Wednesday, May 11, 2016

WSP Global Inc.

Sound bite for Twitter and StockTwits is: Price looks reasonable. The dividend yield is good, but it remains to be seen if this will turn into a dividend growth stock. There is a good possibility. They did increase dividends prior to changing to a corporation. See my spreadsheet on WSP Global Inc.

I own this stock of WSP Global Inc. (TSX-WSP, OTC- WSPOF). In September 2011 I rationalized my portfolio. I sold stocks that did not make it into my core and bought stocks that could of the same type. In this case selling Stantec and buying Genivar. In October 2011 I wanted to sell Enerflex because it is not a company I bought but a distribution from Toromont and I bought more Genivar, now called WSP Global. I am considering replacing Progressive Waste Solutions (TSX-BIN, NYSE-BIN). So, I am looking at MacDonald, Dettwiler & Associates which is Tech as I have little in Tech and this stock which is an industrial as is Progressive Waste.

This company started out in 2006 as an income trust. It at first raised its dividends between 2006 and 2009, but afterwards kept the dividends flat. They could not really afford the dividend being paid as Dividend Payout Ratio for EPS was higher than 100% from 2012 to 2014.

I have done well on this stock, but then I have done well on all my stocks that converted from Income Trust to corporations. I have had this stock since 2011 or 4.6 years. My total return is 19.29%^ with 13.62% from capital gains and 5.67% from dividends. This unlikely to be repeated as dividend rates are lower and the lowering of dividend yields caused the stock price to go up. It was thought that dividend yields on income trusts that changed to corporations would be around 4 to 5%. This stock has a current yield of 3.68% based on dividends of $1.50 and a stock price of $40.76. Then again the dividend yield on this stock did not get as high as the dividend yield on other income trust stocks.

Some analysts feel that dividends will be cut. The company does not say this and DPR for EPS for 2015 was 73% and the DPR for CFPS for 2015 was 42%. The DPR for EPS for 2016 is expected to be 67% and the DPR for CFPS is expected to be 123%. The analyst's values for EPS/CF Ratio for 2016 would be 1.83. However, the 10 year median value for this ratio is 0.47 and the highest it has ever been is 0.70. So I have to wonder about the analysts' values for 2016 for CFPS.

The outstanding shares are increasing a lot. The 5 and 10 year growth in outstanding shares is 40.5% and 29.1% per year. There is nothing inherently wrong with increasing shares, but it does mean that I as a shareholder am much more interested in per share values to judge growth. Growth is non-existent to good.

The worse growth is in CFPS and the 5 and 8 year growth is at a negative 4.6% and a positive 1.6%. Cash Flow growth over the past 5 and 10 years is at 34% and 31.2% per year. The best growth is in Revenue and it has grown at 59.9% and 46.9% per year over the past 5 and 10 years. Revenue per Share growth is at 11.8% and 16.7% per year over the past 5 and 10 years.

I wish that the Liquidity Ratio was a bit higher. The Liquidity Ratio for 2015 was at 1.26 and its 5 year median value is 1.51. Other debt ratios are fine.

The 5 year low, median and high median Price/Earnings per Share Ratios are 15.50, 19.46 and 23.42. The 9 year values are a bit lower at 14.51, 17.46 and 22.34. The current P/E Ratio is 18.36 based on a stock price of $40.76 and 2016 EPS estimate of $2.22. This stock price testing suggests that the stock price is reasonable and probably around the median.

I get a Graham Price of $37.67. The 10 year low, median and high median Price/Graham Price Ratios are 0.82, 1.08 and 1.31. The current P/GP Ratio is 1.08 based on a stock price of $40.76. This stock price testing suggests that the stock price is reasonable and probably around the median.

I get a 10 year Price/Book Value per Share Ratio of 1.51. The current P/B Ratio is 1.44 based on a stock price of $40.76 and BVPS of 28.27. The current ratio is some 4.2% lower than the 10 year ratio. This stock price testing suggests that the stock price is reasonable and below the median. On an absolute basis, a P/B Ratio at 1.50 or lower is a good ratio for buying a stock.

Because this stock used to be an income trust, dividend yield testing is not a good idea. However, P/S Ratio and P/CF Ratio testing can be done. The 10 year P/S Ratio using Net Revenue is 1.09. The current P/S Ratio is 0.82 based on Net Revenue of $4,943M, Net Revenue per Share of $49.56 and a stock price of $40.76. The current ratio is some 24% lower than the 10 year median ratio.

The 10 year Price/Cash Flow per Share Ratio is 10.40. The current P/CF Ratio is 33.69 a value some 224% higher. Analysts seem to give a CFPS for 2016 that drops some 41%. If you compare the 12 month period to the end of 2015 and the 12 month period to the end of the first quarter, Cash Flow is up by 86%. So again, I wonder about the CFPS estimate for 2016.

There is a review of this company by The Dividend Guy on Seeking Alpha. I guess you have to be careful of what you read because he says that the cut their dividends in 2012, which is untrue. I have the stock and my dividends were not cut. The dividend yield never reached a low as 4.33% in 2013 and I do not know where he got the Dividend Payout Ratio of 60%. . Reading this report, I wondered at times if he was talking about WSP Global.

The thing with the dividends on YCharts is that I am not sure what they are showing. The yield has been dropping since 2012. He is correct that they did merge with Parsons Brinckerhoff. Also, this company used to be called Genivar and as that company they did have problems with inappropriate behavior in Quebec. See an article in the Financial Post.

Doug Watt of Motley Fool likes this company. See what analysts on Stock Chase think 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.

Yesterday on my other blog I wrote about Update Notes for May 2016... learn more. The next stock I will write about will be Progressive Waste Solutions Ltd. (TSX-BIN, NYSE-BIN)... learn more on Friday, May 13, 2016 around 5 pm.

WSP Global Inc. is an engineering services firm providing private and public-sector clients with a complete range of professional consulting services throughout all project phases, including planning, design, construction and maintenance. WSP now has global coverage. Its web site is here WSP Global 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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