Tuesday, May 13, 2014

SNC-Lavalin Group Inc. 2

I own this stock of SNC-Lavalin Group Inc. (TSX-SNC, OTC-SNCAF). This stock was one from Mike Higgs' list of dividend growth stocks. I liked the idea of low dividends and high dividend increases. When you are building up a portfolio, low dividends are good for tax reasons. High dividend increases are attractive for the future.

When I look at insider trading, I find $8.3M of insider selling and $0.8M of insider buying with net insider selling of $7.5M. All the buying and selling is by officers of the company. Insiders not only have stock options but also have Restricted Share Units, Deferred Stock Units, and Participation Stock Units.

There are a lot of officers with stock options as the insider trading report has 10 pages covering this. The insider trading report generally some 6 to 8 people covered per page, but usually there are only a couple of pages to cover officers with stock options.

The 5 year low, median and high median Price/Earnings per Share Ratios are 16.06, 20.50 and 24.93. These 5 year P/E Ratios are lower than the 10 year P/E Ratios. The current P/E Ratio is 21.32 based on a stock price of $50.73 and 2014 EPS estimate of $2.38. This stock price test suggests that the stock price is relatively reasonable.

I get a Graham price of $27.21. The 10 year low, median and high median Price/Graham Price Ratios are 1.64, 2.12 and 2.52. The current P/GP Ratio is 1.86 based on a stock price of $50.73. This stock price test suggests that the stock price is relatively reasonable.

The 10 year Price/Book Value per Share Ratio is 4.28. The current P/B Ratio is 3.67 is 14% lower. This P/B Ratio is based on a stock price of $50.73 and a Book Value per Share of $13.83. This stock price test suggests that the stock price is relatively reasonable.

The 5 year median dividend yield 1.65% and the current dividend yield is 1.89% a value some 14% lower. This shows that the current price is relatively reasonable, but towards the cheap end. The historical dividend yield tests show somewhat the same as the historical average dividend yield is 1.61%. The historical median dividend yield is just 1.38% a value 37% lower than the current dividend yield.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold. The consensus recommendation would be a Buy. However, there are a lot of analysts that are giving a recommendation of Hold. The 12 month stock price consensus is $55.80. This implies a total return of 11.89% with 9.99% from capital gains and 1.89% from dividends.

A recent article in the G&M Bertrand Marotte talks about this company having strong growth in earnings on lower revenue in the 1st quarter of 2014. According to Watch List News, Paradigm Capital recently raised the 12 month stock price but kept their Hold rating on this stock. The CEO of SNC-Lavalin talks about the sale AltaLink on BNN. On the Motley Fool Benjamin Sinclair talks about why the shares of SNC-Lavalin recently soared.

I realize that this company does have some current problems; however, I also believe that they will get resolved. I will be holding on to the shares I have. I will not be buying more as I already have sufficient shares in the company. On an historical dividend yield bases the stock price is a good one. See my spreadsheet at snc.htm.

This is the second of two parts. The first part was posted on Monday, May 12, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc.); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is here SNC-Lavalin.

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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