Wednesday, November 2, 2016

Pason Systems Inc.

Sound bite for Twitter and StockTwits is: Price is cheap. I like the dividend yield test because you are using current values. However, the dividend might be in danger of being cut or suspended. The time to buy this stock might be when revenues actually start to pick up. See my spreadsheet on Pason Systems Inc.

I do not own this stock of Pason Systems Inc. (TSX-PSI, OTC-PSYTF). I read a report on this stock in the Buy and Sell Advisor in September 2013. I had not heard of this dividend growth company before so I decided to investigate it.

This stock has had a rough year in 2015 and 2016 seems worse. However, this cannot be surprising because this company is in the business of support for the oil industry. I doubt that we will be off oil in less than 20 years. There will be companies that make money in oil even if the price stays low. Look at life insurance companies that have lately been able to make money and raise dividend even with interest rates staying low.

Dividends are moderate to low and the dividend growth has been good. The current dividend yield is good at 4.46% based on dividends of $0.68 and a stock price of $15.25. However, the 5 year median dividend yield is 2.77% and the historical median dividend yield (12 years) is 2.18%. The dividend yield started off below 1% and has been increasing over the years.

The dividend growth is good. The growth over the past 5 and 10 years is at 17.8% and 23.9% per year. The Dividend Payout Ratios is current rather high partially because they did not earn anything in 2015. If you look at average EPS and Dividend over the past 5 years, they have paid out 90% of earnings in dividends. The DPR for CFPS is better being at 60.6% in 2015 and has an average of 29.8%.

They are currently in a very tough business. However, they seem prepared to weather problems. Their debt ratios are good. Their Liquidity Ratio has always been good with a 5 year median of 2.99. However, the one for 2015 was 12.85 and the current one is 11.28. The Debt Ratios are also current very high at 13.88 for 2015 and currently at 11.85. The Leverage and Debt/Equity Ratios are also quite good at 1.08 and 0.08.

Analysts expect that the company will pick up in 2017 and 2018 but who really knows? Revenue is going south quickly. Revenue is down by 43% in 2015 and is expected to be down by another 47% in 2016. If you compare the 12 months to the end of 2015 to the 12 months to the end of the second quarter Revenue is down by 29%. Revenue for the second quarter of 2016 is some 54% lower than revenue for the second quarter of 2015.

The 5 year low, median and high median Price/Earnings per Share ratios are 15.86, 21.00 and 26.15. The corresponding 10 year values are 16.11, 20.46 and 25.16. The historical ones are 8.47, 19.22 and 23.95. These are fairly consistent. Since the EPS last year and this year is negative, we cannot determine a proper P/E Ratio and use this for testing the stock price. When the EPS turns positive, these values might be useful.

I get a Graham Price of $7.38. The 10 year low, median and high median Price/Graham Price Ratios are 1.80, 2.17 and 2.58. The current P/GP Ratio is 2.07. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year Price/Book Value per Share Ratio of 3.40. The current P/B Ratio is 3.06 based on BVPS of $4.98 and a stock price of $15.25. The current P/B Ratio is some 9.8% lower than the 10 year ratio. This suggests that the stock price is reasonable and below the median.

The current dividend yield is 4.46% based on dividends of $0.68 and a stock price of $15.25. The old historical dividend high is 3.95%. The current dividend yield is 12.9% higher than the old high dividend yield high. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations I find Buy, Hold and Underperform Recommendations. The most are Hold recommendations and the consensus recommendation would be a Hold. The 12 months stock price is $17.95. This implies a total return of $22.16% with 17.70% from capital gains and 4.46% from Dividends when based on a current price of $15.25.

Kevin Wiens put out a long report on this company on Seeking Alpha. It is dated March 2015, but it is very through and so still relevant I believe. Eileen French talks about this stock being downgraded to a Hold recently by GMP Securities. Other companies have done the same. Karen Thomas of Motley Fool wrote a report on this company a year ago. It is interest as it points out that this is a quality company that has handled the downturn better than other companies.

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 those reports here and here.

The last stock I wrote about was about was North West Company (TSX-NWC, OTC-NWTUF)... learn more . The next stock I will write about will be Molson Coors Canada (TSX-TPX.B, NYSE-TAP)... learn more on Friday, November 4, 2016 around 5 pm. Tomorrow on my other blog I will write about Money Show 2016 - Derek Foster... learn more on Thursday, November 3, 2016 around 5 pm

Pason is the leading global provider of specialized data management systems for drilling rigs. Their solutions, which include data acquisition, well-site reporting, remote communications, and web-based information management, enable collaboration between the rig and the office. Its web site is here Pason Systems 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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