Imperial Oil Ltd. – Value Analysis (NYSE AMERICAN:IMO) : November 6, 2017

Capitalcube gives Imperial Oil Ltd. a score of 69.

Our analysis is based on comparing Imperial Oil Ltd. with the following peers – Cenovus Energy Inc., Suncor Energy Inc., Canadian Natural Resources Limited, Exxon Mobil Corporation, Oil company LUKOIL PJSC Unsponsored GDR 144A, Royal Dutch Shell Plc Sponsored ADR Class A, Athabasca Oil Corporation and Pembina Pipeline Corporation (CVE-US, SU-US, CNQ-US, XOM-US, LUKZY-US, RDS.A-US, ATH-CA and PBA-US).

Investment Outlook

Imperial Oil Ltd. has a fundamental score of 69 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It’s current Price/Book of 1.31 is about median in its peer group.
  • The market expects IMO-US to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • IMO-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • IMO-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively low gross margin and median pre-tax margin suggest operations may be constrained on pricing versus peers.
  • IMO-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • IMO-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

IMO-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 11.78% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 22.62%), and a well-cushioned interest coverage level of 8.72x, IMO-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 8 peers for the company have an outstanding debt balance.

IMO-US has moved to a Quick & Able from a Constrained profile at the recent year-end.

  • IMO-US‘s interest coverage has increased 7.03 points from last year’s low but is still below its five-year average interest coverage of 74.33.
  • The increase in its interest coverage to 8.72x from 1.69x (in 2016) was also accompanied by an increase in its peer median during this period to 4.20x from 1.69x.
  • Interest coverage rose 4.52 points relative to peers.
  • IMO-US‘s debt-EV is less than (but within one standard deviation of) its five-year average debt-EV of 12.42%.
  • Though its debt-EV has remained relatively stable at 11.78% compared to 2016, its peer median has increased to 22.62% from 21.98% during this period.
  • Relative to peers, debt-EV fell 0.64 percentage points.

Access the detailed analysis for Imperial Oil Ltd.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Cenovus Energy Inc. N/A 1.41 1.43 20.59
Suncor Energy Inc. 18.53 0.91 3.82 52.57
Canadian Natural Resources Limited 26.59 0.71 2.91 27.47
Exxon Mobil Corporation 10.18 0.85 18.93 72.25
Oil company LUKOIL PJSC Unsponsored GDR 144A 27.1 1.43 10.04 99.82
Royal Dutch Shell Plc Sponsored ADR Class A 42.25 1.23 4.2 42.49
Athabasca Oil Corporation 74.9 2.98 -0.37 4.71
Pembina Pipeline Corporation 18.64 0.78 7.95 24.17
Imperial Oil Limited 11.78 1.26 8.72 46.88
Peer Median 22.62 1.23 4.2 42.49
Best In Class 10.18 2.98 18.93 99.82

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Company Profile

Imperial Oil Ltd. is an integrated oil company, which engages in the exploration, production and sale of crude oil and natural gas in Canada. It also petroleum refiner, producer and marketer of petroleum products. The company operates its business through following segments: Upstream, Downstream and Chemical. The Upstream segment includes the exploration and production of crude oil, natural gas, synthetic oil and bitumen. The Downstream segment operations consist of the transportation and refining of crude oil, blending of refined products and the distribution and marketing of those products. The Chemical segment is organized and operates to manufacture and marketing of various petrochemicals. Imperial Oil was founded on September 8, 1880 and is headquartered in Calgary, Canada.


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