TMX Group Ltd

Sound bite for Twitter and StockTwits is: Price seems reasonable. I still would not buy this stock as there are too many things I do not like about it. See my spreadsheet on TMX Group Ltd.

I do not own this stock of TMX Group Ltd (TSX-X, OTC-TMXXF). I looked at this stock in 2008 after I found it on a list of Strongest Dividend Growth stocks. I am interested in such stocks. However, this has not turned out to be a dividend growth stock after all.

The goodwill and intangible items are down in dollar terms because of impairment charges, but at a ratio to the market cap of 2.26 they are still relatively high. Last year the ratio was 1.69. This is not good. If the public values the intangible and goodwill items less than the company's balance sheet, it often leads to write-offs and earnings losses.

Personally, I would not consider this stock. I feel it has too much vulnerability. The debt ratios are low for Liquidity and Debt. The Liquidity does not even get high enough when you add in CF less Dividends. The Goodwill and Intangible Ratios are far too high. Also, it is currently not a dividend growth stock.

Currently the dividend is moderate, but there has been no dividend increase since 2011. It never had the habit of yearly dividend increases. The current dividend yield is 3.00% based on dividends of $1.60 and a stock price of $53.42. The dividend growth for the past 5 and 10 years is at 0.85 and 5.9% per year. If you had bought this stock 5 years ago, the dividend yield on your original purchase if you got it at a median price would only be 3.87%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 18.69, 21.74 and 24.79. The 10 year corresponding values are similar at 18.57, 21.88 and 24.92. The current P/E Ratio is 15.95 based on a stock price of $53.42 and 2016 EPS estimate of $3.35. This is a big jump over last year's EPS by some 448%. If you compare the 12 month period to the end of the first quarter to the 12 month period to the end of 2015, EPS is only up by 7.3%. EPS for the first quarter of this year is only up by 9% over the first quarter of last year. So you have to wonder about this estimate.

I get a Graham Price of $62.39 when I calculate the Graham Price the way I usually do using in the calculation the EPS estimate for that year. However, the EPS estimate may be way off. Others I know calculate the Graham Price using the 3 years trailing EPS. By this method the Graham Price would be $35.09.

Using either method the 10 year low, median and high median Price/Graham Price Ratios are similar except for the P/GP Ratio median high value. However, the problem is that current P/GP Ratio is 1.52 using the second method but only 0.86 using my usual method. So the second method shows the stock as expensive and my usual method shows it as cheap. These different methods should not have such different results.

The 10 year Price/Book Value per Share Ratio is 2.70. The current P/B Ratio is 1.03 a value some 62% lower based on a BVPS of $51.26 and a stock price of $53.42. This stock price test suggests that the stock is cheap. A P/B Ratio of 1.03 is a low ratio. The BVPS growth is 35% per year over the past 5 years. There was a 226% increase in BVPS in 2012 and a 311% increase in 2008. This is an unusual pattern for book value.

I get a Historical Median Dividend Yield of 3.21%. The current dividend yield is 3.00% based on a stock price of $53.42 and Dividends of $1.60. By this stock price test the stock price is reasonable but above the median. This would be my favourite test as it uses present values and not estimates.

The 10 year Price/Cash Flow per Share Ratio is 11.05. The current P/CF Ratio is 11.38 based on the 12 month Cash Flow of $255.4M and a stock price of $53.42. This stock price testing suggests that the stock price is reasonable but above the median.

The 10 year P/S Ratio is 4.52 and the current P/S Ratio at 4.00 is some 12% lower. The current P/S Ratio is based on 2016 Revenue estimate of $631.1M (Revenue per Share of $13.35) and a stock price of $53.42. This stock price testing suggests that the stock price is reasonable and below the median.

When I look at analysts' recommendations I find only Hold and Underperform recommendations. Most recommendations are a Hold and the consensus is a Hold. The 12 month stock price is $48.00. This implies a total loss of 7.15% with 3.00% from dividends and a capital loss of 10.15%.

Jeff Patterson on Finance Magnates talks about the fourth quarter of 2015 loss mainly due to impairment charges. Eric Lam of Bloomberg News talks on Financial Post of this stock becoming world's top-performing stock. However, that is only because it has recovered from the plunge in stock price that occurred in 2015. See analysts remarks on this stock at Stock Chase. There is only one remark in 2016 and that is a Don't Buy recommendation by Bruce Campbell.

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 Inter Pipeline Ltd. (TSX-IPL, OTC-IPPLF)... learn more . The next stock I will write about will be Artis REIT (TSX-AX.UN, OTC-ARESF)... learn more on Friday, July 15, 2016 around 5 pm. Tomorrow on my other blog I will write about stocks being a Value Trap... learn more on Thursday, July 14, 2016 around 5 pm.

TMX Group Ltd. operates two national stock exchanges, Toronto Stock Exchange serving the senior equity market and TSX Venture Exchange serving the public venture equity market, Natural Gas Exchange (NGX), a North American exchange for the trading and clearing of natural gas and electricity contracts and Shorcan Brokers Limited, a fixed income inter-dealer broker. Its web site is here TMX Group Ltd.

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.