Intrinsic value of Canadian Natural Resources Limited - CNQ

Previous Close

$27.80

  Intrinsic Value

$5.17

stock screener

  Rating & Target

str. sell

-81%

Previous close

$27.80

 
Intrinsic value

$5.17

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of CNQ 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 0001), $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 33.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  20,928
  32,334
  48,355
  70,161
  98,987
  136,084
  182,665
  239,850
  308,629
  389,823
  484,072
  591,825
  713,348
  848,743
  997,971
  1,160,880
  1,337,237
  1,526,756
  1,729,130
  1,944,056
  2,171,252
  2,410,482
  2,661,563
  2,924,382
  3,198,899
  3,485,150
  3,783,256
  4,093,416
  4,415,912
  4,751,105
Variable operating expenses, $m
  9,397
  14,518
  21,711
  31,502
  44,445
  61,102
  82,016
  107,693
  138,574
  175,031
  217,348
  265,729
  320,293
  381,086
  448,089
  521,235
  600,419
  685,513
  776,380
  872,881
  974,892
  1,082,306
  1,195,042
  1,313,048
  1,436,306
  1,564,832
  1,698,682
  1,837,944
  1,982,745
  2,133,246
Fixed operating expenses, $m
  5,334
  5,451
  5,571
  5,694
  5,819
  5,947
  6,078
  6,211
  6,348
  6,488
  6,631
  6,776
  6,925
  7,078
  7,234
  7,393
  7,555
  7,722
  7,891
  8,065
  8,242
  8,424
  8,609
  8,799
  8,992
  9,190
  9,392
  9,599
  9,810
  10,026
Total operating expenses, $m
  14,731
  19,969
  27,282
  37,196
  50,264
  67,049
  88,094
  113,904
  144,922
  181,519
  223,979
  272,505
  327,218
  388,164
  455,323
  528,628
  607,974
  693,235
  784,271
  880,946
  983,134
  1,090,730
  1,203,651
  1,321,847
  1,445,298
  1,574,022
  1,708,074
  1,847,543
  1,992,555
  2,143,272
Operating income, $m
  6,198
  12,365
  21,073
  32,965
  48,723
  69,035
  94,570
  125,946
  163,706
  208,305
  260,093
  319,319
  386,129
  460,580
  542,649
  632,252
  729,262
  833,521
  944,859
  1,063,110
  1,188,117
  1,319,752
  1,457,912
  1,602,536
  1,753,601
  1,911,128
  2,075,182
  2,245,874
  2,423,358
  2,607,833
EBITDA, $m
  12,718
  22,439
  36,139
  54,826
  79,565
  111,436
  151,485
  200,678
  259,869
  329,766
  410,920
  503,719
  608,393
  725,030
  853,595
  993,958
  1,145,917
  1,309,226
  1,483,620
  1,668,837
  1,864,634
  2,070,807
  2,287,199
  2,513,712
  2,750,311
  2,997,027
  3,253,965
  3,521,296
  3,799,263
  4,088,178
Interest expense (income), $m
  457
  953
  2,030
  3,593
  5,789
  8,777
  12,727
  17,811
  24,194
  32,031
  41,456
  52,583
  65,499
  80,266
  96,919
  115,474
  135,924
  158,249
  182,417
  208,389
  236,122
  265,575
  296,710
  329,494
  363,903
  399,919
  437,539
  476,767
  517,619
  560,124
  604,319
Earnings before tax, $m
  5,245
  10,335
  17,480
  27,176
  39,946
  56,308
  76,760
  101,752
  131,675
  166,848
  207,510
  253,820
  305,864
  363,661
  427,175
  496,328
  571,013
  651,104
  736,471
  826,988
  922,542
  1,023,041
  1,128,418
  1,238,634
  1,353,682
  1,473,589
  1,598,415
  1,728,254
  1,863,234
  2,003,515
Tax expense, $m
  1,416
  2,790
  4,719
  7,338
  10,785
  15,203
  20,725
  27,473
  35,552
  45,049
  56,028
  68,531
  82,583
  98,188
  115,337
  134,009
  154,174
  175,798
  198,847
  223,287
  249,086
  276,221
  304,673
  334,431
  365,494
  397,869
  431,572
  466,629
  503,073
  540,949
Net income, $m
  3,829
  7,544
  12,760
  19,839
  29,161
  41,105
  56,034
  74,279
  96,123
  121,799
  151,482
  185,288
  223,280
  265,472
  311,838
  362,320
  416,840
  475,306
  537,624
  603,701
  673,456
  746,820
  823,745
  904,203
  988,188
  1,075,720
  1,166,843
  1,261,626
  1,360,161
  1,462,566

