Wednesday, November 20, 2013

Canadian Oil Sands 2

On my other blog I am today writing about other possible web sites to use instead of Globe & Mails site...continue...

I do not own this stock Canadian Oil Sands (TSX-COS, OTC-COSWF). I am reviewing this stock because when anyone talks about investing in Canadian Oil Sands, this is the stock that seems to be mentioned first. As with some other investment in oil companies, if the dividend is good, then it will vary according to the price of oil.

In the past 30 days, there was approximately $225,390 of insider selling and $47,728 of insider buying. This is a negative. The CEO owns a lot of shares and they are currently valued at some $27M. He also has a lot of stock options and they are valued at some $47M.

The 5 year low, median and high median Price/Earnings Ratios are 9.24, 11.57 and 17.41. The current P/E Ratio is 10.94 based on a current stock price of $20.89 and 2013 earnings estimate of $1.91. Analysts expect the earnings to decline in 2013 by around 5.5%. If you look at the 12 month earnings to the quarter 3, the earnings have declined by almost 12% to$1.78. If in this calculation you use the 13 month earnings you get a P/E of 11.74. Both these P/E ratios show that the stock price is reasonable as they both show a P/E Ratio median P/E Ratio.

I get a Graham Price of $20.45 and the 10 year low, median and high median Price/Graham Price Ratios are 0.89, 1.37 and 1.66. The current P/GP Ratio is 1.02. This stock price test says that the stock price is relatively reasonable to cheap.

The 10 year Price/Book Value per Share Ratio is 2.96 and the current P/B Ratio is 2.15 a value some 73% of the 10 year ratio. This stock price test shows that the stock price is cheap.

The 5 year dividend yield is 6.17% and the current dividend yield at 6.7% is some 8.6% higher. This stock price test shows that the current stock price is reasonable to cheap. If you look at historical high and low dividend yields, the current yield is less than the historical average and therefore shows that the stock price is cheap.

When I look at analysts' recommendations, I find only Hold recommendations and the consensus recommendation would be a Hold. The 12 month consensus stock price is $21.00. This implies a total return of 7.23% with 6.7% from dividends and 0.53% from capital gains.

The financial post has an opinion piece by Sarah Dobson from an environmental group saying that "Tar sands are sticky business". However, I recently read a report from a professor who said that the real problem with global warming is burning of coal, not oil or gas. If we burn all our oil and gas there might be increased warming, but not greenhouse.

However, burning our coal is different. Half of the US gets their electricity from coal plants. China is still increasing the number of coal plants it uses to produce electricity. Germany has started to build coal plants also because they have coal and they want to get away from using nuclear energy because of what happened in Japan. Has Germany ever had a tsunami?

Another Financial post article by Bloomberg says that Canadian oil sands companies trail global peers in reporting environmental performance. There is a report on this company by Motley Fool.

The thing is if you are a long term investor, you want to buy good companies when the stock price is relatively cheap. That is how you do well in investing over the long term. If you had your eye on buying this stock, is the time to do so. You do not wait until it is expensive to buy. Yes, you may have to wait to get returns and the analyst may be right that the capital gain return over the next year will be low. But if you are a long term investor, this should not matter. See my spreadsheet at cos.htm.

This is the second of two parts. The first part was posted on Tuesday, November 19, 2013 and is available here.

Canadian Oil Sands Trust provides a pure investment opportunity in the oil sands through its 36.74% interest in the Syncrude Project. Syncrude is an experienced oil sands operator, producing a high-quality crude oil for the past 30 years. With large, bitumen-rich leases located in the sweet spot of the Athabasca oil sands deposit and a fully integrated upgrading facility that produces 100% light, sweet crude oil, the quality of their Syncrude asset is very good. Its web site is here CDN Oil Sands.

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.

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