Is it a good company at a reasonable price? The price seems to be reasonable. It may even be cheap. Since this is an energy stock, I do not think that it is a long time hold type company. Energy companies can make you money over the cycles, but they are cyclical. Companies in this sector are also risky.
I do not own this stock of Ovintiv Inc (TSX-OVV, NYSE-OVV). I have owned this stock before as Alberta Energy Co. This company split into two companies in the later part of 2009 - Encana Corporation and Cenovus Energy Inc. On January 27, 202, this company has changed its name from Encana Corp (TSX-ECA, OTC-ECA) to Ovintiv Inc (TSX-OVV, OTC-OVV).
When I was updating my spreadsheet, I noticed this is the sort of company you buy in the low part of its cycle and sell in the high part. The stock price got as low of $2.95 CDN$ in 2020. The problem, of course, is not only are such stock cyclical they are also risky.
Analysts have increased a lot what Revenues are expected in 2022 and 2023 from $7,942 and $7,693 last year to $11,573M and $13,164M this year. They have also raised expected EPS of $6.93 and $5.99 of last year to $9.63 and $14.50 this year. This is in US$.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.96%. The 5, 10 and historical dividend yields are also low at 1.27%, 1.67% and 1.45%. The dividends have grown at a moderate rate (8% to 14%) at 8.04% per year over the past 5 years. However, dividends have gone up and down and been flat in the past. I have 29 years of data and yearly dividends have been increased 12 times and decreased 10 times.
If you had invested in this company in December 2011, for $1,038.95 you would have bought 11 shares at $94.45 per share. In December 2021, after 10 years you would have received $152.45 in dividends. The stock would be worth $468.16. Your total return would have been $620.61.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $94.45 | $1,038.95 | 11 | 10 | $152.45 | $468.16 | $620.61 |
The Dividend Payout Ratios (DPR) are probably fine. The DPR for EPS for 2021 is 9%. I cannot calculate the 5 year coverage because of earnings losses. The DPR for EPS is expected to also be at 9% next year. The DPR for Cash Flow per Share (CFPS) for 2021 is 4% with 5 year coverage at 3.7%. The DPR for Free Cash Flow (FCF) for 2021 is 6% with 5 year coverage at 25%.
Debt Ratios are fine and the company is currently making a profit. The Long Term Debt/Market Cap Ratio is currently at 0.55. The ratio was 1.71 last year, but in 2021 the debt was reduced and the stock price went up, so now the ratio is good. The Liquidity Ratio for 2021 is 0.58. If you add in cash flow after dividends, the ratio is 1.67 and a good one. The Debt Ratio for 2021 is good at 1.56. The Leverage and Debt/Equity Ratios are fine at 2.77 and 1.77.
The Total Return per year is shown below for years of 5 to 29 to the end of 2021 in CDN$. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 8.04% | -10.80% | -11.59% | 0.79% |
| 2011 | 10 | -17.55% | -5.81% | -7.66% | 1.86% |
| 2006 | 15 | -4.60% | -5.13% | -7.56% | 2.43% |
| 2001 | 20 | 0.61% | 2.91% | -1.06% | 3.97% |
| 1996 | 25 | 2.13% | 5.86% | 1.60% | 4.26% |
| 1992 | 29 | 2.30% | 8.75% | 3.85% | 4.90% |
The Total Return per year is shown below for years of 5 to 20 to the end of 2021 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 9.28% | -9.71% | -10.51% | 0.80% |
| 2011 | 10 | -19.32% | -7.88% | -9.62% | 1.74% |
| 2006 | 15 | -5.13% | -5.39% | -8.04% | 2.65% |
| 2001 | 20 | 1.76% | 4.89% | -0.16% | 5.05% |
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 2.76, 4.45 and 6.14. The corresponding historical ratios are 6.82, 8.24 and 10.00. The current P/E Ratio is 5.27 based on a stock price of $69.59 and EPS estimate for 2022 of $13.21 (9.63 US$). The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$. The P/E Ratios are very low. This is because of earnings losses.
I get a Graham Price of $95.88. The 10-year low, median, and high median Price/Graham Price Ratios are 0.63, 1.00 and 1.33. The current P/GP Ratio is 0.73 based on a stock price of $69.59. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in CDN$.
I get a 10-year median Price/Book Value per Share Ratio of 1.35. The current ratio is 2.26 based on a Book Value of $5,821M, Book Value per Share of $22.56 and a stock price of $51.00. The current ratio is 68% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$.
I also have a Book Value per Share estimate for 2022 of $24.40. This will produce a Book Value of $6,295M, and a P/B Ratio of 2.09 based on a stock price of $51.00. The current P/B Ratio is 55% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$.
I get a 10-year median Price/Cash Flow per Share Ratio of 3.32. The current P/CF Ratio is 3.09 based on Cash Flow per Share of $16.50 and a stock price of $51.00. The current P/CF Ratio is 7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$.
I get an historical median dividend yield of 1.68%. The current dividend yield is $1.96% based on dividends of $1.00 and a stock price of $51.00. The current dividend yield is 17% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$.
I get a 10 year median dividend yield of 1.61%. The current dividend yield is $1.96% based on dividends of $1.00 and a stock price of $51.00. The current dividend yield is 21.5% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$.
The 10-year median Price/Sales (Revenue) Ratio is 1.75. The current P/S Ratio is 1.14 based on Revenue estimate for 2022 of $11,573M, Revenue per Share of $44.86 and a stock price of $51.00. The current ratio is 35% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$.
Results of stock price testing is that the stock price is probably still cheap. The 10 year dividend yield test says this and it is confirmed by the P/S Ratio test. A lot of the other testing is showing the stock price as reasonable. The exception is the P/B Ratio test. But the Book Value is looking at what the company has done in the past. Other testing is looking at the potential future. Dividends are set based on how management feels about the future. Estimates, like Revenue, are set depending on how analysts feel about the future of the company.
When I look at analysts’ recommendations, I find Strong Buy (10), Buy (10), and Hold (4). The consensus would be a Strong Buy. The 12 month stock price consensus is $77.04 ($56.18 US$). This implies a total return of 12.68% with 10.71% from capital gains and 1.97% from dividend based stock price of $69.59.
An analyst this year on Stock Chase said he likes CNQ better. Daniel Da Costa on Motley Fool thinks you should buy this well it is cheap. Adam Othman on Motley Fool says if you had bought this stock at its 2020 lows, you could have grown your capital by 19 times. The company reports on a Press Release their results for 2021. The company in a Press Release talks about their second quarter of 2022 results.
Simply Wall Street reviews this stock via Yahoo Finance. Simply Wall Street gives this stock 4 stars out of 5 and list 2 risks of has a high level of debt and unstable dividend track record.
Ovintiv Inc is an independent oil and gas producer with key assets in the Permian, Eagle Ford, Montney, and Duvernay areas of North America. 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 Friday, October 28, 2022 around 5 pm. Tomorrow on my other blog I will write about Timothy Snyder – Substack .... learn more on Thursday, October 27, 2022 around 5 pm.
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