ONEX Corp.

On my other blog I am today writing about dividend income growth using RY and RIO.UN as examples continue...

Sound bite for Twitter and StockTwits is: High risk, hard to evaluate. The dividend yield is extremely low at just 0.31%. Analysts see total return of only 4% over the next 12 months. This is low for a company that has not made any profit over the past 3 years. They do have a lot of cash on hand and capital gain return has been good with stock price increasing by just over 18% so far this year. See my spreadsheet at ocx.htm.

I do not own this stock of ONEX Corp. (TSX-OCX, OTC-ONEXF), but I used to. I bought this stock in 2001 because it was on a stock hit list article I read. By April 2008, I knew that this was not the sort of stock I wanted to be invested, so I sold. I thought this was a dividend paying stock, but I was mistaken. Sometimes it is a good idea to review the sort of stock that we should not buy if we want to buy dividend growth stocks.

They have not done well lately with 3 years of earnings losses. Another thing that is noticeable is that they have a lot of cash on hand, currently equivalent to almost 40% of the stock's price.

Since 2013 there has been some dividend increases. So dividend growth showing for last 5 and 10 years is at 9.7% and 4.8% per year. One dividend increase was for 18% and another for 35%. There was also an increase of 28.6% in 2015. So, it appears that this stock might become a dividend growth stock. However, the dividend yield is so low that I still would not be interested. The current dividend yield is just 0.3%.

The one area that this stock good at is in total return. The total return in the last 5 and 10 years is at 21.74% and 15.84% per year. The portion of this total return from dividends is at 0.32% and 0.36% per year. The portion of this total return from dividends is at 21.41% and 15.47% per year.

Outstanding shares have decreased over the past 5 and 10 years at 2% and 2.4% per year. Shares have increased due to DRIP and Stock Options and decreased due to Buy Backs. There has been no increase in shares due to Stock Options over the past 2 years.

When shares are decreasing, what you want to look at is things like Revenue, rather than Revenue per Share. Revenue is down by 1.6% and up by 3.5% per year over the past 5 and 10 years. Revenue per Share is up by 0.4% and 6.1% per year over the past 5 and 10 years.

The company has done best in cash flow with Cash Flow up by 8% and 11.7% per year over the past 5 and 10 years. CFPS is up by 10.2% and 14.4% per year over the past 5 and 10 years.

The Liquidity Ratio is good, but the Debt Ratio is low and the Leverage and Debt/Equity Ratios are high. The Liquidity Ratio is 1.87 and the Debt Ratio is 1.09. The Leverage and Debt/Equity Ratios are 11.58 and 10.58.

It is interesting that there are some 7 analysts giving a rating on this stock, but none seem to be supplying estimates on Revenue, Earnings or Cash Flow. I was able to some earnings estimates with EPS expected to be around $0.32 US$ or $0.42 CDN$ for 2015. However, the second quarterly report shows EPS down by 256% (a higher loss) than EPS to the end of 2014. The EPS estimate gives this stock a P/E Ratio of 190.64 based on a stock price of $79.75.

Book Value has been dropping like a stone over the past 3 years and the current P/B Ratio is 55.86 based on a stock price of $79.75. The Graham Price I get for 2015 is $3.67 compared to a stock price of $79.75. The P/GP Ratio is 21.75 when a good stock price has the ratio close to 1.00.

Where on this stock the P/E, P/B and P/GP Ratios are extremely high, the P/CF and P/S Ratios are the opposite at extreme lows. The 10 year P/CF Ratios is 2.27 a very low number. The current P/CF Ratio is 3.58 based on a stock price of $79.75 CDN$ and CF of $1,212.00 US$ or $1,584.00 CDN$ for the 12 months ending in the second quarter. The current P/CF is some 58% higher than the 10 year value and this suggests a relatively high stock price. However, a P/CF Ratio value of 3.58 is a low Ratio.

The 10 year P/S Ratio of 0.16 is very low. The current P/S Ratio of 0.34 is some 109% higher. The difference between the 10 year ratio and the current one suggests that the stock price is relatively high. However, a P/S Ratio of 0.34 is a very low P/S Ratio.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold Recommendations. Most of the recommendations are a Hold; however, the consensus recommendations would be a Buy. The 12 month stock price is $82.80. This implies a total return of 4.14% with 3.82% from capital gains and 0.31% from dividends. Is such a low return worth the risk of buying this stock?

This Dakota Financial News article talks about some brokerages updating their recommendations for Onex. This article in the Las Vegas Sun talks about Onex buying Tropicana Las Vegas hotel and casino with Penn National Gaming.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

Onex is one of North America's oldest investment firm committed to acquiring and building high-quality businesses in partnership with talented management teams. Onex manages investment platforms focused on private equity, real estate and credit securities. Its web site is here ONEX.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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