AltaGas Ltd 2

On my other blog I am today writing about Charities and Coercion continue...

I own this stock of AltaGas Ltd (TSX-ALA, OTC-ATGFF). When I bought this stock in 2009 it was on many dividend growth stock lists. In 2009, I saw that this stock also had good growth in Revenues, Earnings, Dividends, and Stock Prices over the last 5 and 10 years. The stock had a fairly strong balance sheet. I took a small position in this stock, and planned to wait and see how things go with this stock before buying more. I bought more in 2010 and 2012.

The insider trading report says that there was some $6.3M of insider selling over the past year and no insider buying. Insider selling was by CEO, CFO, Officers and Directors. Not only do insiders have stock options, but they have other sorts of stock option like vehicles called Rights Performance Units, Rights Restricted Units and Subscription Rights.

In 2013, outstanding shares were increased by 806,093 shares with a book value of $18.9M. This number of shares would be worth $32.9M at the end of 2013. This number of shares is less than 1% of the outstanding shares at the end of 2013.

There is insider ownership with the biggest being for the CEO and Chairman of the Board who has shares worth around $55.5M. The CFO has shares worth around 1.2M and an officer has shares worth around 1.5M.

The 5 year low, median and high median Price/Earnings per Share Ratios are 21.83, 24.33 and 26.82. The current P/E Ratio is 26.15 based on a stock price of $44.98 and 2014 earnings estimate of $1.72. This stock price test suggests that the stock price is within a reasonable range, although towards to high end of that range.

I get a Graham price of $26.40. The 10 year low, median and high median Price/Graham price Ratios are 1.10, 1.27 and 1.46. The current P/GP Ratio is 1.70. This stock price test suggests that the stock price is high.

I get a 10 year Price/Book Value per Share Ratio of 2.07. The current P/B Ratio is 2.50 a value some 20% higher and based on a Book Value per Share of $18.00 and a stock price of $44.98. This stock price test suggests that the stock price is high.

I do not think that doing a stock price test on dividend yield would be a valid one as dividend yields moved considerably higher when this company became an income trust and now have moved lower because it is a corporation.

If you look at the 10 year Price/CFPS Ratio, it is 9.45. The current P/CF Ratio is 11.25 based on 2014 estimates of CFPS of $4.00 and a stock price of $44.98. The current P/CF Ratio is some 19% above the 10 year median P/CF Ratio. This stock price test suggests that the stock price is at the very top of the reasonable stock price range.

The only test to suggest that the stock price might be reasonable is the Price/Sales Ratios. The 10 year P/S Ratio is 1.13 and the current P/S Ratio is 1.17 based on current outstanding shares and 2014 sales estimates of $3,038.5M. These ratios are close and therefore this stock price test suggests that the stock price is reasonable.

When I look at analysts' recommendations I find Buy and Hold recommendations and the consensus recommendation is a Buy. The 12 months consensus stock price is $45.00. This implies a total return of $3.45% with 3.40% from dividends and .04% from capital gains.

There is an interesting article in the Calgary Herald that talks about how this company went from zero to an $8B company in 20 years. There is a recent article at Market Watch that talks about the good year this company had in 2013. There is al an article in the Chronicle Herald which talks about work being started on the long-anticipated Alton natural gas storage project in Colchester County beginning in 2014.

It would seem like this stock is currently probably in the overbought category. I will keep my stock as I do not sell just because a stock gets overpriced. However, now may just not be the right time to buy. See my spreadsheet at ala.htm.

This is the second of two parts. The first part was posted on Thursday, March 27, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is here AltaGas.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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