Thursday, August 20, 2015

EnerCare Inc.

Sound bite for Twitter and StockTwits is: Dividend growth stock, expensive. This stock has turn back into a dividend growth stock. However, I would consider it expensive until it can start to growth Revenue, Earnings and Cash Flow. Dividend Payout Ratio for EPS is too high. See my spreadsheet at eci.htm.

I do not own this stock of EnerCare Inc. (TSX-ECI, OTC-CSUWF). I started to follow this stock in 2009 when it was an income trust. This was one of a few income trusts that I followed because it was recommended by MPL communications.

When this company became a corporation, it cut its dividend by almost 50%. That leads to dividends declining by 4.4% and 9.5% per year over the past 5 and 10 years. However, the company has again started to raise dividends and they are up by 1.4% per year over the past 4 years.

In 2015 they raised the dividend an unprecedented 20.7%. Dividends are still paid monthly. Dividends are still almost 35% lower than what they were in 2008, but this is a big commitment on their part to again be a dividend growth company.

Unfortunately they cannot afford these dividends. The Dividend Payout Ratio for 2014 was 201%, a decline from the 5 year median of 456%, but still not a good payout ratio. Although analysts expect this ratio to improve, it will not be below 100% anytime soon.

You can use other dividend payout ratios such as for CFPS where the DPR is 52% for 2014 and has a 5 year median value of 35%. For the next few years this ratio is expected to be around 35%. You can also use the Funds from Operations (FFO). Here the DPR for 2014 is 58.5% and this is expected to go lower in the future.

Shares have increased by 13% and 6.4% per year over the past 5 and 10 years. I will look at per share values because of this. The Revenue growth is low to moderate. FFO growth is non-existent. Earnings growth is non-existent to low. Cash Flow growth is non-existent.

Revenue per share has increased by 0.8% and 3.2% per year over the past 5 and 10 years. Revenue growth is expected to be good in 2015. FFO has declined by 1.9% and 2.89% per year over the past 5 and 10 years. It is expected to well in 2015 at around 47%. If you compare the 12 month periods to the end of 2014 and to the end of the second quarter, FFO has grown at 48%.

EPS has declined by 5% and increased by 0.7% per year over the past 5 and 10 years. ESP is expected to growth 50% this year. If you compare the 12 month periods to the end of 2014 and to the end of the second quarter, EPS has grown at 2.9%. Analysts missed the market in 2014 expecting EPS of $0.47 and EPS came in at $0.34.

CFPS is down by 11.4% and 4.8% per year over the past 5 and 10 years. Analysts expect growth of around 40% in CF this year. If you compare the 12 month periods to the end of 2014 and to the end of the second quarter, CF has declined at 2.5%.

The 5 year low, median and high median Price/Earnings per Share ratios are 53.33, 60.37 and 67.20. These are out of line for this type of stock. The 10 year corresponding values are lower, but still too high at 28.63, 35.71 and 42.78. The current P/E Ratio at 27.98 is high for this type of stock.

The Price/Graham Price Ratio is too high at 1.85. The Price/Book Value per Share Ratio is currently too high at 2.74, and the P/S Ratio is too high at 2.35.

The 5 year high Price/FFO Ratio is 9.34 and the 10 year P/FFO is 8.84. The current P/FFO is 10.57 suggests that the stock price is relatively high. The current P/FFO is based on FFO 2015 estimate of 1.35 and a stock price of $14.27.

The 10 year median Price/Cash Flow per Share Ratio is 4.82 and the current P/CF Ratio at 6.83 is some 33% higher. The current ratio is based on 2015 CFPS estimate of $2.22 and a stock price of $14.27. This stock price testing suggests that the stock price is relatively expensive. I wonder about the CFPS estimate as per above comments.

Looking at the analysts' recommendations, I find Buy and Hold recommendations. The consensus would be a Buy recommendation. The 12 month stock price consensus is $16.70. This implies a 12 month total return of 22.92% with 5.89% from dividends and 17.03% from capital gains.

An article in the HPAC Magazine talks about this company's rebranding. This article in Watch List News talks about this being rated by some analysts. In this Motley Fool article by Joseph Solitro, he says this is a cheap stock to buy and hold forever. He compares his current P/E of 29.4 to his 5 year average P/E Ratio of 450.9 to suggest that the stock is cheap. You have to wonder about this as I consider a P/E Ratio of 450 to be a rather silly one.

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.

EnerCare Inc. owns a portfolio of waterheaters and other portfolio assets, which they rent to primarily residential customers. They rent out waterheaters in the GTA and southern Ontario. EnerCare also owns EnerCare Connections Inc., a leading sub-metering company, with metering contracts for condominium and apartment suites in Ontario, Alberta and elsewhere in Canada. Its web site is here EnerCare Inc.

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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