Thursday, June 25, 2015

Canexus Corporation

Sound bite for Twitter and StockTwits is: Cheap, but not doing well. I do not like the debt ratios. When debt ratios are not good, a company can be vulnerable. They have an updated business plan and their credits have bought into it. This is a good sign. See my spreadsheet at cus.htm.

I do not own this stock of Canexus Corporation (TSX-CUS, OTC- CXUSF). I started to follow this stock in 2012 after reading that it was part of Sentry Small/Mid Cap Income Fund. It is a small cap that pays good dividends. See stocks in this fund on G&M. Sentry home site is here. This stock was also mentioned by Michael Decter in May of 2012. Michael Decter is president and CEO of LDIC Inc.

This stock started out as an income trust with a very high yield of around 11.3%. They lowered the dividend in 2008 and then kept it flat until 2014 when dividend was decreased by some 93%. The current dividend yield is just 2.61%. They really had no choice about decreasing the dividends as they were not covering the dividend by their earnings. In 2014 EPS was negative and they could not even cover the dividend with cash flow.

In 2015 analysts expect EPS is be again negative, but with positive earnings in 2016. In 2015, analysts do expect dividends to be covered by cash flow. In fact some analysts expect the EPS in 2016 to cover earnings and also expect that the company will raise the dividends in 2016.

With current stock price at $1.53, the total return over the past 5 and 10 years has been a loss of 15.73% and 3.49% per year. The portion attributable to capital loss is at 26.37% and 16.00% per year. The portion attributable to dividends is at 10.64% and 12.52% per year.

Of course you try to make money when you invest. However, another thing that you should also try to do is limit your losses. Dividends help to do this. If you invested in the company at the start at $10.00 you would have recovered some 58% of your purchase price in dividends.

Outstanding shares have grown at 40% and 20% per year over the past 5 and 10 years. Revenues have grown at a moderate rate and cash flows have grown at a good rate. However, there is a decline Revenue per Share and CFPS has some growth. There has been no growth in EPS as they are now negative.

Revenue is up by 4.5% and 4.1% per year over the past 5 and 9 years. Revenue per Share is down by 25.6% and 14.4% per year over the past 5 and 9 years. Analysts do expect very modest growth in Revenues for 2015 of around 1.6%. If you compare the Revenue for the 12 months to the end of 2014 and for the 12 months to the end of the first quarter, Revenue is up by 1.7%.

Cash Flow is up by 37% and 28.5% per year over the past 5 and 9 years. CFPS is down by 2.4% and up by 5.7% per year over the past 5 and 9 years. Analysts do expect growth in Cash Flow for 2015. However, if you compare the 12 months to the end of 2014 and for the 12 months to the end of the first quarter, Cash Flow is down by 35%.

Another thing is that the debt ratios are no good. The Liquidity Ratio is 0.84. This means that the current assets cannot cover the current liabilities. If you subtract current long term debt from current debt, the Ratio becomes 1.35. A good Liquidity Ratios start at 1.50. The Debt Ratio is low at 1.20. Good Debt Ratios start at 1.50. Leverage and Debt/Equity Ratios are high at 6.07 and 5.07. Good Leverage and Debt/Equity Ratios are under 2.00 and 1.00.

There is little to do stock price testing with. With negative EPS expected in 2015, you cannot do price testing with EPS. Using Book Value for testing says that the stock is way overpriced. Dividend yields are a fraction of what they used to be and so imply the stock is way overprice.

I get a Graham Price of $1.11. The 10 year Price/Graham Price Ratios are 1.30, 1.52 and 1.83. The current P/GP Ratio is 1.38. This testing would suggest that the stock price is relatively reasonably. I wonder how good this testing is as it is rather hard to really get a good fix on the Graham Price.

The 10 year Price/Cash Flow per Share Ratio is 9.13. If I use the 12 month to the end of the first quarter CFPS, I get a P/CF Ratio of 5.80, a value some 36.5% lower than the 10 year P/CF Ratio. This stock price testing suggests that the stock price is relatively cheap.

The 10 year P/S Ratio is 0.66 and the current P/S Ratio of 0.49 is some 25.6% lower. The current P/S Ratio is based on 2015 Revenues of $580.00. This stock price testing suggests that the stock price is relatively cheap. On an absolute basis, a P/S Ratio of less than 1.00 suggests the stock is priced cheaply.

When I look at analysts' recommendations I find a Buy recommendation and lots of Hold recommendations. The consensus recommendations would be a Hold. The 12 month stock price consensus is $1.94. This implies a total return of 29.41% with 2.61% from dividends and 26.80% from capital gains.

This site of Dakota Financial News talks about recent analysts ratings of which most are Holds. Lou Schizas' technical analysis of Canexus in the Globe and Mail shows this stock in deep decline. In March 2015 Canexus announced a Business Improvement Plan.

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.

Canexus Corporation is engaged in the production of sodium chlorate and chlor-alkali products, and operates a hydrocarbon terminal. They have four plants in Canada and two at one site in Brazil. Its web site is here Canexus.

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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