Monday, July 7, 2014

Suncor Energy Inc. 2

On my other blog I am today writing about possible cheap dividend stocks for July 2014 continue...

I do not own this stock of Suncor Energy Inc. (TSX-SU, NYSE-SU). I started following this stock as Petro-Canada (TSX-PCA). It was on Mike Higgs' list of dividend growth stocks. This was also a key stock for the Investment Reporter. My spreadsheet follows PCA into SU.

When I look at insider trading, I find some $17.1M of insider selling and $.1M of insider buying with $17M of net insider selling. Insider selling is only .03% of the company's market cap. The increase in outstanding shares in 2013 due to stock options is 4.75M. These shares have a book value of $127M or 0.32% of outstanding shares. This number of shares was worth $176.9M at the end of 2013.

There are a lot of stock options outstanding and most of those have strike dates. However, there is a lot of other stock option like vehicles of Deferred Share Units, Performance Share Units, Options SunShare, Options SunShare 2012, Sunshare 2012 Restricted Share Units, Performance Units, Restricted Share Unit, Options - PC Options/SARS, Options - Suncor Energy Option Plan (Post A), PC Deferred Share Units, PC Restricted Share Units, and PC Performance Share Units (Officers). (I think I got them all.)

As far as I can see, the only person with significant shares in this company is the CEO and he has shares worth some $14.4M.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.58, 13.89 and 17.37. These are significantly lower than the corresponding 10 year P/E Ratios which are 15.54, 19.86 and 24.91. The current P/E Ratio is 12.10 based on a stock price of $45.61 and 2014 EPS estimate of $3.77. This stock price test suggests that the stock price is relatively reasonable. Against the 10 year P/E Ratios, the stock price is relatively cheap.

I get a Graham Price of $49.39. The 10 year low, median and high median Price/Graham Price Ratios are 0.83, 1.17 and 1.48. The current P/GP Ratio is 0.92 based on a stock price of $45.61. This stock price test suggests that the stock price is relatively cheap. On an absolute basis, a P/GP Ratio of 1.00 or less says the stock price is cheap.

I get a 10 year Price/Book Value per Share Ratio of 1.40. The current P/B Ratio is 1.59 based on a BVPS of $28.75 and a stock price of $45.61. The current P/B Ratio is some 14% higher than the 10 year ratio and this stock price test suggests that the stock price is relatively reasonable, but towards the upper part of the reasonable range.

The current dividend yield is 2.02% and the 5 year median dividend yield is 1.27%, a value some 58% lower. If you look at the historical average, the dividend yield is 1.01 and the historical median dividend yield is 0.50%. The historical high dividend yield is 1.72%. By all these measures the current stock price is relatively cheap.

There is a number of article about Suncor appointing Alister Cowan from Husky as it new chief financial officer. The one refer to is from the Financial Post. Another Financial Post article talks about Suncor recycling Toxic Oil-Sands run off.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month stock price is $48.00. This implies a total return of 7.26% with 5.24% from capital gains and 2.02% from dividends. This is not a resounding back up for a Buy recommendation.

It is interesting that using the stock price tests I generally use, the stock price is showing quite cheap in all but the P/B Ratio test. If you do a P/CF test or a P/S Test, the price does not look cheap and in fact for the P/S Ratio test the stock price is showing as relatively expensive. See my spreadsheet at su.htm.

This is the second of two parts. The first part was posted on Friday, July 4, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Suncor Energy Inc. is an integrated energy company. Suncor's operations include oil sands development and upgrading, conventional and offshore oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand. Suncor is also developing a growing renewable energy portfolio. Their international and offshore business includes operations in the North Sea (United Kingdom, Netherlands and Norway) and the East Coast of Canada. They are also in Libya, Syria and Trinidad and Tobago. Its web site is here Suncor.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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