WSP Global Inc. 2

On my other blog I am today writing about way I like dividend growth stocks continue...

Sound bite for Twitter and StockTwits is: Stock price is reasonable to expensive. One thing is certain and that is that this stock is not cheap. See my spreadsheet at wsp.htm.

I own this stock of WSP Global Inc. (TSX-WSP, OTC- WSPOF). In Sept 2011 I rationalized my portfolio. I sold stocks that did not make it into my core and bought stocks that could of the same type. In this case selling Stantec and buying Genivar. In October 2011 I wanted to sell Enerflex because it is not a company I bought but a distribution from Toromont. I bought more Genivar, now called WSP Global.

Over the past year there was only some insider buying at $0.8M. Buying was at 0.02% of the market cap of this stock. Outstanding shares were not increased in 2014 for stock options. The company does have stock options and they can be exercised for cash or stock.

There is some insider ownership. The CEO has shares worth $30.9M and 1% of the outstanding shares. The CFO has shares worth $0.4M. The chairman has shares worth $0.8M.

The 5 year low, median and high median Price/Earnings per Share Ratios are 14.70, 18.61 and 22.91. The corresponding 9 year ratios are fairly close at 14.32, 16.30 and 21.77. The current P/E Ratio is 21.11 based on a stock price of $43.27 and 2015 EPS estimates of $2.05. This stock price test suggests that the stock price is relatively reasonable.

However, I do wonder about the P/E Ratio test. If they go get an EPS of $2.05 for 2015 it will be the highest EPS ever. The first quarterly report did not point this way because EPS was down. In the first quarter of 2014 EPS was $0.33 and for the first quarter of 2015 it was $0.32. This is not much difference but it does not point to the EPS going in the preferred or expected direction.

I get a Graham price of $34.12. The 9 year low, median and high median Price/Graham Price Ratios are 0.81, 1.07 and 1.32. The current P/GP Ratio is 1.27 based on a stock price of $43.27. This stock price test suggests that the stock price is relatively reasonable.

I get a 9 year median Price/Book Value per Share Ratio of 1.58. The current P/B Ratio is 1.71 based on a BVPS of $25.24 and a stock price of $43.27. The current P/B Ratio is just 8.6% higher than the 9 year median ratio. This stock price test suggests that the stock price is relatively reasonable.

I cannot do any historical dividend yield testing as this stock used to be an Income Trust. But looking at the 5 year median dividend yield which is 5.8% and the current one of 3.5% suggest that the stock price might be high. It was expected that old Income Trust companies would end up with dividend yields between 4 and 5% and is lower than this range. Part of this problem is that dividends have been flat for 6 years. The current dividend yield is some 41% lower than the 5 year median dividend yield. This stock price test suggests that the stock price is relatively expensive.

Doing a Price/Cash Flow per Share test is also showing stock price maybe expensive. The 9 year median P/CF Ratio 7.39. The current P/CF Ratio is 13.03, a value some 76% higher. The current P/CF Ratio is based on 2015 CFPS estimate of $3.32. This estimate is some 30% higher than the current CFPS. However, the CFPS was up strongly in the first quarter of 2015. In any event though, this stock price test suggests that the stock price is relatively expensive.

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 would be a buy. The 12 month stock price consensus is $47.90. This implies a total return of 14.17% with 10.70% from capital gains and 3.47% from dividends based on a stock price of $43.27.

This Financial Post article by Damon van der Linde talks about this company becoming a global consulting giant. This article in Sleek Money talks about analysts recommendation changes for WSP Global. The Stock Chase Site shows recent comments by analysts about this stock. The Dividend Guy has a fairly recent and interesting report on this stock.

This is the second of two parts. The first part was posted on Friday, June 05, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

WSP Global Inc. is an engineering services firm providing private and public-sector clients with a complete range of professional consulting services throughout all project phases, including planning, design, construction and maintenance. WSP now has global coverage. Its web site is here WSP 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.

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