SNC-Lavalin Group Inc 2

I first bought this stock (TSX-SNC) in December 1989 and I sold some in July 2008. I have made a total return on my investment of 30% per year. The reason I sold some stock in 2008 is that the value of this stock was too high a percentage of my portfolio. I look at getting rid of some of my holdings when I stock reaches 5% of my portfolio. I definitely sell some when the stock reaches 10%. This stock is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats .

The one thing I do not like about this stock is the amount of insider selling. Over the past year, there has been some $12.6M in inside selling, with $1.8M in insider buying. A lot of the selling is in connection with stock options and insiders seem to have lots of stock options. I do not think that giving out stock options align insiders interests with shareholder interest. More people are beginning to see this, but not enough to change stock options policies.

When I look at the 5 year low average P/E ratio, I get one of 20.5 and when I look at the 5 year high average P/E ratio, I get one of 32.6. Both these ratios are high, but it is not untypical for growth companies to have high P/E ratios. Based on the earnings estimates I get for 2010, I get a current P/E ratio of 19. This is not a very low P/E ratio, but it is lower than the 5 year average low P/E. When I do the Graham Price calculation, I get one of $23.12. The current stock price of $46.69 is just over 100% higher. Unfortunately, the stock price of this stock has often been this high over the Graham Price. This is a growth stock and this often happens with a growth stock. Over the past 5 years, the Stock Price has been at an average low against the Graham Price of 88% and an average high against the Graham Price of 203%.

I get a 5 year average Price/Book Value ratio of 4.51 and a current one of 4.82. They are close, but to signal a good stock price you want to see this P/B Ratio at 80% of the 10 year average. The last ratio I will look at is the dividend yield. I get a current yield of 1.5% and 5 year average of 5 year average of 1.12. The 5 year average high is 1.5%. This would all point to a good current stock price. So all this points to a relatively good stock price, however, it is not an absolutely good stock price.

So, what do the analysts say? When I look at the analysts recommendations, I find Strong Buy, Buy, Hold and Sell. I can only find one sell recommendation. The consensus would be a Buy recommendation. (See my site for information on analyst ratings.) It is hard to find negative comments on this stock. The closes is that it is not a stock you can buy and put away in your portfolio forever. Most analyst feel that is company is very well run and is the best infrastructure play in Canada. It also earns half it money outside Canada.

I am certainly pleased with my investment in this company and I will continue to hold this stock.

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 here SNC. See my spreadsheet at 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 for stocks followed and investment notes. Follow me on twitter.