Teck Resources Ltd

Sound bite for Twitter and StockTwits is: Price probably good. I would never buy a resource stock such a Teck for the long term. However, there is often money to be made in the short term when they cut their dividends. Buying now you might be a bit late to the party, but there may be still profits to be made. The real time to buy is when they announce a dividend cut. See my spreadsheet on Teck Resources Ltd.

I do not own this stock of Teck Resources Ltd. (TSX-TCK.B, NYSE-TCK), but I have in the past. The time to buy this stock is when it cuts its dividend. For example, I bought this stock in 2008 and sold in 2009. I bought this stock because the company purchased Fording Canadian Coal Trust at exactly the wrong time and got into financial difficulties and the stock price dropped off a cliff as they had to cut dividends. When the stock recovered somewhat in 2009, I sold for a profit.

The usual reason you are given to buy resource stocks is for diversification. I disagree. I know that resource stocks take up a large portion of the TSX, but they are volatile and not consistent dividend payers. I track some resources because they are part of the TSX and I like to know what is going on in resource stocks. However, I never consider them a long term investment. I buy them after dividends cuts and ride to some highs, but I never look at any resource stock as a permanent part of my portfolio.

This company again cut their dividends in 2015 and again in 2016. Because of this the stock price has been declining. In fact it has been declining since 2012. After the declared dividend cut in December 2015, the stock price (as usual) started to pick up. The stock price so far this year is up by some 379% based on a current price of $25.58.

The company has a long history of paying dividends. However, the dividends are not steady. Dividends can be cut or suspended as well as increased. For stocks you should be buying low and selling high. The best time to buy this stock is when they cut their dividends or better when they announce a dividend cut.

Analysts seem to expect this stock to start picking up this year or next. It is obvious the market expects better with this company because of the run up of the stock price this year.

One important point is the debt ratios and they are fairly good. The Liquidity Ratio for 2015 was 2.78 and the 5 year median is also 2.78. The Debt Ratio for 2015 was 1.92 and the 5 year median is 2.08. Leverage and Debt/Equity Ratios for 2015 was 2.08 and 1.08 with the 5 year median values at 1.92 and 0.92 respectively. Good dividend ratios can see a company through the bad times.

This company often has cash on hand. The median cash per share over the past 5 year is $4.81. At the end of 2015 they had cash on hand of $3.27 per share. At the end of the second quarter of 2016 they had $2.21 on hand which is 8.9% of the stock price.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.76, 17.78 and 22.80. The corresponding 10 year values are 7.89, 13.19 and 16.98. The corresponding historical values are 9.64, 14.66 and 19.68. We should probably be paying attention to the longer term values in this testing. The current P/E Ratio is 26.93 based on a stock price of $25.58 and 2016 EPS of $0.95. The P/E Ratios move to 23.05 and 20.63 for 2016 and 2017 based on EPS of $1.11 and 1.24. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $24.63. The 10 year low, median and high median Price/Graham Price Ratios are 0.60, 0.92 and 1.26. The current P/GP Ratio is 1.04 based on a stock price of $25.58. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.20. The current P/B Ratio is 0.90 a values some 24.7% lower. The current P/B Ratio is based on BVPS of $28.39 and a stock price of $25.58. This stock price testing suggests that the stock price is relatively cheap.

I get a 10 year P/S Ratio of 1.97. The current P/S Ratio is 1.80 based on Revenue estimate for 2016 of $8.187M, Revenue per Share of $14.21 and a stock price of $25.58. The current P/S Ratio is some 8.6% lower than the 10 year median. This stock price testing suggests that the stock price is reasonable and below the median.

When trying to judge a stock price, the P/E Ratio is in a lot of cases not the best measure. I personally like the dividend yield test the best, but it is not a great one for this case because dividends go down as well as up. The next best way is the P/B Ratio where you are not using estimates. The P/S Ratio testing is not bad because analysts often hit what the revenue will be when they do not hit where earnings will be.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold, Underperform and Sell. That is they are all over the place. Most of the recommendations are a Hold and the consensus would be a Hold. The 12 month stock price consensus is $22.10. Based on a currently price of $25.58, this implies a total loss of 10.86% with a capital loss of 11.26% and dividends of 0.39%.

Jonathan Ratner in this article in the Financial Post talks about RBC Capital Markets upgrading this stock to an Outperform (Buy) because of strength in coking coal prices and potential upside from zinc. Andrew Walker of Motley Fool likes this stock and thinks the price will go to $40. See what analysts are saying at 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 HNZ Group Inc. (TSX-HNZ, OTC- CDHPF)... learn more . The next stock I will write about will be Kombat Copper Inc. (TSX-KBT, OTC-PNTZF)... learn more on Wednesday, October 19, 2016 around 5 pm. Tomorrow on my other blog I will write about Money Show 2016 - Peter Schiff... learn more on Tuesday, October 18, 2016 around 5 pm.

Teck is a diversified resource company involved in mining and mineral development with major business units focused on copper, metallurgical coal, zinc, gold and energy. This company has interests in several oil sands developments. The company explores for resources in the Americas, the Asia Pacific Region, Europe and Africa. Its web site is here Teck Resources 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.