Friday, October 14, 2016

HNZ Group Inc.

Sound bite for Twitter and StockTwits is: Price probably good. It would seem that ratios on this stock have always been quite low. On a relatively P/E Ratio basis it is expensive, but on a relative P/B Ratio it is not. I would prefer to go with the P/B Ratio as there are no estimates involved. We also know that the EPS is relatively low for this stock currently. See my spreadsheet on HNZ Group Inc.

This might be a suitable stock for someone building a stock portfolio and can stand some risk. If you are dependent on dividends, then this would probably not be a stock for you.

I do not own this stock of HNZ Group Inc. (TSX-HNZ, OTC-CDHPF). Canadian Helicopters Group Inc. has come up in Daily Buy and Sell Advisor of MPL Communications. Dividend Ninja Blogger also mentioned this stock in a blog entry talking about High Yield Canadian Stocks. See link. Richard Morrison wrote about small caps in the Financial Post in February 2011. He was screening financially healthy, profitable, reasonably valued small companies. He got 18 of them, many were former income trusts. One of the 18 stocks was this stock.

The one think I noticed when I updated the spreadsheet is how much cash they have on hand. At the end of 2015 they had over $11M and $0.85 per share or 7.3% of the share price of $13.30. At the end of the second quarter they had $14.7M or $1.13 per share or 8.5% of the share price. Some analysts take cash on hand off of share price when calculating P/E Ratios as they feel this is a better reflection of the true cost of the stock.

The other thing I noticed was how good the debt ratios are. It is important for companies strongly affected by the business cycle to have good debt ratios so that they can safely survive the bad times. This company does. The Liquidity Ratio for 2015 was 2.11. The Debt Ratio was 4.46 in 2015. The Leverage and Debt/Equity Ratios for 2015 were 1.29 and 0.29 respectively.

Long term debt is really low also. The Long Term Debt to Market Cap Ratio is 0.02. (These values are equal when the ratio is 1.00.)

This stock was issued as an income trust in 2005. It was not long after than the tax laws changed. There really has been very little dividend growth before dividends were cut this year. This was probably due to the fact they could not cover dividends in 2014 and there was an earnings loss in 2015. Whether or not this will be a dividend stock in the future is unknown at present. They did say that they were suspending dividends.

I am currently not interested in buying this stock as it is not a dividend growth stock. I will continue to follow it because it might become one. Who knows the future?

Last year was not a good year for this company. They have been having trouble since 2012 with dropping Revenue, Earnings and Cash Flow. Analysts expect 2016 to be a better year with increases in Revenue, Earnings and Cash Flow. If you compare the 12 month period to the end of the second quarter with the 12 months to the end of 2015, Revenue, Earnings and Cash Flow are all up from 2015.

The 5 year low, median and high median Price/Earnings per Share Ratios are 5.94, 8.32 and 10.70. The 10 year corresponding values are 4.45, 6.04 and 7.27. These are very low values. The current P/E Ratio is 16.84 based on a stock price of $13.30 and 2016 EPS estimate of $0.79. This testing suggests that the stock is relatively expensive. However, a P/E Ratio of 16.84 is a rather moderate ratio.

I get a Graham Price of $17.87. The Price/Graham Price Ratio is 0.74 based on a stock price of $13.30. The 10 year low, median and high median P/GP Ratios are 0.42, 0.54 and 0.69. This testing suggests that the stock is relatively expensive. On one hand when P/GP Ratio is at 1.00 or below, it points to a cheap stock price. On the other hand, this stock seems to have always had a low P/GP Ratio.

I get a 10 year median Price/Book Value per Share Ratio of 1.01. The current P/B Ratio is 0.74 based on BVPS of $3.32 and a stock price of $13.30. The current ratio is some 26% lower than the 10 year value. This stock price testing suggests that the stock price is relatively cheap. Also, when the P/B Ratio is 1.50 or less the stock price is considered good.

I get a 10 year median P/S Ratio of 1.02. The current P/S Ratio is 0.81 based on 2016 Revenue estimate of $213, Revenue per Share of $16.36 and a stock price of $13.30. The current P/S Ratio is some 20.3% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. When this P/S Ratio is 1.00 or less the stock price is considered to be good.

When I look at analysts' recommendations, I find Buy and Hold recommendations with more Hold recommendations and the consensus recommendation would be a Hold. The 12 month stock price is $15.38. This implies a total return of 15.64%, all from capital gains.

This Press Release talks about the company combining their two stock symbol into one, but they will continue to monitor non-Canadian Residence ownership. This Press Release talks about the suspension of dividends to maintain their balance sheet. I agree that borrowing to pay dividends is never prudent. I am glad the company can make the tough decisions. Gary Lamphier of the Edmonton Journal writes about how the CEO of this company is positive about the future.

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 Enbridge Income Fund Holdings Inc. (TSX-ENF, OTC-EBGUF)... learn more . The next stock I will write about will be Teck Resources Ltd. (TSX-TCK.B, NYSE-TCK)... learn more on Monday, October 17, 2016 around 5 pm. Today on my other blog I will write about Money Show 2016 - Charles White... learn more .

HNZ Group Inc. is an international provider of helicopter transportation and related support services with fixed primary operations in Canada, Australia, New Zealand and regions of Southeast Asia. The group also delivers contracted on demand support in Afghanistan and Antarctica. Its web site is here HNZ 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.

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