Wednesday, February 12, 2014

Nordion Inc.

On my other blog I am today writing about possible stocks to buy continue...

I do not own this stock of Nordion Inc. (TSX-NDN, NYSE-NDZ), but I used to. I bought this stock in 1996, 1997 and 1998. At that time it was a good dividend stock and it gave me exposure to the Health section. I sold in 2006 as the stock seemed to be going nowhere at that time. The company has also changed its name since I held it. It used to be called MDS Inc. (TSX-MDS).

The stock has not done very well since I sold it in 2006. It has cut its dividend to zero. The dividend was revived in 2011, but then dropped again in 2013.

The share price hit a low in 2012. Over the past 5 years, investors have made some money with the total return at 6.50% per year with 1.36% per year from dividends and 5.13% per year from capital gains. However, over the past 10 years investors would have lost money with total loss at 3.98% per year and capital loss at 4.62% per year and dividends at 0.64% per year.

Shares have been declining over the past 5 and 10 years, with shares down by 12.4% and 7.9% over these periods. This stock reports in US$, but no matter how you look at the figures, the revenues and cash flows have been declining. However, there is some growth in earnings. Because shares are declining, the "per share" figures might look better than they really should.

For example, the revenue is down by 29.3% and 15.6% per year over the past 5 and 10 years in US$. However, Revenue per Share is down by 19.3% and 8.3% per year in US$ over the past 5 and 10 years.

Since the company had earnings losses in 2008 to 2010 inclusive, I do not have 5 year growth figures for earnings. I only have 2 year growth and it looks very good at some 283% per year, but this growth is from a very low level. Over the past 10 years EPS has grown at 31% per year. However, net income is only up 20% per year. There has been reorganization going over the years, so earnings seem to pop up to a higher level in 2008. (By the same token, revenues dropped a lot in 2009.)

Because of the decrease in the number of shares, the Cash Flow per Share looks better than Cash Flow. Cash Flow over the past 4 and 10 years is down by 24.7% and 11% per year. CFPS is down by 11% and 3.4% per year over the past 4 and 10 years. These figures are in US$. I am using 4 years for the second value as 5 years ago, there was negative cash flow.

The one good thing to say about the company is the debt ratios. The Liquidity Ratio for 2013 is 4.96 and the Debt Ratio is 3.92. The current Leverage and Debt/Equity Ratios are also quite good at 1.34 and 0.34, respectively.

The site Ticket Report talks about a recent analyst upgrade on this stock by The Street Ratings and the reasons for this.

It is difficult to get a fix on the P/E Ratios as there were recent earnings losses in 2008 to 2010 inclusive. However, getting rid of the attached P/E Ratios, I get 10 year low, median and high median P/E Ratios of 18.07, 20.52 and 22.97. The current P/E Ratio is 14.86 based on a stock price of $10.52 and EPS of $0.71 CND$ for 2014. This test points to a current cheap stock price.

The 10 year median Price/Book Value per Share Ratio is 1.65. The current P/B Ratio is 1.36 a value that is some 82% of the 10 year median and points to a reasonable stock price. For the stock price to be cheap, the P/B Ratio would need to be 80% of the 10 year median P/B Ratio. It is getting close.

When I look at analysts' recommendations, I find Strong Buy, Hold and Sell recommendations. The consensus would be a Hold recommendation. The 12 month stock price consensus is $10.50 and this is just below where the stock price is today at $10.52.

This is not a stock I would consider buying. First it has no dividend and secondly, it is certainly not a stock you can buy and forget about. See my spreadsheet at ndn.htm.

Nordion Inc. is a global life sciences company that provides products and services for the development of drugs and diagnosis and treatment of disease. The company is a provider of pharmaceutical contract research, medical isotopes for molecular imaging, radiotherapeutics, and analytical instruments. Its web site is here Nordion.

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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