Equitable Group Inc.

Sound bite for Twitter and StockTwits is: Price reasonable but above relative median. I do not see the point in buying this bank. I think it is riskier than the big banks and yet offers lower dividends and probably lower total return. Other people say that they like it because its net profit margin is better than other banks. See my spreadsheet on Equitable Group Inc.

I do not own this stock of Equitable Group Inc.(TSX-EQB, OTC-EQGPF). I had read a glowing report on investing on this company in 2013, so I decided to check it out. It was interesting as it was loaning money to new immigrants, a class of people who generally have a difficult time getting loans and mortgages from our regular banks. It sounded intriguing.

On this stock, dividends are low and dividend increases are moderate. The current dividend is 1.35% based on a stock price of $56.21 and dividends of $0.76. The 5 year median dividend yield is 1.6%. The 5 and 9 year dividend growth is at 10.9% and 8.9% per year. The last dividend increase occurred in 2015 and was for 5.6%.

This bank is paying out a low amount of its earnings. The Dividend Payout Ratios for EPS for 2014 was 10.26% and the 5 year median is 10.26%. DPR is expected to be similar in 2015. Since reported cash flow has been negative lately, there is no DPR for cash flow. A lot of analysts currently think that a bank's reported cash flow is basically meaningless.

An article in CFO.com of 2009 talks about this subject. Sites that give estimates, generally do not give Cash Flow estimates on this bank. They basically ignore cash flow. For example, 4 Traders, a site that generally give cash flow estimates, just ignores them for this bank. However, it does give cash flow estimates for other Canadian Banks. For example, see their site on Bank of Nova Scotia.

The next thing to look at is insider trading. The Net Insider Selling is at 0.03%. This is a little high. So it does not add anything positive to this stock.

Shareholders have done fine with 5 and 10 total returns to date of 19.26% and 9.96% per year. The portion of this total return attributable to dividends is 1.66% and 1.34% per year. The portion of this total return attributable to capital gain is 17.60% and 8.61% per year. Shareholders did better to the end of 2014. The stock price has dropped some 14.4% this year.

The outstanding shares have increased by 0.7% and 2.8% per year over the past 5 and 10 years. Shares have increased due to Stock Issues and Stock Options. I have looked a growth in Net Interest, Revenue and Earnings. For all of these, growth is good.

Revenue has growth at 20.3% and 21.5% per year over the past 5 and 10 years. Revenue per Share has grown at 19.4% and 18.1% per year over the past 5 and 10 years. Net Interest Income has grown by 22.8% and 21.7% per year over the past 5 and 10 years. Analysts expect good growth in Net Interest Income for 2015 of some 18%. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the second quarter, Net Interest Income has grown by 9%.

EPS is up by 14.2% and 17.5% per year over the past 5 and 10 years. Analysts expect good growth also in 2015 by around 15%. 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 has grown by 10%.

The 5 year low, median and high median Price/Earnings per Share Ratios are at 5.67, 6.93 and 8.37. The 10 years corresponding ratios are a bit higher at 5.87, 7.10 and 9.60. The current P/E Ratio is 7.47 based on a stock price of $56.21 and 2015 EPS estimate of $7.52. This stock price testing suggests that the stock price is reasonable, but above the relative median.

I get a Graham Price of $87.60. The 10 year low, median and high median Price/Graham Price Ratios are 0.48, 0.60 and 0.81. The current P/GP Ratio is 0.64 based on a stock price of $56.21. This stock price testing suggests that the stock price is reasonable, but above the relative median.

The 10 year median Price/Book Value per Share Ratio is 1.14. The current P/B Ratio is 1.24 a value 8% higher than the 10 year median ratio. The current P/B Ratio is based on BVPS of $48.49 and a stock price of $56.21. This stock price testing suggests that the stock price is reasonable, but above the relative median.

The 5 year n median Dividend Yield is 1.60% and the current Dividend Yield at 1.35% is some 15% lower. The historical dividend yield is 1.44% and the current dividend yield is some 6% lower. (Historical is not long as dividends have been paid for only some 10 years.) This stock price testing suggests that the stock price is reasonable, but above the relative median.

When I look at analysts' recommendations I find Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price consensus is $70.00. This implies a total return of 25.895 with 1.35% from dividends and 24.53% from capital gains.

The site of Mideast Time talks about RBC raising the price for this company. This Newswire article talks about an insider buying more shares. A couple of analyst talk about Equitable Group Inc on Stock Chase.

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.

Equitable Group Inc. is a niche mortgage lender. The company's primary business is first charge mortgage financing, which offer through company's wholly owned subsidiary, Equitable Bank (formerly The Equitable Trust Company). Equitable Bank is a Schedule I bank pursuant to the Bank Act, it actively originates mortgages across Canada and serves single family, small & large commercial borrowers. Its web site is here Equitable Group 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.

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