Friday, September 23, 2016

Wajax Corp

Sound bite for Twitter and StockTwits is: Industrial stock cheap. With a cheap price, you will also get risk. I believe that this company will recover, but I do not know when. Time to buy good companies is when they are cheap. See my spreadsheet on Wajax Corp.

I do not own this stock of Wajax Corp. (TSX-WJX, OTC- WJXFF). TD Waterhouse put out a report on good dividend paying stocks to own in November 2011. This was a stock they named. I had not heard of it before, so I decided to investigate it.

This is a company I would consider if I was looking for an Indusial stock. This sector has its ups and downs. They have paid good dividends when they could. I am sure dividends will grow as they can. However, industrial company can seldom raise their dividends consistently. The company has good debt ratios and this is a plus for companies in volatile sectors. The reason to invest in this stock is diversification.

The dividend yield is rather high and they struggle to cover the dividend with earnings. They had an earnings loss in 2015 and the Dividend Payout Ratio for 2016 is expected to be 135%. However, they are expected to have enough earnings in 2017 to cover the dividends. The DPR for CFPS is better. The DPR for CFPS in 2015 was 32% and the 5 year median was 44%.

When the company has paid dividends, the dividend yield was generally good to high. Current the Dividend yield is 6.84% based on dividends of $1.00 a stock price of $14.62. The historical high dividend yield is over 15% because this company was once an Income Trust. The historical low dividend is 0% and the historical median dividend yield is 4.01%. The 5 year median dividend yield is 6.62%. I consider any dividend of 6% or higher as a high dividend.

The problem with this stock if you depend on dividend income is that it probably will not be producing any or will cut their dividends in economic recessionary periods. They did not cut the dividend when they went from an income trust to a corporation, but they have been cutting their dividend every year since 2013. Dividends are down by 67% since their peak in 2012. They are possibly finished with dividends cuts for now. They also paid dividends between 1986 and 1991 but then cut them for some 12 years to 2004.

The company has good debt ratios. The Liquidity Ratio for 2015 was at 2.38 and the Debt Ratio for 2015 is 1.74. These are very good. The Leverage and Debt/Equity Ratios are fine but I like to see them lower. They were 2.35 and 1.35 for 2015.

The outstanding shares have increased and they have grown at 1.9% and 3.8% per year over the past 5 and 10 years. I would look at per share values to decide if company is growing or not.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.00, 11.76 and 13.52. The corresponding 10 year values are lower at 6.28, 8.72 and 11.28. The historical values are 8.22, 10.76 and 13.52. The current P/E Ratio is 19.76 based on a stock price of $14.62 and 2016 EPS estimate of $0.74. Note that the 2017 P/E Ratio is 11.16. The P/E for 2016 looks expensive, but not so for 2017 which points to a stock price that is relatively reasonable and around the median.

I get a Graham Price of $15.05. The 10 year low, median and high median Price/Graham Price Ratios are 0.79, 1.05 and 1.35. The current P/GP Ratio is 0.97 based on a stock price of $14.62. 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 2.54. The current P/B Ratio is 1.08, a value some 58% lower. The current P/B Ratio is based on a stock price of $14.62 and BVPS of $13.60. This stock price testing suggests that the stock price is relatively cheap.

The historical median dividend yield is 4.01%. The current dividend is 6.84% based on dividends of $1.00 and a stock price of $14.62. Usually when dividends are cut this test would not show a cheap price. However, the current dividend yield is some 70% higher than the historical median dividend yield. Of course it is nowhere near the historical high of 15% and will probably never get there again. Dividend yield has been all over the place since this company was a corporation, then an income trust and then again a corporation. This stock price testing suggests that the stock price is relatively cheap.

I get a 10 year median P/S Ratio of 0.44. The current P/S Ratio is 0.23 based on 2016 revenue estimate of $1,246M for 2016 ($62.71 Revenue per Share). The current P/S Ratio is based on a stock price of $14.62 and 19.870M shares. The current P/S Ratio is some 47% below the 10 year median. This stock price testing suggests that the stock price is relatively cheap.

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.

When I look at analysts' recommendations, I find only Hold recommendations, so the consensus would be a hold. The 12 month price consensus is $16.00. This implies total return of 16.28% with 9.44% from capital gains and 6.84% from dividends.

Hazel Jackson on Engelwood Daily talks about the stock gaining 1.5% on September 20, 2016. This article by the Canadian Press in the Winnipeg Free Press talks about the company reorganizing its operations in the face of a downturn in Western Canada's energy sector. The Western energy sector is still a problem. Brenda Bouw for the G&M talks about problems in Wajax Corp.

The last stock I wrote about was about was Telus Corp. (TSX-T, NYSE-TU)... learn more . The next stock I will write about will be Canadian Utilities Ltd. (TSX-CU, OTC-CDUAF)... learn more on Monday, September 26, 2016 around 5 pm.

Wajax is a leading Canadian distributor and service support provider of mobile equipment, industrial components and power systems. Reflecting a diversified exposure to the Canadian economy, Wajax has three distinct business divisions. The organization's customer base covers core sectors of the Canadian economy - mining, oil and gas, forestry, construction, manufacturing, industrial processing, transportation and utilities. Its web site is here Wajax Corp.

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