SNC-Lavalin Group Inc. 2

Sound bite for Twitter and StockTwits is: Price is looking relatively cheap. I still see this stock as rather risky. You have to wonder if an expected 10% capital gain over the next year is worth the risk. See my spreadsheet at snc.htm.

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 over the past year, I find $0.2M of insider buying and $0.9M of insider selling with net insider selling at $0.7M. This is 0.01% of the outstanding shares and therefore relatively quite small.

In 2014 the outstanding share were increased by 658,000 or 0.43% for stock options. There is some insider ownership with the CEO owning shares worth around $1.4M and the Chairman owning share worth around $1.4M. This is way under 1% of the outstanding shares and so relatively small. The Caisse de dépôt et placement du Québec is a large shareholder.

The 5 year low, median and high median Price/Earnings per Share Ratios are 16.06, 20.50 and 24.93. The 10 year corresponding ratios are similar at 16.61, 21.62 and 27.63. The current P/E Ratio is 20.99 based on a stock price of $45.33 and 2014 EPS estimate of $2.16. This stock price testing suggests that the stock price is relatively reasonable.

I get a Graham Price of $33.72. The 10 year low, median and high median Price/Graham Price Ratios are 1.56, 2.09 and 2.52. The current P/GP Ratio is 1.34 based on a stock price of $45.33. This stock price testing suggests that the stock price is relatively cheap.

I get a 10 year Price/Book Value per Share Ratio of 4.28. The current P/B Ratio is 1.94 based on a stock price of $45.33 and BVPS of $23.40. The current P/B Ratio is some 55% lower than the 10 year median P/B Ratio. However, I must say that a ratio of 4.28 is a bit high. This stock price testing suggests that the stock price is relatively cheap.

The current Dividend Yield is 2.21%. The 5 year median Dividend Yield is 1.94% a value some 13% lower. Recently because of company problems, the Dividend Yields are getting higher. This stock price testing suggests that the stock price is relatively reasonable.

The historical average Dividend Yield is 1.64% and the historical median Dividend Yield is 1.40%. These Dividend Yields are 35% and 57% lower than the current Dividend Yield of 2.21% and suggests that the stock price is relatively cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendation. Most of the recommendations are a Buy and the consensus would be a Buy. The 12 month stock price consensus is $50.20. This implies a total return of 12.95% with 2.21% from dividends and 10.74% from capital gains.

This Financial Post article by Yadullah Hussain talks about Caisse de dépôt et placement du Québec raising their stake in SNC. It would seem that they own 12% of the shares worth around $820M. This Financial Post article by Damon van der Linde talks about SNC hoping to resolve their legal troubles. Joseph Solitro of the Motley Fool recently gave this stock a good review.

This is the second of two parts. The first part was posted on Thursday, May 14, 2015 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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