In This Article:
- By GF Value
The stock of Suncor Energy (NYSE:SU, 30-year Financials) shows every sign of being modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $21.04 per share and the market cap of $32 billion, Suncor Energy stock gives every indication of being modestly undervalued. GF Value for Suncor Energy is shown in the chart below.
Because Suncor Energy is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
Link: These companies may deliever higher future returns at reduced risk.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Suncor Energy has a cash-to-debt ratio of 0.09, which is worse than 75% of the companies in Oil & Gas industry. The overall financial strength of Suncor Energy is 3 out of 10, which indicates that the financial strength of Suncor Energy is poor. This is the debt and cash of Suncor Energy over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Suncor Energy has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $18.4 billion and loss of $2.043 a share. Its operating margin is -23.61%, which ranks worse than 76% of the companies in Oil & Gas industry. Overall, the profitability of Suncor Energy is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of Suncor Energy over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Suncor Energy is -5.6%, which ranks in the middle range of the companies in Oil & Gas industry. The 3-year average EBITDA growth rate is -25.5%, which ranks worse than 78% of the companies in Oil & Gas industry.