Crescent Point Energy Corp. 2

I do not own this stock Crescent Point Energy Corp. (TSX-CPG, OTC-CSCTF). I got this idea to look into this stock from another blogger, My Own Advisor and his November 2012 blog entry on great Canadian dividend paying stocks. See his site is here. I also noticed that several people at the Toronto Money Show of 2013 mentioned this stock.

When I first reviewed this stock, besides not liking the fact it cannot raise dividends, I felt that the Liquidity Ratio was much too low as was the Return on Equity. At the end of 2012, the situation had not changed. The Liquidity Ratio and ROE are pathetic.

The insider trading report shows that $5.5M of insider buying and $16.7M of insider selling occurred over the past 12 months, with a net insider selling of $11.2M. There is a fair amount of insider ownership with the CEO having shares worth $42M and the CFO having shares worth $10.1M. I do not see any options, but there are option like vehicles called Restricted Share Units and Deferred Share Units.

I cannot get a fix on historical Price/Earnings per Share Ratios over the last 5 years as the EPS has been all over the place, including an EPS loss year. For example the 5 year median P/E Ratio is 59.49. This is a very high ratio. The 10 year median P/E Ratios are more rational with the low, median and high median ratios being 13.46, 17.98 and 21.06.

I get a current P/E Ratio of 38.00 based on a stock price of $40.66 and 2013 EPS estimate of $1.07. However, the 12 month EPS to the end of the 3rd quarter is $0.09, so you have to wonder at the estimate. Using the 12 month EPS, the P/E Ratio is 451.78. The P/E Ratio for 2014 using a stock price of $40.66 and the 2014 earnings estimate of $1.60 is a more reasonable, but still high P/E of 25.41.

I get a Graham Price of $23.07. The 10 year low, median and high median Price/Graham Price Ratios are 1.03, 1.20 and 1.57. The current P/GP Ratio is 1.76. By this stock price test, the current stock price is relatively quite high.

The 10 year median Price/Book Value per Share Ratio is 2.05 and the current P/B Ratio is 1.84 a value 89% of the 10 year median ratio. This stock test suggests that the stock price is relatively reasonable.

The 5 year median Dividend Yield is 6.96% and the current Dividend Yield is 6.79% a value 2.4% lower. This stock test suggests that the stock price is reasonable.

When I look at the analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month stock price consensus is $46.90. This implies a total return of 22.13% with 6.79% from dividends and 15.35% from capital gains.

The Motley Fool talks about whether the dividend is sustainable. They come to the conclusion that the company is treating the dividend as an operational expense rather than returning excess earnings to the shareholders. Their conclusion is that the dividend is sustainable. On Seeking Alpha Caiman Valores gives a good analysis of why he likes this stock. He looks at the potential of 7% dividend and 30% capital gains.

He also talks about the company treating the dividend as an operational expense and the fact that Canadian Lightstream Resources (TSX-LTS) that did the same have just slashed their dividend by 40%. He thinks that CPG's dividend is safe because of the company's low debt, solid balance sheet and strong operational cash flows. He also thinks that the stock is currently fairly valued on some criteria, but undervalues on a Net Asset Value (NAV) basis.

The stock price seems to be relatively reasonable. Although I looked at the two analyses above and I understand their point of view, this is probably not the sort of stock I like. I generally do not like oil and gas companies. I generally do not like stocks that do not grow their dividends. See my spreadsheet at cpg.htm.

This is the second of two parts. The first part was posted on Thursday, December 5, 2013 and is available here.

Crescent Point Energy Corp. is a conventional oil and gas income trust with assets focused in properties comprised of light oil and natural gas reserves in Western Canada. They acquire, exploit and develop high-quality, large resource-in-place assets and manage risk through a solid hedging program and a clean balance sheet. Its web site is here Crescent Point Energy.

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.