Tuesday, December 22, 2015

FirstService Corp

Sound bite for Twitter and StockTwits is: Probably Expensive. I think that I would like to see the 2015 annual statement on this company to make any further comments. It will become clearer how well it is doing. However, it certainly seems to have vote of confidence from the street as the stock has moved up sharply this year. See my spreadsheet on FirstService Corp.

I do not own this stock of FirstService Corp (TSX-FSV, NASDAQ-FSV), but I used to. I bought FirstService Corp in 2002 as it looked like good solid company that knows how to make money. By 2010 the company was underperforming so I sold the stock and kept the preferred shares until the end of the year before selling them too. Preferred shares are not by favorite why of getting dividends.

At the end of May 2015 FirstService Corp became Colliers International (TSX-CIG, NASDAQ-CIGI) and FirstService Corp was spin-off the company. These separate stocks started to trade on June 2, 2015. I split the assets of the company depending on the stock prices as of June 2, 2015. I also use this value to split past stock prices.

What is interesting about both these companies is that the stock price rose strongly after the split. FirstService Corp stock is up 131% so far this year and Collier is up 79% so far this year.

In regards to dividends, the company started to pay dividends mid-2013 at $0.10 US$ each quarter. FirstService Corp. has continued these dividends. The dividend yield is very low at just 0.96% based on a current stock price of $57.55.

This company has Multiple Voting and Subordinate Voting shares. There are few Multiple Voting shares which are all owned by Jay Steward Hennick. All shareholders of the old FirstService Corp got shares in the two new companies on a one for one basis. So Hennick got the same Multiple Voting Shares in each company. For Subordinate Voting shares if you had 100 shares in the old company you would now have 100 shares of FirstService Corp and 100 shares of Collier International.

Shares have grown at 3.9% and 1.7% per year over the past 5 and 10 years. Shares have increased due to Stock Options and Share Issues and have decreased due to Buy Backs. Revenue growth is moderate to good. Cash Flow growth is good. Earnings have not grown that well, especially over the past 5 years when they have had a number of earning losses. This is in US$ as the company reports in US$.

There is also a problem knowing how analysts have come up with their estimates for 2015. FirstService Corp never said how they are splitting up the company; that is what percentage of assets, earnings, etc. go with each company. They are inconsistent in the quarterly statements for the percentages assigned to the New FirstService Corp. For Collier, they just are using the FirstService Corp values for comparison in their quarterly statements.

That being said, I calculate Revenue has grown at 9.8% and 12.8% per year over the past 5 and 10 years. Revenue per Share has grown at 5.7% and 10.9% per year over the past 5 and 10 years. Analysts expect Revenue to decline this year by around 6%. However, if you look at the 12 month period to the end of the third quarter and the 12 month period to the end of 2014, Revenue is up by 7%.

Analysts expect very good growth in EPS in 2015 at some 98% increase. However, if you look at the 12 month period to the end of the third quarter and the 12 month period to the end of 2014, CFPS is up by 6.6%.

Cash Flow has grown at 14.7% and 10.3% per year over the past 5 and 10 years. CFPS has grown by 10.5% and 8.4% per year over the past 5 and 10 years. Analysts expect CFPS to grow by 4.95 in 2015. However, if you look at the 12 month period to the end of the third quarter and the 12 month period to the end of 2014, EPS is up by only 38.5%.

I get 5 year low, median and high median Price/Earnings per Share Ratios of 12.03, 15.38 and 18.72. The corresponding 10 year P/E Ratios are lower at 10.43, 13.04 and 16.47. The current P/E Ratio is 34.43 based on a stock price of $57.55 CDN$ and 2015 EPS estimates of $1.20 US$ or $1.67 CDN$. This stock price test suggests that the stock price is relatively expensive. (You get the same results whether you use US$ values or CDN$ values.)

Because of the spin off, there is not much to compare the current stock price with. The only other viable ratio I think is the P/S Ratio. The 10 year median P/S Ratio is 0.48. The current P/S Ratio is 1.14, a value some 135% higher. This stock price test suggests that the stock price is relatively expensive.

Also of note is I get a Graham Price of $15.54. The Price/Graham Price Ratio would be 3.70. This is a high value. The 10 years P/GP Ratio median high value was 3.05. This is also a rather high value as a good stock price is when this ratio is at 1.00 or lower. This stock price test suggests that the stock price is relatively expensive.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month stock price consensus is $49.08. This implies a loss of 13.75% with a capital loss of 14.72% and dividends of 0.96%. The consensus price does not seem to match the recommendations.

Here is a news release on Globe Newswire concerning the split in this company between FirstService Corp and Collier. There are some comments on this company by analysts at 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.

The company serves its customers through two industry-leading service platforms: FirstService Residential, North America's largest manager of residential communities; and FirstService Brands, one of North America's largest providers of essential property services delivered through individually branded franchise systems and company-owned operations. Its web site is here FirstService Corp.

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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