -7,081
  -6,910
  -6,650
  -6,311
  -5,906
  -5,448
  -4,954
  -4,438
  -3,915
  -3,399
  -2,903
  -2,437
  -2,009
  -1,626
  -1,291
  -1,003
  -764
  -568
  -413
  -293
  -202
Current shareholders' claim on cash, %
  100
  87.1
  76.2
  67.0
  59.3
  52.7
  47.1
  42.2
  38.0
  34.4
  31.2
  28.4
  25.9
  23.7
  21.7
  19.9
  18.4
  16.9
  15.6
  14.5
  13.4
  12.4
  11.5
  10.7
  10.0
  9.3
  8.6
  8.1
  7.5
  7.0
  6.5

Suncor Energy Inc. (Suncor) is an integrated energy company. The Company is focused on developing Canada's petroleum resource basin, Athabasca oil sands. The Company operates in three business segments: Oil Sands, Exploration and Production (E&P), and Refining and Marketing. The Company's Oil Sands segment includes Oil Sands operations and Oil Sands ventures operations. Its E&P segment consists of offshore operations off the east coast of Canada and in the North Sea, and onshore assets in North America, Libya and Syria. The Company's Refining and Marketing segment is engaged in Refining and Supply, and Marketing operations. In addition, it explores for, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally. It transports and refines crude oil, and markets petroleum and petrochemical products primarily in Canada. It markets third-party petroleum products. Suncor also conducts energy trading activities.

FINANCIAL RATIOS  of  Suncor Energy (SU)

Valuation Ratios
P/E Ratio 174.7
Price to Sales 2.8
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 13.3
Price to Free Cash Flow -84
Growth Rates
Sales Growth Rate -8.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.3%
Cap. Spend. - 3 Yr. Gr. Rate -0.6%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 36.1%
Total Debt to Equity 39.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 6.7%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 0.7%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity 1%
Return On Equity - 3 Yr. Avg. 0.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 63.2%
Gross Margin - 3 Yr. Avg. 59.8%
EBITDA Margin 26.8%
EBITDA Margin - 3 Yr. Avg. 25.8%
Operating Margin -0%
Oper. Margin - 3 Yr. Avg. 4%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. 1.6%
Net Profit Margin 1.6%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate -414.1%
Eff/ Tax Rate - 3 Yr. Avg. -123.8%
Payout Ratio 432.7%

SU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SU stock intrinsic value calculation we used $19841 million for the last fiscal year's total revenue generated by Suncor Energy. The default revenue input number comes from 2016 income statement of Suncor 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 SU stock valuation model: a) initial revenue growth rate of 22.5% 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 SU is calculated based on our internal credit rating of Suncor 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 Suncor 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 SU stock the variable cost ratio is equal to 100.7%.

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 SU 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 6.1% for Suncor Energy.

Corporate tax rate of 27% is the nominal tax rate for Suncor 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 SU 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 SU are equal to 258.5%.

Life of production assets of 11.3 years is the average useful life of capital assets used in Suncor 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 SU is equal to 4.5%. 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 - $33033 million for Suncor 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 1668.68 million for Suncor 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 Suncor Energy at the current share price and the inputted number of shares is $56.1 billion.

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COMPANY NEWS

▶ PRESS DIGEST- Canada - Oct 16   [07:49AM  Reuters]
▶ Suncor Energy: The Only Integrated Energy Loser This Week   [Oct-12-17 01:35PM  Market Realist]
▶ Goldman Sachs' Six Favorite Energy Stocks   [10:02AM  Barrons.com]
▶ Suncors 50-DMA Crosses over Its 200-DMA   [Sep-28-17 07:39AM  Market Realist]
▶ Stocks To Watch: Suncor Energy Sees RS Rating Rise To 84   [03:00AM  Investor's Business Daily]
▶ Another Oil Giant Sees Value in an Unexpected Place   [Sep-21-17 04:33PM  Motley Fool]
▶ Stocks Up, Nikkei 225 Soars; Can Royal Dutch Shell, Chevron Lead Upside?   [Sep-19-17 03:30PM  Investor's Business Daily]
▶ Why Has Short Interest in ExxonMobil Risen?   [Sep-14-17 10:36AM  Market Realist]
▶ What ExxonMobils Valuations Reveal Today   [09:06AM  Market Realist]
▶ How Does Suncors Dividend Yield Rank among Top Peers?   [Sep-06-17 02:06PM  Market Realist]
▶ Aveva Chairman Says 'Pretty Confident' on Schneider Deal   [Sep-05-17 06:59AM  Bloomberg Video]
▶ Why I Love Suncor Energy Inc.   [Aug-23-17 12:21PM  Motley Fool]
▶ Canadas Oil Industry Doomed If Prices Fall Lower   [Aug-20-17 07:00PM  Oilprice.com]
▶ [$$] A Gusher of Cash at Suncor   [Aug-08-17 12:37AM  The Wall Street Journal]
▶ [$$] A Gusher of Cash at Suncor   [Aug-07-17 11:08AM  The Wall Street Journal]
▶ Rick George, Suncor CEO for Decades, Dies at 67   [Aug-02-17 03:57PM  Fortune]
▶ 5 Companies To Watch As Oil Rebounds   [Jul-31-17 07:30PM  Oilprice.com]
▶ Suncor Energy misses Street 2Q forecasts   [Jul-26-17 11:33PM  Associated Press]
▶ Suncor Energy declares dividend   [07:30PM  Marketwired]
▶ Funds That Go Moatless   [Jul-24-17 07:00AM  Morningstar]
▶ 3 Oil Stocks I'd Buy Right Now   [10:30AM  Motley Fool]
▶ Is Suncors 2Q17 Segmental Outlook Positive?   [Jul-18-17 09:11AM  Market Realist]
▶ Suncors 2Q17 Estimates: What to Expect   [07:44AM  Market Realist]
▶ Here's Why the Best Is Yet to Come for Suncor Energy   [Jul-17-17 11:04AM  Motley Fool]
▶ Suncor Energy releases 2017 Report on Sustainability   [Jul-13-17 06:30AM  Marketwired]
▶ Suncor Energy Inc.'s Most Brilliant Moves in 2017 So Far   [Jul-05-17 10:00PM  Motley Fool]
▶ Markets Overcome The Crash: Oil Rally Continues   [Jul-04-17 03:00PM  Oilprice.com]
▶ [$$] Oil Company Wins Over Investors by Promising to Stop Looking for Oil   [Jul-02-17 11:35PM  The Wall Street Journal]
▶ [$$] Oil Company Wins Over Investors by Promising to Stop Looking for Oil   [Jul-01-17 08:03AM  The Wall Street Journal]
▶ 3 Things You Didn't Know About Suncor Energy Inc.   [Jun-30-17 11:16AM  Motley Fool]
▶ 5 Things You Didn't Know About Teck Resources Ltd   [Jun-23-17 11:28AM  Motley Fool]
▶ How Teck Resources Ltd. Makes Most of Its Money   [Jun-22-17 10:00AM  Motley Fool]
Financial statements of SU
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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