Thursday, September 20, 2012

Canadian Natural Resources 2

I now own this stock of Canadian Natural Resources (TSX-CNQ) as I just bought 100 shares this morning. This is a stock on a number of dividend lists as it has a good record of dividend increases. It raises the dividend each year and over the past 5 and 10 years the growth in dividend is 19% and 21.5% per year.

When I look at insider trading I find a huge amount of insider selling at $94.9M. There is some insider buying at $5.5M, but the net insider selling is at $89.4M. Some $50M of the insider selling is by directors and it would appear that a lot of this is by Allan Markin who resigned in April of this year.

When I looked at this stock in July 2011, I noted that Markin had 12.9M shares currently worth some $411M. It would seem that he has only sold around 1.7M shares since then. If he is selling off shares, then he has a long way to go to sell all his shares. We will no longer know when he does this as he ceased to be an insider in April 2012. Allan Markin decided to resign without notice on Monday, April 2nd, 2012 as chairman of Canadian Natural Resources Ltd. after 23 years. See notice in Calgary Herald. He seemed to have sold a lot of his shares at the same time.

There is some $11.8M of insider selling by the CEO. It would seem that he is cashing in options. He still has some $63.6M in options. He owns around $65M in shares in this company. The CFO also seems to be cashing in options with insider selling at $4M. He has $22.5M in shares in this company and $24.8M in options. The remaining insider selling is by officers at $28.7M. Officer purchases total $4.5M in shares. Insiders get an awful lot of options. The company says that stock options outstanding are equal to around 6% of the outstanding shares. This company is worth some $34.8B.

There are some 415 Institutions holding some 644.8M shares. This was as at June 30th, 2012. I cannot find information on recent buying or selling by institutional owners on this company.

The 5 year low, median and high median Price/Earnings Ratios are 12.04, 16.38 and 20.71. The current P/E ratio is 18.08 based on a stock price of $31.82 and 2012 earnings of 1.76. This would suggest the stock price is a bit high, but still reasonable.

I get a current Graham price of $29.39. The 10 year low, median and high median Price/Graham Price Ratios are 0.81, 1.18 and 1.50. The current P/GP Ratio is 1.08. This would suggest a reasonable stock price.

I get a 10 year Price/Book Value ratio of 2.00 and a current P/B Ratio of 1.46. This current Ratio is 73% of the 10 year ratio and would suggest a very good stock price.

The 5 year median dividend yield is 0.73%. The current dividend yield is 1.32%. This current yield is 80% higher than the 5 year median dividend yield and suggests a very good stock price.

My stock price test give mixed results. When this happens, it is best to go with the results from the P/B Ratio and dividend yield, unless there are specific reasons not to do so. In this case, I would go with these tests and judge the stock price to be very good.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold. Most of the recommendations fall in the Strong Buy and Buy categories. The consensus recommendation would be a Buy. The 12 month consensus stock price is $40.80. This implies a total return over the next 12 months of 29.54%, with 1.32% from dividends and 28.22% from capital gains.

One analyst with a hold recommendation does not see much growth in the share price over the next 12 months. It says the average forward P/E is 11 and the estimate for earnings for 2013 would produce a P/E of 11. (I get a forward P/E of 11.74. However, earning estimates are notorious for being wrong. I am also buying for the long term and not what the stock price will be next year.)

One analyst with a buy recommendation says that this stock is undervalued. Another analysts with a buy recommendation said that this company is the broadest and widest diversified oil/gas play. A number of analysts say that it is a well-managed company.

Seeking Alpha made an interesting remark about pipelines and Canadian Oil patch companies. There just may be problems with future pipeline capacity. He also thinks this company is undervalued .

Daily Political talks about why Zacks has a hold rating on this stock. The blogger Invistock talk about this company being a buy. This stock is a top pick for David Winters of Wintergreen Advisers.

Canadian Natural Resources Ltd. is a senior oil and natural gas exploration, development and production company. The Company's operations are focused in Western Canada, in the U.K. sector of the North Sea and in offshore West Africa. Its web site is here Canadian Natural Resources. See my spreadsheet at cnq.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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