I do not own this stock of Cenovus Energy Inc. (TSX-CVE, NYSE-CVE). I do not own this stock 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.
When I was updating my spreadsheet, I noticed the Liquidity Ratio fell from 1.13 (a low value) to 0.67 (a much lower value) from the annual 2017 to the third quarterly statement. When this ratio is lower than 1.00 it means that current assets cannot cover current liabilities. Even adding in cash flow after dividends this ratio is just 0.89. This is a risk
Canadian oil and gas companies have been having problems lately. This stock is no different. As you can see from the chart below, dividend growth is negative. They have been reducing their dividends since hitting a recent high in 2014. Dividends have been decreased by some 81%.
Mostly dividends have had a low yield. The current dividend yield is 1.69%. The historical median is also low at 1.45%. The 5 and 10 year median dividend yields are moderate at 3.10% and 2.78% because yields were growing prior to the dividend cuts.
The current Dividend Payout Ratio for 2017 is 6.56% with 5 year coverage at 65.7%. They had good earnings in 2017 but they are expected to have an earnings loss in 2018. Net year the 5 year coverage of dividends is expected to be around 77% in 2018. Analysts are again expecting positive earnings in 2019 and 2020.
The only Debt Ratio problem involves the Liquidity Ratio. Their Long Term Debt/Market Cap Ratio for 2017 is 0.67 in 2018. I talked above about the problem with the Liquidity Ratio which is a negative for this stock. The Debt Ratio is good at 1.95 with 5 year median at 1.83. Leverage and Debt/Equity Ratios for 2017 are 2.05 and 1.05 which are fine.
The Total Return per year is shown below for years of 5 to 25 for Canadian shareholders. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | -25.65% | -16.47% | -19.18% | 2.70% |
| 10 | -6.31% | -6.37% | -9.96% | 3.58% |
| 15 | 1.79% | 4.46% | -0.19% | 4.65% |
| 20 | 5.70% | 9.69% | 4.71% | 4.99% |
| 25 | 5.10% | 10.61% | 5.99% | 4.61% |
The Total Return per year is show below for years of 5 to 12 for US shareholders. I do not have as much US$ data. This company changed report currency from US$ to CDN$ in 2009.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | -28.99% | -20.55% | -22.91% | 2.37% |
| 10 | -8.52% | -8.61% | -12.10% | 3.50% |
| 15-12 | 3.36% | -2.89% | -7.05% | 4.16% |
| 20 | 6.39% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.68, 27.54, and 34.12. the corresponding 10 year ratios are 19.19, 23.25 and 27.17. The historical median ratios are 13.91, 16.82 and 19.85. The current P/E Ratio is negative because the company is expected to have an earnings loss this year. This means that we can not do a proper test with P/E Ratios.
However, the company is expected to have a profit in 2019. The 2019 P/E Ratio is 11.94. We are getting close to 2019. This ratio is based on a current price of $11.82 and 2019 earnings estimate of $0.99. This stock price testing would suggest that the stock price is relatively cheap.
I get a Graham Price of $18.37. The 10 year low, median, and high median Price/Graham Price Ratios are 1.17, 1.47 and 1.70. The current P/GP Ratio is 0.64 based on a stock price of $11.82. This stock price testing would suggest that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 2.05. The current P/B Ratio is 0.78 based on Book Value of $18,624M, BV per Share of $15.16 and a stock price of $11.82. The current ratio is some 62% below the 10 year ratio. This stock price testing would suggest that the stock price is relatively cheap.
I get an historical median dividend yield of 1.45%. The current dividend yield is $1.69% based on dividends of $0.20 and a stock price of $11.82. The current dividend yield is some 17% higher than the historical median. This stock price testing would suggest that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.37. The current P/S Ratio is 0.66 based on 2018 Revenue estimate of $22,124M, Revenue per Share of $18.00 and a stock price of $11.82. The current ratio is some 52% below the 10 year median ratio. This stock price testing would suggest that the stock price is relatively cheap.
All the stock testing shows the stock price as being cheap except for the dividend yield test. However, there is a problem with the dividend yield test as the dividends have been cut substantially over the last while. It would seem that the stock price is current cheap.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (17) and Hold (10). The consensus would be a Buy. The 12 month stock price would be $16.43. This implies a total return of 40.69% with 39% from capital gains and 1.69% from dividends based on a current stock price of $11.82.
David Rudolf on Bharatapress about several recent analysts changes to their target price. Brandon Baker on Bharatapress talks about stock purchases by Blume Capital Management. Mary Kom on Fairfield Current talks about Beutel Goodman selling some of their holdings in this stock.. Andrew Walker on Motley Fool thinks this stock might be an interesting contrarian pick. See what analysts are saying on Stock Chase. There are both positive and negative comments.
Cenovus Energy Inc is engaged in developing, producing, and marketing crude oil, natural gas liquids and natural gas in Canada with marketing activities and refining operations in the United States. Its web site is here Cenovus Energy Inc.
The last stock I wrote about was about 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 Wednesday, November 14, 2018 around 5 pm. Tomorrow on my other blog I will write about Money Show 2018 - Panel.... learn more on Tuesday, November 13, 2018 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.
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