Thursday, September 24, 2015

Just Energy Group Inc.

Sound bite for Twitter and StockTwits is: Neg. BV, would not buy. On some comparative basis the stock price is relatively reasonable, but this stock has a Negative Book Value. I also do not like the debt ratios. Insiders seem to like it, but maybe they are the only ones making money. See my spreadsheet on Just Energy Group Inc.

I do not own this stock of Just Energy Group Inc. (TSX-JE, NYSE-JE). I started to follow this is July 2010. It was one of the high yield income trusts that people were talking about, so I decided to check it out.

This stock used to be an income trust with distributions paid monthly. Current the dividends are paid quarterly and they have recently dropped some 60%. Dividends were flat from 2010 to 2014 before they were decreased. The company was a dividend growth stock until the legislation was changed in regards to income trust companies.

Analysts expect that the Dividend Payout Ratios will be good for the current financial year ending in March 2016. As far as I can see the company has not yet said if they will raise their dividend again.

Shareholders have not done well lately with the stock price declining every year since 2012 expect for this year. Shares are up by 28% so far this year. The total return over the past 5 and 10 years is a loss of 4.84% and a gain of 0.16% per year. The portion of this total return due to capital loss is 12.27% and 8.38% per year. The portion of this total return due to dividend is at 7.43% and 8.54% per year.

Outstanding shares have increased by 1.8% and 3.3% per year over the past 5 and 10 years. Shares have increased due to DRIP, Stock Options and Share Issued. Shares have decreased due to Buy Backs. Revenue growth has been good. Earnings growth has been non-existent as has growth in FFO and AFFO. Growth in Cash Flow has been non-existent to moderate.

Revenue has grown at 11.1% and 15.5% per year over the past 5 and 10 years. Revenue per Shares has grown at 9.2% and 11.8% per year over the past 5 and 10 years. Analysts expect growth in Revenue of around 7% this fiscal year.

There was a large earnings loss for the fiscal year end in March 2015. Analysts expect EPS of around $1.11 in 2016. The Funds from Operations have declined by 12.9% and 0.4% per year over the past 5 and 10 years. AFFO is worse with a decline of 17.4% per year over the past 5 years. However, analysts expect both of these measures to growth nicely in the 2016 fiscal years. FFO is expected to be up by 18% in 2016. If you compare the 12 months to the end of the first quarter of 2016 to the 12 months to the end of the 2015 fiscal year, FFO is up by 13%.

Cash Flow is down by 5.4% and up by 6.2% per year over the past 5 and 10 years. CFPS is down by 7.1% and up by 2.7% per year over the past 5 and 10 years. Analysts expect good growth in cash flow for this stock for the 2016 fiscal year and cash flow is up for the first quarter of 2016.

The one thing I do have concerns over the debt ratios. The Liquidity Ratio is just 0.91 for the 2015 fiscal year. Even if you add in cash flow after dividends it is still just 0.92. This means that current assets cannot cover current liabilities. The Debt Ratio is also low at 0.67 in fiscal year 2015. This means that assets cannot cover liabilities. The company has a negative book value. This makes the company vulnerable in bad times.

The only insiders with much in the way of stock are the Chairman with 4.1% of the stock worth around $46.5M and two 10% (at least) stock holders. One owner has 12.5% of the shares worth around $142.8M and the other owns 16.6% of the shares worth around $189.2M.

Another thing to point out is that outstanding shares were increased by 2.2M shares for the 2015 fiscal year for stock options and this is some 1.5% of the outstanding shares. This is relatively a lot. You would expect this percentage to be 0.50% or less. The median share increase for stock options for the stock I follow is 0.20% and 70% of the companies raised shares by 0.50% or less. The corresponding values for 2014 and 2013 were shares increasing by 0.38% and 0.17%.

I do not think that using the Price/Earnings per Share Ratio for stock price testing would be valid. For example, the 5 year median P/E Ratio was 2.62. I have proper values for Price/Funds from Operations Ratios. The 5 year low, median and high median P/FFO Ratios are 7.69, 9.83 and 11.83. The corresponding 10 year values are similar at 8.02, 10.01 and 12.03. The current P/FFO Ratio is 8.64 based on 2016 FFO estimate of $0.90 and a stock price of $7.78. This stock price testing suggests that the stock price is relatively reasonable and relatively below the median.

I cannot calculate a Graham Price and the Book Value is negative so I cannot use the Price/Graham Price Ratios or the Price/Book Value per Share Ratio to judge the stock price. This is not a good situation.

The 10 year Price/Cash Flow per Share Ratio is 9.81 and the current P/CF Ratio is 9.60 a value some 2% lower. The current P/CF Ratio is based on 2016 CFPS estimate of $0.81 and a stock price of $7.78. This stock price testing suggests that the stock price is relatively reasonable and relatively below the median.

When I look at analysts' recommendations, I see Buy and Hold Recommendations. Most recommendations are a Hold and the consensus is a Hold recommendations. The 12 month consensus stock price is $6.75. This implies a negative total return of 6.81% with a capital loss of 13.24% and dividends of 6.43%. This is assuming a current stock price of $7.78.

Nelson Smith of Motley Fool does not like this company. The site of Dakota Financial News talks about recent ratings for this company and recent insider buying.

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.

Just Energy's business involves the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price and price-protected contracts. Just Energy derives its margin or gross profit from the difference between the fixed price at which it is able to sell the commodities to its customers and the fixed price at which it purchases the associated volumes from its suppliers. The company also offers "green" products through its Just Green program. Through its subsidiary Terra Grain Fuels, the Fund produces and sells wheat-based ethanol. Its web site is here Just Energy.

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.

No comments:

Post a Comment