Tuesday, August 9, 2011

Innergex Renewable Energy 2

I do not own this stock (TSX-INE). When looking at this spreadsheet, please realize I am coming from the Innergex Power Income Fund (TSX-IEF.UN) to the Innergex Renewable Energy stock (TSX-INE). This can make a big difference in past performance for a stock.

When I look at the insider trading report, I find that there has been a minimal amount of insider buying during the past year. There was no insider selling. The entire insider buying was by directors of the company. There are 26 institutional investors in this company and they own some 35% of this company. They have increased their stake in this company by 6.6% over the past 3 months.

The real problem I find with this company is that no one seems to expect it to earning much in the way of income over the next couple of years. At the current 2011 estimates, the P/E is at 105.33, a ridiculously high figure. I get a Graham Price of only $3.46, so the current stock price of $9.48 is some 173% higher.

The 10 year median Price/Book Value Ratio is 1.50 and the current one is 1.60. The current one is some 7% above the 10 year median P/B Ratio. For a good stock price, you would want to see the current P/B Ratio lower than the 10 year Median P/B Ratio. However, a P/B Ratio of 1.60 is a reasonable one.

The current dividend yield is 6.12%. This is lower than the 5 year median dividend yield of 8.14%. What you would want is the current dividend yield to be higher than the 5 year median dividend yield. The lowering of the dividend accounts for part of this discrepancy.

When I look at analysts’ recommendations, I see Strong Buy, Buy and Hold recommendations. The consensus recommendations would be a Buy recommendation. This is rather a common recommendation on a lot of stocks. I can find only very little in comments on this stock. One analyst with a Hold recommendation thinks that the 12 month stock price will be the same as the stock price today.

Personally, I do not like the fact of low or non-existent earnings. Also, analysts do not seem to think that even the Distributable Cash for 2011 and 2012 will cover the dividends. I tried to find out where in 2011 the company thinks the Distributable Cash is. All I could find was that they said they did better than expected. However, there was no indication what that was. Another point to make is that earnings estimates have a notorious reputation for being wrong.

One bright point is that analysts expect the revenues to grow. Personally, I would like to see a few years of solid growth in earnings and cash flow to even consider this company. However, as with other utility companies, this stock has not fallen as much as the market in the recent market drop. This is probably a good sign.

I had mentioned before that I plan to sell of some Computer Modelling Group (TSX-CMG) equal to what I paid for the stock and keep the remaining shares. This is so, on this fast growing Tech company, I can at least ensure I do not lose money. I was waiting for a time when I would get a reasonable price for CMG and also buy Emera (TSX-EMA) for a reasonable price. My Emera purchase was to replace the CMG shares sold. Emera has a slightly better dividend and, being a utility, was a more stable and long term stock purchase.

I sold CMG today and bought Emera today because I could both sell CMG at a reasonable price and buy Emera at a reasonable price. Because the market was quite volatile, I did put in a market price limited to today. I noticed that the utility stocks were finally moving down. In the initial market drop, there was not much change in utility stock prices.

Innergex is involved in Canada’s renewable energy industry. The Company develops, owns and operates facilities located in North America, leveraging run-of-river hydroelectric power generating facilities, wind farms and photovoltaic solar parks. Its web site is here Innergex Renewable Energy . See my spreadsheet at ine.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. Susan,

    Do you always buy stocks at market price? I was trying to buy ENB today near closing. I put in a price below market but the price kept going up, so I never bought. I think what I was doing is not the correct way to buy stocks. You are quite right when the market dropped in mid afternoon, the utility stocks did not drop by much.