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  93,013
  143,706
  214,912
  311,826
  439,942
  604,818
  811,843
  1,066,001
  1,371,684
  1,732,549
  2,151,433
  2,630,333
  3,170,435
  3,772,192
  4,435,428
  5,159,468
  5,943,274
  6,785,581
  7,685,024
  8,640,248
  9,650,010
  10,713,252
  11,829,170
  12,997,255
  14,217,327
  15,489,556
  16,814,470
  18,192,960
  19,626,276
  21,116,023
Adjusted assets (=assets-cash), $m
  93,013
  143,706
  214,912
  311,826
  439,942
  604,818
  811,843
  1,066,001
  1,371,684
  1,732,549
  2,151,433
  2,630,333
  3,170,435
  3,772,192
  4,435,428
  5,159,468
  5,943,274
  6,785,581
  7,685,024
  8,640,248
  9,650,010
  10,713,252
  11,829,170
  12,997,255
  14,217,327
  15,489,556
  16,814,470
  18,192,960
  19,626,276
  21,116,023
Revenue / Adjusted assets
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
Average production assets, $m
  74,336
  114,850
  171,757
  249,211
  351,601
  483,371
  648,825
  851,948
  1,096,250
  1,384,653
  1,719,425
  2,102,162
  2,533,812
  3,014,736
  3,544,794
  4,123,446
  4,749,864
  5,423,037
  6,141,871
  6,905,286
  7,712,288
  8,562,031
  9,453,873
  10,387,406
  11,362,488
  12,379,253
  13,438,125
  14,539,814
  15,685,320
  16,875,925
Working capital, $m
  -649
  -1,002
  -1,499
  -2,175
  -3,069
  -4,219
  -5,663
  -7,435
  -9,567
  -12,085
  -15,006
  -18,347
  -22,114
  -26,311
  -30,937
  -35,987
  -41,454
  -47,329
  -53,603
  -60,266
  -67,309
  -74,725
  -82,508
  -90,656
  -99,166
  -108,040
  -117,281
  -126,896
  -136,893
  -147,284
Total debt, $m
  37,591
  66,537
  107,195
  162,533
  235,687
  329,832
  448,043
  593,167
  767,713
  973,766
  1,212,949
  1,486,401
  1,794,799
  2,138,402
  2,517,110
  2,930,537
  3,378,090
  3,859,048
  4,372,629
  4,918,063
  5,494,636
  6,101,748
  6,738,937
  7,405,913
  8,102,575
  8,829,017
  9,585,543
  10,372,661
  11,191,085
  12,041,730
Total liabilities, $m
  53,111
  82,056
  122,715
  178,053
  251,207
  345,351
  463,562
  608,687
  783,232
  989,285
  1,228,468
  1,501,920
  1,810,318
  2,153,922
  2,532,629
  2,946,056
  3,393,609
  3,874,567
  4,388,149
  4,933,582
  5,510,155
  6,117,267
  6,754,456
  7,421,433
  8,118,094
  8,844,537
  9,601,062
  10,388,180
  11,206,604
  12,057,249
Total equity, $m
  39,903
  61,650
  92,197
  133,773
  188,735
  259,467
  348,281
  457,314
  588,453
  743,263
  922,965
  1,128,413
  1,360,117
  1,618,270
  1,902,799
  2,213,412
  2,549,664
  2,911,014
  3,296,875
  3,706,667
  4,139,854
  4,595,985
  5,074,714
  5,575,822
  6,099,233
  6,645,020
  7,213,408
  7,804,780
  8,419,673
  9,058,774
Total liabilities and equity, $m
  93,014
  143,706
  214,912
  311,826
  439,942
  604,818
  811,843
  1,066,001
  1,371,685
  1,732,548
  2,151,433
  2,630,333
  3,170,435
  3,772,192
  4,435,428
  5,159,468
  5,943,273
  6,785,581
  7,685,024
  8,640,249
  9,650,009
  10,713,252
  11,829,170
  12,997,255
  14,217,327
  15,489,557
  16,814,470
  18,192,960
  19,626,277
  21,116,023
Debt-to-equity ratio
  0.940
  1.080
  1.160
  1.210
  1.250
  1.270
  1.290
  1.300
  1.300
  1.310
  1.310
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
  1.330
Adjusted equity ratio
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,829
  7,544
  12,760
  19,839
  29,161
  41,105
  56,034
  74,279
  96,123
  121,799
  151,482
  185,288
  223,280
  265,472
  311,838
  362,320
  416,840
  475,306
  537,624
  603,701
  673,456
  746,820
  823,745
  904,203
  988,188
  1,075,720
  1,166,843
  1,261,626
  1,360,161
  1,462,566
Depreciation, amort., depletion, $m
  6,521
  10,075
  15,066
  21,861
  30,842
  42,401
  56,914
  74,732
  96,162
  121,461
  150,827
  184,400
  222,264
  264,451
  310,947
  361,706
  416,655
  475,705
  538,761
  605,727
  676,516
  751,055
  829,287
  911,176
  996,709
  1,085,899
  1,178,783
  1,275,422
  1,375,905
  1,480,344
Funds from operations, $m
  10,349
  17,619
  27,827
  41,699
  60,003
  83,506
  112,949
  149,011
  192,285
  243,260
  302,309
  369,689
  445,545
  529,923
  622,785
  724,026
  833,494
  951,011
  1,076,384
  1,209,428
  1,349,972
  1,497,875
  1,653,032
  1,815,379
  1,984,897
  2,161,619
  2,345,626
  2,537,048
  2,736,066
  2,942,910
Change in working capital, $m
  -243
  -354
  -497
  -676
  -894
  -1,150
  -1,444
  -1,773
  -2,132
  -2,517
  -2,922
  -3,340
  -3,767
