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The best description for Canadian energy stocks right now is "down, but not cheap."

This week's charts gauge the attractiveness of energy stock valuations using the aggregate price to estimated cash flow ratios for both the broad S&P/TSX energy index and the more specific S&P/TSX oil producers index.

I'm using analyst estimates for cash flow in the next 12 months, at the risk of them being inaccurate, instead of trailing cash flow. The primary reason for this is that the previous 12 months includes a July to November period when the crude oil commodity price averaged more than $90 (U.S.) a barrel – an environment that is highly unlikely to occur in the near future.

In other words, I think the cash flow generated in the $90 price environment is less reliable as an indicator of future stock performance than the consensus annual forecast. It is also the case that, while individual analysts' forecasts are likely to be wrong, the average of numerous forecasts is likely to be more accurate, as former Legg Mason chief investment officer Michael Mauboussin argued in "Explaining the Wisdom of Crowds."

The first chart, below, shows the price to cash flow ratio and the progress of the S&P/TSX energy index, which includes oil and natural gas producers, coal miners and energy services stocks. A closer look at the recent data relative to the financial crisis performance is instructive.

The index felt a stomach-churning 55 per cent between June and November, 2008. In valuation terms, the sector became immensely more attractive as a result. The price to forward cash flow ratio fell from an expensive 7.7 times to a bargain basement level of 3.2 times.

The selloff in the past 11 months has had a much different effect on valuations. The decline in the index value was similarly painful, but the sector became more expensive and less attractive on valuations. The price to cash flow ratio was 7.5 times at the end of August, 2014, and it ballooned to 9.8 times in April of this year. The price-to-cash-flow ratio for the energy index is currently 8.2 times, well above the average level since the financial crisis.

The situation is very similar for the more specific S&P/TSX oil producers index (bottom chart). During the financial crisis, the selloff made stocks cheap but the recent weakness leaves producers more expensive than when the downdraft began. The producers index has an average price to cash flow ratio of 6.3 times after a volatility-filled week of trading which, while not grossly expensive relative to market history, is less attractive than many investors may think given the 46 per cent fall in stock prices.

These charts are not meant to represent an exhaustive research process – there are undoubtedly stocks in both indexes that are attractively valued based on cash flow relative to market history. They do, however, serve as a reminder that lower stock prices do not always mean a stock is cheap.

Scott Barlow, Globe Investor's in-house market strategist, writes exclusively for our subscribers at Inside the Market online. Subscribe to Globe Unlimited at