Badger Daylighting Ltd.

Sound bite for Twitter and StockTwits is: Relatively expensive but insider buying. Insider buying is at 0.09%. This is rather high. Most stocks I track have insider selling with a median insider selling of $0.02% and 70% have insider selling at 0.07% or less. See my spreadsheet at bad.htm.

I do not own this stock of Badger Daylighting Ltd. (TSX-BAD, OTC- BADFF). I started to follow this stock after reading a couple of articles in February 2012 in the G&M that talked about the company. The first article looked at what the pros who manage small-cap funds are buying. Badger was one of 10 stocks mentioned and it looked like an interesting stock. It is a dividend paying small cap. The second article looked at what stocks might appeal to a conservative investor looking for income.

This stock used to be an income trust. When it changed to a corporation, it lowered its dividends or distributions by some 19% in 2011. Since then it has had one dividend increase of 5.9% in 2013. It also still pays dividends monthly. This company only started to pay dividends in 2004. Between 2004 and 2011 it raised the distributions some years and left them flat other years.

Dividend yields on this company were good when it was an income trust. But most income trusts companies had good dividends. Currently the dividend yield is moderate. The current dividend is 1.82% based on a stock price of $19.80 and dividends of $0.36. The 5 year median dividend is much better at 3.81%.

The Dividend Payout Ratios are reasonable. The DPR for 2014 for EPS was 25% and for CFPS was 13.3%. The 5 year median DPR ratio for EPS was 43% and for CFPS was 25%. Earnings are expected to drop in 2015 and DPR for EPS is expected to be around 55% in 2015. The second quarterly report shows EPS dropping.

Shareowners have done well. The 5 and 10 year total return to date is 29.21% and 17.32%. The portion of this total return that is dividends is 3.74% and 4.32%. The portion of this total return that is capital gain is 25.47% and 13.00%. However, the stock price has dropped some 25% in 2015 after making great gains in 2012 and 2013.

Outstanding shares have increased by 2.7% and 1.7% per year over the past 5 and 10 years. Shares have increased due to Stock Options and Share Issues. This company has had good growth in Revenue, Earnings and Cash Flow over the past 5 and 10 years. One problem is that the company is not expected to do very well in 2015.

Revenue is up by 25.6% and 18.3% per year over the past 5 and 10 years. Revenue per Share is up by 22.3% and 16.3% per year over the past 5 and 10 years. Revenue is expected to drop by around 6% in 2015. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the second quarter, Revenue is down by 2%.

EPS is up by 18.7% and 12.7% per year over the past 5 and 10 years. EPS is expected to drop by 54% in 2015. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the second quarter, EPS is down by 37%.

Cash Flow per Share is up by 23.2% and 15.2% per year over the past 5 and 10 years. CFPS is expected to climb by some 25% in 2015. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the second quarter, CFPS is up by 9.7%.

Debt Ratios are very good. The Liquidity Ratio for 2014 was 2.86 and the Debt Ratio was 2.02. The Leverage and Debt/Equity Ratios were 1.98 and 0.98.

The 5 year median Price/Earnings per Share Ratios are 9.19, 11.15 and 13.11. The corresponding 10 year ratios are similar at 8.99, 10.98 and 13.36. The current P/E Ratio is 30.46 based on a stock price of $19.80 and 2015 EPS estimate of $0.65. Part of the reason for this high P/E Ratio is that the company's EPS is expected to drop in 2015. This stock price testing suggests that the stock is relatively expensive.

The 10 year median Price/Book Value per Share ratio is 3.14. The current P/B Ratio is 3.25 a value some 3% higher. The current P/B Ratio is based on BVPS of $6.10 and stock price of $19.80. This stock price testing suggests that the stock price is relatively reasonable and just slightly above the relative median. However, a P/B Ratio is 3.25 is a rather high P/B Ratio. A P/B Ratio is 1.50 is considered a good one and 70% of the stocks I cover have a P/B Ratio of 2.11 or less.

The 5 year dividend yield is 3.81% compared to the much lower current dividend yield of 1.82%. The current dividend yield is based on dividends of $0.36 and a stock price of $15.80. The historical average and median yields are even higher at 6.31% and 5.70%. This stock price testing suggests that the stock price is relatively expensive. This is caused by a relatively flat dividend and an increasing stock price.

As far as I can see there is only one analyst following this stock and the stock recommendation is a Buy. The 12 month target price is $30.00. This implies a total return of 53.33% with 1.82% from dividends and 51.52% from capital gains.

This recent Dakota Financial News article talks about insider buying and Canaccord Genuity increasing their stock price target. This BNN report says that this company is a top pick for Norman Levine.

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.

Badger is North America's largest provider of non-destructive excavating services. Badger traditionally works for contractors and facility owners in the utility and petroleum industries. Badger's business model involves the provision of excavating services through two distinct entities: the Operating Partners (franchisees in the United States and agents in Canada), and Badger Corporate. Its web site is here Badger Daylighting.

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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