Is it a good company at a reasonable price? The stock price could be relatively expensive or it could be relatively reasonable. I have to wonder about it being cheap. This is a resource stock and I generally do not buy resource stocks because their extreme volatility. I have around 1% of my portfolio in resource stocks and I have then so that I pay attention to resources because they are important to the Canadian economy.
I do not own this stock of Obsidian Energy Ltd (TSX-OBE, NYSE-OBE). I bought this stock as Maximum Energy Trust (MXT.UN) in 1998. In November 2001, there was a stock exchange and the stock became Ultimate Energy Fund. In June 2004 fund changed from Ultimate Energy Income Trust to Petrofund Energy. Petrofund Energy merged with Penn West in July 2006. The company changed its name from Penn West Petroleum Ltd. (TSX-PWT, NYSE-PWE) to Obsidian Energy Ltd (TSX-OBE, NYSE-OBE) in 2017.
When I was updating my spreadsheet, I noticed that this stock is back on the NYSE with the OBE symbol. This occurred at the beginning of 2022. Symbol for the US has gone from OTC-OBELF to NYSE-OBE.
It looks like there is lots of insider selling, but it is insider not keeping all their options. Over the past year, all the insiders I follow have increased the number of shares they hold. This includes the CEO, CFO, an officer, a director, and the Chairman.
If you had invested in this company in December 2011, $1,130.64 you would have bought 8 shares at $141.53 per share. In December 2021, after 10 years you would have received $154.56 in dividends. The stock would be worth $41.68. Your total return would have been $196.24.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $141.53 | $1,130.64 | 8 | 10 | $154.56 | $41.68 | $196.24 |
The dividends have been suspended since 2015, so there is no dividend yield or Dividend Payout Ratios.
It is not so much the company has problems with the amount of debt, the problem is with Liquidity. The Long Term Debt/Market Cap Ratio for 2021 is 0.93. Mainly due to the rise in the stock market, the ratio is down to a much better ratio currently at 0.52. The Debt Ratio is 2.15. The Leverage and Debt/Equity Ratios are 1.87 and 0.87.
The Liquidity Ratio is very low at 0.16. If you add in cash flow, it is still very low at 0.54. When under 1.00, it means that current assets cannot cover current liabilities. If you exclude the current portion of their long term debt, it is 2.05. However, the problem is that the company’s debt is short term and with short term debt, they can need money in economic hard times and find no one is willing to lend to them.
The Total Return per year is shown below for years of 5 to 26 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 0.00% | -20.68% | -20.68% | 0.00% |
| 2011 | 10 | 0.00% | -25.97% | -28.11% | 2.14% |
| 2006 | 15 | 0.00% | -14.83% | -22.72% | 7.89% |
| 2001 | 20 | 0.00% | 10.98% | -14.99% | 25.97% |
| 1996 | 25 | 0.00% | 11.47% | -13.38% | 24.85% |
| 1995 | 26 | 0.00% | 8.83% | -13.36% | 22.19% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are negative and useless. The corresponding 10 year ratios are also negative. The corresponding historical ratios are 4.09, 7.24 and 8.63. The problem is a lot of years with earnings losses. You cannot really do a P/E Ratio test. However, the current P/E Ratio is very low at 2.21 based on a stock price of $8.70 and EPS estimate for 2022 of $3.93. Any P/E Ratio below 10 is considered a cheap stock.
I have Funds from Operations (FFO) Data. The 5 year low, median, and high median Price/Earnings per Share Ratios are 0.31, 1.24 and 2.20. The corresponding 10 year ratios are 1.89, 4.67 and 6.66. The current P/FFO Ratio is 2.59 based on a stock price of $8.70 and FFO for last 12 months of $3.36. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $29.41. The 10 year low, median, and high median Price/Graham Price Ratios are 1.38, 3.64 and 5.59. (But most of the past P/FP Ratios are just guesses). The current P/GP Ratio is 0.30 based on a stock price of $8.70. This ratio is below he low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. A P/GP Ratio below 1.00 is a cheap ratio.
