Is it a good company at a reasonable price? The current stock price might be expensive. The stock price is up some 906% from December 2020 to now. The P/S Ratio test says the stock price is expensive. In any event it is a resource stock, which is not my favourite sector. In any event, it is a high risk type of stock. The positive thing is that there is lots of insider buying. A lot of my stock price tests are showing the stock as reasonable. It depends on what tests you like.
I do not own this stock of Obsidian Energy Ltd (TSX-OBE, NYSE-OBE). I bought this stock as Maximum Energy Trust 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. to Obsidian Energy Ltd in 2017. I sold this stock when it was Penn West in 2010 as it was changing to a corporation, but they are also getting back into exploration, rather than just selling oil from their wells.
When I was updating my spreadsheet, I noticed that insiders are buying. The CEO, CFO and Chairman have all bought shares in the past year. Net insider buying is 0.20% where normal would be 0.01% net insider buying or selling. There was a 7 to 1 consolidation in 2019. The stock price hit a low of $0.87 in 2020, but at the end of 2022, the stock price was $8.98. So far this year, it is down 2.6% at $8.75.
The company has started to grow again. The 5 year growth is positive compared to 10 year growth.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 76.43% | 12.02% |
| 5 | AFFO Growth | 100.75% | 14.96% |
| 5 | Net Income Growth | 1064.40% | 63.39% |
| 5 | Cash Flow Growth | 265.44% | 29.59% |
| 5 | Dividend Growth | 0.00% | 0.00% |
| 5 | Stock Price Growth | -17.77% | -3.84% |
| 10 | Revenue Growth | -76.17% | -13.36% |
| 10 | AFFO Growth | -70.88% | -11.61% |
| 10 | Net Income Growth | 365.57% | 16.63% |
| 10 | Cash Flow Growth | -61.71% | -9.15% |
| 10 | Dividend Growth | 0.00% | 0.00% |
| 10 | Stock Price Growth | -87.85% | -19.01% |
If you had invested in this company in December 2012, for $1,034.88 you would have bought 14 shares at $73.92 per share. In December 2022, after 10 years you would have received $164.64 in dividends. The stock would be worth $125.72. Your total return would have been $290.36. This is a total return would be a loss of 17.04% per year.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $73.92 | $1,034.88 | 14 | 10 | $164.64 | $125.72 | $290.36 |
The dividends have been suspended so I cannot calculate a yield nor a Dividend Payout Ratio.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2022 are low and good at 0.30. The Liquidity Ratio is very low at 0.45, but if you add in Cash Flows it is 2.50 and fine. The Debt Ratio is high a good at 3.53. The Leverage and Debt/Equity Ratios are low and good at 1.40 and 0.40.
| Type | Ratio '22 | Ratio Curr |
|---|---|---|
| Lg Term R | 0.30 | 0.38 |
| Intang/GW | 0.00 | 0.00 |
| Liquidity | 0.45 | 0.48 |
| Liq. + CF | 2.50 | 3.15 |
| Debt Ratio | 3.53 | 3.47 |
| Leverage | 1.40 | 1.40 |
| D/E Ratio | 0.40 | 0.40 |
The Total Return per year is shown below for years of 5 to 27 to the end of 2022. 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. This stock used to be an income trust and therefore originally had very good dividends.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2017 | 5 | 0.00% | -3.84% | -3.84% | 0.00% |
| 2012 | 10 | 0.00% | -17.04% | -19.01% | 1.97% |
| 2007 | 15 | 0.00% | -16.63% | -20.54% | 3.91% |
| 2002 | 20 | 0.00% | 11.54% | -12.39% | 23.93% |
| 1997 | 25 | 0.00% | 15.93% | -10.62% | 26.55% |
| 1995 | 27 | 0.00% | 8.85% | -11.13% | 19.98% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are all negative and therefore useless. The corresponding 10 year ratios are also all negative and useless. The corresponding historical ratios are 3.66, 5.80 and 7.06. They are low because there have been so many earnings losses years. The current P/E Ratio is 4.51 based on a stock price of $8.75 and EPS estimate for $1.94. This is a very low P/E Ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have Funds from Operations (FFO) Data. The 5-year low, median, and high median Price/FFO Ratios are 0.31, 1.24 and 2.20. The corresponding 10 year ratios are 1.44, 4.01 and 6.13. The current P/FFO is 1.54 based on FFO for the last 12 months of $5.70 and a stock price of $8.75. This 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 also have Cash Flow from Operations (CFFO) Data. The 5-year low, median, and high median Price/CFFO Ratios are 0.60, 1.93 and 2.75. The corresponding 10 year ratios are 1.22, 3.20 and 5.44. The current P/CFFO is 1.66 based on FFO for the last 12 months of $5.28 and a stock price of $8.75. This 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 $50.01 based on FFO (because numbers are positive and you cannot calculate a GP with negative numbers). The 10-year low, median, and high median Price/Graham Price Ratios are 0.11, 0.27 and 0.41. The current P/GP Ratio is 0.17 based on a stock price of $8.75. 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 10-year median Price/Book Value per Share Ratio of 0.35. The current P/B Ratio is 0.45 based on a stock price of $8.75, Book Value of $1,608M and Book Value per Share of $19.50. The current ratio is 28% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 2.87. The current P/CF Ratio is 1.94 based on a stock price of $8.75, Cash Flow per Share estimate for 2023 of $4.52 and Cash Flow of $373M. The current ratio is 33% below the 10 year median. This stock price testing suggests that the stock price is relatively cheap.
I cannot do any dividend yield testing because dividends are suspended.
The 10-year median Price/Sales (Revenue) Ratio is 0.76. The current P/S Ratio is 0.93 based on Revenue estimate for 2023 of $775M, Revenue per Share of $9.40 and a stock price of $8.75. The current P/S Ratio is 23% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price could be relatively expensive. I think that the P/S Ratio test is important. That is because Revenue is necessary for earnings and cash flow. If you look at the stock price, since the year-end low in 2020 of $0.87 to the current stock price of $8.75, that is a 906% increase. So, maybe an expensive rating is reasonable. I must admit that most of the other testing are show the price as cheap or reasonable.
When I look at analysts’ recommendations, I find Buy (3) and Hold (2) recommendations. The consensus would be a Buy. The 12 month stock price consensus is $11.30. This implies a total return of 29.14% all from capital gains.
In 2022 and 2021, analysts were saying on Stock Chase Do not buy. In 2022, the analyst did not like the management team. Stock Chase gives this stock 1 star out of 5. Christopher Liew on Motley Fool said that the stock was a top performer and its upward momentum is not over. The company put out a press release on their 2022 results. The company put out a Press Release on their first quarter of 2023 results.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street has 2 warnings of earnings are forecast to decline by an average of 67.6% per year for the next 3 years; and high level of non-cash earnings. Simply Wall Street give this stock 3 stars out of 5.
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 most 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 Friday, July 14, 2023 around 5 pm. Tomorrow on my other blog I will write about Living Off Dividends.... learn more on Thursday, July 13, 2023 around 5 pm.
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