AGT Food and Ingredients Inc.

On my other blog I am today writing about possible cheap dividend stocks for July 2015 continue...

Sound bite for Twitter and StockTwits is: Is risk worth possible gains? I would think that there is a fair amount of risk in this company. Not only have they not done well lately, they have fluctuating earnings and cash flow. On the plus side debt ratios are fine. See my spreadsheet at agt.htm.

I do not own this stock of AGT Food and Ingredients Inc. (TSX-AGT, OTC- AGXXF). I wanted to review all the income trust stocks touted in the 2009 Money Show. There was a lot of talk at this show about some of the Unit Trust being currently good buys with very good yield. This stock converted to a corporation in 2009. Company went public in 2005.

This company did not decrease their dividends, but they changed from a monthly dividend to a quarterly dividend when changing to a corporation. Since going to a corporation, this company has only made two dividend increases and they were in 2011 and 2012. Since then dividends have been flat. Not a great dividend growth stock, if it is even a dividend growth stock.

Management has said that dividends will be paid as determined by the Board of Directors. They also say that Management does not anticipate a reduction of the current dividend in the coming periods. Dividends have only grown at 2% and 2.1% per year over the past 5 and 9 years. According to the Bank of Canada, inflation is running under 2% over the past 2, 5 and 10 years.

Shares have grown at 42% and 6.2% per year over the past 5 and 9 years. If I were a shareholder, I would focus on per share values. Shares have increased due to share issues and stock options. Revenue growth has been good. EPS is non-existent to moderate. Cash Flow growth is low to good.

Revenue has grown at 28.5% and 76.3% per year over the past 5 and 9 years. Revenue per Share has grown at 21% and 24.4% per year over the past 5 and 9 years. Analysts expect Revenue growth of around 11% in 2015. If you look at the 12 month period to the end of 2015 and the 12 month period to the end of the first quarter, Revenue has grown at 5.5%. It is going in the right direction.

EPS has fluctuated a lot since this company went public. They also had two years of losses. EPS is down by 18.9% and up by 7.3% per year over the past 5 and 9 years. It is also worthwhile looking at 5 year running averages because of the big fluctuations in EPS and over the past 5 years, 5 year running averages are down by 29.8%.

Analysts expect growth in EPS to be around 48%. If you look at the 12 month period to the end of 2015 and the 12 month period to the end of the first quarter, EPS is down by 45.8%. It is not going in the right direction.

Cash flow is up by 16.5% and 59.4% per year over the past 5 and 9 years. CFPS is up by 2.3% and 14% per year over the past 5 and 9 years. It is also worthwhile looking at 5 year running averages because of the big fluctuations in Cash Flow and over the past 5 years, 5 year running averages are up by 28.6% for Cash Flow and up by 3.7% for CFPS.

Analysts expect growth in Cash Flow of around 300% in 2015. If you look at the 12 month period to the end of 2015 and the 12 month period to the end of the first quarter, Cash Flow is up by 58%. It is going in the right direction.

Return on Equity was over 10% prior to 2009. Since then it has been under 10%. The ROE for 2014 is just 6.1%. The 5 year median is much lower at 2.5%. The ROE on comprehensive income for 2014 is 6.1%, but the 5 year median is really low at 0.7%. The earnings for 2014 seem to be of good quality, but this would not appear to be the case for other years.

Debt ratios overall are good. The Liquidity Ratio is 1.72. It is important to have a good Liquidity Ratio if earnings fluctuate and 1.72 is a good ratio. The Debt Ratio is 1.54 and this is also a good one. The Leverage and Debt/Equity Ratio are a bit high but fine at 2.88 and 1.88. The 5 year median values are 2.36 and 1.36.

The 5 year low, median and high median Price/Earnings per Share Ratio are 16.81, 23.75 and 30.69. The 10 year corresponding values are much lower at 5.81, 7.70 and 10.57. The current P/E Ratio is 21.12 based on a stock price of $29.99 and 2015 estimate EPS of $1.42. Because P/E Ratios has grown a lot lately, it is hard to make a relative call on this ratio. A P/E Ratio is sort of moderate. Price is not cheap.

I get a Graham Price of 21.15. The 10 years low, median and high median Price/Graham Price Ratios are 0.81, 1.02 and 1.37. The current P/GP Ratio is 1.42 based on a stock price of 29.99. This testing suggests that the stock is relatively expensive.

The 10 year Price/Book Value per Share Ratio is 1.42. The current P/B Ratio is 2.14 based on a stock price of $29.99 and BVPS of $14.00. The current P/B Ratio is some 51% higher than the 10 year ratio and this testing suggests that the stock is relatively expensive.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 months stock price consensus is $33.70. This implies a total return of 14.37% with 2% from dividends and 12.37% from capital gains.

There are some recent analysts' comments at Dakota Financial News. Joseph Solitro of Motley Fool feels positive amount this stock. I do wonder about it being good value because the 5 year average price to earnings is 36.2 and the P/E is much lower today. I think that a P/E Ratio of 36.2 is very high for this sort of stock.

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.

AGT Food and Ingredients is one of the largest suppliers of value-added pulses, staple foods and food ingredients in the world. They buy lentils, peas, beans and chickpeas from farmers around their 34 facilities located in the best pulse growing regions in Canada, the United States, Turkey, Australia, China and South Africa and ship their products to over 100 countries around the globe. Its web site is here AGT Foods.

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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