Tuesday, December 13, 2011

FirstService Corp 2

I do not own this stock (TSX-FSV), but I used to. I bought this in June 2002 and sold April 2010. I made a return of 3.17% per year (including preferred shares). Rather than pay a dividend, this company issued preferred shares to current shareholders. This rather complicates trying to value this company.

When I look at Insider Trading, I find some $5.6M of insider selling and minimal insider buying. The net insider selling is $4.9M. It seems to be mostly that CFO and officers are not keeping their stock options. The number of shares outstanding when down slightly. The company has repurchased shares. It seems to me that they repurchased slightly more than they issued in stock options.

Some 90 institutions own 81.3% of the outstanding shares. Over the past 3 months they both purchased and sold shares of this company. Over this period they have increased their shares by 9.7%.

To get a handle on historical Price/Earnings ratios is not straight forward. This is because the company issues not only EPS but Adjusted EPS. Analysts seem to value the Adjusted EPS and the estimates appear to be based on Adjusted EPS. In relation to Adjusted EPS, the 10 year median P/E ratios go from a high of 26 to a low of 14.8. If we go with Adjusted EPS estimates, the current P/E is 14.1, which would be a relatively low P/E Ratio.

When looking at P/E Ratios, I also follow the trailing P/E Ratios. For 2011, the trailing P/E ratio is 16.6. This is not a very high P/E ratio either.

Based on the Adjusted EPS, I get a current Graham Price of $15.64. This is some 63.6% above the current stock price of $25.58. This is about the median difference between the Graham Price and the stock price. So the stock price would be reasonable by this measure.

I get a 10 year median Price/Book Value Ratio of 3.11 and a current one of 4.26. The current on is some 37% above the 10 year median. The main reason is the lack of growth in book value. However, by this measure, the current stock price is high.

When I look at analysts’ recommendations, I get Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. One Hold recommendation comes with a stock price of $29.00, which is some 13.4% higher than the current stock price. A couple of analysts with Strong Buy recommendations said that the company is undervalued. However, they feel that this is a long term buy (to hold for at least 3 to 5 years.) For a report on this company by Raymond James see Canada Research.

This company is a global diversified leader in the rapidly growing real estate services sector, providing services in the following three areas: commercial real estate, residential property management, and property services. This is an international company, having business in North and South America, Europe, Asia, Australia and New Zealand. Controlling shareholder is Jay Hennick. He has 9% holding, but has 52.5% voting control. Its web site is here First Service Corp. See my spreadsheet at fsv.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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