Wednesday, November 23, 2016

IBI Group Inc.

Sound bite for Twitter and StockTwits is: Price is Cheap to Reasonable. Price is hard check because of cancelled dividend and negative book value. I think it is a viable company, but it may take some time to recover. See my spreadsheet on IBI Group Inc.

I do not own this stock of IBI Group Inc. (TSX-IBG, OTC-IBIBF). I have had this stock on my list to investigate for some time before I finally did in 2011. What finally prompted me set up a spreadsheet on this stock was an investment report I read in March of 2011.

This company had 3 bad years of negative earnings in 2012 to 2014 inclusive. They suspended the dividends in 2013 after paying only 1 dividend. This used to be an income trust. A lot of income trust companies are having a hard time adjusting to being corporations. There is no mention of when they might resume dividends, but they did make a profit in 2015 but not in the first 3 months 2016.

Some analysts have complained about the high debt of this company. They seem to be trying to reduce debt. For the third quarter of 2016, the Debt/Market Cap Ratio moved to 0.35 from 1.31. Debt went down (50%), but market cap also went up (180%).

One serious problem is that the Book Value of this company is negative. This means that break value of the company is negative. This has occurred because of the three years of negative earnings.

The 12 year low, median and high median Price/Earnings per Share Ratios are 6.20, 9.45 and 12.17. They are probably a bit low. If you include only positive P/E Ratios the ratios are 10.49, 11.34 and 15.95. The current P/E Ratio is 21.34 based on a stock price of $6.19 and 2016 EPS estimate of $0.29. This is rather high. If you use the 2017 EPS estimate of $0.52 gives you get a P/E Ratio of 11.90. This probably points to the stock price is being reasonable and around the median.

I cannot do any P/B Ratio testing or any Graham Price testing because the Book Value for this stock is negative. I can do no dividend yield testing because the dividend is suspended.

The 10 year median P/S Ratio is 0.60. The current P/S Ratio is 0.44 based on a stock price of $6.19, Revenue of $353M and Revenue per Share of $14.14M. The current P/S Ratio is some 27% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

Another way to look at this stock is to see how Revenue per Share, Cash Flow per Share and EPS is changing relatively to the stock price change. On this stock you need to look at per share values because the outstanding shares have been rising by 14% and 17% per year over the past 5 and 10 years.

The stock price has been falling at 14.1% and 6.5% per year over the past 5 and 10 years. The Revenue per Share has been falling by 11.1% and 2.2% per year over the past 5 and 10 years. EPS has been fall by 16.2% and 14.1% per year over the past 5 and 10 years. Cash Flow per share has been falling by 27.9% and 14.2% per year over the past 5 and 10 years.

So what do we see in this data. First Revenue for the 12 month period ending in the third quarter is close to the estimate for Revenue in 2016. Revenue has not fallen as much as the stock price. This again shows that the stock price is relatively cheap.

EPS has dropped a little faster than the stock price. The 12 month period to the end of the third quarter shows negative EPS, but analysts expect earnings of $0.29. They could be right. This would suggest price is relatively reasonable.

There are lots of problems looking at cash flow. First for the 12 month period to the end of the third quarter, Cash Flow is down by just 9.7%, but the 2016 estimates shows Cash Flow down by 51%. Cash Flow has been volatile. Cash flow was negative 5 years ago.

When I look at analysts' recommendations I find Buy and Hold recommendations. There is more Buy than Hold recommendations. The consensus recommendation would be a Buy. The 12 months stock price consensus is $7.10. This implies a total return of 14.70% all from capital gains based on a current stock price of $6.19.

The company recently put out a Press Release about the partial redemption of their 6% convertible debentures. The company also put out a Press Release about their third quarterly results for 2016. There is a recent technical analysis of this company on Wall Street Confidential. Some analysts said positive things about this company at The Cerbat Gem . Most analysts are positive about this company 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 Johnson and Johnson (NYSE-JNJ)... learn more . The next stock I will write about will be PFB Corp. (TSX-PFB, OTC-PFBOF)... learn more on Friday, November 25, 2016around 5 pm. Tomorrow on my other blog I will write about the Five Year Rule... learn more on Thursday, November 24, 2016around 5 pm.

IBI Group Inc. is an international, multi-disciplinary provider of a range of professional services focused on the physical development of cities. The Company through IBI Group provides professional services, including planning, design, implementation, analysis of operations and other consulting services in relation to four main areas of development (urban land, building facilities, transportation networks and systems technology.) Its web site is here IBI 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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