Friday, July 8, 2016

Morneau Shepell Inc.

Sound bite for Twitter and StockTwits is: Seems expensive, good dividend. This stock has a very good dividend at 4.34%. Both the P/B Ratio and P/CF Ratio show this stock to be expensive. See my spreadsheet on Morneau Shepell Inc.

I do not own this stock of Morneau Shepell Inc. (TSX-MSI, OTC-MSIXF). Every once in a while I go through the stocks that my brokerage, TD Waterhouse, is recommending to find promising new stocks. In February 2013 this stock was rated a buy by TD Waterhouse. It was under Diversified Financials.

This stock was an income trust from 2005 to 2011. When it changed to a corporation, it decreased its dividend by 17.4%. Since that time the dividend has been flat. The problem is that they are paying out, in 2015 some 236% of their earnings. However, analysts expect a good increase in EPS in 2016 and the Payout to be reduced to 85%. One problem I see is that the EPS dropped in the first quarter of 2016.

The dividend yield is very good. It is a company that was an income trust and these companies were expected to end up with dividends in the 4 to 5% range. This stock has a current dividend of 4.34% based on dividends of $0.78 and a stock price of $17.97. The 5 year median dividend yield is 5.6%.

I would only be interested in this stock if they can change the dividend picture and their earnings picture. They would need to pay out less in dividends than earnings and they would have to start increasing their dividends. The Return on Equity is 5.5% in 2015 with the 5 year median at 6.1%. I prefer companies with ROE of at least 10%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 27.59, 30.92 and 34.25. The corresponding 10 year values are close at 24.35, 29.22 and 32.30. I think that these P/E Ratios are rather high. The current P/E Ratio is 19.53 based on a stock price of $17.97 and 2016 EPS estimate of $0.92. This stock price testing suggests that the stock price is relatively cheap. I think that P/E Ratios of around 10 shows a stock is cheap.

I get a Graham Price of $11.30. The 10 year low, median and high median Price/Graham Price Ratios are 1.24, 1.45 and 1.59. The current P/GP Ratio is 1.59 based on a stock price of $17.97. This stock price testing suggests that the stock price is relatively reasonable, but at the far range end of the reasonableness range. A P/GP Ratio is 1.59 is a rather high ratio.

I get a 10 year median Price/Book Value per Share Ratio of 1.65. The current P/B Ratio is 2.91 a values some 77% higher. The current P/B Ratio is based on a Book Value per Share of $6.17 and a stock price of $17.97. This stock price testing suggests that the stock price is expensive. The problem here is that the Book Value is declining. This is not a good thing.

When you look at P/S Ratios, the 10 year median P/S Ratio is 1.41 and the current ratios is 1.43. This stock price testing suggests that the stock price is reasonable and around the median.

This is not true looking at Cash Flow. The 10 year median Price/Cash Flow per Share Ratio is 12.40. The current P/CF Ratio is 16.34 based on a stock price of $17.97 and CFPS estimate for 2016 of $1.10. The current P/CF Ratio is some 32% higher than the 10 year median ratio. This stock price testing suggests that the stock price is expensive.

On a positive note, the company is growing both Revenue and Cash Flow. The 5 and 10 year growth in Revenue per share is 10.9% and 10.4% per year. The 5 and 10 year growth in CFPS is 6.6% and 21.2% per year. The dividend is good at 4.34%. Studies have shown that high dividend stocks can do very well in the long term.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most recommendations are a Buy. The 12 month stock consensus price is $19.10. This implies a total return of $10.63 with 6.29% from capital gains and 4.34% from dividends based on a stock price of $17.97.

In this press release, Morneau Shepell talks about celebrating their 50th anniversary. On Breaking Financial News we hear that National Bank Financial upped their target price to $20.00. See what analysts say about this stock on Stock Chase

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.

The last stock I wrote about was about was Empire Company Ltd (TSX-EMP.A, OTC- EMLAF)... learn more . The next stock I will write about will be Inter Pipeline Ltd. (TSX-IPL, OTC-IPPLF)... learn more on Monday, July 11, 2016 around 5 pm.

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 Morneau Shepell 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.

No comments:

Post a Comment