Equitable Group Inc.

Sound bite for Twitter and StockTwits is: Price reasonable. Some analysts are worried about this company's exposure to the Toronto Real Estate market and feel that there will be a drop in Real Estate prices in Toronto and that this will adversely affect Equitable Group. Well, the Real Estate market in Toronto cannot go up for ever and there must be a correction. Problem is that no one knows when. See my spreadsheet on Equitable Group Inc.

I do not own this stock of Equitable Group Inc. (TSX-EQB, OTC-EQGPF). I had read a glowing report on investing on this company in 2013, so I decided to check it out. It was interesting as it was loaning money to new immigrants, a class of people who generally have a difficult time getting loans and mortgages from our regular banks. It sounded intriguing.

If I was looking for a financial services stock, I would consider this stock. It is an unusual bank and it is a dividend growth stock.

This maybe a dividend growth stock, but dividend increases have not been consistent as dividends were not raised in all years. They started to dividends late in 2004 after going public earlier that year. Dividends are low and the dividend increases are moderate. The current dividend is 1.53% based on Dividends of $0.84 and a stock price of $54.95. The historical median dividend is 1.41% and the 5 year median dividend is 1.38%. Dividends have growth by 13.1% and 9.1% per year over the past 5 and 10 years.

The Dividend Payout Ratio is low. The DPR EPS for 2015 is at 9.57%. The 5 year DPR for EPS is 9.97%. Since the cash flow is often negative, there is no DPR for CFPS that is meaningful. Banks often have negative cash flow.

The company has good growth in Revenue, Earnings and Book Value. There is an article by Sarah Johnson on CFO that talks about why cash flow is basically meaningless for Banks. This is an American discussion, but we have the same problem in Canada.

The 5 year low, median and high median Price/Earnings per Share Ratios are 5.67, 7.20 and 8.43. These are very low, but the corresponding 10 year values are not much better at 5.87, 7.10 and 8.57. The current P/E Ratio is 6.81 based on a stock price of $54.95 and 2016 EPS estimate of $8.07. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $91.96. The 10 year low, median and high median Price/Graham Price Ratios are 0.48, 0.60 and 0.72. The current P/GP Ratio is 0.60 based on a stock price of $54.95. This stock price testing suggests that the stock price is relatively reasonable and below the median. It is close to being relatively cheap.

I get a 10 year median Price/Book Value per Share Ratio of 1.12. The current P/B Ratio is 1.18 a values some 5.3% higher and based on BVPS of $46.57 and a stock price of $54.95. This stock price testing suggests that the stock price is relatively reasonable, but above the median.

I get an historical median dividend yield of 1.41%. The current dividend yield is 1.53% a value some 8% higher based on dividends of $0.84 and a stock price of $54.95. This stock price testing suggests that the stock price is relatively reasonable and below the median.

When I look at analysts' recommendations, I find Buy and Hold Recommendations. Most of the recommendations are a Buy and the consensus recommendation would be a Buy. The 12 month stock price is $69.50. This implies a total return of 28.01% with 1.53% from dividends and $26.48% from capital gains based on a current stock price of $54.95.

James Conley at Baseball News Source talks about analysts' consensus of a Buy. Rupert Hargreaves on Value Walk talk about Marc Cohodes being short on this stock. He is betting against the Canadian housing market. He thinks that Equitable is poorly positioned to weather any sort of home price correction. Cohodes also believes that Equitable will not be able to pass stress tests required by the Office of the Superintendent of Financial Institutions. See what analysts are saying about this company at Stock Chase. David Baskin thinks there is an opportunity to by a quality company with Equitable Group.

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 Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF)... learn more. The next stock I will write about will be The North West Company (TSX-NWC, OTC-NWTUF)... learn more on Monday, October 31, 2016 around 5 pm.

Also, on my book blog I have put a review of the book Ancient World by Susan Wise Bauer. learn more...

Equitable Group Inc. is a niche mortgage lender. The company's primary business is first charge mortgage financing, which offer through company's wholly owned subsidiary, Equitable Bank (formerly The Equitable Trust Company). Equitable Bank is a Schedule I bank pursuant to the Bank Act; it actively originates mortgages across Canada and serves single family, small & large commercial borrowers. Its web site is here Equitable Group 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.