Monday, November 28, 2016

Innergex Renewable Energy

Sound bite for Twitter and StockTwits is: Bit expensive. I do not like this stock. They cannot afford their dividends and the Long Term Debt/ Market Cap Ratio is above 1.00. Also their book value is dropping. See my spreadsheet on Innergex Renewable Energy.

I do not own this stock of Innergex Renewable Energy (TSX-INE, OTC-INGXF), but I used to. I bought this stock in 2006 as it was highly rated and it was in the alternative energy field. I bought Innergex Power on a buy rating and favorable report from TD although it has only been going from 2003. In 2008 I sold Innergex as I did not think that it is a stock I want to hold as dividend increased less than the rate of inflation.

This company used to be an income trust. On March 29, 2010 the company changed from an income trust of Innergex Power (IEF.UN) to Innergex Renewable Energy (INE) and the strategic combination of Innergex Power Income Fund and Innergex Renewable Energy became effective. For INE shareholders, dividends were cut in 2010 and then increased in 2011, so in the end dividends were only cut by just over 14%.

Dividends have been growing lately and the growth is at 6% per year over the past 5 years. However, dividends have declined over the past 10 years by 0.5%. Dividend yield is currently at 4.64% based on dividends of $0.64 and a stock price of $13.80. By my standards the dividend growth for the past 5 years is low and the dividends are good.

They are not earning enough to cover the dividends. In the past 5 years they have paid out in dividends more than they have earned. In 2015 they had an earnings loss of $0.37 and paid out $0.59 in dividends. Dividends have been covered by CFPS where 93.7% of the CFPS was paid out in dividends. The 5 year median payout via CFPS is better at 43%.

The Liquidity Ratio is good at 2.15. The Debt Ratio is very low at just 1.18 where you want to see a ratio of 1.50 or better. Leverage and Debt/Equity Ratios are very high at 6.63 and 5.63 where you want to see ratios of less than 3.00 and 2.00 respectively.

However, what really bothers me about their debt is that their long term debt is currently at a ratio to the market cap of 1.63. The market is valuing this company way below just the long term debt. This is not good.

I cannot test the stock price using Price/Earnings per Share Ratio because I just have negative P/E Ratios.

I get a 10 year median Price/Book Value per Share Ratio of 1.87. The current P/B Ratio is 4.48 a value some 140% higher. The current P/B Ratio is based on BVPS of $3.08 and a Stock Price of $13.80. This stock price testing suggests that the stock price is relatively expensive. In absolute terms a P/B Ratio of 4.48 is high.

I get a Graham Price of $3.90. The 10 year low, median and high median Price/Graham Price Ratios are 1.28, 1.42 and 1.57. The current P/GP Ratio is 3.54 based on a stock price of $13.80. This stock price testing suggests that the stock price is relatively expensive. In absolute terms a P/GP Ratio of 3.54 is high. Problem is earnings are low and Book Value is dropping.

You cannot use historical median dividend yields as this stock used to be an income trust. The 5 year median Dividend Yield is 5.57% and the current Dividend Yield is 4.64% a value some 18% lower. By this measure, the stock price seems to be reasonable but above the median. It is getting close to expensive.

The 10 year median P/S Ratio 5.25 and the current P/S Ratio is 5.13 a value some 2.4% lower. This stock price testing suggests that the stock price is reasonable and below the median. I think a P/S Ratio of 5.13 is a rather high one however.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. Most are a hold and the consensus recommendations would be a Hold. The 12 month stock price is $16.41. This implies a total return of 23.55% with 18.91% from capital gains and 4.64% from dividends.

Demetris Afxentiou of Motley Fool likes this stock and the renewable energy field. Some technical analysis is done on this stock at Wall Street Confidential. The Williams Percent Range shows that this stock is neither oversold nor overbought. There is a positive report on this company at World Finance.

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 and here.

The last stock I wrote about was about was PFB Corp. (TSX-PFB, OTC-PFBOF)... learn more . The next stock I will write about will be Crescent Point Energy Corp. (TSX-CPG, NYSE-CPG)... learn more on Wednesday, November 30, 2016 around 5 pm. Tomorrow on my other blog I will write about Valeant Pharmaceuticals and Debt... learn more on Tuesday, November 29, 2016 around 5 pm.

Innergex is involved in Canada's renewable energy industry. The Company develops, owns and operates facilities located in North America, leveraging run-of-river hydroelectric power generating facilities, wind farms and photovoltaic solar parks. Its web site is here Innergex Renewable Energy.

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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