Stock Market Series

How Are Undervalued Canadian Mining and Energy Companies Performing (Part 1)?

Remember this picture?

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This is a list of undervalued stocks I generated on TMX Money awhile back.  So far I have done fundamental analysis on Air Canada, BlackBerry and Valeant Pharmaceuticals and THEY ARE ALL NOT INVESTABLE.

In this post, we would look at the mining and energy companies listed above and see whether they have durable competitive advantage.

Barrick Gold Corporation (TSE:ABX) is a gold mining company.  The company is principally engaged in the production and sale of gold and copper, as well as related activities, such as exploration and mine development.  Currently, Barrick has nine producing gold mines, which are located in Canada, the United States, Peru, Argentina, Australia and the Dominican Republic.

Here is the company’s financial statement analysis from 2013 to 2016 (click here if you need a refresher on accounting formulas):

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Although Barrick is starting to make a profit, I do not think I will be investing in Barrick yet as the company’s retained earnings is still negative.  My decision is just like what Warren Buffett said, “Cash flow is king!”

Pursing this further, ARC Resources Limited (TSE: ARX) is a crude oil and natural gas company founded in 1996.  The company is engaged in the exploration, development and production of crude oil and natural gas in Canada.

Here is the company’s financial statement analysis from 2013 to 2016:

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Although ARC Resources’ debt to shareholders’ equity ratio is low, I would not invest in ARC Resources yet because of the negative retained earnings.

Lastly, Cenovus Energy Incorporated (TSE:CVE) is a Canada-based integrated oil company. It operates in the business of developing, producing and marketing crude oil, Natural Gas Liquids (NGLs) and natural gas in Canada.  Cenovus has three main businesses: oil sands (the development and production of bitumen and natural gas in northeast Alberta) conventional (the development and production of conventional crude oil, NGLs and natural gas in Alberta and Saskatchewan) and refining and marketing (the transportation and selling of crude oil and natural gas).

Here is the company’s financial statement analysis from 2013 to 2016:

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I think Cenovus Energy is the most financially sound company so far until I realized Cenovus Energy lost money (negative net income) last year.   Furthermore, I found Cenovus Energy’s revenue had dropped from $20,107 million CAD in 2014 to $12,282 million CAD in 2016 from the company’s income statement.

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I believe this significant drop in revenue was what caused Cenovus Energy to generate negative profit in 2016.

 

As a result, I still have doubts in Cenovus Energy and would not invest in this company now.

We shall continue with the other six mining and energy companies on the list in the next post:  Whitecap Resources Incorporated, Teck Resources, Lundin Mining Corporation, IAMGOLD Corporation, Enerplus Corporation, and Encana Corporation.

Please feel free to leave a comment below! Catch you on the flip side!

1 thought on “How Are Undervalued Canadian Mining and Energy Companies Performing (Part 1)?”

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