Cenovus Energy Inc 2

On my other blog I am today writing about the secular bear market we are in ...continue...

I do not own this stock Cenovus Energy Inc. (TSX-CVE, NYSE-CVE). This is another stock that was talked about at the 2010 Money Show in Toronto. There were those who liked oil companies and they mentioned both Suncor Energy Inc. (TSX-SU) and Cenovus Energy Inc. (TSX-CVE). This company was split off from EnCana in 2009. This was the oil part of EnCana and EnCana now is just a gas play. My spreadsheet reflects this split.

Over the past 30 days officers have cash in options or sold stock worth around $530,000. This is not a good sign. However, people sell for all sorts of reasons and the only insider trading that tells you anything is insider buying.

The 5 year low, median and high median Price/Earnings per Share Ratios are 18.70, 21.96 and 25.21. P/E Ratios have gone up as the 10 year low, median and high median P/E Ratios are 12.47, 14.85 and 18.07. I think that the 5 year median P/E Ratios are a little high. The current P/E Ratio is 17.94 based on a stock price of $30.50 and 2013 earnings estimate of 1.70. However, the earnings estimate is about 30% higher than last year's earnings. The 12 month earnings to September 30, 2013 are just $0.80 which gives a P/E of 38.13, which is quite a high P/E.

I get a Graham Price of $22.61 and the 10 year low, median and high median Price/Graham Price Ratios are 1.00, 1.13 and 1.37. The current P/GP Ratio is 1.35. This stock test suggests that the stock price is a bit high.

I get a 10 year median Price/Book Value per Share Ratio of 2.22 and the current P/B Ratio is only 3% higher at 2.28. This stock test suggests that the stock price is reasonable.

The 5 year median dividend yield is 2.76% and the current yield is 15% higher at 3.17%. This is good and shows that the stock price is reasonable to cheap. Also, using historical dividend yields, the current yield is about the historical high. On this testing, the stock price is cheap.

When I look at the analysts' recommendations, I find Strong Buy and Buy recommendations. Since most of the recommendations are a Buy, the consensus recommendation would be a Buy. The 12 months stock price consensus is $38.50. This implies a 29.4% total return with 3.17% from dividends and 26.3% from capital gains.

The Motley Fool has a review of this stock. It talks about the fact that this company is sitting on a lot of oil. An article in Bloomberg quotes John Stephenson about how he currently prefers Canadian Natural Resources Ltd. (TSX-CNQ) to this stock.

Oil prices seem to be recovering and this stock is rather cheap. However, the question is can they make earnings and cash flow from the rise in oil prices. See my spreadsheet at cve.htm.

This is the second of two parts. The first part was posted on Thursday, November 21, 2013 and is available here.

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.

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.