Tuesday, November 12, 2013

Innergex Renewable Energy 2

I am putting up on my other blog my notes from the World Money Show 2013 in Toronto. I will put up these notes as I transcribe them here.

I do not own this stock Innergex Renewable Energy (TSX-INE, OTC-INGXF). In 2006 I bought Innergex Power on buy rating and favorable report from TD although it has only been going from 2003. In 2008 I sold Innergex as I did not think that it is a stock I want to hold as dividend increased less than the rate of inflation.

Over the past year there has been $0.2M of insider buying and no insider selling. Caisse de dépôt et placement du Québec owns just under 11% of this company. Insiders own shares in this company. For example the CEO has shares worth $5.6M and the CFO has shares worth $1.1M. A number of officers also own shares.

You cannot look at relative Price/Earnings Ratios on this stock because the last 3 years the company had negative earnings. The current P/E Ratio at 23.15 is rather high for a utility company. The current stock price is $9.26 and the 2013 earnings estimate is $0.40. The estimate would appear reasonable as the 12 month EPS to September 30, 2013 for this stock is $0.39. Certainly earnings are going in the right direction.

I get a Graham Price of $6.63 and the 10 year low, median and high median Price/Graham Price Ratios are 1.14, 1.32 and 1.51. The current P/GP Ratio is 1.40. This shows that the stock price is relatively high. Also, 1.40 is a high P/GP Ratio for a utility company on an absolute basis.

The 10 year Price/Book Value per Share Ratio is 1.55 and the current P/B Ratio is 1.90, a value some 23% higher. This current P/B Ratio suggests that the stock price is relatively high.

Generally for old Income Trust stocks, I do not use the Dividend Yield stock price test. This is because for a lot of income trusts, including this one, dividends were cut when the company became a corporation. However, for this stock, the 5 year median dividend yield is 7.4% and the current is some 15% lower at 6.26%. Generally a high stock price is when the current dividend yield is more than 20% higher than the 5 year median. However, this also shows that the stock price is relatively on the high side.

The analysts' recommendations are Strong Buy, Buy and Hold. The consensus recommendation would be a Buy. (This sort of recommendation covers most of the stock on the TSX and therefore is extremely common.) The 12 months stock consensus stock price is $10.50 and this implies total returns of 19.65%, with 6.26% from dividends and 13.39% from capital gains.

The Stockhouse news site talks about the good third quarterly results for this company. A Globe and Mail article talks about Canada's independent power companies having a dismal year in 2013 because of the expectations that interest rates are on the rise. The site Ticker Report talks about Scotiabank raising the 12 month stock price on this stock with a sector perform rating. It also talks about BMO changing their rating from outperform to market perform. (Both sector perform and market perform is a buy rating and outperform is a strong buy rating. See my blog for more information on analyst ratings.)

I still like companies I invest in to be earning money. This stock has had too many years of losses recently and two quarters of profit does not convince me the company can earn money. Not only do I want a company earning money, but I would like their earnings to cover their dividends with a proper Dividend Payout Ratio. See my spreadsheet at ine.htm.

This is the second of two parts. The first part was posted on Monday, October 11, 2013 and is available here.

Innergex is involved in Canada's renewable energy industry. The Company develops, owns and operates facilities located in North America, leveraging run-of-river hydroelectric power generating facilities, wind farms and photovoltaic solar parks. Its web site is here Innergex.

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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