Friday, November 14, 2014

Chesswood Group Ltd.

On my other blog I am today writing about the presentation at the World Money Show in Toronto by Money Saver Magazine with David Stanley.

I do not own this stock of Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF). A reader wrote me in 2012 that he was researching and found a company that he hoped I could give me a brief outlook on. He said that the company is Chesswood Group and they are basically a financial leasing company. From 2009 to 2012 they increased their dividends from 2.5 cents to 5.5 cents per month. This is a 120% increase.

Dividends are now at 65 cents, an increase of 8.3% for 2014. The dividend growth over the past 5 years is at 5.2% per year. The dividends are down by 2.3% per year over the past 7 years. The low growth and lower dividends can be explained because this stock used to be an income trust company. When it became a corporation it decreased the dividends by some 74%.

If you look at dividend increases since they start to increase them again in 2009, dividends are up by 21.8% per year. I wonder about this dividend growth being sustainable. Earnings are growing, but revenue and cash flow are not. The current dividend yield is very good at 5.42%.

The Dividend Payout Ratio is for 2013 is at 80% and 24.1% for EPS and CFPS. The DPR for EPS is expected to be about 72% for 2014. There is not many analysts following this stock and there are noestimates for CF.

The outstanding shares have increased by 6.9% and 4.9% per year over the past 5 and 7 years. Revenue is not growing much and Revenue per Share is down. Earnings have growing very well, but cash flow has not. Without future revenue growth, EPS cannot grow. Revenue is expected to go down by 11% for 2014, but then go up 15% in 2014. This means it is expected to growth 2.7% from 2013 to 2014.

The Revenue has grown at 2.5% and 6.7% per year over the past 5 and 10 years. Revenue per Share is down by 4.2% and up by 2.5% per year over the past 5 and 7 years. Earnings per Share have grown well and EPS is up by 25% and 5% per year over the past 4 and 7 years. I use the last 4 years EPS growth because 5 years ago the EPS was negative.

Cash flow is down by 3.8% and up by 1.9% per year over the past 5 and 7 years. CFPS is down by 10% and 2.8% per year over the past 5 and 7 years.

The Liquidity Ratio is high, but the Debt Ratio is a bit low and the Leverage and Debt/Equity Ratios are a bit high. The Liquidity Ratio for 2013 is 13.15. They have very little current debt. The Debt Ratio is 1.46. The Leverage and Debt/Equity Ratios are 3.18 and 2.18. Generally speaking, Leverage and Debt/Equity Ratios are usually high for financial companies.

The 5 year low, median and high median Price/Earnings per Share are at 8.05, 10.03 and 12.01. The corresponding 7 year values are a bit lower. The current P/E Ratio is 14.54 based on a stock price of $14.43 and 2014 EPS estimate of $1.08. This stock price test suggests that the stock price is relatively expensive. However, a P/E Ratio of 14.54 is not a high one.

The 10 year Price/Book Value per Share Ratio is 0.99. The current P/B Ratio of 2.28 is some 130% higher. This stock price test suggests that the stock price is relatively expensive.

One thing I should mention that I did not like was in 2011 this company did a 1 to 100 consolidation and then a 100 to 1 split. The sole purpose of this seemed to be to get rid of small shareholders. This is not a positive sign for small investors.

Sound bit for Twitter and StockTwits is: Dividend Growth Stock, with problems. See my spreadsheet at chw.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.

Chesswood Group Limited is a financial services company operating primarily in the specialty finance industry. Chesswood's approach is to acquire financial services businesses. It owns Pawnee Leasing Corporation, located in Fort Collins, Colorado, is Chesswood's largest operating company. Pawnee's assets comprise approximately 75% of Chesswood's consolidated assets. Chesswood owns of one of the larger Acura dealers in Canada, Acura Sherway, in addition to Canada's only eDealer, Its web site is here Chesswood Group.

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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