Encana Corp. 2

On my other blog I am today writing about the presentation at the World Money Show in Toronto by Iain Butler.

I do not own this stock of Encana Corp. (TSX-ECA, NYSE-ECA) but I used to. Please note that my spreadsheet following this company starts with Alberta Energy Company and follows this company into the formation of EnCana in 2002. It was in 2002 EnCana was formed with the merger of AEC and PanCanadian Energy Corporation. Company split into EnCana Corp and Cenovus Energy Inc. in 2009, Oil with Cenovus and gas with EnCana.

When I look at insider trading, there is not much happening. There is no insider selling and insider buying is at $0.6M. This is at $0.004% of market cap and so relatively very little. There seems to be little insider ownership. The CEO owns shares worth around $1.2M and the Chairman owns shares worth around $2M. Otherwise insider ownership is little.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.96, 15.91 and 17.86. The current P/E at 8.42 is based on a stock price of $20.21 and 2014 EPS estimate of $2.40. This stock price test suggests that the stock price is cheap.

I get a Graham Price of $28.08. The 10 year low, median and high median Price/Graham Price Ratios are 0.78, 1.03 and 1.19. The current P/GP Ratio is 0.72 based on a stock price of $20.21. This stock price test suggests that the stock price is cheap.

The 10 year Price/Book Value per Share Ratio is 1.96. The current one is 30% lower at 1.38 based on a stock price of $20.21 and BVPS of $14.60. This stock price test suggests that the stock price is cheap.

If you do a dividend yield stock price test you get different results. The current dividend yield 1.57% is much lower than the 5 year median dividend yield of 3.12% and the historical average of 2.99%. Interestingly it is not lower than the historical median yield of 1.45%. The yield on this stock has been quite high recently until the dividend was cut recently by some 65%.

However, they have cut the dividend to get a better Payout Ratio for EPS. Last year the DPR for EPS was 209%. In 2012 they had an earnings loss. The DPR for EPS for 2014 is expected to be around 13%.

The Motley Fool likes EnCana because they expect gas prices to heat up. On the Seeking Alpha Site Carl Surran thinks the EnCana's bullish thesis is still intact. Also on Seeking Alpha IAE Research say the company should grow after reshuffling its assets.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. There are a lot of analysts following this stock and most of the recommendations are a Buy or a Hold. The consensus recommendation would be a Buy. The 12 month consensus stock price is $24.30. This implies a total return of 21.81% with 20.24% from capital gains and 1.57% from dividends.

Sound bit for Twitter and StockTwits is: price is cheap. The price is rather low. However, they just also cut their dividend to a 1.6% yield. Most analysts do not see much in the way of dividend increases over the next little while. So, dividends are not likely to be very good in the near future. See my spreadsheet at eca.htm.

This is the second of two parts. The first part was posted on Monday, November 17, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

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. 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. 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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