The next target selected was Cenovus Energy Inc. (CVE) based on the Piotroski F-Score and comparing its financial information to the industry.
Due to the oil price dropped significantly couple years ago, most of the oil and gas companies were having difficult time. However, Cenovus is one of the companies that improves strongly financially once the oil price got stable.
I performed two easy filters to find Cenovus, and they are ROE > 15 and P/B < 1. At the time of filtering, CVE’s ROE was 16.32 and P/B was 0.53 trading around $12 Cad per share. After filtering, I input the financial statement to my analysis, and generated the results shown below.
Financial Summary:
As seen from the summary, CVE was trading with low price due to the influence of low oil price. However, it has a strong revenue and operating income growth compared to last year. It also has better performance than the industry averages on revenue growth, operating margin, net profit margin, ROE and ROA. The only concern would be the high debt of the company. However, the current ratio and quick ratio are both higher than the industry as well which give me confident that Cenvous will be able to survive in the short term until the profit increases.
From the Piotroski F-Score, we can see that CVE received a 6 out of 9. Although it was not an acceptable score of 7 out of 9, the high ROE and growth plus the low P/B ratio indicated that CVE was an attractive investment at this point. It also turns around faster from the recession than its peers in the industry when the oil price became stable. Therefore, I decided to invest at CVE in December 2017.
Disclosure: I purchased CVE’s stocks in December 11, 2017 around $12.23 Cad per share. It is trading at around $12.56 Cad per share at the moment of writing this post.
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