I do not own this stock of Cenovus Energy Inc (TSX-CVE, NYSE-CVE). I had held this stock previously as Alberta Energy Company from April 2000 until August 2002. 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 there is a lot of red ink on my spreadsheet, but then we are dealing with an energy company. Dividends have been suspended and analyst do not expect this company will make any money over the short term. For example, analysts think that over the next 3 year this company will have negative EPS, but positive cash flow. Of course, the cash flow is expected to drop in 2020. Also, this stock has gone up by almost 20% today, Monday, November 9, 2020 from $4.67 to $5.56.
The dividends were suspended in 2020. When it did pay dividends, the dividend yield was mostly low (under2%). The historical median dividend yield is 1.58%. The 10 year median dividend yield was higher within the moderate range (2% to 4% ranges) at 2.59%. Over the past 27 years that I have dividend information, the dividends went up 11 times and down 5 years and remain the same for the rest of the years.
The Dividend Payout Ratios (DPR) have generally been fine over the long term. The DPR for EPS for 2019 is 12% with 5 year coverage at 60%. Note that EPS has tended to be volatile. The DPR for CFPS for 2019 is 75 with 5 year coverage at 16%. The DPR for Free Cash Flow for 2019 is 12% with 5 year coverage at 37%. The dividends have gone up, down and remained flat at different times. Dividend coverage has varied over time also.
Debt Ratios are mostly good but have deteriorated this year. The Long Term Debt/Market Cap Ratio for 2019 is 0.41. However, because of the steep fall in the stock price, the current ratio is 1.14. The Liquidity Ratio for 2019 is 1.30 and if you added in cash flow after dividends it is 2.50. The Debt Ratio for 2019 is 2.16. The Leverage and Debt/Equity Ratios for 2019 are 1.86 and 0.86.
The Total Return per year is shown below for years of 5 to 27 to the end of 2019. 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 | -27.55% | -9.60% | -11.25% | 1.65% |
| 2009 | 10 | -12.42% | -3.08% | -6.26% | 3.19% |
| 2004 | 15 | 4.06% | 2.40% | -1.52% | 3.91% |
| 1999 | 20 | 6.02% | 7.25% | 2.92% | 4.33% |
| 1994 | 25 | 4.79% | 10.95% | 6.18% | 4.77% |
| 1992 | 27 | 4.95% | 10.55% | 6.08% | 4.46% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 2.95. 4.83 and 6.71. These are quite low due to some years of negative ratios. The corresponding 10 year ratios are 16.73, 19.82 and 22.92. The corresponding historical ratios are 12.93, 15.59 and 18.25. The current P/E Ratio is negative as is the P/E Ratio for the next two years. So, this test cannot be done.
I estimate a Graham Price of $23.56. The 10 year low, median, and high median Price/Graham Price Ratios are 1.06, 1.38 and 1.64. The current P/GP Ratio is 0.24 based on a stock price of $5.56. 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 1.70. The current P/B Ratio is 0.40 based on a Book Value of $17,032M, Book Value per Share of $13.86 and a stock price of $5.56. The current ratio is 76% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 7.19. The current P/CF Ratio is 37.07 based on Cash Flow per Share estimate for 2020 of $0.15, Cash Flow of $1,909M and a stock price of $5.56. The current ratio is 415% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
However, analysts expect the cash flow to crash by around 94% this year. If we look at the Cash Flow per Share estimate for 2021, it is $1.84, the Cash Flow would be $2,041 and with a stock price of $5.56, we get a P/B Ratio of 4.48. This ratio is 38% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I cannot do any median dividend yield testing because the dividends have been suspended.
The 10 year median Price/Sales (Revenue) Ratio is 1.27. The current P/S Ratio is 0.49 based on Revenue estimate for 2020 of $13,987M, Revenue per Share of $11.38 and a stock price of $5.56. The current ratio is 62% below the 10 year 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 P/S Ratio test show that the stock price is relatively cheap. The dividends are suspended so I cannot do any stock price testing using dividend data. The P/B Ratio test is a good one and it say the stock price is relatively cheap. There are some problems with some tests as noted above.
Is it a good company at a reasonable price? Personally, I do not invest much in resources even though they are a large part of the Canadian stock market. I have around 1% in resource stocks. I do follow a number because they are a large part of the Canadian economy. I do not think any resource stock is a buy and hold, but you can make money on them in the short term if you buy them at low prices, at their cycle lows and sell when they are relatively high.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (6), Hold (7), Underperform (1), and Sell (2). These recommendations are all over the place. The consensus would be a Hold. The 12 month stock price is $7.22. This implies a total return of 29.86% coming all from capital gains.
One analyst on Stock Chase says you might want to consider pipelines as producers have a hard time getting their product out of Canada. Jitendra Parashar on Motley Fool talks about this stock dropping after its third quarter as it missed analysts’ estimates.. A writer on Simply Wall Street talks about who owns shares in this company. A writer on Simply Wall Street says that the company's debt level put the company at risk. Michael Fitzsimmons on Seeking Alpha talks about Cenovus taking over Husky.
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 11, 2020 around 5 pm. Tomorrow on my other blog I will write about an Enbridge Inc review.... learn more on Tuesday, November 10, 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.
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