Intrinsic value of Suncor Energy - SU

Previous Close

$30.96

  Intrinsic Value

$5.05

stock screener

  Rating & Target

str. sell

-84%

  Value-price divergence*

-70%

Previous close

$30.96

 
Intrinsic value

$5.05

 
Up/down potential

-84%

 
Rating

str. sell

 
Value-price divergence*

-70%

*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 50.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -8.22
  38.50
  35.15
  32.14
  29.42
  26.98
  24.78
  22.80
  21.02
  19.42
  17.98
  16.68
  15.51
  14.46
  13.52
  12.66
  11.90
  11.21
  10.59
  10.03
  9.53
  9.07
  8.67
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
Revenue, $m
  19,841
  27,480
  37,139
  49,074
  63,512
  80,647
  100,632
  123,580
  149,560
  178,605
  210,716
  245,865
  284,005
  325,076
  369,011
  415,741
  465,203
  517,342
  572,112
  629,484
  689,445
  751,997
  817,161
  884,977
  955,502
  1,028,810
  1,104,993
  1,184,159
  1,266,435
  1,351,960
  1,440,891
Variable operating expenses, $m
 
  27,672
  37,399
  49,417
  63,956
  81,211
  101,337
  124,445
  150,607
  179,855
  212,191
  247,586
  285,993
  327,351
  371,594
  418,651
  468,460
  520,963
  576,117
  633,890
  694,271
  757,261
  822,881
  891,172
  962,190
  1,036,011
  1,112,728
  1,192,449
  1,275,300
  1,361,424
  1,450,977
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
  27,672
  37,399
  49,417
  63,956
  81,211
  101,337
  124,445
  150,607
  179,855
  212,191
  247,586
  285,993
  327,351
  371,594
  418,651
  468,460
  520,963
  576,117
  633,890
  694,271
  757,261
  822,881
  891,172
  962,190
  1,036,011
  1,112,728
  1,192,449
  1,275,300
  1,361,424
  1,450,977
Operating income, $m
  -3
  -192
  -260
  -344
  -445
  -565
  -704
  -865
  -1,047
  -1,250
  -1,475
  -1,721
  -1,988
  -2,276
  -2,583
  -2,910
  -3,256
  -3,621
  -4,005
  -4,406
  -4,826
  -5,264
  -5,720
  -6,195
  -6,689
  -7,202
  -7,735
  -8,289
  -8,865
  -9,464
  -10,086
EBITDA, $m
  4,524
  6,094
  8,236
  10,883
  14,084
  17,884
  22,316
  27,405
  33,166
  39,608
  46,729
  54,523
  62,981
  72,089
  81,832
  92,195
  103,164
  114,726
  126,872
  139,595
  152,892
  166,764
  181,215
  196,254
  211,893
  228,150
  245,044
  262,600
  280,846
  299,812
  319,533
Interest expense (income), $m
  734
  727
  1,470
  2,409
  3,570
  4,974
  6,640
  8,584
  10,815
  13,342
  16,166
  19,289
  22,707
  26,416
  30,411
  34,683
  39,228
  44,038
  49,108
  54,435
  60,014
  65,845
  71,928
  78,265
  84,860
  91,719
  98,848
  106,257
  113,956
  121,957
  130,274
Earnings before tax, $m
  64
  -919
  -1,730
  -2,752
  -4,014
  -5,538
  -7,344
  -9,449
  -11,862
  -14,592
  -17,641
  -21,010
  -24,695
  -28,692
  -32,994
  -37,593
  -42,484
  -47,659
  -53,113
  -58,841
  -64,840
  -71,109
  -77,648
  -84,460
  -91,549
  -98,921
  -106,583
  -114,546
  -122,821
  -131,421
  -140,360
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
  -919
  -1,730
  -2,752
  -4,014
  -5,538
  -7,344
  -9,449
  -11,862
  -14,592
  -17,641
  -21,010
  -24,695
  -28,692
  -32,994
  -37,593
  -42,484
  -47,659
  -53,113
  -58,841
  -64,840
  -71,109
  -77,648
  -84,460
  -91,549
  -98,921
  -106,583
  -114,546
  -122,821
  -131,421
  -140,360

