Friday, November 16, 2012

Cenovus Energy Inc 2

I do not own this stock of Cenovus Energy Inc. (TSX-CVE, NYSE-CVE). I did own the predecessor company of EnCana. I sometimes venture into oil and gas companies and they are a large part of the TSX. I like to know what is going on in this sector, but I really do not like investing much in it. Currently I hold some Husky (TSX-HSE) and Canadian Natural Resources Ltd. (TSX-CNQ).

When I look at insider trading I find a minimal amount of insider buying and $6.1M of insider selling. There is a net of insider selling of $6M. The insider selling seems to be of options. Insiders often treat options as part of their salary.

There are lots of options outstanding and insider do own a fair bit of stock. For example the CEO owns $3.6M in shares and has $45.7M in options. The CFO has $0.5M in shares and has $14M in options. An officer has $3.4M in shares and $35M in options. A director has $5M in shares and $5M in options. (This is just a sampling.)

The 5 year low, median and high median Price/Earnings Ratios are 14.76, 17.69 and 20.62. The current P/E Ratio is 16.73 based on a stock price of $33.79 and 2012 earnings of $2.02. This shows that the stock price is reasonable. (Note that the P/E ratios for the 10 year period are also lower than the above 5 year period shows and are 9.47, 11.60 and 14.68. Usually, you do not see such a difference between the 5 and 10 year median values.)

I get a Graham Price of $24.60. The 10 year low, median and high median Price/Graham Price Ratios are 0.83, 1.09 and 1.25. The current ratio is 1.37 and shows the stock price is high. However, the P/GP Ratios have been moving up lately and the 5 year low, median and high medina P/GP Ratios are 1.23, 1.46 and 1.67. The stock price has been growing fast than the Graham Price.

The 10 year median Price/Book Value per share Ratio is 2.01 (and the 5 year median value is higher at 2.48). The current P/B Ratio at 2.54 is some 26% above the 10 year ratio. This rather higher ratio suggests that the current stock price is a bit high.

The 5 year median dividend yield is 2.76 and the current dividend yield is 2.60% and it is some 5.6% lower than the 5 year dividend yield and suggests a reasonable to high stock price.

What we can say is that there were big changes for the company when it was split from EnCana, which was 3 years ago. The 5 year values are probably valid. So we can say that the company's stock price is not cheap. We may even be able to say it is reasonable.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold. There are a lot of Buy recommendations and the consensus recommendation would be a Buy recommendation. The 12 months stock price is $41.90. This implies a total return of 26.6% with 24% coming from capital gain and 2.6% from dividends.

A number of analysts feel that this stock can still grow over well over the next while. Others call it a low cost producer and a company that is well run. I guess to want to buy this stock you would have to be bullish on oil and not everyone is.

Here is a positive report on Cenovus entitled "Suncor, Cenovus and Husky get praise from JPMorgan" at the Financial Post. Also another one with title of "Suncor, Cenovus work around crude oil discount" at the Financial Post.

Analysts at National Bank cut their price target on shares of Cenovus Energy from $41.00 to $40.00 in a research note to investors on Friday. Analysts at RBC Capital reiterated an outperform rating on shares of Cenovus Energy as did analysts at BMO Capital. See Zolmax News.

If you want a company into oil of the Oil Sands, this stock seems to be reasonably price.

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 or StockTwits.

1 comment:

  1. I'd like to own this company at some point. I'd like to buy it under $30 though.