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.
When I was updating my spreadsheet, I noticed that it has not done well for shareholders lately with cutting of dividends and drop in stock price so that shareholders that have held this stock for the past 5 and 10 years have lots. However, near the end of 2019 they have raised the dividend by 25%. This would signal that management expects the company to do better in the near future.
The other thing I noticed is that the outstanding shares have been increasing rapidly with increase of 10.2% and 5.1% per year over the past 5 and 10 years. This greatly affects per share values. For examples, Revenue over the past 5 years is down only 2.7% per year, but Revenue per Share is down by 11.7% per year. The growth in Book Value in the past 10 years is 28%. However, Book Value per Share is down by 22% over the same period.
Talk about dividends yields and growth. This is an energy company, so the dividends have both gone up and down over the years. See the chart below. Dividend yields are Low (less than 2%) to moderate (2% to 4% ranges). The current yield is 2.06% with 5, 10 and historical yields at 1.71%, 2.66% and 1.45%.
The Dividend Payout Ratios are too high for EPS, but they do have good coverage for CFPS and FCF. I cannot calculate the current DPR for EPS as the EPS is negative for 2018. However, the 5 year coverage is 128%. The DPR for CFPS for 2018 is 18% with 5 year coverage at 20%. According to the Wall Street Journal the Free Cash Flow for 2018 is $832M with dividends at $2.45M giving a coverage of 30%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is 0.72. The Liquidity Ratio is 1.23 for 2018 with 5 year median at 1.42. If you add in Cash Flow after dividends, the Ratio for 2018 is 1.99. The Debt Ratio is 1.99 with 5 year median at 1.92. The Leverage and Debt/Equity Ratios for 2018 are 2.01 and 1.01 with 5 year median at 2.22 and 1.22.
The Total Return per year is shown below for years of 5 to 26 to the end of 2018. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | -27.05% | -18.35% | -20.59% | 2.24% |
| 2008 | 10 | -14.43% | -6.27% | -10.04% | 3.77% |
| 2003 | 15 | 3.16% | 3.37% | -1.73% | 5.09% |
| 1998 | 20 | 5.70% | 8.28% | 2.88% | 5.40% |
| 1993 | 25 | 5.10% | 9.78% | 4.69% | 5.09% |
| 1992 | 26 | 4.90% | 10.11% | 5.03% | 5.08% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 2.95, 4.83 and 6.71. The corresponding 10 year ratios are 19.19, 23.25 and 27.17. The corresponding historical ratios are 13.06, 16.17 and 19.53. The current P/E Ratios is 5.94 based on a stock price of $12.11 and 2019 EPS estimate of $2.04. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $26.38. 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 0.46 based on a stock price of $12.11. This stock price testing suggests 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 0.80 based on a Book Value of $18,624M, Book Value per Share of $6.61 and a stock price of $12.11. The current ratio is 61% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.45%. The current dividend yield is 2.06% based on dividends of $0.25 and a stock price of $12.11. The current dividend yield is some 42% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
If we look at the 10 year median dividend yield of 2.66%, this testing is quite different. In this case the current dividend yield is 22.3% below the 10 year dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.30. The current P/S Ratio is 0.72 based on 2019 Revenue estimate of $20,596M, Revenue per Share of $16.76 and a stock price of $12.11. The current ratio is 44% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The best test is the P/S Ratio test and this is showing the stock price is relatively cheap. The dividend yield test is not good because of the variability of the dividend over the years. I find no fault in the P/B Ratio nor the P/GP Ratio testing and both these show the stock price is relatively cheap.
Is it a good company at a reasonable price? Well the stock price would seem to be quite cheap. As to a good company, it is in the energy business which is a very risky business. I have very little in any resource area. I generally do not think that they are good long term buys. You might be able to make money on this stock as the stock price will probably rise. Just be aware that you are taking on a risky company and industry.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (10, Hold (6) and Sell (1). The consensus is a Buy. The 12 month stock price consensus is $14.96. This implies a total return of 25.60% with 23.53% from capital gains and 2.06% from dividends.
See what analysts are saying on Stock Chase. Some think energy companies will come back. Brian Pacampara on Motley Fool thinks it’s a great opportunity to buy this stock. A writer on Simply Wall Street says a fair value is $11.70 CDN$, so the current price is fair. Andrew Walker on Motley Fool says the worse for the company is over and it is currently an interesting pick. An article from Reuters on London Free Press talks about this company posting a better than expected profit.
Cenovus Energy is an integrated oil company, focused on creating value through the development of its oil sands assets. The company also engages in production of conventional crude oil, natural gas liquids, and natural gas in Alberta, Canada, with refining operations in the U.S. 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 Wednesday, November 13, 2019 around 5 pm. Tomorrow on my other blog I will write about Steinberg Wealth Management .... learn more on Tuesday, November 12, 2019 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.
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