20 Mar

Why Suncor Stock Is Trading at High Valuations

WRITTEN BY Maitali Ramkumar

Suncor’s valuations

Suncor Energy (SU) is trading at a forward PE multiple of 17.3x, higher than the peer average of 13.1x. ExxonMobil (XOM), Chevron (CVX), and PetroChina (PTR) are also trading above the peer average at 17.5x, 16.8x, and 15.5x, respectively. In contrast, Royal Dutch Shell (RDS.A), BP (BP), Total (TOT), and Petrobras (PBR) are trading below the peer average at 11.5x, 12.6x, 10.6x, and 12.1x, respectively.

Suncor is trading at a forward enterprise value-to-EBITDA multiple of 6.8x, again above the peer average of 5.0x.

Why Suncor Stock Is Trading at High Valuations

Why the premium over its peers?

Suncor’s trading above the peer averages is likely the result of its robust financials and rising upstream volumes.

In 2018, Suncor’s adjusted earnings rose 35% to 4.3 billion Canadian dollars. The company’s cash flow from operations also rose 18% to 10.6 billion Canadian dollars. Its total debt-to-total capital ratio of 28% also stood below the global industry average, indicating a favorable position. The company also provided high shareholder returns in 2018, as we discussed in the previous article.

Suncor has a growing upstream portfolio. The company is expected to see a ~10% rise in its hydrocarbon volumes in 2019. Suncor expects first oil from its major upstream project, Oda, in the second quarter of 2019, earlier than scheduled.

In the fourth quarter of 2018, oil sand volumes touched new highs of 741 Mbpd (thousand barrels per day) due to higher utilization at Fort Hills and record output at Syncrude. Hebron’s fourth production well also completed in the fourth quarter of 2018, further ramping up volumes.

It’s no surprise that with Suncor’s sound financials, rising shareholder returns, and expanding upstream portfolio, its stock is trading at higher valuations than those of its peers.

In the next article, we’ll discuss Suncor stock’s performance.

Latest articles

Today, Canopy Growth announced that it acquired the Saskatchewan-based KeyLeaf Life Sciences along with entities relating to the company and its intellectual property. Here's what you need to know about the completed deal.

Yesterday, Tyson Foods (TSN) and fellow meat producers Pilgrim’s Pride (PPC) and Sanderson Farms (SAFM) took a hit to their stocks after news came out about an investigation over price-fixing allegations.

On June 24, RH (RH) was trading at $115.01, implying a rise of 21.2% since its announcement of its first-quarter earnings results on June 12. Despite the surge in its stock price, the company is still trading at a discount of 29.1% to its 52-week high.

26 Jun

Roku Stock Fell Close to 7.0% Yesterday

WRITTEN BY Aditya Raghunath

Roku stock fell 6.8% yesterday to close trading at $93.25 per share. Roku stock has lost over 9.0% in market value in the last two trading days. Prior to this pullback, Roku stock was up a whopping 235.0% year-to-date.

26 Jun

Beyond Meat Stock Up Today on New Product Launch

WRITTEN BY Rajiv Nanjapla

Today, Beyond Meat (BYND) announced that its new product, Beyond Beef, will hit markets across the US later this week.

FedEx (FDX) ended fiscal 2019 on a dismal note and reported a significant YoY decline in fourth-quarter earnings. The delivery giant posted adjusted EPS of $5.01, which was 15.2% lower than the year-ago quarter’s earnings of $5.91. The company cited sluggish revenue growth and increased expenses as the main reason behind the dismal bottom-line performance.