Monday, May 11, 2015

Canadian Natural Resources 2

On my other blog I am today writing about austerity measures and they do not work continue...

Sound bite for Twitter and StockTwits is: Stock is currently cheap. Although this company may have problems until the price of oil recovers, you can pick up this dividend growth stock at a good price currently. See my spreadsheet at cnq.htm.

I own this stock of Canadian Natural Resources (TSX-CNQ, NYSE-CNQ). I first bought CNQ in September 2012 because the dividend yield was relatively high. The 5 and 10 year median dividend yields were 0.73% and 0.75%. The current one was at 1.31% and I got it with a yield of 1.32%. I sold some TransAlta to buy this stock. In April 2013 I bought more shares of this stock because the yield was now at 1.54%.

First of all I would like to talk about stock options. The outstanding shares were increased by 1.34% for stock options in 2014. This is rather high as most stocks only increase outstanding shares by 0.50% per year or lower for stock options. For 2013 the shares were increased by .0.50% and in 2012 by 0.61%. So all this says that stock options are rather high.

There is some insider ownership with the CEO having shares worth around $84.2, an officer has shares worth around $30M and a director has shares worth around $811.2M. These are the largest of insider ownership. The director with $811.2M of shares owns just over 2% of the company.

Over the past year insider buying was around $4.9M and insider selling was at $52.1M. There is a net of insider selling at $47.2M or 0.11% of the outstanding shares. Insiders seem to be selling off stock options.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.82, 16.38 and 20.71. The corresponding 10 year ratios are lower at 12.26, 15.96 and 18.99. The current P/E Ratio is 201.42 based on a stock price of $38.27 and 2015 EPS estimate of $0.19. It appears that most analysts think that this company will have little to no earnings this year.

The EPS for 2012 to 2014 were $1.72, $2.08 and $3.58. Over the next three years earnings are expected to be $0.19, 1.69 and $3.07. If we use the EPS estimate for 2016, the P/E Ratio is 22.64, a ratio that is a bit high but not as high as the 201.42 ratio using the EPS estimate for 2015. You have to wonder what if testing the stock price using the P/E Ratios is worthwhile.

Because of the big drop in EPS estimate for 2015 from the EPS in 2014, the Graham Price dropped from $46.17 to $10.55. You also have to question the use of the Price/Graham Ratio in testing the stock price.

I get a 10 year Price/Book Value per Share of 1.75. The current P/B Ratio is 1.47, a value some 24.6% lower. The current P/B Ratio is based on a stock price of $38.27 and BVPS of $26.02. This stock price testing suggests that the stock price is relatively cheap.

The historical high dividend yield is 2.21%. The current dividend yield is 2.40% based on a stock price of $38.27 and a dividend of $0.92. Since the current dividend yield is higher than the historical dividend yield, this stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy Hold and Sell recommendations. The vast majority of the recommendations are a Buy and the consensus is a Buy. The 12 month consensus stock price is $45.30. This implies a total return of 20.77% with 2.40% from dividends and 18.37% from capital gains.

This CTV News article talks about Canadian Natural Resources' first 2015 quarterly earnings loss. This article in the Brandon Sun talks about this company cutting spending as it waits for a rebound in crude prices. Adam Mancini of the Motley Fool gives a good report on this stock.

This is the second of two parts. The first part was posted on Friday, May 08, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Canadian Natural Resources Ltd. is a senior oil and natural gas exploration, development and production company. The Company's operations are focused in Western Canada, in the U.K. sector of the North Sea and in offshore West Africa. Its web site is here Canadian Natural Resources.

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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

1 comment:

  1. The oil price is biting hard on CNRL's offshore operations. As a small company in terms of offshore production, it relies heavily upon contracted operating personnel and external support services. But cuts of 35% during the past 9 months have taken their toll - CNRL is has begun to haemorage key operational personnel.

    When the upturn occurs CNRL will have insufficient ability to follow the pace. Earlier decommisioning of North Sea assets will also impact production: The only bright star appears to be their operation off Ivory Coast, West Africa, where crude production is expected to increased by 30% during Q2 2016.