SNC-Lavalin

I am reviewing this stock (TSX-SNC) today as I have just received the annual report on this stock. I bought this stock in December 1998 and I have made a return of 29% per year. Included in this is selling 1/3 of my holdings for $55.78 a share in July 2008. This is quite a bit above the current price of $32.05. I sold some of this stock in July 2008 as I held too high a percentage of it in my portfolio. I do not like it if any stock becomes too high a percentage in my portfolio. If something happens to such a stock, your portfolio can suffer greatly.

What I like about this stock is the good growth in Revenues and Earnings over the last 5 and 10 year period. This is also a stock that grows its dividend, with the 5 year dividend growth at almost 29% a year. However, the yield on this stock is very low, with a 5 year average of just under 1%. This is a dividend paying growth stock and my return has consisted of 1% dividend and 28% capital gain.

The Graham Price is quite a bit below the stock price. Even with the decrease of the stock price to $32.05, the stock price is still 75% higher than the Graham Price. This is because the stock price has been growing in the 20% range per year, and the Earnings and Book Value have been growing in the 10% range per year.

The next things to discuss are the Liquidity Ratios and the Return on Equity (ROE). First of all the Liquidity Ratio and the Asset/Liability ratios are low at 1.08 and 1.19. It is much better if they were both at 1.50; however, they are at least over 1.00. This means that assets, both total and current can cover the liabilities, both total and current. The ROE is much better with the ratio at 28.5% for the year ending in December 2008 and the five year average being 19.3%.

The one thing to worry about is the Accrual Ratio, which is very high at 4.58%. It would be much better if the Operations Cash Flow were a lot higher than the Net Income. For 2008, they were almost the same amount. I must admit that I have done very well by this stock. SNC-Lavalin is a well thought of company. I plan to hold on to the stock I have left.

SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is www.snc-lavalin.com. See my spreadsheet on this company at www.spbrunner.com/stocks/snc.htm.

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. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.