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
  87,795
  118,655
  156,784
  202,913
  257,657
  321,508
  394,823
  477,826
  570,623
  673,213
  785,510
  907,364
  1,038,581
  1,178,948
  1,328,246
  1,486,273
  1,652,848
  1,827,833
  2,011,131
  2,202,699
  2,402,545
  2,610,739
  2,827,404
  3,052,722
  3,286,932
  3,530,328
  3,783,257
  4,046,118
  4,319,361
  4,603,484
Adjusted assets (=assets-cash), $m
  63,421
  87,795
  118,655
  156,784
  202,913
  257,657
  321,508
  394,823
  477,826
  570,623
  673,213
  785,510
  907,364
  1,038,581
  1,178,948
  1,328,246
  1,486,273
  1,652,848
  1,827,833
  2,011,131
  2,202,699
  2,402,545
  2,610,739
  2,827,404
  3,052,722
  3,286,932
  3,530,328
  3,783,257
  4,046,118
  4,319,361
  4,603,484
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
  71,035
  96,004
  126,855
  164,178
  208,472
  260,134
  319,453
  386,612
  461,694
  544,700
  635,560
  734,152
  840,321
  953,893
  1,074,691
  1,202,551
  1,337,328
  1,478,909
  1,627,216
  1,782,214
  1,943,912
  2,112,362
  2,287,666
  2,469,973
  2,659,473
  2,856,406
  3,061,052
  3,273,735
  3,494,817
  3,724,702
Working capital, $m
  2,148
  1,237
  1,671
  2,208
  2,858
  3,629
  4,528
  5,561
  6,730
  8,037
  9,482
  11,064
  12,780
  14,628
  16,605
  18,708
  20,934
  23,280
  25,745
  28,327
  31,025
  33,840
  36,772
  39,824
  42,998
  46,296
  49,725
  53,287
  56,990
  60,838
  64,840
Total debt, $m
  12,901
  24,091
  39,490
  58,516
  81,534
  108,852
  140,714
  177,298
  218,716
  265,022
  316,214
  372,251
  433,055
  498,533
  568,576
  643,076
  721,931
  805,052
  892,370
  983,835
  1,079,428
  1,179,151
  1,283,040
  1,391,155
  1,503,589
  1,620,460
  1,741,915
  1,868,126
  1,999,294
  2,135,642
  2,277,420
Total liabilities, $m
  32,620
  43,810
  59,209
  78,235
  101,253
  128,571
  160,433
  197,017
  238,435
  284,741
  335,933
  391,970
  452,774
  518,252
  588,295
  662,795
  741,650
  824,771
  912,089
  1,003,554
  1,099,147
  1,198,870
  1,302,759
  1,410,874
  1,523,308
  1,640,179
  1,761,634
  1,887,845
  2,019,013
  2,155,361
  2,297,139
Total equity, $m
  33,033
  43,985
  59,446
  78,549
  101,659
  129,086
  161,076
  197,806
  239,391
  285,882
  337,280
  393,541
  454,589
  520,329
  590,653
  665,451
  744,623
  828,077
  915,744
  1,007,577
  1,103,552
  1,203,675
  1,307,980
  1,416,529
  1,529,414
  1,646,753
  1,768,694
  1,895,412
  2,027,105
  2,164,000
  2,306,346
Total liabilities and equity, $m
  65,653
  87,795
  118,655
  156,784
  202,912
  257,657
  321,509
  394,823
  477,826
  570,623
  673,213
  785,511
  907,363
  1,038,581
  1,178,948
  1,328,246
  1,486,273
  1,652,848
  1,827,833
  2,011,131
  2,202,699
  2,402,545
  2,610,739
  2,827,403
  3,052,722
  3,286,932
  3,530,328
  3,783,257
  4,046,118
  4,319,361
  4,603,485
Debt-to-equity ratio
  0.391
  0.550
  0.660
  0.740
  0.800
  0.840
  0.870
  0.900
  0.910
  0.930
  0.940
  0.950
  0.950
  0.960
  0.960
  0.970
  0.970
  0.970
  0.970
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.990
  0.990
  0.990
  0.990
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
  -919
  -1,730
  -2,752
  -4,014
  -5,538
  -7,344
  -9,449
  -11,862
  -14,592
  -17,641
  -21,010
  -24,695
  -28,692
  -32,994
  -37,593
  -42,484
  -47,659
  -53,113
  -58,841
  -64,840
  -71,109
  -77,648
  -84,460
  -91,549
  -98,921
  -106,583
  -114,546
  -122,821
  -131,421
  -140,360
Depreciation, amort., depletion, $m
  4,527
  6,286
  8,496
  11,226
  14,529
  18,449
  23,021
  28,270
  34,213
  40,858
  48,204
  56,244
  64,969
  74,365
  84,415
  95,105
  106,420
  118,348
  130,877
  144,001
  157,718
  172,028
  186,935
  202,448
  218,582
  235,352
  252,779
  270,890
  289,711
  309,276
  329,620
Funds from operations, $m
  3,976
  5,367
  6,766
  8,474
  10,515
  12,911
  15,676
  18,822
  22,351
