EnerCare Inc

On my other blog I am today writing about charity ...continue...

I do not own this stock EnerCare Inc (TSX-ECI, OTC-CSUWF). This was one of a few income trusts I followed because it was recommended by MPL communications. Like other income trusts, it converted to a corporation. This company cut their dividend at the same time by about 50% (2009). However, they still make a dividend payment each month which some dividend investors appreciate.

The company started modestly to again increase their dividends in 2012. The most recent increase was for 1.8% in 2013. However, they are straggling to make a profit lately and the Dividend Payout Ratio for earnings is way too high. They are not also expected to make a profit in 2013. It is expected the DPR will be around 259% for 2014 if dividends do not change. However, the DPR for cash flow is fair, running around 35%.

Most analysts expect this company to again have a loss in 2013. The consensus EPS for 2013 is -$0.08. Some analysts expect them to make a slight profit and others to have a much larger loss. Certainly the first quarterly results of 2013 shows a bigger loss that the 1st quarter of 2012. All the analysts expect the company to make a profit in 2014.

The bright spot on this stock is that they are growing their revenue. Revenue is has grown by 9% and 7% per year over the past 5 and 9 years. Revenue per Share has grown at 5.6% and 5.3% per year over the past 5 and 9 years.

There is growth in cash flow over the past 9 years, but not over the past 5 years. People who have held on to this stock for 10 years has made money, but not over the past 5 years. However, the 10 year good return was because of dividends at 11.25% per year. There was a slight capital loss.

The debt ratios are not very good. The Liquidity Ratio is currently only 1.21. If you add in cash flow after dividends it rises to 2.68. A lot of utility companies rely on cash flow to give them a better Liquidity Ratio. However, the Debt Ratio is also low at 1.11 currently. It has always been quite low and the company has a 5 year median Debt Ratio of just 1.20. Most utilities have better Debt Ratios.

The Leverage and Debt/Equity Ratios are a bit high at 10.04 and 9.04. These ratios have been rising over the past few years. They were better for the financial year of 2012 at 8.39 and 7.39. The 2012 ratios are more typical of utility companies.

When doing stock price tests, I cannot use my usual P/E or dividend yield tests. P/E is not much good when a company has no profit and dividend yield is not good for income trusts that have cut their dividends. I get a Graham Price of just $1.47 and the P/GP Ratio is 6.15 which on any basis say the stock price is very high. The 10 year median P/B Ratio is 2.39, a fair value. However, the current P/B Ratio is 6.58 a very high value.

The 5 year Price/Cash Flow per Share Ratio is 3.63 and the current ratio is 30% higher at 4.72. This says that the stock price is relatively high. The only good showing is the Price/Sales (or Revenue) per Share Ratio. The 5 year median P/S is 1.81 and the current one is 1.86 only 2.7% higher and this says that the stock price is relatively reasonable.

When I look at analysts' recommendations, I get Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. This is a very common analysts' recommendation for stocks. The 12 months stock price consensus is $10.80. This implies an 18.77% return with 7.52% from dividends and 11.26% from capital gains.

A number of analysts say that they like the good dividend, currently at around 7.5%. They think it is safe and might be increased again in 2015. The site Seeking Alpha talks about recent insider buying.

However, you should think carefully before buying high yield stocks. They are generally high for a reason. This stock has no profit for 2012 and few expect one for 2013. This will be a short report as I do not have enough days to do long reports on all the stocks I am following. See my spreadsheet at eci.htm.

EnerCare Inc owns a portfolio of waterheaters and other portfolio assets, which they rent to primarily residential customers. They rent out waterheaters in the GTA and southern Ontario. EnerCare also owns EnerCare Connections Inc., a leading sub-metering company, with metering contracts for condominium and apartment suites in Ontario, Alberta and elsewhere in Canada. Its web site is here EnerCare.

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.