Friday, November 29, 2013

Encana Corp 2

I do not own this stock EnCana Corp (TSX-ECA, NYSE-ECA), but I used to. I had held this stock previously as Alberta Energy Company from April 2000 until August 2002 and made some 18% total returns per year. I had EnCana Corp from February 2006 to November 2009 and made a 9.54% per year total return. I sold this stock in 2009 because I only had 100 shares and the stock was going to split into two companies. I would have ended up with small investment in two companies.

There has been no insider trading over the past 3 months. There has been over the past year $1.0M of insider buying and not insider selling. This buying occurred mid-year and was for $19.00 or less. Insiders not only have Options but also have Restricted Share Units; Rights - Performance Share Unit Plan; Shareholder Appreciation Rights and Deferred Share Units. There does not seem much in the way of insider ownership.

The 5 year low, median and high median Price/Earnings Ratios are 8.86, 10.91 and 12.95. The current P/E Ratio is 18.34 based on a stock price of $20.08 and 2013 earnings estimates of 1.09 CDN$ ($1.04 US$). I get a Graham Price of $13.77. The 10 year low, median and high median Price/Graham Price Ratios are 0.69, 0.89 and 1.08. The current P/GP Ratio 1.46. Both these stock test suggest that the stock price is relatively high.

The 10 year Price/Book Value per Share Ratio is 1.81 and the current one is 2.16 a value some 43% higher. The 5 year median Price/Cash Flow per Share Ratios is 4.62 and the current P/CF Ratio is 5.73 based on a stock price of $20.08 and CFPS of $3.51 CDN$ (and $3.33US$). Both these stock test suggests that the stock price is relatively high. (They just recently lowered the dividend so dividend yield stock test is probably not helpful at this point.)

I know that other people think that this stock price is not high. On an absolute basis, a P/E Ratio of 18.34 or a P/CF Ratio of 5.73 is not that high. It is not cheap, but not expensive either. However mostly the comments on cheapest of this stock is relation to other oil and gas stocks.

When I look at analysts' recommendations, I find Strong Buy, Buy Holder and Underperform recommendations. The consensus recommendation would be a Hold. The 12 month census stock price is $20.90. This implies a total return of 5.5% with 1.47% from dividends and 4.08% from capital gains.

In the Calgary Herald, an article talks about the continuing downsizing of Encana into a smaller more focused company. The market has responded positively to these changes. The site WKRB talks about some analysts' recommendations including coverage just Initiated by Desjardins with a buy rating. The site TSI Network Daily has a review of this stock.

In August of 2013, the site Insider Monkey said hedge funds were buying this stock and that this is a good thing. In a post of last year, Canadian Capitalist makes a good point on the foreign exchange fee charged on US$ dividends paid on Canadian companies, like Encana.

This stock by any measure is not cheap. It has just decreased its dividend some 65% in a major restructuring. Would not be my favourite, but I notice that the Buy and Sell Advisor just include this stock in their dozen stock picks for 2014. See my spreadsheet at eca.htm.

This is the second of two parts. The first part was posted on Thursday, November 28, 2013 and is available here.

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. Alberta Energy Company Ltd. (AEC) and PanCanadian Energy Corporation (PanCanadian) companies merged to form EnCana in 2002. EnCana split into EnCana and Cenovus in 2009. Its web site is here EnCana.

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. Susan,
    Thank you for your review of Encana.

    What are your thougths about Carfinco Financial Group? It is a small divident paying financial industry company with somewhat unique business concept in Canada.

  2. I do not follow Carfinco Financial Group.


  3. Thank you anyway. Love your blog.