Trying to find solid long-term value plays in today's market has perhaps become slightly easier, as many securities which fall into a variety of buckets have sold off in recent months, for a number of reasons. In the case of Cenovus Energy Inc. (TSX:CVE)(NYSE:CVE), being an oil sands producer certainly hasn't done much for the company in the past two years, with prices for Albertan heavy oil remaining very low relative to other global grades of oil.
That being said, the company's more than 50% rise in just three months is evidence of the market's view that real value continues to exist with this large-scale oil sands operator, driving down what I previously considered to be ridiculously low valuation multiples.
When an investor considers the fact that, despite the aforementioned 50% increase in just three months, the company is still trading at a 10% discount to book value, and is trading at a price to sales ratio of less than 1, the fundamentals underpinning this company remain extremely attractive, leading me to believe Cenovus could potentially be poised for a run similar to that of Air Canada (TSX:AC), a company which has maintained very low valuation multiples for long periods of time, despite posting strong and improving earnings results each and every year over the past decade.
Cenovus has improved its production levels, the price of oil has continued higher (with many believing this trend has only just begun), and the potential for Cenovus to continue to grow its barrels per day numbers exists through expanding partnerships with various railroads in Canada, to get more of its oil out of Alberta and in the hands of refiners in the U.S.
While the price of oil may remain volatile for some time, on a fundamental basis, Cenovus appears to be one of those companies that remain too cheap to ignore at this point in time.
Invest wisely, my friends.
