I do not own this stock of Ovintiv Inc (TSX-OVV, NYSE-OVV), 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. Name was changed to Ovintiv this year.
When I was updating my spreadsheet, I noticed that the big news is that the stock is doing a 5 to 1 stock consolidation. Also, analysts expect that the company will have a big loss in 2020 of $3,992M or $15.30 EPS loss. However, the company is expected to have very good cash flow. The reason for the loss is showing up in the quarterly statements. The company is taking an impairment loss and operations expenses has climbed about 125%. There was a 1 to 5 consolidation of the stock in January 2020.
The dividend yield is currently moderate with dividend growth variable. The current dividend yield is moderate (2% to 4% ranges) at 4.07%. The 5, 10 and historical median dividend yields are low (below 2%) at 0.76%, 1.57% and 1.96%. Dividends have gone up and down and remained flat at different times. The last dividend increase was in 2019 and it was for 25%. There has been no increase in 2020. Dividends have not grown over the past 15 years because of the 79% decrease in 2016.
The Dividend Payout Ratios (DPR) are erratic. The DPR for EPS for 2019 is 42%. The 5 year coverage cannot be calculated because of earnings losses. Analysts expect an earning loss in 2020, but expect a DPR for EPS of 89% in 2021. The DPR for CFPS for 2019 is 3% with 5 year coverage at 6%. The DPR for Free Cash Flow for 2019 is 35% with 5 year coverage non-calculable because of negative FCF.
Debt Ratios could improve. The Long Term Debt/Market Cap Ratio for 2019 is 1.14 and is currently at 2.95. The stock price has fallen by 57% so far this year. The Liquidity Ratio for 2019 is 0.75, but if you add in cash flow after dividends it is 1.92. The 5 year median Liquidity Ratio is 1.23. The Debt Ratio for 2019 is 1.86. The Leverage and Debt/Equity Ratios for 2019 are fine at 2.16 and 1.16.
The Total Return per year is shown below for years of 5 to 27 to the end of 2019 in CDN$. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | -21.40% | -16.58% | -17.77% | 1.19% |
| 2009 | 10 | -19.38% | -13.76% | -15.84% | 2.08% |
| 2004 | 15 | -1.60% | -2.81% | -6.85% | 4.04% |
| 1999 | 20 | 1.67% | 3.80% | -1.29% | 5.08% |
| 1994 | 25 | 1.33% | 8.61% | 2.69% | 5.92% |
| 1992 | 27 | 1.73% | 8.45% | 2.85% | 5.60% |
The Total Return per year is shown below for years of 5 to 18 to the end of 2019 in US$. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | -23.15% | -18.42% | -19.50% | 2.88% |
| 2009 | 10 | -21.07% | -15.47% | -17.57% | 2.15% |
| 2004 | 15 | -2.10% | -8.27% | -11.34% | 2.53% |
| 2002 | 18 | 2.31% | -0.79% | -5.30% | 2.21% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 4.56, 8.39 and 12.22. The corresponding 10 year ratios are 7.30, 10.92 and 14.53. The corresponding historical ratios are 7.19, 8.56 and 10.45. The current P/E Ratio is a negative 0.60 based on a stock price of $12.12 and EPS estimate for 2020 of an EPS loss of $20.13 ($15.30 loss US$). So, this testing cannot be done. This is in CDN$.
The P/E Ratio for 2021 is 21.93 based on a stock price of $12.12 and 2021 EPS estimate of $0.53 ($0.42 US$). The P/E Ratio for 2022 is 15.35 based on 2020 EPS estimate of $0.79 ($0.60 US$). This This stock price testing suggests that the stock price is expensive. This testing is not working well because of the expected drop in EPS over the next couple of years. This is in CDN$.
I get a Graham Price of $19.23. The 10 year low, median, and high median Price/Graham Price Ratios are 0.80, 1.04 and 1.44. The current P/GP Ratio is 0.63 based on a stock price of $12.12. This stock price testing suggests that the stock price is relatively cheap. This is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.35. The current P/B Ratio is 0.40 based on a Book Value of $5,873M, Book Value per Share of $22.61 and a stock price of $9.07. The current ratio is 70% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 4.27. The current P/CF Ratio is 1.37 based on Cash Flow per Share estimate for 2020 of $6.61, Cash Flow of $1,717M and a stock price of $9.07. The current ratio is 68% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result in CDN$.
I get an historical median dividend yield of 1.57%. The current dividend yield is 4.14% based on Dividends of $0.38 and a stock price of $9.07. The current dividend yield is 163% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result in CDN$.
I get a 10 year median dividend yield of 1.96%. The current dividend yield is 4.14% based on Dividends of $0.38 and a stock price of $9.07. The current dividend yield is 111% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 2.31. The current P/S Ratio is 0.38 based on Revenue estimate for 2020 of $6.140M, Revenue per Share of $23.63 and a stock price of $9.07. The current ratio is 83% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably cheap. The dividend yield tests are showing the stock price as cheap even after big drops in the dividends. This is confirmed by the P/S Ratio test. All the other tests are showing the stock price as cheap except for the P/E Ratio tests. The problem with the P/E Ratio tests is the drop in EPS.
Is it a good company at a reasonable price? The company’s stock price is certainly reasonable. It is also quite cheap. However, this is a very risky stock because there are so many unknowns about what will happen in the oil and gas industry in the near future and over the longer term. Certainly, we will get off oil and gas because of pollution, but what that time table is, is anyone guess.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (2), Hold (18), Underperform (1) and Sell (2). The consensus is a Hold. The 12 month stock price target consensus is $15.735 ($11.97 US$). This implies a total return of 434.05% with 29.97% from capital gains and $4.07% from dividends.
All the latest entries on Stock Chase are negative. One analyst says that energy is not an investable asset and I agree. Travis Hoium on Motley Fool talks about oil stocks, including Ovintiv. David Jagielski on Motley Fool thinks the worse might be over for this company. A writer on Simply Wall Street says there are better dividend stock to buy than Ovintiv. Comments on Reddit about this stock moving to NASDAQ..
Ovintiv is an independent oil and gas producer with key assets in the Permian, Eagle Ford, Montney, and Duvernay areas. Its web site is here Ovintiv Inc.
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 Monday, November 2, 2020 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.
No comments:
Post a Comment