I get a 10 year median Price/Book Value per Share Ratio of 0.35. The current P/B Ratio is 0.89 based on a stock price of $8.70, Book Value of $790M, and Book Value per Share of $9.78. The current P/B Ratio is 153% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
However, any P/B Ratio under 1.50 is considered cheap. A ratio of 0.89 is very low and is pointing to a cheap stock. Another problem is the decline in Book Value per Share, which is down 21% per year over the past 5 years.
I get a 10 year median Price/Cash Flow per Share Ratio of 4.76. The current P/CF Ratio is 1.35 based on Cash Flow per Share estimate for 2022 of $6.44, Cash Flow of $520M and a stock price of $8.70. The current ratio is 72% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. Analysts are also expecting the cash flow to go up some 162%. This is rather high increase. However, even the P/CF Ratio for 2021 at 2.12 is pointing to a cheap price.
There are currently no dividends, so I can do no dividend yield tests.
The 10 year median Price/Sales (Revenue) Ratio is 0.76. The current P/S Ratio is 1.10 based on Revenue estimate for 2022 of $637M, Revenue per Share of $7.89 and a stock price of $8.70. The current ratio is 46% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, any P/S Ratio below 1.00 is low and 1.10 is a good ratio.
Results of stock price testing is that the stock price is probably expensive, but it could also be reasonable. This is based on the P/S Ratio and P/B Ratio tests. I hesitate to say it is expensive because the ratios are low. The very low ratios are pointing to a cheap stock price. Like for P/S Ratio, a ratio of 1.10 is low even though the test results say the stock is expensive. It is interesting that the P/FFO test is showing the stock price as reasonable and below the median. This may be the best test.
Last year I said the results of stock price testing is that the stock price is probably cheap. I think that there is only two valid tests of the P/B Ratio and the P/S Ratio and both these say that the stock is current relatively cheap.
When I look at analysts’ recommendations, I find Buy (2), Hold (1), and Underperform (1). The consensus would be a Hold. The 12 month stock price is $15.50. This implies a total return of 78.16% with it all coming from capital gain based on a stock price of $8.70.
When I look at analysts’ recommendations last year, I found Hold (1), and Underperform (1). The consensus was an Underperform. The 12 months stock price consensus was $3.63. This implies a total loss of 13.98% all from a capital loss based on a current stock price of $4.22. What happened was a price increase to 8.70 and a total return of 106.16% all from capital gains.
The last two analysts on Stock Chase say Do Not Buy. They do not like current management. Stock Chase gives this stock 3 stars out of 5. Amy Legate-Wolfe on Motley Fool says this stock is now a growth stock. Christopher Liew on Motley Fool says this company will profit if oil prices rise to $150. The company put out a Press Release on their fourth quarterly results. The company put out a Press Release on their first quarter 2022 results.
Simply Wall Street has reviewed this stock on Yahoo Finance. Simply Wall Street lists 5 warnings signs on this company of earnings are forecast to decline by an average of 53.3% per year for the next 3 years; high level of non-cash earnings; has a high level of debt; significant insider selling over the past 3 months; and Shareholders have been diluted in the past year.
Obsidian Energy Ltd, is an intermediate-sized oil and gas producer with strategic assets in Alberta. It operates in a single reporting segment that is exploration, development and holding an interest in oil and natural gas properties and related production infrastructure in the Western Canada Sedimentary Basin. The company generates the majority of the revenue from the Crude oil sale. Its web site is here Obsidian Energy Ltd.
The last stock I wrote about was about was TMX Group Ltd (TSX-X, OTC-TMXXF) ... learn more. The next stock I will write about will be Artis REIT (TSX-AX.UN, OTC-ARESF) ... learn more on Monday, July 18, 2022 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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