  -4,197
  -4,626
  -5,050
  -5,467
  -5,875
  -6,274
  -6,663
  -7,043
  -7,416
  -7,784
  -8,147
  -8,510
  -8,874
  -9,241
  -9,615
  -9,997
  -10,391
Cash from operations, $m
  10,593
  17,973
  28,323
  42,375
  60,896
  84,656
  114,393
  150,784
  194,417
  245,777
  305,231
  373,029
  449,312
  534,120
  627,411
  729,076
  838,961
  956,886
  1,082,658
  1,216,091
  1,357,015
  1,505,292
  1,660,816
  1,823,526
  1,993,407
  2,170,493
  2,354,867
  2,546,663
  2,746,064
  2,953,301
Maintenance CAPEX, $m
  -4,075
  -6,521
  -10,075
  -15,066
  -21,861
  -30,842
  -42,401
  -56,914
  -74,732
  -96,162
  -121,461
  -150,827
  -184,400
  -222,264
  -264,451
  -310,947
  -361,706
  -416,655
  -475,705
  -538,761
  -605,727
  -676,516
  -751,055
  -829,287
  -911,176
  -996,709
  -1,085,899
  -1,178,783
  -1,275,422
  -1,375,905
New CAPEX, $m
  -27,880
  -40,513
  -56,908
  -77,454
  -102,390
  -131,769
  -165,454
  -203,123
  -244,302
  -288,403
  -334,772
  -382,737
  -431,650
  -480,924
  -530,058
  -578,653
  -626,418
  -673,172
  -718,835
  -763,415
  -807,001
  -849,743
  -891,842
  -933,534
  -975,082
  -1,016,765
  -1,058,871
  -1,101,689
  -1,145,506
  -1,190,605
Cash from investing activities, $m
  -31,955
  -47,034
  -66,983
  -92,520
  -124,251
  -162,611
  -207,855
  -260,037
  -319,034
  -384,565
  -456,233
  -533,564
  -616,050
  -703,188
  -794,509
  -889,600
  -988,124
  -1,089,827
  -1,194,540
  -1,302,176
  -1,412,728
  -1,526,259
  -1,642,897
  -1,762,821
  -1,886,258
  -2,013,474
  -2,144,770
  -2,280,472
  -2,420,928
  -2,566,510
Free cash flow, $m
  -21,362
  -29,061
  -38,659
  -50,145
  -63,354
  -77,956
  -93,462
  -109,254
  -124,617
  -138,788
  -151,002
  -160,535
  -166,738
  -169,068
  -167,098
  -160,524
  -149,162
  -132,941
  -111,882
  -86,085
  -55,713
  -20,968
  17,919
  60,705
  107,149
  157,018
  210,096
  266,191
  325,135
  386,790
Issuance/(repayment) of debt, $m
  19,950
  28,945
  40,659
  55,338
  73,154
  94,145
  118,211
  145,124
  174,545
  206,054
  239,183
  273,452
  308,399
  343,603
  378,708
  413,427
  447,553
  480,958
  513,582
  545,433
  576,574
  607,111
  637,189
  666,977
  696,661
  726,443
  756,526
  787,118
  818,424
  850,645
Issuance/(repurchase) of shares, $m
  11,209
  14,203
  17,787
  21,737
  25,801
  29,627
  32,779
  34,755
  35,015
  33,011
  28,219
  20,160
  8,424
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  31,159
  43,148
  58,446
  77,075
  98,955
  123,772
  150,990
  179,879
  209,560
  239,065
  267,402
  293,612
  316,823
  343,603
  378,708
  413,427
  447,553
  480,958
  513,582
  545,433
  576,574
  607,111
  637,189
  666,977
  696,661
  726,443
  756,526
  787,118
  818,424
  850,645
Total cash flow (excl. dividends), $m
  9,797
  14,086
  19,787
  26,931
  35,601
  45,816
  57,528
  70,626
  84,943
  100,277
  116,400
  133,077
  150,084
  174,535
  211,610
  252,903
  298,391
  348,017
  401,700
  459,348
  520,861
  586,143
  655,108
  727,682
  803,811
  883,461
  966,622
  1,053,309
  1,143,558
  1,237,436
Retained Cash Flow (-), $m
  -15,038
  -21,747
  -30,547
  -41,576
  -54,961
  -70,732
  -88,814
  -109,034
  -131,138
  -154,811
  -179,701
  -205,448
  -231,704
  -258,154
  -284,528
  -310,613
  -336,253
  -361,350
  -385,861
  -409,791
  -433,188
  -456,131
  -478,729
  -501,109
  -523,411
  -545,786
  -568,388
  -591,372
  -614,893
  -639,101
Prev. year cash balance distribution, $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 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
  -5,241
  -7,661
  -10,761
  -14,646
  -19,361
  -24,916
  -31,286
  -38,408
  -46,195
  -54,534
  -63,302
  -72,371
  -81,620
  -83,619
  -72,918
  -57,710
  -37,862
  -13,333
  15,839
  49,557
  87,673
  130,012
  176,379
  226,573
  280,400
  337,675
  398,234
  461,936
  528,666
  598,334
Discount rate, %
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
  -4,949
  -6,793
  -8,907
  -11,244
  -13,694
  -16,118
  -18,366
  -20,293
  -21,773
  -22,715
  -23,070
  -22,832
  -22,040
  -19,095
  -13,903
  -9,064
  -4,828
  -1,360
  1,271
  3,076
  4,135
  4,571
  4,530
  4,162
  3,602
  2,963
  2,328
  1,753
  1,267
  880
Current shareholders' claim on cash, %
  74.9
  59.2
  48.7
  41.5
  36.3
  32.5
  29.7
  27.6
  26.1
  25.1
  24.4
  24.0
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9
  23.9

