I up dated my July 7th entry on Dividend Growth Index as the Dividend Growth Investor has just posted updates on the stocks he was covering. See my Dividend Growth Index post and Dividend Growth Investor's post.
I do not own this stock of Pulse Seismic Inc. (TSX-PSD). This company did not do well from 2006 to 2010 when the EPS was negative. They prudently cancelled dividends for 2009 and 2010. They restated the dividend payments in the later part of 2011. They increased the dividend after the 1st quarter of 2012 by 60%. However, the dividends are still considerably smaller than those paid in 2008.
The insider trading report says that insider buying was $4.8M and net insider buying was at $4.7M. There is a bit of insider selling. There seems to be a lot of options issued. Plus there are also option like things called Rights LTIP, Rights Performance Share Unit and Rights Restricted Share Unit
The CEO, CFO and officers all have more options than shares. However, the Directors tend to have more shares than options (or option like things). There is one director with an 8% stake in this company. Both the CEO and CFO have stock worth in the $100,000's.
There are 12 institutions that own 17% of the outstanding shares. Over the past 3 months they have increased their shares by 2.2%. This is a positive.
It not possible to come up with past Price/Earnings Ratios as there was a number of years when this company has not earnings. However, the current P/E Ratio of 10.18 is a good ratio.
I can come up with a Graham Price. The 10 year low, median and high Price/Graham Price Ratios are 1.27, 1.54 and 1.80. The current P/GP Ratio is just 0.85 on a Graham Price of $2.64. This suggests a very good current price of $2.24.
However, the Graham Price increased substantially this year because expected earnings are quite high compared with the past. If we use last year's Graham Price of $1.50, I get a P/GP Ratio of 1.49. This suggests a reasonable stock price of $2.24.
I get a 10 year Price/Book Value Ratio of 1.29. The current P/B Ratio is 1.59. This is some 24% higher and would suggest a high relative stock price. Book value was going down because the company was not earning any profits. It is not surprising that the P/B Ratio is higher than the 10 year median ratio.
The current dividend yield is 3.57%. I will use the 10 year median dividend yield rather than the 5 year one as we are missing 3 years of dividends. This 10 year median dividend yield is 3.42% and our current dividend yield is 4.4% higher. This would suggest a good current price.
I do not often talk about the accrual ratio. This is really only important if it is above 5% or below -5%. When it is below -5% it is saying that the stock price is very low. The Accrual Ratio on this stock is -9.2%. Richard Sloan did a paper on this subject some years back. I cannot find my original document, but this one says essentially the same thing. See Smart Money.
When I look for analysts' recommendations, I find Strong Buy, Buy and Underperform recommendations. The consensus would be a Buy. Consensus 12 months stock price is $2.47. This implies a total return 13.8% with 10.3% from capital gain and 3.5% from dividends.
Although the financial are not yet out, Pulse Seismic has put out a news release for 2nd quarter ending in June 2012. It says it has record sales and strong growth in cash flow.
There is an interesting discussion on this stock at Financial Web Ring. Seeking Alpha also has an interesting article on this stock.
It would seem that this company is currently doing well. The stock price seems at a reasonable level, so I can see were the Buy and Strong Buy recommendations are coming from. However, this is a small risky stock and probably is not for the faint of heart to buy. Dividend will probably continue to fluctuate in the future.
Pulse Data Inc. is a provider of 2D and 3D seismic library data and is based in Calgary, Alberta. Pulse owns the second-largest licensable seismic data library in western Canada. Pulse's 2D and 3D seismic data library extends over the Western Canada Sedimentary Basin, plus selected areas of the U.S. Rocky Mountains region and northern Canada, with a particular focus on active exploration areas. Its web site is here Pulse Seismic. See my spreadsheet at psd.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.
You cannot attempt to value this company by looking at EPS..... EPS means nothing for this company as most of their EPS is wiped out by a depreciation expense of their library. This is a huge advantage as they can dramatically reduce taxes.
ReplyDeleteI explained how this is an advantage here:
http://caps.fool.com/Blogs/special-situation-investing/753484
Here is a cut and paste:
Speaking of special situation opportunities, have you ever heard of Pulse Seismic? (PSD.TO) The company licenses seismic data to oil and gas companies in Canada. Market Cap = $156m
The special situation is their hidden asset; their seismic data.
Under accounting rules, they have to depreciate the seismic data quite aggressively, which wipes out their entire earnings basically. However, Pulse has proven that this data doesn't actually lose value, as they still license and make money from data that was produced in the 1960s.
Their data is now down to about 90m on their balance sheet, but this same data has already produced nearly 40m in FCF after only 6 months this year. That is $40m FCF after 6 months for a company with a market cap of only $156m!!!!!
The cost to replicate this data would be in the billions, and it is very unlikely that a company would ever try to replicate their library and compete with them. It would make absolute no sense whatsoever. Pulse doesn't even obtain new data themselves unless they already have a company willing to pay for a license of the new data. So all new data "surveys" are co-funded between Pulse and the company wanting the new data.
To prove their economic moat, or competitive advantage, one doesn't have to look far, as their gross margins are above 90% consistently year after year.
They made a very timely purchase of a competitor during the economic crisis, and have been aggressively paying down the debt for that purchase.
Once that debt is paid off (2-3 years), I think they will have no problem tripling or quadrupling the current dividend, which is already an impressive 3.2% yield, which represents a mere ~10% of FCF.
And also worth mentioning, they have produced these impressive results with nat gas prices incredibly suppressed. That has to give an investor some type of comfort.
Pulse is my largest holding outside of my ETFs which are my core holdings.
Thanks for you comments.
ReplyDeleteHowever, I must say I was not only looking at EPS when I looked at this company. I would be the first to admit that EPS is a rather fake number, but it is valuable in comparing one company to another.