Friday, November 17, 2017

Cenovus Energy Inc.

Sound bite for Twitter and StockTwits is: Dividend paying Resource. Price is relatively cheap to relatively reasonable. There is lots of insider buying. 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. My spreadsheet reflects this split. I was also following Alberta Energy Co. (TSX-AEC) into EnCana.

One thing I noticed doing the spreadsheet is that there is Net Insider Buying of 0.04%. This is a lot as you would expect this to be around 0.01%. Purchases were made by CEO, CFO, other officers and Directors. They also changed the Chairman and the CEO recently.

The other thing is that their debt increased 103% because they acquired assets from ConocoPhillips including ConocoPhillips' 50% interest in the FCCL Partnership, the oil sands venture which was jointly owned with and operated by Cenovus, as well as the majority of ConocoPhillips' Deep Basin conventional assets in Alberta and British Columbia.

Because a lot of people mention the debt load of this company, I thought I should look at that. The Long Term Debt/Market Cap Ratio at the end of the third quarter is 0.82. This is high, but not too high. The Liquidity Ratio is very good at 2.55 for 2016 and is current lower at 1.41. I like to see this ratio at 1.50 or higher. The Debt Ratio is 1.85 for 2016 with a current one at 1.84. The Leverage and Debt/Equity Ratios for 2016 are 2.18 and 1.08 and are currently at 2.19 and 1.19. So these are also fine. I do not find the debt load troubling.

Dividends have gone up, down and stayed the same over the year. Dividends are down by 25.7% and 1.2% per year over the past 5 and 10 years. There have been big increases in the past, like the increases in 2007 and 2008 of 69.60% and 147.75%. They have also been big decreases like in 2016 of 76.54%.

Although people who have had this stock for say 5, 10 or 15 years are not making much in the way of yield which is 0.57%, 0.67% and 1.89%. However, those same people would have had 9.41%, 25.46% and 81.57% of their stock's price paid for by dividends.

The 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 14.76, 17.47 and 20.17. The current expansion in stock price is partially based on higher P/E Ratios. The current P/E Ratios is 4.76 based on a stock price of $12.86 and 2017 EPS estimate of $2.70. This is not as unrealistic as it might first seem as the EPS for the 12 month period ending in the third quarter is 2.73.

However, the EPS for 2017 is high because of accounting done around the acquisition of assets from ConocoPhillips. So if you take out the special earnings due to this purchase the EPS for the 12 month to the end of the third quarter, you have EPS of $0.35. Using this EPS, the current P/E Ratio is 36.74. By this measure the stock is relatively expensive. However, I do wonder about using this method for determining relatively value of the current stock price.

There is some flexibility in calculating the Graham Price. People use the formula in a number of ways. You just need to be consistent for one stock. For this stock I am using the last 3 years of EPS in the formula. I get a Graham Price of $11.32. The 10 year low, median and high median Price/Graham Price Ratios are 0.94., 1.12 and 1.37. The current P/GP Ratio is 1.14 based on a stock price of $12.86. This stock price testing suggests that the stock price is relatively reasonable and just above the median.

I get a 10 year median Price/Book Value per Share Ratio of 2.13. The current P/B Ratio is 0.81 based on a stock price of $12.86, Book Value of $19,433M and Book Value per Share of $15.81. The current P/B Ratio is some 62% lower than the 10 year median. This stock price testing suggests that the stock price is relatively cheap. Also, the ratio is less than 1.00. This says that the stock is selling below book value and this also is saying that the stock is relatively cheap.

I get an historical dividend yield of 1.45%. The current dividend yield is 1.56% based on dividends of $0.20 and a stock price of $12.86. The current dividend is higher than the historical one by 7.3%. This stock price testing suggests that the stock price is relatively reasonable and below the median.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold and Underperform Recommendations. Most are either a Buy or a Hold. The consensus recommendations would then be a Buy. The 12 month stock price is $14.82. This implies a total return of 16.80% based on a current price of $12.86 with 15.24% from capital gains and 1.56% from dividends.

Joey Frenette of Motley Fool currently likes this stock. Clarence Martin on Highlight Press talks about some institutional buyers of this stock. Jeff Lewis in an article in the Globe and Mail talks about recent sale of assets by this company. See what analysts are saying about this company on Stock Chase. Their views are mixed.

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.

The last stock I wrote about was about was Keyera Corp. (TSX-KEY, OTC-KEYUF)... learn more. The next stock I will write about will be Johnson and Johnson (NYSE-JNJ)... learn more on Monday, November 20, 2017 around 5 pm.

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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.


  1. Hi Susan,
    Thanks as always for your detailed analyses. Just wanted to point out that the current dividend yield is actually 7.3% HIGHER than the historical yield (not lower as you have said).