Monday, January 24, 2011

Teck Resources Ltd

I have followed this stock (TSX-TCK.B) for sometime. I was looking at it in November 2008 and I thought that the price was getting rather silly. So I bought 100 shares and sold then when the price picked up in May 2009. I made just over $1,200. This was lots of fun. Generally, I do not buy mining stock, as you have to keep an eye on them all the time. With my portfolio, I could ignore it for 6 months and nothing will happen. I do follow some mining stock because they are a big part of the TSX.

The shares of this company bottom at around $3.93 in December of 2008. No dividends were paid in 2009, but the stock did start to recover in 2009 and hit $39.80 by year end. Today, the stock price is up again, higher than it has ever been at $59.60. Dividends were reinstated, and then increased in 2010.

The company had short term debt problems with their take over of Fording Coal. For this, they got hammered in the market. Unfortunately, they bought Fording Coal at the wrong time. When they started to take over Fording Coal they could not have foreseen their future problems, but they did do the takeover at a market top.

The dividend payments are, at $.60 a year are below those paid in 2008 of $1.00 per share. But, also please note that since this is a mining company, dividends could possibly fluctuate in the future. This company has not paid out a high percentage of its earnings or cash flow.

Teck Resources has had good growth over the past 5 and 10 years, with the 10 year figures usually much better than the 5 year figures. Revenues per share have grown over the past 5 and 10 years at the rate of 9% and 16% per year, respectively. Cash flow, net of non-cash items, has grown at the rate of 6% and 22% per year per share over the past 5 and 10 years, respectively. The only growth figures where the 5 year growth was better than the 10 year growth was in book value. Book Value has grown at the rate of 25% and 12% per share per year, over the past 5 and 10 years, respectively.

The Liquidity Ratio has usually been very good for this stock. It is currently at 2.19 and has a 5 year average of 2.43. The only year this fell alarmingly low was in 2008 and it ended up at 0.44 that year. The Asset/Liability Ratio is currently at 2.18 and has a 5 year average of 2.04. Even in 2008, this ratio was good at 1.54. For these ratios, you want one of at least 1.50. A ratio of 1.50 says that the assets are one and one half times the liabilities.

I guess the last thing to cover today is the Return on Equity. The ROE has been quite good since 2004 and the ROE at the end of 2009 was 12.6% with a 5 year average of 17.9%. The ROE to September 2010 is also good 12.3%. Tomorrow, I will look at what my spreadsheet ratios say about the current price and what analysts have to say about this stock.

Teck is a diversified resource company involved in mining and mineral development with major business units focused on copper, metallurgical coal, zinc, gold and energy. This company has interests in several oil sands developments. The company explores for resources in the Americas, the Asia Pacific Region, Europe and Africa. Its web site is here Teck. See my spreadsheet at tck.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.

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