FirstService Corp

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

However, it never performed as I had expected. I bought it for capital gain and the stock did not perform. I know it got hit by the 2008 bear market, but I did not see it doing very well any time soon, so I sold. Shortly after selling the FSV shares, I also sold the preferred shares. Preferred shares are not generally the time of shares I like to hold.

Having dividends come from the preferred shares basically meant that the dividends would not rise. However, since the dividends were paid in US$, they did fluctuate for Canadian shareowners. The average dividend yield from the preferred shares for the FSV shares was around 3.4%. This is not a bad yield, but, as I said it would not increase.

As far as stock return goes, looking just at the stock price of FSV shares, they are up around 9% per year over the past 10 years. However, over the past 5 years they are down around 1.1% per year. It is much better looking at the total package, including the preferred shares distributed. Then the total return would be around 13.9%per year over the past 10 years and 7% per year over the past 5 years. Included in this total return would be dividends worth just over 1% per year over the past 10 years and 1.8% per year over the past 5 years.

This stock’s financials use US GAAP rules and the financials are given in US$. So, as for a lot of stocks reporting in US$, the growth looks much better in US$ terms than in CDN$ terms. In the area of revenue, the growth has been good. The 5 and 10 year growth in revenue per shares is 9.5% and 10.8% per year, respectively.

In other areas growth has not been so good. If you look at real Earnings per Share they are down substantially per share at 46% and 16% per year lower, respectively. However, the company and some analysts are using an Adjusted EPS value and by this measure, earnings are up.

When looking at cash flow from operations, using the net of non-cash items, the CF has only grown at 2.5% and 6% per year over the past 5 and 10 years. A lot of analysts like to exclude changes in current assets and liabilities in calculating Cash Flow from operations, no matter what the company does in their annual reports.
Otherwise, Cash Flow from operations may not properly reflect how a company is doing. The investor’s friend site gives a good overview of this subject

When looking at Book Value, you really have to look at Total Equity (that is included Preferred Shares) for this stock as the Preferred Shares were given out free to shareholders. Over the past 10 years, Book Value is up 3.6% per year. However, over the past 5 years, Book Value is down some 6.6% per year. Book Value also took a hit and is down some 9% at the end of the last quarter of September 30, 2011.

The Return on Equity is generally fine as it has a 5 year median of 13.2%. However, it was a bit low at the end of the financial year of 2010 at just 6.3%.

The Liquidity Ratio is just ok at 1.02 at the end of 2010. The current one is lower at 0.75 because of some long term debt being included. There is not much in the way of notes for the latest financials as they are just published in a release with no substantial notes. However, I have no reason to believe that FSV cannot handle their long term debt. The Asset/Liability Ratios is of for the end of the financial year of 2010 at 1.49, but the latest one is rather low at 1.26.

As far as the last two debt ratios of Leverage Ratio and Debt/Equity Ratio goes they were fine until the financial year ending in December 2008 and then they started to rise. The ones for the end of 2010 were 5.67 and 3.79. The current ones are 6.50 and 5.17. These ratios vary by industry, but seem quite high to me for this company.

I am not sorry to have sold this stock. I got a reasonable price for it and even if I still had it, it would not be worth much more than I sold it for. Tomorrow, I will talk about what my spreadsheet says about the current stock price and what analysts say about this stock.

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.