Thursday, July 17, 2014

Atlantic Power Corp.

I do not own this stock of Atlantic Power Corp. (TSX-ATP, NYSE-AT). Because I like utility companies and in 2010, I have read two columns that recommended this particular utility company (TSX-ATP), I decided to investigate it. This company is in the TSX Utility Index and this is perhaps this is why it is recommended?

This stock was an issued on the TSX as an income trust in 2004. However in 2009, it changed its structure to a corporation. Dividends were increased until 2012. In 2013, dividends were decreased by 65% after the company had 4 years of losses. The financial year of 2013 also resulted in a loss. A number of analysts believe that the dividends will be cut again in 2014.

For Dividend Payout Ratios, we can only look at them from a cash flow per share perspective because this company is has negative EPS. The 5 year median PDR for CFPS is 90%. The DPR for CFPS for 2013 was 63%.

I know that some analysts are still looking at DPR in regards to Distributable Cash and Adjusted Funds from Operations (AFFO). For Distributable Cash the 2013 DPR is 53%. For AFFO, the DPR is 60.7%. Some analysts are quoting AFFO for 2014 and they expect it to be around a negative $0.05. I do not like using these measurements as this company is no longer an income trust. Even at that, there would seem to be no analyst that thinks this company can cover distributions in 2014.

Outstanding shares have increased by 14.5% and 14.1% per year over the past 5 and 10 years. Shares have increased due to Share Issues, Stock Options and DRIP. Growth is good in Revenue, but not in Revenue per Share over the past 5 years. Growth is good for cash flow over the past 10 years, but not over the past 5 years. This is the same pattern for growth cash flow per share. There is no growth in earnings as earnings have been negative for the last 5 years.

The Revenue has grown at 11% and 46% per year over the past 5 and 10 years. Revenue per Share has declined at 3.5% and grown at 28% per year over the past 5 and 10 years. Cash Flow has grown at 2% and 40% per year over the past 5 and 10 years. CFPS has declined by 11% and grown by 22% per year over the past 5 and 10 years. These figures are in US$ as the company reports in US$.

The debt ratios are fine. The Liquidity Ratio for 2013 is 0.96. If you include cash flow after dividends, this ratio is 1.18. There is the current portion of the long term debt included in the Liquidity Ratio and if this is subtracted for 2013, the ratio is 2.16. The Debt Ratio for 2013 is 1.48. The Leverage and Debt/Equity Ratios for 2013 are 2.91 and 1.97, respectively.

As far as testing the current stock price, I cannot use the Price/Earnings per Share Ratios as the company has no profits. This is the same reason I cannot use the Graham Price. If you look at Price/Book Value per Share, the 10 year median value is 2.15 and the current P/B Ratio is some 61% lower at 0.85. This stock test says that the stock price is relatively cheap. On an absolute basis, a P/B Ratio of 0.85 is very low and shows a cheap price.

The Price/Cash Flow per Share 10 year median ratio is 9.61. The current P/CF Ratio is 5.31 a value some 45% lower. This stock test says that the stock price is relatively cheap. On an absolute basis, a P/CF Ratio of 5.31 is low and shows a cheap price.

The 10 year median Price/Revenue per Share or P/S Ratio is 2.68 and the current P/S Ratio is 0.87 a value 68% lower. This stock test says that the stock price is relatively cheap. On an absolute basis, a P/S Ratio of 0.85 is very low and shows a cheap price.

When I look at the analysts' recommendations, I find Buy, Hold, Underperform and Sell recommendations. The consensus recommendation is Underperform. The 12 month stock price consensus is $3.53. This implies a total loss of 6.21%. The capital loss would be 15.75% and the dividends are at 9.55%. However, I do not think you can count on getting the dividends, so loss could be larger.

The Investing Daily site has put out an article on this company called "Atlantic Power Dividend in Jeopardy Again". It is dated November 2013, but I do not think things have changed much. The site Mideast Time talks about analysts' ratings on Atlantic Power. The loss for the first quarter at $0.16 and lower than the analysts' consensus loss of $0.25.

Sound bit for Twitter and StockTwits is: company is struggling but possibly cheap. See my spreadsheet at atp.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

Atlantic Power Corporation is an independent power producer that owns interests in a diversified fleet of power generation and transmission projects located in the United States. This company has a collection of gas-fired plants in the US and is generally in the lower cost quadrant of generation in its region. ATP owns interests in a diversified portfolio of independent, non-utility power generation projects and one transmission line situated in major U.S. markets. Its web site is here Atlantic Power.

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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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