It's been a great afternoon session for Suncor Energy investors, who saw their shares rise 1.2% to a price of $40.84 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
Suncor Energy Has Attractive P/B and P/E Ratios:
Suncor Energy Inc. operates as an integrated energy company in Canada, the United States, and internationally. The company belongs to the Energy sector, which has an average price to earnings (P/E) ratio of 13.84 and an average price to book (P/B) ratio of 2.05. In contrast, Suncor Energy has a trailing 12 month P/E ratio of 9.5 and a P/B ratio of 1.17.
P/E rations can be placed into context by dividing them by the firm's expected 5-year EPS growth rate, which gives us its Price to Earnings Growth (PEG) ratio. Suncor Energy's PEG ratio is 1.05, which tells us the company is fairly valued in terms of growth. PEG ratios under 1 are considered an indicator of undervalued growth, but we need to keep in mind that many successful companies with excellent share performance have maintained much higher PEG ratios.
As always, a quantitative approach to a stock should be supplemented with a look at qualitative factors, such as the competence of its management team, quality of its corporate culture, and the wide variety of social and economic factors that can impact the success of its product.
Generally Positive Cash Flows and an Average Current Ratio:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $38,986 | $38,989 | $25,052 | $39,101 | $62,907 | $52,206 |
| Net Margins | 8% | 7% | -17% | 11% | 14% | 16% |
| Net Income (M) | $3,293 | $2,899 | -$4,319 | $4,119 | $9,077 | $8,295 |
| Net Interest Expense (M) | $741 | $875 | $930 | $851 | $814 | $726 |
| Depreciation & Amort. (M) | $5,738 | $10,572 | $9,526 | $5,850 | $8,786 | $6,435 |
| Earnings Per Share | $2.02 | $1.86 | -$2.83 | $2.77 | $6.53 | $6.33 |
| Avg. Price | $30.11 | $26.58 | $16.14 | $19.89 | $31.21 | $40.84 |
| P/E Ratio | 14.83 | 14.29 | -5.7 | 7.18 | 4.77 | 6.44 |
| Free Cash Flow (M) | $10,580 | $10,421 | $2,675 | $11,764 | $15,680 | $12,344 |
| Total Debt (M) | $13,890 | $12,884 | $13,812 | $13,989 | $9,800 | $11,087 |
| Current Ratio | 0.84 | 0.94 | 0.89 | 1.06 | 1.13 | 1.44 |