  26,266
  30,562
  35,234
  40,274
  45,673
  51,422
  57,512
  63,936
  70,688
  77,764
  85,161
  92,878
  100,919
  109,286
  117,988
  127,033
  136,431
  146,196
  156,344
  166,890
  177,855
  189,259
Change in working capital, $m
  -228
  344
  435
  537
  650
  771
  899
  1,033
  1,169
  1,307
  1,445
  1,582
  1,716
  1,848
  1,977
  2,103
  2,226
  2,346
  2,465
  2,582
  2,698
  2,815
  2,932
  3,052
  3,174
  3,299
  3,428
  3,563
  3,702
  3,849
  4,002
Cash from operations, $m
  4,204
  5,023
  6,332
  7,937
  9,865
  12,140
  14,777
  17,789
  21,182
  24,959
  29,117
  33,652
  38,558
  43,825
  49,445
  55,409
  61,711
  68,342
  75,299
  82,579
  90,180
  98,104
  106,354
  114,936
  123,859
  133,132
  142,768
  152,781
  163,188
  174,007
  185,257
Maintenance CAPEX, $m
  0
  -4,538
  -6,286
  -8,496
  -11,226
  -14,529
  -18,449
  -23,021
  -28,270
  -34,213
  -40,858
  -48,204
  -56,244
  -64,969
  -74,365
  -84,415
  -95,105
  -106,420
  -118,348
  -130,877
  -144,001
  -157,718
  -172,028
  -186,935
  -202,448
  -218,582
  -235,352
  -252,779
  -270,890
  -289,711
  -309,276
New CAPEX, $m
  -4,872
  -19,756
  -24,969
  -30,851
  -37,323
  -44,294
  -51,662
  -59,319
  -67,158
  -75,082
  -83,006
  -90,860
  -98,592
  -106,169
  -113,571
  -120,798
  -127,860
  -134,777
  -141,581
  -148,307
  -154,998
  -161,697
  -168,450
  -175,305
  -182,306
  -189,501
  -196,933
  -204,646
  -212,682
  -221,082
  -229,885
Cash from investing activities, $m
  -5,556
  -24,294
  -31,255
  -39,347
  -48,549
  -58,823
  -70,111
  -82,340
  -95,428
  -109,295
  -123,864
  -139,064
  -154,836
  -171,138
  -187,936
  -205,213
  -222,965
  -241,197
  -259,929
  -279,184
  -298,999
  -319,415
  -340,478
  -362,240
  -384,754
  -408,083
  -432,285
  -457,425
  -483,572
  -510,793
  -539,161
Free cash flow, $m
  -1,352
  -19,271
  -24,923
  -31,410
  -38,684
  -46,683
  -55,334
  -64,551
  -74,246
  -84,337
  -94,747
  -105,411
  -116,279
  -127,313
  -138,492
  -149,804
  -161,255
  -172,855
  -184,629
  -196,606
  -208,820
  -221,312
  -234,124
  -247,303
  -260,895
  -274,950
  -289,516
  -304,644
  -320,384
  -336,787
  -353,904
Issuance/(repayment) of debt, $m
  -125
  12,172
  15,399
  19,027
  23,018
  27,318
  31,862
  36,584
  41,419
  46,306
  51,192
  56,036
  60,805
  65,477
  70,043
  74,500
  78,855
  83,121
  87,317
  91,466
  95,592
  99,724
  103,889
  108,116
  112,434
  116,871
  121,455
  126,212
  131,168
  136,348
  141,777
Issuance/(repurchase) of shares, $m
  2,158
  13,122
  17,190
  21,855
  27,124
  32,965
  39,334
  46,179
  53,447
  61,083
  69,039
  77,271
  85,744
  94,432
  103,317
  112,392
  121,655
  131,114
  140,780
  150,673
  160,815
  171,232
  181,953
  193,009
  204,433
  216,260
  228,524
  241,263
  254,514
  268,315
  282,706
Cash from financing (excl. dividends), $m  
  2,032
  25,294
  32,589
  40,882
  50,142
  60,283
  71,196
  82,763
  94,866
  107,389
  120,231
  133,307
  146,549
  159,909
  173,360
  186,892
  200,510
  214,235
  228,097
  242,139
  256,407
  270,956
  285,842
  301,125
  316,867
  333,131
  349,979
  367,475
  385,682
  404,663
  424,483
Total cash flow (excl. dividends), $m
  624
  6,023
  7,666
  9,472
  11,459
  13,599
  15,861
  18,212
  20,619
  23,052
  25,485
  27,896
  30,270
  32,596
  34,869
  37,088
  39,256
  41,379
  43,468
  45,534
  47,588
  49,644
  51,718
  53,822
  55,972
  58,181
  60,463
  62,831
  65,298
  67,877
  70,580
Retained Cash Flow (-), $m
  -4,138
  -13,122
  -17,190
  -21,855
  -27,124
  -32,965
  -39,334
  -46,179
  -53,447
  -61,083
  -69,039
  -77,271
  -85,744
  -94,432
  -103,317
  -112,392
  -121,655
  -131,114
  -140,780
  -150,673
  -160,815
  -171,232
  -181,953
  -193,009
  -204,433
  -216,260
  -228,524
  -241,263
  -254,514
  -268,315
  -282,706
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
 
