Today we are looking at Suncor Energy Inc. (NYSE: SU), to determine if you should buy SU stock. We will look at SU financial ratios, analyst ratings, and current valuation to determine a SU forecast and price.
What Does SU Do?
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, transports, refines, and markets crude oil in Canada and internationally; markets petroleum and petrochemical products under the Petro-Canada name primarily in Canada. It operates through Oil Sands; Exploration and Production; Refining and Marketing; and Corporate and Eliminations segments.
SU Stock Analysis and Forecast
Suncor Energy Inc. Competition and Comparables
In order to undergo a comparable analysis (to determine SU stocks value), we need to first outline who SU’s competitors are.
These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to SU, and have a market cap similar to SU (if possible).
By keeping this in mind, I found the following list of companies to be some of SU stocks closest competitors:
KMI, PSX, WMB, MPC, VLO, DVN, MPLX, OXY, TRP, ET
SU Stock News and Information
Analysis of Suncor Inc. Stock Performance and Financial Ratios
- SU Revenues: In FY 2021, SU experienced a yearly increase in revenues of $14.47B (or 58.67%) resulting in a total revenue figure of $39.13B.
- SU Cost of Revenues: In FY 2021, SU experienced a yearly increase in their cost of revenues of $1B (5.38%), resulting in a total revenue figure of $19.64B. Since the increase (of 5.38%), in SU’s cost of revenue was lesser (by -53.29%) than the increase (of 58.67%) in SU’s revenues, we should expect that SU experienced an increase (roughly 53.29%) in their FY gross profits.
- SU Gross Profit: In FY 2021, SU experienced a yearly increase in their gross profit of $13.47B (or 223.56%) resulting in a total gross profit of $19.49B. This increase is somewhat consistent with our conclusion from the comparison of revenues and cost of revenues between FY and FY.
- SU EBITDA: In FY 2021, SU experienced a yearly increase in their EBITDA of $7.94B (or 167.45%) resulting in a total EBITDA of $12.69B. This increase (of 167.45%) stems from the fact that SU experienced a increase in their gross profits of 223.56% (as we saw in the previous bullet point).
Overall, Suncor had a great financial performance in 2021, however how has Suncor fared in more recent times?
- SU Revenues: In Q1 2022, SU experienced a quarterly increase in revenues of $2.34B (or 20.97%) resulting in a total revenue figure of $13.49B.
- SU EBITDA: In Q1 2022, SU experienced a quarterly increase in their EBITDA of $1.6B (or 40.26%) resulting in a total EBITDA of $5.59B.
SU stock beat their EPS estimate by $0.41(or 27.15%), as they reported an EPS of $1.92 or the quarter (compared to their estimated EPS of $1.51).
Is SU Share Dilution an Issue?
As part of their Q1 2022 earnings release, SU stated that they currently have 1.45B Shares Outstanding (weighted average), which is up 0 shares (from 1.45B shares outstanding in Q4 2021). This lack of dilution is great to see as an investor.
Furthermore, SU stock has up to 1M of shares that they can issue (thereby diluting SU’s stock). This maximum dilution for the period would only have a dilutionary effect on SU of 0.07%. This level of dilution is essentially negligible and should not affect an investors decision on whether or not to invest into Suncor Inc Stock.
Latest SU Stock Analyst Ratings
Here is the current analyst rating distribution for SU. In total there are 21 SU stock analyst ratings.
Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if SU stock is a buy or sell
SU Stock Rating and Forecast
Currently, we have 3 financial ratings that help investors get a general idea of a company’s valuation. These 3 metrics include DCF, ROE, and P/E, which are very common in the investing/valuation climate.
Firstly, SU stock has a DCF rating of 5 — Very Strong. DCF ratings determine the value behind a company based on their financial projections, expectations, and discount rate (time value of money). This is one of the most used valuation models in the stock market, and thus a high level of importance should be associated with this rating.
Secondly, SU stock has an ROE rating of . SU’s current ROE is 12.09%, which justifies their rank of 3 — Neutral. ROE shows us how good (or bad) a company is at using their shareholders funds to generate money (returns). ROE is most useful when compared against the industry average, which is currently 20.69%. Although Suncor’s ROE is good, it is well below the average of their peer’s which is why their rating is a 3.
Lastly, SU stock has a P/E rating of SU stock price to earnings ratio is currently 12.13 which justifies their rank of 4 — Strong. Price to Earnings is the most commonly found financial metric and is best used when comparing a company’s p/e to the industry average. SU operates in the Oil & Gas Integrated industry, which currently has an average P/E of 16.1.
Overall, based on the 3 previously mentioned fields, SU stock has been given a comprehensive rating of This rating implies that they are healthy financially.
SU Stock Price Prediction and Valuation
The Latest Suncor Stock Ratings
As we know, SU stock has been given an overall rating of 4 — Strong. This implies that the SU stock is sound fundamentally and is a good candidate for being “undervalued”. With this in mind, let’s proceed.
SU Price Forecast Using Comparable Analysis
- Price to Book (P/B): SU’s current P/B ratio is 1.43, compared to the average P/B ratio of SU’s peers being 2.36. This implies that SU is undervalued and their share price should change by a factor of 64.97% to be at fair value (based on SU’s P/B compared to the P/B of their peers).
- Price to Equity (P/E): SU stock P/E ratio is currently 12.13, compared to the average P/E ratio of SU’s peers being 16.1. This implies that SU is undervalued and their share price should change by a factor of 32.8% to be at fair value (based on SU’s P/E compared to the P/E of their peers).
Overall, SU stock is undervalued and needs to experience a change in stock price of (an average of) 48.89% to be considered “at fair value”.
Is SU Stock a Buy or Sell?
Overall, due to the overall stock rating of (Based off of DCF, ROE, and P/E), as well as the fact that a comparable analysis (P/E and P/B) found that SU was undervalued and need to experience a price change of 48.89% in order to be at their fair value, I have concluded the following:
Suncor Stock is currently undervalued, which makes it a great candidate for a buy. Furthermore, there is not much risk based off of their financials which is an added benefit.
Originally published at https://utradea.com.
