Friday, November 18, 2016

Cenovus Energy Inc.

Sound bite for Twitter and StockTwits is: Relatively cheap? Resource stocks tend to go up and down and if you want to make money you have buy them when they are down. See my spreadsheet on Cenovus Energy Inc.

I do not own this stock of Cenovus Energy Inc. (TSX-CVE, NYSE-CVE). This is another stock that was talked about at the 2010 Money Show in Toronto. There were those who liked oil companies and they mentioned both Suncor Energy Inc. (TSX-SU) and Cenovus Energy Inc. (TSX-CVE). This company was split off from EnCana (TSX-ECA) in 2009. I was also following Alberta Energy Co. (TSX-AEC) into EnCana.

Dividends have been cut. They were cut by 40% in 2015 and then another 69% in 2016, this year. This is hardly surprising as all oil companies are not doing well. The current dividend is low at 1.01% based son dividends of $.20 and a stock price of $19.81.

If you bought this stock 5, 10 or 15 years ago, your dividend yield on your original stock price if a median price is 0.58%, 0.76% and 1.90%. So having bought it 5 or 10 years ago, the dividend yield on your original price is lower than buying today. However, if you bought this stock 5, 10 or 15 years ago, dividends paid would have covered 11.5%, 29.8% or 81% of your original stock price if you paid a median price.

Even at today’s low dividend analysts do not think that dividends will be covered by EPS until 2018. It is expected that by the end of 2016 dividends paid over the past 5 years will be 124% of EPS over the past 5 years.

For this stock, the stock price is falling further than Revenues or Cash Flow are falling. Capital loss over the past 5 and 10 years is at 12.06% and 3.70% per year. Over the say time period Revenue per share is down by 1.4% per year over the past 5 years, but up by 5.11% per year over the past 10 years. Cash Flow per share is down by 8.8% over the past 5 years which is not as fast as capital loss of the stock price. However, the CFPS has fallen further over the past 10 years with decline in CFPS at 8.3% per year over the past 10 years.

The Liquidity Ratio is generally low on this company, but it has been rising lately. The Liquidity Ratio for 2015 is 3.48. The one for the end of the third quarter of 2016 is still high at 3.10. This is a good sign that they are ensuring a good Liquidity Ratio when times are bad. It will help them through a rough patch.

The 5 year low, median and high median Price/Earnings per Share Ratios are 21.23, 27.54 and 34.12. The corresponding 10 year ratios are 19.19, 23.25 and 27.17. The historical ratios are 14.77, 17.58 and 20.40. We cannot do any testing of 2016 P/E Ratio as the EPS is negative and is expected to be very low in 2017.

I get a Graham Price of $16.36 using in the formula the last 3 earnings rather than the 2016 estimate. I cannot use a negative EPS in this formula. The 10 year Price/Graham Price Ratios are this basis are 0.94, 1.20 and 1.43. The current P/GP Ratio is 1.21 based on a stock price of $19.81. This stock price testing suggests that the stock price is relatively reasonable and around the median.

I get a 10 year median Price/Book Value per Share Ratio of 2.13. The current P/B Ratio is 1.44 a values some 32% lower. The current P/B Ratio is based on BVPS of $13.72 and a stock price of $19.81. This stock price testing suggests that the stock price is relatively cheap. This test maybe the best test to use. It is not based on estimates and is based on very recent values.

I cannot do any testing on Dividend Yield as I normally do because of the recent dividend cuts. However, the last time they cut the dividends the Dividend Yield got to a median of 0.79% (2004). The current dividend yield of 1.01% is some 27.8% higher. This might be suggestive of a current relatively cheap stock price.

The 10 year P/S Ratio is 1.61. The current P/S Ratio is 1.38 based on 2016 Revenue estimates of $11958M and $14.35 Revenue per Share. The current P/S Ratio is some 14% lower than the 10 year ratio. This stock price testing suggests that the stock price is reasonable and below the median.

When I look at analysts’ recommendations, I find Buy and Hold recommendations. There are more Hold recommendations that Buy recommendations and the consensus recommendation would be a Hold. The 12 month stock price consensus is $22.43. This implies a total return of 14.245 with 13.23% from capital gains and 1.01% from dividends.

Judy McKinnon talks on Wall Street Journal about the third quarter results including an earnings loss. Stock Talk Staff talks about some technical analysis on this stock at Stock Talk Daily. See what views analysts have of this stock at Stock Chase. One thinks it is overvalued.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see that report here.

The last stock I wrote about was about was Alimentation Couche-Tard Inc. Redone (TSX-ATD.B, OTC-ANCUF)... learn more . The next stock I will write about will be Johnson and Johnson (NYSE-JNJ)... learn more on Monday, November 21, 2016 around 5 pm.

Also, on my book blog I have put a review of the book The Bonobo and the Atheist by Frans de Waal learn more...

Cenovus Energy Inc. is an integrated oil company. The Company's operations include enhanced oil recovery (EOR) properties and established crude oil and natural gas production in Alberta and Saskatchewan. It also has ownership interests in two refineries in Illinois and Texas, United States. Its web site is here Cenovus Energy Inc.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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