  -5,849
  -9,524
  -12,383
  -15,666
  -19,366
  -23,472
  -27,967
  -32,828
  -38,031
  -43,554
  -49,375
  -55,474
  -61,836
  -68,449
  -75,304
  -82,400
  -89,734
  -97,312
  -105,140
  -113,228
  -121,588
  -130,235
  -139,187
  -148,462
  -158,079
  -168,062
  -178,433
  -189,216
  -200,439
  -212,126
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
 
  -5,570
  -8,598
  -10,542
  -12,508
  -14,419
  -16,194
  -17,762
  -19,055
  -20,025
  -20,634
  -20,867
  -20,723
  -20,219
  -19,389
  -18,276
  -16,934
  -15,423
  -13,804
  -12,139
  -10,483
  -8,887
  -7,391
  -6,026
  -4,814
  -3,764
  -2,879
  -2,151
  -1,569
  -1,116
  -773
Current shareholders' claim on cash, %
  100
  78.8
  62.8
  50.6
  41.3
  34.1
  28.4
  23.9
  20.3
  17.4
  15.1
  13.1
  11.5
  10.1
  8.9
  8.0
  7.1
  6.4
  5.7
  5.2
  4.7
  4.3
  3.9
  3.5
  3.2
  3.0
  2.7
  2.5
  2.3
  2.1
  1.9

Suncor Energy Inc. operates as an integrated energy company. The company primarily focuses on developing petroleum resource basins in Canada's Athabasca oil sands; explores, acquires, develops, produces, and markets crude oil and natural gas in Canada and internationally; transports and refines crude oil; markets petroleum and petrochemical products primarily in Canada; and markets third party petroleum products. It operates in Oil Sands; Exploration and Production; Refining and Marketing; and Corporate, Energy Trading, and Eliminations segments. The Oil Sands segment recovers bitumen from mining and in situ development in northern Alberta, and upgrades it into refinery feedstock and diesel fuel or blends the bitumen with diluent for direct sale to market. The Exploration and Production segment is involved in offshore operations off the east coast of Canada and in the North Sea; and operating onshore assets in North America, Libya, and Syria. The Refining and Marketing segment refines crude oil and intermediate feedstock into petroleum and petrochemical products; manufactures blends; and markets refined petroleum products to retail, commercial, and industrial customers through its dealers and other retail stations. The Corporate, Energy Trading, and Eliminations segment owns interest in six wind power projects with generating capacity of 287 megawatts in Canada; and ethanol plant in Ontario, as well as engages in marketing, supply, and trading crude oil, natural gas, power, and byproducts. The company was formerly known as Suncor Inc. and changed its name to Suncor Energy Inc. in April 1997. Suncor Energy Inc. was founded in 1953 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Suncor Energy (SU)

Valuation Ratios
P/E Ratio 160.9
Price to Sales 2.6
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 12.3
Price to Free Cash Flow -77.3
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 38.5% 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 1633.92 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 $50.6 billion.

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TOT Total ADR 50.35 10.00  str.sell
STO Statoil ADR 18.27 11.75  sell
ENB Enbridge 39.29 237.94  str.buy

COMPANY NEWS

▶ 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]
▶ How Suncor Energy Inc. Makes Most of Its Money   [Jun-19-17 05:15PM  Motley Fool]
▶ Oil Pipelines To Be Inspected By Robots   [Jun-10-17 07:00PM  Oilprice.com]
▶ Suncor's Management Is Undeterred by Its Recent Setback   [Jun-09-17 08:22AM  Motley Fool]
▶ A Look at BPs Dividend Yield   [07:37AM  Market Realist]
▶ Where Do Analyst Ratings for SU, TOT, E, and PBR Stand?   [Jun-01-17 07:35AM  Market Realist]
▶ TOT, E, SU, and PBR: Did Their Short Interest Surge in 2Q17?   [May-30-17 10:37AM  Market Realist]
▶ TOT, SU, E, and PBR: Comparing Their Dividend Yields   [May-29-17 10:37AM  Market Realist]
▶ Canada And Brazil Could Jeopardize Oil Market Balance   [May-22-17 06:00PM  Oilprice.com]
▶ How TECKs Debt Reduction Strategy Differs from Other Miners   [May-16-17 10:38AM  Market Realist]
▶ Suncor Is Looking for an Oil Sands Deal   [May-11-17 09:15AM  Motley Fool]
▶ Is The Market Ignoring OPEC?   [May-09-17 03:04PM  Oilprice.com]
▶ A Sobering Look At The Future Of Oil   [May-08-17 06:00PM  Oilprice.com]
Stock chart of SU 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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