On my other blog I am today writing about growing dividend income, spreadsheet versus actual. continue...
Sound bite for Twitter and StockTwits is: Cannot make money. No matter what my stock testing shows, I do not like companies that cannot make money. See my spreadsheet at atp.htm.
I do not own this stock of Atlantic Power Corp. (TSX-ATP, NYSE-AT). Because I like utility companies and in 2010, I have read two columns that recommended this particular utility company (TSX-ATP), I decided to investigate it. This company has converted from an income trust to a corporation.
My first impression when updating my spreadsheet recently was that this company does not seem to know how to make a profit. Personally, I prefer companies that can make a profit. It is in only one year in the past 11 years has this company made a profit. Analysts also do not expect this to happen again anytime in the near future.
They, of course, cannot cover their distributions with earnings. As far as I can see their distributable income for 2014 was negative. The Adjusted Funds from Operations was positive, but could not cover distribution either. The Payout Ratio for AFFO was 115%.
This is probably why the company changed their distributions from monthly to quarterly and dropped then some 70%. Distributions are down by 21% and 12% per year over the past 5 and 9 years.
Stock prices have not done well either. The total return is negative over the past 5 years at 19.6% per year and positive over the past 10 years at 2.07% per year. The capital loss over the past 5 and 10 years is at 26.74% and 11.40% per year. The portion of the total return attributable to dividends is at 7.09% and 13.47% per year over the past 5 and 10 years.
The outstanding shares have increased by 15% and 12.7% per year over the past 5 and 10 years. Shares have increased due to Share Issues, Stock Options and DRIP. This company reports in US$ and using US GAAP, so most of what I talk about in revenue, earnings and cash flow will be using US$. Revenue growth is moderate to good. There is no growth in AFFO, FFO or earnings. In fact earnings are growing worse. Growth in cash flow is non-existent to good.
Revenue has grown at 20% and 41% per year over the past 5 and 10 years. Revenue per share has grown at 4.4% and 25% per year over the past 5 and 10 years. Analysts expect no growth in 2015 or 2016.
With earnings most analysts refer to AFFO and I only have AFFO figures for 3 years and AFFO is down by 37% over the past 3 years.
Cash Flow is up by 14.7% and 31.8% per year over the past 5 and 10 years. Cash Flow down by 0.3% and up by 16.98% per year over the past 5 and 10 years. Because Cash Flow has fluctuated a lot it is interesting to look at 5 year running averages. Over the past 5 years, 5 year running averages for cash flow per share is down by 2.7% per year.
Debt ratios are decent. The Liquidity Ratio is good in 2014 at 1.82. The Debt Ratio is a little low in 2014 at 1.39 and I would prefer this to be at least 1.50. The Leverage and Debt/Equity Ratios for 2014 are 3.08 and 2.22, respectively. I would prefer them to be lower.
There are many ways to determine if stock price is reasonable and most I cannot apply, such as P/E Ratios, Price/Graham Price Ratios (because Graham Price is undeterminable) and dividend yield (because dividends have recently dropped 70%).
I can look at AFFO, but I only have four years of data. The median Price/AFFO Ratio over the past 4 years is 11.49 and the current P/AFFO Ratio is 19.78 based on 2015 AFFO estimate of $0.12 US$ or $0.16 CDN$ and a CDN$ stock price of $3.10. The current P/AFFO Ratio is some 74% higher than the 4 year median P/AFFO Ratio. This stock price testing suggests that the stock price is expensive.
The 10 year Price/Book Value per Share Ratio is 2.10. The current P/B Ratio is 0.86 based on BVPS of $3.61 CDN$ and stock price of $3.10 CDN$. This stock price test suggests that the stock price is cheap. On an absolute basis, a P/B Ratio less than 1.00 says a stock is cheap. You are purchasing a stock for less than its breakup value. Also, this stock has $1.08 CDN$ in cash for each shares.
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.
Atlantic Power Corporation is an independent power producer that owns interests in a diversified fleet of power generation and transmission projects located in the United States. This company has a collection of gas-fired plants in the US and is generally in the lower cost quadrant of generation in its region. ATP owns interests in a diversified portfolio of independent, non-utility power generation projects and one transmission line situated in major U.S. markets. Its web site is here Atlantic Power.
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.
Very poor quality report......
ReplyDeleteYour comment leaves me with the impression you are invested in this stock. I always get such comments when some one is invested in a stock that I give a negative review on.
ReplyDeleteVery poor quality means you haven't mentioned non-recurring items as same, you say they can't make money, and yet fail to mention they would be, if they didn't have to suffer a one time, non-recurring item, from time to time. Yeah, I'd say that was a material mistake on your part. You sound like the 2 or 3 other analysts who work for the short side of the street, and often are so far off the real performance of the company, only to be never held accountable. Just study Whispers.com, and see how long these guys have been wrong, and by how much. Thier reports are laughable, rather look at their firm's trading desk, and thier short positions. What's your excuse?
ReplyDeleteOne profitable year in the last 11 and you say that they "suffer a one time, non-recurring item, from time to time". Really??
ReplyDelete11 years, really????? I've owned this for 2 years, bought it after the first dividend cut, after doing research which suggested buying utility stocks, AFTER dividend cuts had been a successful historical pastime. That is until, dividend cut number 2. But, that being said, they out-performed in 7 out of those 8 quarters, and by more than a little bit. If you look at the nearly $1.00 a share ingood-will they wrote off last year, not counting the one-time refi fees with Goldman Sachs, and redemption fee charges, then yeah, they are kickin ass, where does your report discuss this? How does your report discuss selling the Windmills for over $700mm in total, reducing debt in half, while keeping about 70% of the cash flow? Where is the insider buying discussion, where are the successful conclusions to the lawsuits? Where is the future cash flow predictions, pro-forma, you are writing about this company through the rear-view mirror. And you put yourself forward as fair minded, third party source of info, then why don't you discuss the short side of he street? The market makers who make money every penny this stock goes down have this agenda, do you?
ReplyDeleteAw, another rant, you poor thing. Have you convinced yourself yet that ATP is a good investment? Let us face it you read the first line of my post and flew into a rage.
ReplyDeleteDid you see my comment on future earnings that no analysts expect positive earnings to happen again anytime in the near future? Of course you didn’t, you did not read my post. Also even AFFO (with dividends) are dropping like a stone.
I have invested in companies that cut their dividends and were unduly punished by the market. BTW, this is not the case here.
Me, I am just an old fashion investor. That is I want to make money investing. What is my Agenda? I just want to have some fun. And how are you putting yourself forward, as a jerk? What is your agenda? You want to convince others to buy ATP because you are currently losing on this stock?
If you do not like the way I blog can I suggest that you do your own blog or read someone that agrees with you. It might cool your rage.