Friday, September 2, 2011

Ag Growth International

I do not own this stock (TSX-AFN). Ag Growth was founded in 1996, but went public in May 2004. I cannot find financials beyond 2004. In June 2009, company was converted into a corporation. This company used to be a Unit Trust (TSX-AFN.UN).

This is one of very few companies to convert from an income trust and not reduced their distributions. In fact, this company was able to raise their dividends by almost 18% by the end of 2010. This is a great showing. Their Dividend Payout Ratios for 2010 was 75% for earnings and 46% for cash flow. Both these ratios are better than the corresponding 5 year median ratios of 91% and 64%.

According to analysts’ consensus estimates for 2011 and 2012, these ratios will go back up in 2011, but will again fall in 2012. (See my site for information on Dividend Payout Ratios). The current dividend yield is very good at 6%. The 5 year growth in dividends is 8% per year.

Since there are only financial statements going back to 2004, I only have 5 year growth statistics on this stock. All these are very good, except for growth in book value. Growth in book value over the past 5 years is just 3.4%. However, I should mention that most income trust stocks do not grow their book values. So, looking at this stock this way, the growth is not bad.

The only statistics I have going back beyond 2004 is for revenue. For revenue, the growth over the past 5 and 10 years are great at 26% and 17% per year, respectively. Good revenue growth usually leads to good earnings and cash flow growth. That is why revenue growth in important.

The 5 year growth for earnings is 8.8% per year. The 5 year growth in cash flow is 9.25% per year. Also, when we look at Return on Equity, we get one of 22.5% for the end of 2010 with a 5 year median ROE of 18.6%. The ROE for the last 12 months ending in June 2011 is a bit lower at 17.7%.

The debt ratios for this stock are very good. Part of the reasons the current ones are good seems to be because of the change in accounting rules to IFRS. However, the debt ratios on this stock have always been good. The current Liquidity Ratio is 3.00. The current Asset/Liability Ratio is 2.14. What you want for these ratios is one of 1.50 or better, so these ratios are very good.

The current Leverage Ratio is 1.88 and the current Debt/Equity Ratio is 0.88. These are also very good. The company has little debt. People who invested in this stock 5 years ago have made out well. The IRR over the past 5 years is 33% per year, with around 8% of the return in dividends. However, I do not think that this stock will do as well going forward, but it should do well.

This company has done very well since going public in 2004. It looks like a great dividend payer, with good dividend growth. On Tuesday, I will look at what analysts say about this company and what my spreadsheet says about the current stock price.

Ag Growth is a leading North American manufacturer of portable grain handling equipment, consisting of augers, belt conveyors, grain drying, fencing, post hole augers, and other ancillary grain handling accessories. This company has 1,400 dealers and distributors in Canada and the United States. Its web site is here AG Growth. See my spreadsheet at afn.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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