Hammond Power Solutions Inc 2

I do not own this stock (TSX- HPS.A, OTC-HMDPF). Here is the hype that I read about this stock in the Buy-Sell Adviser published by MPL Communications. This stock was recommended by Ryan Irvine of Keystone Financial.

When I look at the insider trading report, I find a small amount of insider buying and a small amount of insider selling, with a net of insider buying. This tells us nothing. There are outstanding options, but not much. There is insider ownership. For example, the CEO has $8.4M in shares (Class A) and $1M in options. The CEO also owns all the Class B shares worth about $22.7M. The CFO has $1.7M in shares and $1M in options.

There are 4 institutions that hold some 40% of the outstanding shares. They have not bought or sold any within the last 3 months. For a small company, large insider ownership is a positive.

The 5 year low, median and high median Price/Earnings Ratios are 8.36, 9.82 and 11.29. The current P/E based on a stock price of $8.39 and 2013 earnings of $1.14 is 7.36. This low P/E ratio suggests that the stock price is good. If we use the 2012 earnings estimate of $.98, we get a P/E of 8.56. This P/E ratio also suggests a low stock price.

I get a 2013 Graham Price of $14.58. The 10 year low, median and high median Price/Graham Price Ratios are 0.36, 0.68 and 0.92. The current P/GP Ratio is 0.58. This low ratio suggests that the stock price is good. Also, a ratio below 1.00 says the stock price is a good one.

I get a 10 year median Price/Book Value per Share Ratio of 1.20 and a current P/B Ratios of 1.01. The current ratio is 84% of the 10 year median. This ratio suggests the stock price is good. (For this ratio to show a cheap stock price, the current P/B ratios would have to be 80% or less than the 10 year median.)

The 3 year median dividend yield is just 1.31% and the current dividend yield at 2.15% is some 63% higher. Normally this would suggest that the stock price is cheap. However, dividends started quite low on this company and have increased rapidly. So this is not much of a definitive test.

When I look for analysts' recommendations, I can only find one and that recommendation is a buy. The 12 months stock price given is $12.00. This implies a total return of 45.17%, with 2.15% from dividends and 43.03% from capital gain. (This sounds good, but who knows what the stock market has in store for us.)

Hammond Power Solutions Inc. (HPS) has won the U.S. and Canadian Electrical Supplier of the Year for Leadership award in October 2012. There is a discussion about this stock on Stockhouse.

I think that the current stock price is good. Purchasing this company might also be considered to be a play on the alternative energy industry. This company would be considered to be a risky investment because they will probably be hit hard in any recession and there are always recessions. This is why I like their debt ratios.

Hammond Power Solutions Inc. is the largest manufacturer of dry-type transformers in North America. They engineer and manufacture a wide range of custom transformers that are exported globally in electrical equipment and systems. They support solid industries such as oil and gas, mining, steel, waste and water treatment, and wind power-generation. Its web site is here Hammond Power Solutions. See my spreadsheet at hps.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 or StockTwits.