Thursday, April 5, 2012

Canam Group Inc

I own this stock (TSX-CAM). I bought this in November 2011 as a short term investment. I wanted to review it after the December 2011 financials were in. Since I bought shares in this company, they are up 30%. These shares, like the TSX has been going down over the past few days. I will probably hold until they start to pay dividends again. I do not expect this to be a permanent investment.

The financial year of 2011 was not good. Revenues increased nicely as they were up some 17% year over year. Earnings and cash flow were negative as expected. If you had been holding this stock over the past 5 or 10 years, you would have probably have lost money as the 5 and 10 year total returns are negative 13% per year and negative 4.6% per year, respectively.

Dividends are paid as and when the company can afford to pay them. In any event the dividend yield is quite low so that they will not make much difference in total return. Dividend yields have been running between 1% and 2%.

The thing that is still solid about this company is good balance sheet. The debt ratios are not quite as good as for 2010, but they are still good. The current Liquidity Ratio is 1.80. This is a good ratio, but not as good as the 5 and 10 year median ratios of 2.28 and 1.96. The current Debt Ratio at 1.68 is still good, but not as good as the 5 and 10 year median ratios of 2.68 and 1.96. These ratios also dipped in the last recession.

The current Leverage and Debt/Equity Ratios are fine at 2.46 and 1.46. These are not as good as the 5 year median ratios of 2.04 and 1.04. (With these ratios lower is better.) However, these ratios also went higher than usual and even higher than the current ratios in the last recession. (That is the recession prior to the current one we are just coming out of.)

It generally takes a while for company’s financials to react after a bear market, then a recession. After the 2000 bear market, this company hit the worse debt ratios in 2003. This time, the bear market started in 2008 and now, in 2011, the debt ratios are the worse they have been.

Analysts expect the company’s revenues, earnings and cash flow all to improve in 2012. Basically, they expect these to improve, but not to be great over the next few years.

There is no point in talking about Return on Equity as there were no earnings. What analysts seem to be expecting is a slow and gradual improvement in the company over the next few years. With the last bear market/recession, the company was doing well in the 5th and 6th year after the recession. If it does the same thing this time, the 5th and 6th years after the recent bear market would be 2013 and 2014.

At the moment I will be holding on to my shares as I can see more capital gain in the future for this company. I am pleased with the current improvement in this company. With the TSX breaking downward out of the narrow band it has been trading in since early March, I have to wonder if we are going to get any more good upward movement until the fall.

I will continue talking about this stock after the Easter Holidays. That will probably be on Tuesday, April 10th, 2012.

Canam Group specializes in the design and fabrication of construction products and solutions for the commercial, industrial, institutional, multi-unit residential, and bridge and highway infrastructure markets. This company has offices in Canada, US, Saudi Arabia, United Arab Emirates, India, Romania France and China. Its web site is here Canam. See my spreadsheet at cam.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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