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.
As you can see, I do not look on oil companies as a long term buy. Also, please note that my spreadsheet following this company starts with Alberta Energy Company and follows this company into the formation of EnCana in 2002. It was in 2002 EnCana was formed with the merger of AEC and PanCanadian Energy Corporation. Company split into EnCana Corp and Cenovus Energy Inc in 2009, Oil with Cenovus and gas with EnCana.
When I was updating my spreadsheet, I noticed that the company intends to domicile in the US and change the company name to Ovintiv Inc. There will also be at that time a consolidation of stock on a 1 to 5 basis. See the News Release. Well what do we expect. Canada is not open to development of our resources. For oil and gas, we cannot get pipelines built.
For this stock, long term shareholders have a stock where the current price is below that of 15 years ago and barely higher than it was 20 years ago. For shareholders with this stock for 20 years have only made a profit because of dividends.
After debt declining for a number of years, the debt has gone up in 2019. Debt to the end of the third quarter is up by 90%. This debt ratios are not good at the end of the third quarter, with Long Term Debt/Market Cap at 1.30. Also, the Liquidity Ratio was deteriorated to 0.82 from 1.35 at the end of 2018. This is caused by an increase in Accounts payable and accrued liabilities.
Talk about dividends yields and growth. Dividend are paid in US$. The dividend yields are low (below 2%). The current dividend yield is 1.68%, with 5, 10 and historical yields are 0.75%, 2.72% and 1.45%. Yields are gone up and down over time. As this is an energy company, dividends have both gone up and down and have sometimes been flat. There has not be much growth over the years. See chart below.
The Dividend Payout Ratios are too high for EPS but ok for CFPS. The DPR for EPS for 2018 was 5.4%. I cannot calculate the 5 year coverage as they paid out more than they earned over the past 5 years. The DPR for CFPS is much better 2.7% for 2018 with 5 year coverage at 7.6%. The dividends paid are 50% of Free Cash Flow.
Debt Ratios have some problems concerting liquidity and Long Term Debt/Market Cap Ratio. Debt has been going down for a number of years, but for the third quarter 2019 it is up 90%. The Long Term Debt/Market Ratio for 2018 was 0.67, but it is now 1.30. Debt Ratio is good in 2018 at 1.94 and is only down to 1.87 currently. Leverage and Debt/Equity Ratios are fine at 2.06 and 1.06 in 2018 and current at 2.15 and 1.15.
The Total Return per year is shown below for years of 5 to 26 to the end of 2018 in CDN$. 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 | -35.13% | -15.04% | -16.30% | 1.26% |
| 2008 | 10 | -22.22% | -9.74% | -12.32% | 2.59% |
| 2003 | 15 | -3.20% | 0.96% | -3.40% | 4.36% |
| 1998 | 20 | 0.78% | 6.62% | 1.56% | 5.06% |
| 1993 | 25 | 1.16% | 8.59% | 3.62% | 4.97% |
| 1992 | 26 | 1.12% | 8.99% | 4.00% | 4.99% |
The Total Return per year is shown below for years of 5 to 26 to the end of 2018 in US$. I do not have as much US$ data as I do CDN$ data.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | -38.28% | -19.26% | -20.37% | 1.11% |
| 2008 | 10 | -23.05% | -10.22% | -13.25% | 3.04% |
| 2003 | 15 | -3.54% | -4.28% | -7.91% | 3.64% |
| 2002 | 17 | 1.40% | -1.57% | -4.44% | 2.86% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 2.55, 3.78 and 5.02. The corresponding 10 year ratios are 6.71, 9.65 and 12.58. The corresponding historical ratios are 10.05, 12.01 and 15.43. there has been 3 earnings losses and therefore negative ratios in the past 7 years. This accounts for some of the low ratios. The current P/E Ratio is 14.37 based on a stock price of $5.86 and EPS of $0.41 ($0.31 US$). This stock price testing suggests that the stock price is relatively reasonable and probably above the median. This is in CDN$.
I get a Graham Price of $9.60. The 10 year low, median, and high median Price/Graham Price Ratios are 0.68, 0.99 and 1.34. The current P/GP Ratio is 0.61 based on a stock price of $5.86. This stock price testing suggests that the stock price is relatively cheap. This is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.39. The current P/B Ratio is 0.58 based on Book Value of $9, 921M, Book Value per Share of $7.64 and a stock price $4.41. The current ratio is some 58% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You would get a similar result in CDN$.
I get an historical median dividend yield of 1.45%. The current dividend yield is 1.68% based on Dividends of $0.10 ($0.08 US$) and a stock price of $5.86. The current dividend yield is 16% above the historical median. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Some people use the 10 year median dividend yield for this test which is 2.27% US$. The current dividend yield is 1.70% based on Dividends of $0.08 and a stock price of $4.41. The current yield is 25% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This is in US$. You would get a similar result in CDN$. Problem is they have been cutting the dividends lately.
The 10 year median Price/Sales (Revenue) Ratio is 2.31. The current P/S Ratio 0.81 based on 2019 Revenue estimate of $7,075M, Revenue per Share of $5.45 and a stock price of $4.41. The current ratio is 65% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You would get a similar result in CDN$.
Results of stock price testing is that the stock price is relatively cheap. The best tests are the P/S Ratio, the P/B Ratio, and the P/GP Ratio tests. All these tests say the stock price is relatively cheap. The problem with the P/E Ratio is the recent negative ratio because of earnings losses. The problem with the dividend yield tests is recent dividend cuts, but also the past history of big increases and decreases.
Is it a good company at a reasonable price? This company is a resource company and so is a high risk. It is certainly cheap. Some wonder about the recent purchase of Newfield Exploration. See notice of this here. I personally limit my investment in resources because these stocks are volatile and currently in Canada, they cannot get their product to market.
When I look at analysts’ recommendations, I find Strong Buy (8), Buy (11), Hold (10) and Sell (2). The consensus would be a Buy. The 12 months stock price is $9.38 ($7.13 US$). This implies a total return of 61.77% with 60.08% from capital gains and 1.68% from dividends based on a stock price of $5.86.
See what analysts are saying on Stock Chase. They agree that it is cheap, but risky. Brian Pacampara on Motley Fool says stock is cheap but more research is needed. A writer on Simply Wall Street says the stock is cheap based on fundamentals. A writer on Simply Wall Street thinks the stock is mispriced and a buy opportunity. Kevin Orland on Financial Post talks about the company moving to US and change its name to Ovintiv Inc.
EnCana Corporation is one of the world's largest independent natural gas producers and gas storage operators. Its web site is here Encana Corp.
The last stock I wrote about was about was CCL Industries Inc (TSX-CCL.B, OTC-CCDBF) ... learn more. The next stock I will write about will be Dollarama Inc. (TSX-DOL, OTC-DLMAF) ... learn more on Wednesday, November 06, 2019 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks November 2019.... learn more on November 05, 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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