Friday, April 29, 2016

SNC-Lavalin Group Inc.

Sound bite for Twitter and StockTwits is: Stock is cheap to reasonable. The company has had some past problems. I believe that I will continue to do well in this company so I am keeping my investment in it. See my spreadsheet on SNC-Lavalin Group Inc.

I own this stock of SNC-Lavalin Group Inc. (TSX-SNC, OTC-SNCAF). This stock was one from Mike Higgs' list of dividend growth stocks. I liked the idea of low dividends and high dividend increases. When you are building up a portfolio, low dividends are good for tax reasons. High dividend increases are attractive for the future.

By 2008 this stock had grown so much it was too high a percentage of my portfolio. I sold 1/3 of my stock. In 2012 I bought 100 shares for my trading account. I was selling low paying dividend stocks from my Pension RRSP and I still wanted SNC as part of my portfolio.

The dividends yields have been higher than usual lately because this company has had some problems. The 5 year median dividend yield is 2.17%. The historical median dividend yield is 1.43%. The current yield is 2.21% based on dividends of $1.04 and a stock price of $47.11.

The dividend growth has been lower than usual lately with dividend increases really slowed down after 2012. The 5 and 10 year growth in dividends is at 8% and 15.8% per year. The last increase was in 2016 and it was for 4%. Recent increases have been in the 4 to 5% range. This is a lot lower than in the past.

I have well in this company. My total return is 25.36% with 22.83% from capital gains and 2.53% from dividends. I have made $8.54 in dividends per share. My shares cost me $5.66. Therefore dividends have paid for my shares by 150.9%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 16.06, 24.93 and 20.50. The corresponding 10 year ratios are 15.35m, 20.77 and 26.07. The corresponding historical ratios are 13.87, 18.39 and 23.90. The current P/E Ratio is 19.25 based on a stock price of $47.11 and 2016 EPS estimate of $2.45. This stock price testing suggests that the stock price is relatively reasonable and possibly below the median.

I get a Graham Price of $37.73. The 10 year low, median and high median Price/Graham Price Ratios are 1.53, 1.91 and 1.53. The current P/GP Ratio is 1.25. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The 10 year median Price/Book Value per Share Ratio is 4.18. The current P/B Ratio is 1.82 based on a stock price of $47.11 and BVPS of $25.83. The current P/B Ratio is some 56% below the 10 year median. This stock price testing suggests that the stock is relatively cheap. (On an absolute basis a P/B Ratio of 1.50 is considered cheap.)

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold Recommendations. Most of the recommendations are a Buy and the consensus is a Buy. The 12 month stock price consensus is $51.50. This implies a total return of 11.535 with 9.32% from capital gains and 2.21% from dividends based on a current price of $47.11.

There is an article by Dave Seglins of CBC News about the difficulties SNC has been having with bribery charges. An article in the Daily Commercial News talks about SNC getting an asphalt facility contract in Saudi Arabia. This article by CTV News talks about problems SNC has with McGill University Health Centre. Monica Rizk and Ron Meisels do some technical analysis on this stock at the G&M. They are bullish. Laurent Cadotte at Seeking Alpha does a nice review of this stock.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see that report here and here.

The last stock I wrote about was about Veresen Inc. (TSX-VSN, OTC-FCGYF)... learn more . The next stock I will write about will be Fortis Inc. (TSX-FTS, OTC-FRTSF)... learn more on Monday, May 2, 2016 around 5 pm.

SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is here SNC-Lavalin 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk . The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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