Encana Corp. 2

Sound bite for Twitter and StockTwits is: Stock is cheap. The time to buy good companies is when they are cheap. However, another problem is that it is hard figure out when this company and indeed the oil and gas industry will recover. It may be a while yet. See my spreadsheet on Encana Corp.

I do not own this stock of Encana Corp. (TSX-ECA, NYSE-ECA) but I used to. I had held this stock previously as Alberta Energy Company from April 2000 until August 2002 and made some 18% total returns per year. I had EnCana Corp from February 2006 to November 2009 and made a 9.54% per year total return. I sold this stock in 2009 because I only had 100 shares and the stock was going to split into two companies. I would have ended up with small investment in two companies.

There is very little insider ownership. The biggest holder that I see is the Chairman who owns shares worth $1.8M that is 0.02% of the outstanding shares. There were no stock options in 2014. There was insider buying of $2M which is some 0.02% of the outstanding shares. There was no insider selling.

There is no point in looking at P/E Ratio as the EPS is expected to be negative in 2014. For Graham Price, I get one of $13.04. The 10 year Low, median and high median P/GP Ratios are 0.78, 1.03 and 1.19. The current P/PG Ratio is 0.86 based on a stock price of $11.24. This would suggest that the stock price is relatively reasonable.

I get a 10 year median Price/Book Value per Share Ratio of 1.96. The current P/B Ratio is 0.93, a value some 53% lower than the 10 year median P/B Ratio. This stock price testing suggests that the stock price is cheap.

The 5 year median dividend yield is 3.12%. The current dividend yield is 3.32% based on dividends of $0.37 CDN$ and a stock price of $11.24. The current dividend yield is some 6% higher than the 5 year median and this suggests that the stock price is relatively reasonable. If you look at the historical median dividend yield it is 1.45%. This current dividend yield is 129% higher and this suggests that the stock price is cheap.

This stock hit a high in 2008 of $49.46 and it is now some 77% lower at $11.24. The stock has lost some 30% of its value in this year alone. Of course revenue, earnings and cash flow are all expected to fall this year.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. There are even numbers of the Buy and Hold recommendations and these are the most numerous. The consensus recommendation would be a Buy. The 12 month stock price is $12.50 US$. This implies a total return of 51.78% with 3.335 from dividends and 48.46% from capital gains.

This article in the Financial Post talks about Encana Corp delaying Alberta gas plants until royalty review concludes. This article at the UPI site says shale-focused Encana Corp.'s overall production was up 35 percent from last year. See some analysts' comments at Stock Chase.

This is the second of two parts. The first part was posted on Wednesday, November 18, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Encana is a leading North American energy producer that is focused on growing its strong portfolio of diverse resource plays producing natural gas, oil and natural gas liquids. Its web site is here Encana Corp.

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.