Waterfurnace Renewable Energy Inc 2

On my other blog I am today writing the difference between the WiLan and Waterfurnace stocks ...continue...

I do not own this stock of Waterfurnace Renewable Energy Inc. (TSX-WFI, OTC-WFIFF). I started to follow this stock after it was reviewed by The Investment Reporter in early 2009. They thought then that the price was relative high and that it is a risky investment, but was a buy for capital gains and dividend income. I do not think that much has changed.

When I look at insider trading I find that there is some $0.3M of insider buying and $0.8M insider selling with $0.5 net insider selling. The buying was earlier in the year and was at around $16.00. The selling was later and was around $20 to $22. The current price is $21.30. Of course, the thing is you just see the buying and selling but you get no reason why.

I get 5 year Price/Earnings per Share Ratios low, median and high median 16.19, 19.13amd 23.39. The current P/E Ratio is 18.64 based on a stock price of $21.30 and 2013 EPS of $1.14 CDN$ and $1.11 US$. This test shows that price is relatively reasonable and around the median price.

I get a Graham Price of $9.25. The 10 year low, median and high median Price/Graham Price Ratios are 1.92, 2.53 and 3.06. The current P/GP Ratio is 2.30. This stock test shows that the price is relatively reasonable and just below the median price.

The 10 year Price/Book Value per Share Ratio is 8.21 and the current P/B Ratio at 6.40 is only 77% of the 10 year median. This stock test says that the stock price is relatively cheap. The current dividend yield is 4.83% and the 5 year median dividend yield at 3.38% is some 43% lower. On a relative basis, this stock test says that the stock is cheap.

So from the stock testing, we find that on a relative basis the stock price is below the median, so on this basis it is relatively cheap. However, on an absolute basis it is not. P/E ratio of 18.64 is not a low P/E where on an absolute basis a low P/E is 10. The P/B Ratio is not very low at 6.40. On an absolute basis a low P/B Ratio is 1.50 or lower. A P/GP Ratio of 2.30 is a rather high ratio for the P/GP and a ratio at or below 1.00 is what says the stock price is a good one. The only test results that shows a good value is the dividend yield of 4.83%.

When I look at analysts' recommendations I find only two and the recommendations are a Strong Buy and a Buy. The consensus recommendation would be a Strong Buy. The consensus 12 months stock price is $24.44. This implies a total return of 19.58% with 4.83% from dividends and 14.74% from capital gains.

This company's site provides a video that explains how geothermal energy works. See the video here.

See Newswire information on the company's second quarter. The blogger I Divided commented positively on this stock. The site Small Caps US records an interesting interview with Rick Hoffmann, the VP of Administration at WaterFurnace. This company is a pick at the Alternative Energy Stocks site.

There is a lot to like about this stock. It has a strong balance sheet, good ROE, growing revenue, earnings, cash flow and dividends. Investors have been willing to pay a premium for this company. There is some insider ownership running just over 10%.

I think that it is a good dividend growth company, but I do wonder about the price being a bit too high. See my spreadsheet at wfi.htm.

This is the second of two parts. The first part was posted on Tuesday, October 8, 2013 and is available here.

WaterFurnace International, Inc. is a leading manufacturer of residential, commercial, industrial and institutional geothermal and water source heat pumps. Products from WaterFurnace include energy-efficient and environmentally friendly geothermal comfort systems, indoor air quality products and pool heaters. Its web site is here WaterFurnace.

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.