Monday, June 3, 2013

Genivar Inc

On my other blog I am today writing about Country Bankruptcies ...continue...

I own this stock of Genivar Inc. (TSX-GNV, OTC-GNVUF). I bought some of this stock a couple of times in 2011. I do not have many shares, but I have made a return of 9.94% per on this stock. Of that total return, 3.51% per year is capital gains and 6.43% per year is dividends.

This company used to be an income trust. Since the legislation cancelling income trusts, this company has kept their dividend level. However, they did make special dividend payments in 2009 and 2011. The dividend yield is still quite high and currently running at just over 6%.

As far as Dividend Payout Ratios goes, they are probably too high. The 5 year median DPR is 88% for earnings and 48% for cash flow. The DPR for earnings in 2012 was 130%. It is expected to come in around 97% for this year and at 82% for 2014. These high DPRs are probably why analysts do not expect any dividend increases for this year or next.

Also, the expected EPS for 2013 is $1.54 a value some 35% above the 2012 EPS of $1.15. However, EPS were lower in the first quarter of 2013 than they were in the first quarter of 2012. If you look at last 12 months of earnings (after the first quarter of 2013) the earnings are $1.11 a value lower than for 2012.

Note that I have just 6 years of data because this company went public in 2006. Total return over the past 5 years is just 0.71% per year. Dividends were at 6.83% per year, but there was a capital loss of 6.12% per year. However, if you got this stock from the beginning, you would have earned 19.43% per year with 9.68% per year from dividends and 9.75% per year from capital gains.

Over the past 5 and 6 years, outstanding shares have increased 32% and 29% per year. The increase in stock has been due to share issues and DRIP. The thing you notice is that growth is good if you look to when the stock was first issued 6 years ago, but not very good over the past 5 years, especially if you are looking at per share growth.

So the 5 and 6 year growth in Revenue is at 37% and 50%, but Revenue per share growth over the past 5 and 6 years is at 4.3% and 16.3% per year. Earnings per Share declined by 2.7% per year over the past 5 years, however it is up by 12% over the past 6 years. Cash Flow declined by 10.4% per year over the past 5 years. It is up by just 2.5% per year over the past 6 years.

The Return on Equity has been consistently low. Only in one year did it reach 10% and that was in 2011. The ROE for 2012 was just 5% and the 5 year median ROE is just 7.7%. The ROE on comprehensive income has varied from the ROE on net income. For 2012, the ROE on Comprehensive income was 6.5%. However, the 5 year median ROE on comprehensive income was also just 7.7%. Stocks that consistently have low ROEs tend to underperform the stock market.

The debt ratios are quite good. This is consistent with a stock with large insider ownership. The Liquidity Ratio is currently at 1.58. The Debt Ratio is currently at 2.09. The current Leverage and Debt/Equity Ratios are also good currently at 1.91 and 0.91.

For me to invest more in this company I would like to see better ROEs and better growth in per share values. I would also need to see some growth in the dividends. This company has proven that they can make money and cash flow as EPS and CFPS has always been positive. At the moment, I will be holding on to the shares I have bought. But I will not yet be buying any more. See my spreadsheet at gnv.htm.

This is the first of two parts. Second part will be posted on Tuesday and will be here.

Genivar Inc. is an engineering services firm providing private and public-sector clients with a complete range of professional consulting services throughout all project phases, including planning, design, construction and maintenance. Mainly in Ontario and Quebec, but has some international exposure. Its web site is here Genivar.

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.

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