HNZ Group Inc.

Sound bite for Twitter and StockTwits is: Reasonable price, but risky. Most of the good stock price testing suggests that the stock price is merely reasonable. Because this company is in some trouble and has yet to turn itself around, there is much risky involved in buying it. I do not think that the stock price is low enough for the risk to be taken. So on a risk/reward basis the stock might not be cheap enough. See my spreadsheet on HNZ Group Inc.

I do not own this stock of HNZ Group Inc. (TSX-HNZ.A, OTC- CDHPF). Canadian Helicopters Group Inc. has come up in Daily Buy and Sell Advisor of MPL Communications. Dividend Ninja Blogger also mentioned this stock in a blog entry talking about High Yield Canadian Stocks. Richard Morrison wrote about small caps in the Financial Post in February 2011. He was screening financially healthy, profitable, reasonably valued small companies. He got 18 of them, many were former income trusts. One of the 18 stocks was this stock.

Of course, what I do not like about this company is that it is not currently a dividend growth company. There was only one dividend increase and that was in 2008. This is another company that was an income trust that converted to a corporation. A lot of the converted income trust companies that did not decrease dividends at conversion have not been able to raise them after conversion.

The Dividend Payout Ratios were fine until 2014 when the DPR for EPS was 1173%. The 5 year median DPR for EPS is 52.5%. For this company earnings peaked in 2011. A lot of companies are having a hard time in this long slow recovery form the last recession.

If you had bought this stock 5 or 10 years ago paying a relative median price some 40.9% or 125% of the cost of your stock would have been covered by dividends payments. This is because dividend yields have been high. Also, if you had bought this stock 5 or 10 years ago paying a relative median price you would be earning 8.2% or 12.6% yield on your original investment.

The stock price hit a peak in 2012 and has been travelling south ever since. Today, Shareholders returns over the past 5 and 10 years are low with the 5 and 10 years total return at 6.27% and 15.96% per year. The portion of these returns attributable to dividends is 6.85% and 9.99% per year. The portion of this return attributable to capital changes is a decline of 0.58% per year over the past 5 years and capital gains of 5.97% per year over the past 10 years.

Outstanding shares have increased by 4.85 and 2.4% over the past 5 and 10 years. Revenue growth is low to moderate; there is no earnings growth and cash flow growth is negative to good.

Revenues peaked in 2011 and have been travelling south ever since. Revenue growth over the past 5 and 10 years is 6.1% and 6% per year. Revenue per Share growth is 1.2% and 3.7% per year. Analysts expect revenue to decline again in 2015 before starting to recover in 2016.

EPS peaked in 2011 and has also been travelling south ever since. Analysts expect EPS to start to growth again in 2015. However, 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 declined by 711% to a negative value (i.e. a loss).

Cash Flow per share is up by 3.4% and 31.5% per year over the past 5 and 10 years. CFPS is down by 1.4% and up by 28.33% per year over the past 5 and 10 years. For the 12 month period to the end of the second quarter Cash Flow is down by 32% to a negative value.

The 5 year median low, median and high median Price/Earnings per Share Ratios are 5.94, 8.32 and 10.70. The corresponding 10 year values are lower at 4.83, 6.46 and 8.70. The P/E Ratio for 2015 is 143.64 based on a stock price of $15.80 and 2015 EPS of $0.11. This stock price testing suggests that the stock price is relatively expensive. However, P/E is very high because EPS is currently very low.

I get a Graham Price of $6.75. This Price has also been travelling south because a lot of other values are going in that direction. The 10 year Price/Graham Price Ratios are 0.42, 0.54 and 0.69. These are very low ratios because a stock is considered a good buy at P/GP Ratio of 1.00. The current P/GP is 2.34 a very high value and suggests that the stock price is relatively expensive. The current P/GP is based on a stock price of $15.80.

The 10 years Price/Book Value per Share Ratio is 1.01. The current P/B Ratio is 0.86 a value some 14.7% lower and is based on a Book Value per Share of $18.42 and a stock price of $15.80. This stock price testing suggests that the stock price is relatively reasonable. However, the stock price is theoretically below the break up price of the company. Also, this company has $0.79 per share in cash or some 5% of the stock price in cash.

Part of the problem of using the dividend yield stock price test is that dividend yields for all old income trust companies have declined when they converted to corporation. The 5 year median dividend yield is 5.42% a value that is some 28% lower than the current dividend yield of 6.98%. The current dividend yield is based on dividends of $1.10 and a stock price of $15.80. This stock price test suggests that that the stock price is relatively reasonable.

The historical median dividend yield is 6.82% a value that is some 2.3% lower than the current dividend yield of 6.98%. This stock price test suggests that that the stock price is relatively reasonable. However, analysts had expected that the dividend yields for old income trusts would be in the 4 to 5% range and by this measure this stock is looking relatively cheap.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most of the recommendations are a Hold and the consensus recommendation is a Hold. The 12 month stock price is $20.00. This implies a total return of 33.56% with 6.98% from dividends and 26.58% from capital gains.

The web site of Octa Finance says that in August Desjardins Securities lowered their 12 months stock price to $18.00. They also say that the stock price is in a down trend. This is a rather small company with a market cap of $200M and there is not much news for it.

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.

HNZ Group Inc. is an international provider of helicopter transportation and related support services with fixed primary operations in Canada, Australia, New Zealand and regions of Southeast Asia. The group also delivers contracted on demand support in Afghanistan and Antarctica. Its web site is here HNZ 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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