Canyon Services Group 2

On my other blog I am today writing about buying the market...continue...

I do not own this stock Canyon Services Group (TSX-FRC, OTC-CYSVF). I get a newsletter weekly from MPL Communications called Advice Hotline. They wrote up this stock on July 19th and I was impressed with it so I did a spreadsheet. You can sign up for this newsletter at their site.

When I look at insider trading, I find that there is insider selling of $3.8M shares over the past year, with net insider selling at $3.6M. There is a bit of insider buying. Insiders seem to be exercising options. This really tells us nothing.

The CEO has shares worth $10M and has options worth $10M. The CFO has shares worth $1M and has options worth 3.4M. An officer has shares worth $0.9M and has options worth $3.4M. A director has shares worth $0.5M and has options worth $0.4M. There is also a director with shares worth $30.9M and has options worth $0.2M. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings per Share ratios are 7.82, 10.70 and 13.57. The current P/E is 61.42 based on 2013 earnings of $0.20 and current stock price of $11.67. However, it might be best to look at P/E based on 2014 earnings which is 11.22. This is based one earnings of $1.04 and a stock price of $11.67. Another thing to point out is the rather low historical P/E Ratios that this company has.

I get a current Graham price of $4.66 and a Price/Graham Price of 2.51, a very high ratio. However, if we use the Graham price for 2012 of $10.46 the P/GP Ratio is a more reasonable 1.12. The P/GP of 1.12 is within a reasonable range, but for a stock to be cheap the ratio would have to be 1.00 or lower.

The 7 year median Price/Book Value per Share Ratio is 1.14 and the current P/B Ratio is over 100% higher at 2.30. The P/B Ratio of 2.30 is not that high, but I would prefer it to be 1.50 or lower.

The Dividend yield is quite good at 5.14% and this shows a rather low stock price. However, it is hard to say where the company will be going on dividends in the future. Will this turn into a dividend growth company? This is rather hard to say at this point.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The most recommendations are in the Hold category, but the consensus recommendation works out to a Buy. The 12 month consensus stock price is $13.70 and this implies a total return of 22.54% with 5.41% from dividends and 17.4% from capital gains.

It is only the dividend yield that suggests that the stock price might be low. If you look on to 2014, the Dividend Payout Ratios do not look bad at 57% for earnings and 35% for cash flow. However, on other measures, the price does not look cheap. I discussed some of this above with my stock tests.

Also, if you look at Price/Sales Ratio it is estimated to be 2.39 in 2013 and 1.62 in 2014. A cheap price would have this Ratio at around 1.00. If you look at the Price/Cash Flow per Share Ratios, this ratio is estimated to be around 14.41 for 2013 and 6.95 for 2014. A good price is when the P/CF is at 5.00 or lower.

The stock price is not cheap and the stock is rather risky. I find it an interesting stock, but not one I would purchase at this time. See my spreadsheet at frc.htm.

This is the second of two parts. The first part was posted on Thursday, September 26, 2013 and is available here.

Canyon Services Group Inc. is a fast-growing company providing hydraulic fracturing and other well-stimulation services, including coiled tubing, acidizing, cementing, nitrogen and CO², to oil and natural gas producers developing a variety of play types across Western Canada. Its web site is here Canyon Services Group.

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.