Tuesday, January 18, 2011

Waterfurnaces Renewable Energy 2

This is a stock (TSX-WFI) that I follow, but I do not own. It is a utility like stock, but it is more risky that other utility stocks. People who have invested in this company have done very well. The company has been paying dividends since 2003.

When I look at the Insider Trading report, what I find is a tiny bit of insider buying and no insider selling. Insiders do not seem to have much in the way of either options or shares. On the graphics showing options and shares for officers of the company, it shows there are more shares than options (however, these are all in small amounts). What we can say that is positive is that the dividends were increase in 2010 by around 16%.

When I look at the P/E Ratios, I get a 5 year median low P/E Ratio of 16.7 and a 5 year median high P/E Ratio of 29. The current P/E Ratio I get is 17, so this is relatively low for this stock, although this is not a particularly low P/E Ratio. Sites that use the last 12 months earnings to get a P/E Ratio get one of 20.

For the Graham Price, I get one of $9.21 for 2011. The current stock price of $24.25 is some 62% higher than the Graham Price. The reason for a low Graham Price is because the growth in book value has not kept up with the growth in earnings. See my report of yesterday. I must say that the average difference between the Graham Price and the stock price is around 120%, with the low difference around 65%. So past history shows that on a relative basis, the stock price is not that high.

The problem with the low Book Value is also shown in the Price/Book Value Ratio. This is currently running at 9.14, with this company having a 10 year average P/B Ratio of 6.91. By the P/B Ratio, the stock price looks high.

The current Dividend Yield of 3.6% is above the 5 year average of 3.3%. This yield shows a current good stock price. A yield of 3.6% is a good yield for a stock. The dividend growth potential of this stock is good. If the dividends continue to increase at the current 5 year growth rate, you could be earning 5% in 5 years time, or 9.8% in 10 years time on an investment in this stock today. However, I should also point out while past history of a stock might point towards a possible future; there is no guarantee of this future. That is, your investment, might not perform this well.

This is not a big company, so there are not that many analysts that follow it. What I find is Strong Buy, Buy and Hold recommendations. The consensus is probably a Buy. (See my site for information on analyst ratings.)

There is not much in analyst reports that I can find, however, I read one that said that insiders own a good chuck of the stock. This and the following one said that insiders were buying. I could not confirm about insiders holdings in the Insider Trading document, but this report does seem incomplete. Apparently, the Head Office for this company is in Fort Wayne, Indiana. They also have an office in Toronto. This company does work in both US and Canada. It is also traded in the US via pink sheets.

I find a blog entry dated December 2010 on this company at Canadian Financial DIY. Because this is a small company, it is risky, but it just might be worth buying for future capital gains and dividend growth.

Waterfurnaces Renewable Energy Inc is a manufacturer and distributor of residential and commercial geothermal and other water source heating and cooling systems. This is an international company with 80% of its revenue from the US. It has revenue from Canada of just over 16% and the rest of the world under 3%. Its web site is here WaterFurnace Inc. See my spreadsheet at wfi.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.

1 comment:

  1. Good analysis! I've been watching this stock for a number of years and whenever I have any extra cash the share price seems to be high, so I haven't bought any yet. It's been stuck in the 20-30 range since I've been watching it.

    I was wondering if you could do an analysis of EDLEUN GROUP INC - EDU:TSX-V
    I am very interested in this stock and was wondering what your thoughts were.