Thursday, March 10, 2011

Canadian Helicopters Group 2

I recently read a favorable report about this stock (TSX-CHL.A), so I decided to investigate it and see if it was indeed this company would make a good investment. I picked it up from Financial Post. The Financial Post had an article about screening for small caps.

Because this company recently converted from an income trust to a corporation, there is only insider trading information available from the beginning of this year. There has been no insider buying or insider selling in this company since the beginning of this year. Although it appears that insiders do own shares, the only really significant insider holding is by Fonds de Solidarité FTQ that owns around 25% of the outstanding shares. This insider is sponsored by Quebec Federation of Labour as a region investment tool.

The 5 year median low Price/Earnings Ratio is 4.1 and the 5 year median high P/E Ratio is 6.6 with the 5 year median average P/E Ratio being 5.8. The current P/E Ratio is 6.4 and even though this is a low P/E Ratio, it is relatively high and almost at the 5 year median high level. I get a current Graham Price of $28.45. The current stock price of $17.45 is some 39% below the Graham Price. However, on average, the difference between the Graham Price and the stock price is that the stock price is 43% lower than the Graham Price. So on a relatively basis, the stock price is high.

The 6 year average Price/Book Value Ratio is 0.97. The current P/B Ratio is 1.31. Although, here again the ratio is low, it is not low on a relative basis. The last thing to look at is the dividend yield. The current yield is 6.3% and the 5 year average is 10.9%. So, even though this yield in absolute terms is good, it is lower than the 5 year average.

When I look at analysts’ recommendations, I find only one and that one is a buy. There may only be one analyst following this stock. (See my site for information on analyst ratings.) This company is liked for its clean balance sheet and the fact it may be getting more contracts. It is considered a buy up to $16.

The price is low on an absolute basis, but not on a relative basis. But even on a relative basis, stock price is near the top, but it is not extraordinarily high. It does have very little debt, so it could weather a problem in the economy. It also has reasonable payout ratios. One commentator said it might be an interesting place to park your money.

Also, today Dividend Ninja has an interesting article on the Dividend Payout Ratio (DPR) on his site.

Also, I am asked to review specific stocks from time to time. However, there is a lot of work involved in producing a spreadsheet that is the basis of my reviews. Few requests come with a reason why I, a dividend investor, might possibly be interested in a stock. For this stock, I reviewed it because of a report that said the company was a small cap stock with a good dividend and low debt. It looked like a stock I might possibly interested in investing in at some point. I am sorry if I ignore most requests to review a stock, but, as I said, there is a lot of work involved.

Canadian Helicopters Limited is the largest helicopter transportation services company operating in Canada. Canadian Helicopters provides helicopter services to a broad range of sectors, including emergency medical services, infrastructure maintenance, utilities, oil and gas, mining, forestry and construction. In addition to helicopter transportation services, Canadian Helicopters operates two flight schools, provides third party repair and maintenance services in Canada and provides military support in Afghanistan. Its web site is here CDN Helicopters. See my spreadsheet at chl.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. SP, Thanx for the mention :)

    I was only aware of Canadian Helicopters recently, but it is one stock that should have been in my radar a long time ago.

    As you point out balance sheet fundamentals are excellent, but price is very close to 52 week highs. That would be a tough entry point for me. Something to ponder for next week ;)

    My worry about this stock is the demand for future orders and contracts. What is your take on that?

    Dividend Ninja