Canadian Oil Sands 2

On my other blog I am today writing about the presentation at the World Money Show in Toronto called Natural Resources Panel.

I do not own this stock of 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.

When I look at insider trading I find $4M of insider selling, $0.7M of insider buying and net insider selling at $3.3M. Net insider selling is at just 0.03% of market cap and so very low. Outstanding shares were increased by only 10,000 shares for stock options in 2013. This is not high enough to provide a percentage of outstanding stock taking a percentage to two decimal points (that is it is less than 0.00%). I also do not see any significant insider ownership.

The 5 year low, median and high median Price/Earnings Ratios are 10.92, 11.13 and 14.29. The 10 year corresponding P/E Ratios are similar at 10.08, 11.69 and 16.19. The current P/E Ratio is 11.25 based on a stock price of $17.66 and 2014 EPS estimate of $1.57. This stock price test suggests that the stock price is reasonable.

I get a Graham Price of $18.45. The 10 year low, median and high median Price/Graham Price Ratios are 0.94, 1.37 and 1.66. The current P/GP Ratio is 0.96 is based on a stock price of $17.66. This stock price test suggests that the stock price is reasonable.

The 10 year Price/Book Value per Share Ratio is 2.96. The current P/B Ratio is 1.83 based on a stock price of $17.66 and BVPS of $9.63. The current P/B Ratio is some 38% lower than the 10 year ratio. This stock price test suggests that the stock price is cheap.

The historical average dividend yield is 5.02 and this historical median dividend yield is 5.22. These are some 34% and 52% below historical yields. These tests do not show that the stock is cheap, but it does show that it is quite low.

When I look at analysts' recommendations, I find Strong Buy, Hold and Underperform recommendations. There is a lot of Hold and Underperform recommendations and the consensus recommendation would be a Hold. The 12 month stock price consensus is $20.50. This implies a total return of 24.01% with 7.93% from dividends and 16.08% from capital gains. (Note with the falling oil prices, the dividend may not be safe.)

In this financial post article, Albert's Premier says that oil sands crude will reach Gulf Coast with or without Keystone. At the Motley Fool, Matt Smith says the company's dividend maybe under threat because of falling oil prices. There is an interest, but long article in the Globe and Mail on why Alberta's oils sands matter to Canadians.

Sound bit for Twitter and StockTwits is: Price cheap to reasonable. Is div safe? In most tests the stock price has not crossed into cheap territory, but it is getting close. However, oil prices are dropping so this will be a problem in the near term. See my spreadsheet at cos.htm.

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

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. 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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