Friday, November 30, 2012

EnCana Corp 2

On my book blog I have written about Kevin Dutton's book on The Wisdom of Psychopaths. This is an absolutely fascinating book on our fellow man. Even if you do not read the book there are a number of very interesting internet links to Kevin Dutton's site and videos. I think that listen to an author greatly enhances your appreciation of his book...continue...

I do not own this stock of EnCana Corp (TSX-ECA, NYSE-ECA), but used to. I have held this stock twice. I do not look on oil companies as a long term buy. Please note that my spreadsheet following this company starts with Alberta Energy Company and follows this company into the formation of EnCana in 2002. It was in 2002 EnCana was formed with the merger of AEC and PanCanadian Energy Corporation.

When I look at Insider Trading, I find a small amount of insider buying and no insider selling. Insiders seem to be retaining their options recently. This is a positive. However, there are lots of options and options like vehicles outstanding. There are not only options but Deferred Share Units, Restricted Share Units and Rights - Performance Share Unit Plan.

Some examples of insider ownership and insider option hold would be that the CEO owns shares worth $3M and has almost $64M in options; an officer has $0.6M in shares and $6.5M in options; a director has 0.8M in shares and $3M in options; and a Subsidiary Executive has $0.2M in shares and $6.7M in options.

According to NASDAQ, the company, as of 30September 2012, has 431 institutions that own 64.6% of the outstanding shares. Over the three month period to 30 September 2012 institutions have increased their shares by 2.3%.

I get 5 year low, median and high median P/E Ratios 10.18, 12.01 and 13.84. I get a current P/E ratio of 17.38 based on 2012 earnings of earnings of $1.24 and stock price of $21.48. All values are in CDN$. It would seem that the current stock price is rather high, relatively speaking.

I get a Graham Price of $14.59. The 10 year low, median and high median Price/GP Ratios are 0.71, 0.92 and 1.08. The current P/GP Ratio is 1.47. This high P/GP Ratio suggests that the stock price is relatively high.

I get a 10 year Price/Book Value per Share Ratio of 1.71. The current P/B ratio is 2.81, which is some 64% higher. However, I would discard this test as the BV fell some 66% because of recent accounting rule changes.

I get a current dividend yield of 3.8%. The 5 year median dividend yield is 2.8% a value some 35% lower. This current high dividend yield would suggest that the stock price is currently cheap. We should probably moderate this judgment as dividends have been raised significantly over the past 5 years.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. The consensus recommendation would be a Hold. The vast majority of the analysts give this stock a Hold recommendation. With the Hold recommendation comes with a 12 month stock price of $22.00. This implies a total return of 6.22%, with 3.8% from dividends and 2.42% from capital gains.

One analyst is worried about the persistently weak fundamentals for gas and gives this stock a Hold recommendation. Some analysts seem optimistic about gas over the short term. Technical analysis seems to be also pointing to a Hold at Barchart.

My stock tests give a rather mixed result. However, I have questions on two of the tests. The cleanest results come from the P/E and P/GP Ratios and they are saying that the stock price is relatively high. (This is why I have more than one test checking on stock price.)

EnCana is among the largest natural gas companies in North America. They are focused on natural gas exploration and the development of resource plays. They have a diversified portfolio of assets and hold a highly competitive land and resource position in a number of North America's most promising shale and tight gas resource plays. Its web site is here EnCana. See my spreadsheet at eca.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 was thinking about buying this company this winter, especially if the price remains low.

    NG prices have to climb at some point. Don't they?