Is it a good company at a reasonable price? This stock has great growth with very low DPRs and very good debt ratios. I am not surprised at the Strong Buy Rating because analysts think that this stock has great potential. The stock price is down off its recent high. It is certainly in the right business. Look at what a hog AI is with electricity. See article on Scientific American. I am certainly keeping the shares I have bought. The stock is testing as expensive, but the problem is that it may not get any cheaper in the future.
I own this stock of Hammond Power Solutions Inc (TSX-HPS.A, OTC-HMDPF). I bought this stock as my main purchase for the TFSA in 2013 and 2014. I picked Hammond initially in 2013 as my main buy because it has good growth and reasonable dividend. Also, I think that it important to try out newer smaller companies for investment purposes. Companies on the TSX are always changing and it is good to get into new industries and new companies. The problem of this, of course, is you do not always know what industries and companies will be long lasting. The TFSA account is my fooling around money account.
When I was updating my spreadsheet, I noticed that the stock has fallen a lot since the end of 2024. That is from a high of $157.35 to a low of $78.24 and has recovered somewhat to a current value of $101.52. I have shares in this company and as of April 30, 2025 I have a total return of 24.03% with 22.44% from capital gains and 1.59% from dividends.
If you had invested in this company in December 2014, for $1,005.58 you would have bought 137 shares at $7.34 per share. In December 2024, after 10 years you would have received $524.71 in dividends. The stock would be worth $17,542.85. Your total return would have been $18,067.56. This would be a total return of 34.58% per year with 33.10% from capital gain and 1.48% from dividends.
Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
---|---|---|---|---|---|---|
$7.34 | $1,005.58 | 137 | 10 | $524.71 | $17,542.85 | $18,067.56 |
The current dividend yield is low with dividend growth good. The current dividend yield is low (below 2%) at 1.08%. The 5, 10 year and historical median dividend yields are moderate (2% to 4% ranges) at 2.29%, 3.17% and 2.65%. The dividend growth is good (15% and above) at 28% per year over the past 5 years. The last dividend increase was in 2024 and it was for 83%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2024 for Earnings per Share (EPS) is good at 16% with 5 year coverage at 15%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 9% with 5 year coverage at 8%. The DPR for 2024 for Free Cash Flow (FCF) is good at 19% with 5 year coverage at 14%. There is no agreement on what the FCF is.
Item | Cur | 5 Years |
---|---|---|
EPS | 16.22% | 14.72% |
CFPS | 8.93% | 8.01% |
FCF | 18.82% | 14.03% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2024 is good at 0.01 and currently at 0.01. The Liquidity Ratio for 2024 is good at 1.99 and 2.10 currently. The Debt Ratio for 2024 is good at 2.66 and 2.81 currently. The Leverage and Debt/Equity Ratios for 2024 are good at 1.60 and 0.60 and currently at 1.55 and 0.55.
Type | Year End | Ratio Curr |
---|---|---|
Lg Term | 0.01 | 0.01 |
Intang/GW | 0.02 | 0.03 |
Liquidity | 1.99 | 2.10 |
Liq. + CF | 2.31 | 2.36 |
Debt Ratio | 2.66 | 2.81 |
Leverage | 1.60 | 1.55 |
D/E Ratio | 0.60 | 0.55 |
The Total Return per year is shown below for years of 5 to 23 to the end of 2024. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
---|---|---|---|---|---|
2019 | 5 | 28.34% | 77.82% | 75.55% | 2.27% |
2014 | 10 | 15.05% | 34.58% | 33.10% | 1.48% |
2009 | 15 | 16.39% | 20.18% | 19.19% | 0.99% |
2004 | 20 | 28.40% | 26.85% | 1.55% | |
2001 | 23 | 25.43% | 24.36% | 1.06% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 3.71, 8.06 and 9.52. The corresponding 10 year ratios are 6.18, 8.83 and 11.84. The corresponding historical ratios are 6.13, 8.49 and 9.88. The current ratio is 13.68 based on a stock price of $101.52 and EPS estimate for 2025 of $7.42. The current ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. (Note that the median P/E Ratio has climbed from 5.35 in 2020 to 19.60 in 2024.)
