Wednesday, October 29, 2014

Pason Systems Inc. 2

On my other blog I am today writing about the presentation at the World Money Show in Toronto by Pat Bolland.

I do not own this stock of Pason Systems Inc. (TSX-PSI, OTC-PSYTF). I read a report on this stock in the Buy and Sell Advisor in September 2013. I had not heard of this dividend growth company before so I decided to investigate it.

When I look at insider trading I find $12.9M of net insider selling. This is just 0.58% of market cap and therefore reasonable. The main insider ownership is by James Douglas Hill who is the founder and chairman and he owns shares worth around $287M.

The 5 year low, median and high median Price/Earnings per Share Ratios are 23.89, 28.59 and 33.30. These are higher than the 10 year corresponding values of 15.11, 19.36 and 23.95. The current P/E Ratio is 19.26. This is based on a stock price of $29.96 and 2014 EPS estimate of $1.40. This stock price test suggests that the stock price is relatively reasonable.

I get a Graham price of $12.34. The 10 year low, median and high median Price/Graham Price Ratios are 1.62, 2.05 and 2.51. The current P/GP Ratio is 2.19. This stock price test suggests that the stock price is relatively reasonable. However, on an absolute basis a P/GP Ratio of 2.19 is a rather high one.

The 10 year Price/Book Value per Share Ratio is 3.76. The current P/B Ratio is 5.58 based on a stock price of $26.96 and BVPS of $4.83. The current P/B Ratio is some 48% higher than the 10 year median P/B Ratio. This stock price test suggests that the stock price is relatively expensive. Also the current P/B Ratio of 5.58 is rather high.

The 5 year median Dividend Yield is 2.50% and the current Dividend Yield at 2.52 is 1%. The historical average Dividend Yield and the historical median Dividend yield are at 1.88% and 1.35%, both of which is lower than the current Dividend yield of 2.52%. These stock price tests suggest that the stock price is relatively reasonable to cheap.

As often happens when a stock starts to pay dividends, the dividends are increased a lot at first and the dividend yield rises. This stock started out with a dividend yield around 0.77%. The current dividend yield is 2.52%. Knowing this suggests you should be a bit cautious about dividend yield testing.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price consensus is $36.40. This implies a total return of $37.54% with 35.01% from capital gains and 2.52% from dividends.

There is a recent article on Forbes to say that this stock has gone into oversold territory. (Oversold is a way to say a stock is relatively cheap.) The dividend blogger talks about Pason Systems being a true Canadian Dividend Achiever.

Sound bit for Twitter and StockTwits is: Price is probably reasonable. See my spreadsheet at psi.htm.

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

Pason is the leading global provider of specialized data management systems for drilling rigs. Their solutions, which include data acquisition, well-site reporting, remote communications, and web-based information management, enable collaboration between the rig and the office. Its web site is here Pason Systems.

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.

No comments:

Post a Comment