Canadian Natural Resources Limited is an independent crude oil and natural gas exploration, development and production company. The Company's segments include Exploration and Production, Oil Sands Mining and Upgrading, and Midstream. The Exploration and Production segment includes exploration, development, production and marketing of crude oil, natural gas liquids (NGLs) and natural gas. The Company's exploration and production operations are focused in North America in Western Canada, the United Kingdom portion of the North Sea, and Cote d'Ivoire, Gabon and South Africa in Offshore Africa. The Horizon Oil Sands Mining and Upgrading segment (Horizon) produces synthetic crude oil (SCO) through bitumen mining and upgrading operations. Midstream activities include the Company's pipeline operations, an electricity co-generation system and an investment in the North West Redwater Partnership (Redwater Partnership).

FINANCIAL RATIOS  of  Canadian Natural Resources Limited (CNQ)

Valuation Ratios
P/E Ratio -204.5
Price to Sales 4
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow -118.8
Growth Rates
Sales Growth Rate -14.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.7%
Cap. Spend. - 3 Yr. Gr. Rate -12.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 57.1%
Total Debt to Equity 64%
Interest Coverage -1
Management Effectiveness
Return On Assets -0.1%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital -0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity -0.8%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 42%
Gross Margin - 3 Yr. Avg. 46.5%
EBITDA Margin 41.9%
EBITDA Margin - 3 Yr. Avg. 47.1%
Operating Margin -12.1%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin -10.1%
Pre-Tax Margin - 3 Yr. Avg. 4%
Net Profit Margin -1.9%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 80.8%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio -371.5%

CNQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNQ stock intrinsic value calculation we used $13080 million for the last fiscal year's total revenue generated by Canadian Natural Resources Limited. The default revenue input number comes from 0001 income statement of Canadian Natural Resources Limited. 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 CNQ stock valuation model: a) initial revenue growth rate of 60% 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 5.9%, whose default value for CNQ is calculated based on our internal credit rating of Canadian Natural Resources Limited, 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 Canadian Natural Resources Limited.
    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 CNQ stock the variable cost ratio is equal to 44.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5219 million in the base year in the intrinsic value calculation for CNQ 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 5.4% for Canadian Natural Resources Limited.

Corporate tax rate of 27% is the nominal tax rate for Canadian Natural Resources Limited. 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 CNQ 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 CNQ are equal to 355.2%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Canadian Natural Resources Limited 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 CNQ is equal to -3.1%. 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 - $24864.8860958 million for Canadian Natural Resources Limited - 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 1202.381 million for Canadian Natural Resources Limited 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 Canadian Natural Resources Limited at the current share price and the inputted number of shares is $33.4 billion.

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