Wednesday, November 3, 2010

Cenovus Energy Inc 2

This oil company, Cenovus Energy Inc (TSX-CVE, NYSE-CVE) and Suncor Energy (TSX-SU, TYSE-SU) were talked about at the recent Money Show in Toronto as companies Canadians should be investing in. I do not own this company, but since I will be selling Penn West Energy Trust (TSX-PWT.UN), this and Suncor would be a likely replacement. This company was split off from EnCana. This was the oil part of EnCana and EnCana now is just a gas play. My spreadsheet reflects this split.

When I look at Insider Trading, I find that there is almost $3M net in Insider Buying. There has been no buying over the last couple of months and only some selling. However, all the selling seems to have been selling of stock options and it is a very small amount of selling. This stock’s price has mostly just gone up and down over the past year and has not made much progress. Also, $3M is a very small portion of a $22B company. Management also holds more stock options than shares.

The 5 year median low P/E ratio is 7.3 and the 5 year median high P/E is 13.8. This makes the current P/E ratio, based on earnings estimates, at 21.6 look a little high. Except for 2009, the P/E ratios on this stock have been quite low lately. The low P/E ratio for 2009 was 19.9 and the high was 29.1. I get a Graham Price, for 2010, of $20.27 for this stock. This is some 44% below the current stock price. Except for 2009, the stock price was at or below the Graham Price at some time during the year. The Stock Price also has not been below the Graham Price during 2010.

I get a current Price/Book Value Ratio of 2.16 and a 10 year average P/B ratio of 1.96. This makes the current P/B ratio about 10% higher than the 10 year average. Also, I get an average 5 year yield of 1.7% and a current yield of 2.7%. This is the only measure that points to a good current stock price. (Also, note that dividends have not changed in 2010 from that paid in 2009).

There are quite a number of analysts following this stock. The recommendations that I find are Strong Buy, Buy and Hold. There are no other. The consensus recommendation would be a Buy. (See my site for information on analyst ratings.) One analysis complains that this company is not a pure oil play as it has natural gas assets. (This is true). He also likes Canadian Natural Resources (TSX-CNQ) better. However, another analysts likes the fact that they have some gas assets.

I find it interesting that this company still has some gas assets. I already have enough investment in Natural Gas, so this may not be the company I will buy.

Cenovus Energy Inc. is an integrated oil company. The Company's operations include enhanced oil recovery (EOR) properties and established crude oil and natural gas production in Alberta and
Saskatchewan. It also has ownership interests in two refineries in Illinois and Texas, United States. Its web site is here Cenovus. See my spreadsheet at cve.htm.

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 for stocks followed and investment notes. Follow me on twitter.

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