I get a Graham Price of $67.92. The 10-year low, median, and high median Price/Graham Price Ratios are 0.45, 0.62 and 0.78. The current P/GP Ratio is 1.49 based on a stock price of $101.52. The current ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Book Value per Share Ratio of 0.83. The current P/B Ratio is 3.68 based on a book value of $329M, Book Value per Share of $27.62 and a stock price of $101.52. The current ratio is 341% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2025 of $32.55. This implies a P/B Ratio of 3.12 with a Book Value of $388M and a stock price of $101.52. This ratio is 274% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.66. The current P/CF Ratio is 21.79 based on Cash Flow for the last 12 months of $55.5M, Cash Flow per Share of $4.66 and a stock price of $101.52. The current ratio is 285% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 2.65%. The current dividend yield is 1.08% based on dividends of $1.10 and a stock price of $101.52. The current dividend yield is 59% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 3.17%. The current dividend yield is 1.08% based on dividends of $1.10 and a stock price of $101.52. The current dividend yield is 66% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10-year median Price/Sales (Revenue) Ratio is 0.30. The current P/S Ratio is 1.42 based on Revenue estimate for 2024 of $854M, Revenue per Share of $71.73 and a stock price of $101.52. The current ratio is 368% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. The dividend yield tests are saying the stock price is expensive and this is confirmed by the P/S Ratio test. All the tests are saying that the stock price is relatively expensive.
When I look at analysts’ recommendations, I find Strong Buy (2) and Buy (2). The consensus is a Strong Buy. The 12 month stock price consensus is $148.25 with a high of $157.00 and low of $140.00. The consensus stock price of $148.25 implies a total 47.11% with 46.03% from capital gains and 1.08% from dividends based on a current stock price of $101.52.
Mainly analysts on Stock Chase are saying the price is too high. One analyst thinks they have capacity constraints going forward. Amy Legate-Wolfe on Motley Fool says this blue-chip stock is being hammered, but it should not be. Sneha Nahata on Motley Fool says Hammond is a long term bet to capitalize on the growing electrification trend and high power demand. The company put out a press release via Globe Newswire about their fourth quarter of 2024. The company put out a press release via Global Newswire about their first quarter of 2025.
Simply Wall Street via Yahoo Finance reviews this stock and is worried about a high Accrual ratio. Simply Wall Street via Yahoo Finance say that the company is under price. They give a fair value of $161.58 to this stock. Simply Wall Street gives two warnings of high level of non-cash earnings; and earnings are forecast to decline by an average of 1.1% per year for the next 3 years. (Note that the earnings estimates that I picked up show an increase in earnings.)
I calculate an accrual ratio for all my stocks. I must admit the accrual ratio for this stock is positive and high. Generally, it means that the stock price will fall. However, this does not always happen. I have 25 years of data on this company accrual ratio. This ratio has been below 5.00 or above 5.00 14 times. The movement of the stock up or down for the accrual ratio has been correct 6 times. This has occurred mostly when the accrual ratio is pointing to that the stock price will increase. I calculate my accrual ratio based on a paper I read some years ago.
Hammond Power Solutions Inc is engaged in designing and manufacturing custom electrical magnetics, cast resin, custom liquid-filled distribution and power transformers, and standard electrical transformers, serving the electrical and electronic industries. The company operates in various geographical markets including Canada, the United States, Mexico, and India from which it derives majority revenue in the United States and Mexico. Its web site is here Hammond Power Solutions Inc.
The last stock I wrote about was about was Ag Growth International (TSX-AFN, OTC-AGGZF) ... learn more. The next stock I will write about will be Mullen Group Ltd (TSX-MTL, OTC-MLLGF) ... learn more on Wednesday, May 21, 2025 around 5 pm. Tomorrow on my other blog I will write about Friedman on Europe.... learn more on Tuesday, May 20, 2025 around 5 pm.
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