Hammond Power Solutions Inc.

Sound bite for Twitter and StockTwits is: Probably cheap and risky. I still like this company and I am planning on holding on to my current shares. See my spreadsheet on Hammond Power Solutions Inc..

I own this stock of Hammond Power Solutions Inc. (TSX-HPS, OTC- HMDPF). I bought this stock as my main purchase for the TFSA in 2013 and 2014. I picked Hammond initially in 2013 as my main buy because it has good growth and reasonable dividend. Also, I think that it important to try out newer smaller companies for investment purposes. Companies on the TSX are always changing and it is good to get into new industries and new companies. The problem of this, of course, is you do not always know what industries and companies will be long lasting.

So far this investment has not been great. However, a lot of companies are having a hard time in the recent economic climate. I have not lost much, but I have not had any gains either. My total return is a loss of 2.74% per year, with a capital loss of 5.66% per year and dividends of 2.92% per year. My total capital loss is 15.8% and my total loss is 7.58%. I have received 0.67 dividends per share and that is some 8.21% of my stock's cost.

This stock pays a dividend. Until 2015 the dividends were increasing and the 5 year dividend growth is at 13.05%. However dividends were flat in 2015 and there is so far no indication of a dividend increase. In 2014 the company paid more in dividends that it's EPS. However the Dividend Payout Ratio for 2015 was at 45%. The DPR for Cash Flow per Share was 16%. If you look at dividends paid and EPS over the past 5 years, the payout is lower at 35%. I think that they can afford their dividends.

The financial year ending in 2015 was better than the one ending in 2014. In 2015 Revenue was up by 10.9%, Earnings were up by 141% and Cash Flow was up by 65%.

I get 5 year low, median and high median Price/Earnings per Share Ratios of 12.62, 16.79 and 20.96. These are higher than the 10 years corresponding Ratios of 8.62, 11.46 and 14.36. These are also higher than the historical data (15 years) at 6.51, 8.91 and 10.24. The current P/E Ratio based on the last 12 months of EPS of $0.53 and a stock price of $6.45 is 12.17. This suggests that P/E Ratio could be reasonable. It is lower than P/E Ratios of the last 5 years and close to the median of 10 years. I note that S&P Capital IQ gives stock a P/E Ratio of 12.4 and says it better than the company's peer average of 22.4. They think that this is a positive.

I get a Graham Price of $11.29. The 10 year low, median and high Price/Graham Price Ratios are 0.60, 0.77 and 1.01. The current P/GP Ratio is 0.57 based on a stock price of $6.45. This stock price testing suggests that the stock is relatively cheap. In theory, a P/GP Ratio of less than 1.00 says a stock is cheap.

The 10 year median Price/Book Value per Share is 1.21. The current P/B Ratio is 50% lower at 0.60 based on BVPS of $10.70 and a stock price of $6.45. This stock price testing suggests that the stock is relatively cheap. Also, a P/B Ratio of less than 1.00 says the stock is selling at below its break up price and is therefore cheap. The stock also has cash on hand equal to 16.7% of the stock's price. That is $1.08 per share.

The median dividend yield over the past 7 years is 1.87%. The current dividend yield is 3.72% a values some 98% higher. The 5 year median dividend yield is higher at 2.29% and this is some 62% lower than the current dividend. The current dividend is based on dividends $0.24 and a stock price of $6.45. This testing suggests that the stock price is relatively cheap.

This stock does have one problem. There does not seem to be any analysts currently following it. This sometimes happens to small companies. However, I did find a recent report from S&P Capital IQ dated May 2016 and this gave a recommendation of a Strong Buy. In an article Ryan Irvine rates this company a Hold. With these two ratings the consensus would be a Buy.

In a recent report on Guru Focus Ryan Irvine recommended action on this stock was a Hold. The article first goes into problems about Canadian Small Caps. David Parkinson, Richard Blackwell and Iain Marlow in an article on the Globe and Mail talk about why the global economy cannot get started. There are quotes from the CEO of Hammond Power Solutions Inc.

Bill Hammond says that he has never seen anything quite like the long, slow, on-again-off-again recovery that the world economy remains stuck in, years after things should have returned to normal. The article goes on to say that seven years after Europe and the United States slipped into what would become the one of the deepest global recessions in history, and five and a half years since the North American economy returned to growth, the recovery remains a perplexing, inconsistent and frustratingly elusive work in progress.

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 my Updated Spreadsheets... learn more . The next stock I will write about will be IGM Financial Inc. (TSX-IGM, OTC-GIFF)... learn more on Friday, June 3, 2016 around 5 pm.

Hammond Power Solutions Inc. is the largest manufacturer of dry-type transformers in North America. They engineer and manufacture a wide range of custom transformers that are exported globally in electrical equipment and systems. They support solid industries such as oil and gas, mining, steel, waste and water treatment, and wind power-generation. Its web site is here Hammond Power Solutions 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.