Northland Power Inc 2

I do not own this stock (TSX-NPI). This company is into generating electric power. I have a lot invested in pipelines and I would like to have more invested in electric power as my utilities investment. I read a report on this stock that said it was a good defensive stock to buy. I am not sure about that.

As far as Insider Trading goes, the report only starts for 2010 that is the last 7 months. During that time there has been a minimal of insider buying. There is not insider selling. There are 41 institutional holding some 21% of this stock. Over the past three months there has been buying and selling and they have decreased their shares by 6% overall. (See my site for information on Insider Trading.) Also, the Chairman of the Board owns some 26% of this company.

For this stock, I have a 5 year median low Price/Earnings ratios of 20.13 and a high P/E ratio of 25.40. These are rather high for a utility stock. Based on estimated earnings for 2010, I get a current P/E ratio of 44.72, an even higher value. The only positive note is that this P/E Ratio is lower than the low of last year, which was 253.00.

When I look at the Graham Price, I get a current one of $6.95. The stock price of $16.10 is 131% higher. The 10 year average difference between the Graham Price and the stock price is 31%. All I can say is that the current difference is better than last year where the difference between the Graham Price and stock price reach over 500%. (See my site for information on calculating Graham Price.)

I get a 10 year median Price/Book Value of 1.67, a not unreasonable value. The current one of 2.70 is rather high and is over 60% higher than the 10 year median. This stock used to be an income trust stock. Lot of income trust stock did not grow their book values. This is the same with this stock and the book value over the past 5 and 10 years has declined by 3% and 2% per year, respectively.

The 5 year median yield is 8.48%. The current yield is lower at 6.71%. This also says the current price is rather high. However, as with lots of companies going from income trust to corporations, this stock has not been raising their dividends. I do not see things improving next year as the earnings are expected to go down in 2012, not up.

When I look at analyst ratings, I find a few Strong Buy, more Buy and even more Hold recommendations. However, the consensus recommendation is a Buy recommendation. I find it strange that even when the company admits that they will be paying in distributions more than their distributable income until 2013 that analysts are so positive on this stock. I, for one, do not like companies that payout more than they should. To me, this implies that they will do into debt to pay distributions.

With Hold recommendations, analysts say that they feel this stock is fully valued. Analysts with Buy recommendations say that the company has good prospects for the future and they like the current yield. Another analyst says that the dividend is safe. One analyst remarks that the stock has good support at $15 level. (This means that it should not go below $15.) The risk level of this stock is given as medium.

I will keep an eye on this stock. However, I have no plans to buy it.

Northland Power Inc. indirectly owns interests in power projects. Northland's assets comprise facilities that produce electricity from "clean" natural gas and "green" renewable sources such as wind and biomass. Electricity generation is sold under long-term PPAs with creditworthy customers, and any fuel for natural-gas-fired projects, where required, is purchased under long-term contracts to assure stability of operating margins. This company operates in Canada, US and Germany. Its web site is here Northland Power. See my spreadsheet at npi.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.