Wednesday, May 13, 2009

EnCana Corp

I am reviewing this stock (TSX-CNR) today as I have received its annual report for 2008. I bought this stock in 2006 and I have earned a return of almost 10% per year on it. This includes dividends received, a price ending at today’s date. I had owned this stock previous from 2000 to 2002 and then I earned some 18% per year return. I usually only buy 100 shares of this stock as it is an oil company and I do no usually buy resource companies of any kind. However, since I live and invest in Canada, I do like to keep trace of what resources are doing. I find the best way to do this is to own some resource stock.

This stock reports in US$ and it has generally done better in US$ than in CDN$. For all the figures I follow, Revenue, Earnings, Stock Price, Book Value and Cash Flow, this stock has had great growth over the past 5 and 10 years. Certainly, the growth in Revenue and Earnings has been very large. I have only had this stock since 2006 this time and the growth over than last few years was not as good as from 2003 to 2006.

This company certainly has a strong balance sheet. Both the Liquidity Ratio and the Asset/Liability Ratio are good. With the Liquidity Ratio at 1.44, there are enough current assets to cover current liabilities; however, I usually like to see that ratio at bit higher at 1.50. The Asset/Liability Ratios is certainly very strong at 1.95.

When we move on to the Return of Equity (ROE), we find that the 5 year average is 24% and the one for the calendar year of 2008 is over 25%. Both these ROE figures are very good indeed. The only ratio I track that is not good is the Accrual Ratio and this is quite high at almost 10%. A high Accrual Ratio can show that the earnings are a lower quality and that they might be bulked up by non-cash items.

This is a large and well respected Canadian Oil company that is widely owned and traded, not only on the TSX, but also on the NYSE. The NYSE symbol is also ECA. I intend to keep this stock for now, but since I only have 100 shares, it is a very small part of my portfolio.

This company is involved in the acquisition, exploration and development of natural gas, crude oil and natural gas liquids. It is a merger of Alberta Energy Company Ltd. (AEC) and PanCanadian Energy Corporation (PanCanadian) companies. It is a world-class independent oil and gas company. Its web site is See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets.

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