Friday, December 9, 2016

Northland Power Inc.

Bye the way, I just bought some stock for this year and it was Calian Group Ltd. (TSX-CGY, OTC-CLNFF). My son just bought some Canadian Utilities Ltd (TSX-CU, OTC-CDUAF).

Sound bite for Twitter and StockTwits is: Relatively expensive. It could be expensive because of possible takeover. However, everyone seems to be ignoring the company's high debt. It seems that the bid price for this stock is already built into the current price, so most people will not make money on it hoping that someone does buy the company. See my spreadsheet on Northland Power Inc.

I do not own this stock of Northland Power Inc. (TSX-NPI, OTC-NPIFF). This company is into generating electric power. I have a lot invested in pipelines and I would like to have more invested in electric power as my utilities investment. I read a report on this stock that said it was a good defensive stock to buy. That is, it is a good stock to hold in a stock market correction. I can certainly see the logic of using utility stocks as defensive stocks.

I do not care what anyone says. Debt does count. This stock's Long Term Debt/Market Cap Ratio is 1.60. It is a huge warning sign when this ratio approaches 1.00. This stock is long past that. They also cannot make a profit. EPS has been negative for the last two years and still negative for the third quarter. Analysts expect a profit for 2016, but for the 12 months ending at the third quarter there is an earning loss of $0.28. I do not see where a profit will come from this year. This is another big warning sign. Comprehensive Income is also negative for the 12 months to the end of the third quarter.

There are some bright spots. They have good and growing cash flow. The other thing is the market seems hopeful. The total return is up by 10.03% and 8.91% per year over the past 5 and 10 years. The downside of this is that it is mostly in dividends. The portion of this above total return attributable to dividends is 6.64% and 6.46% per year over the past 5 and 10 years. The portion of this above total return attributable to capital gain is 3.57% and 2.27% per year over the past 5 and 10 years.

Operational Profit Margin (CF/Revenue) Ratio is good at 54% in 2015. This is a growing ratio also and this is good. However, they do not seem to be able to translate cash flow and OPM into profit.

This company used to be an income trust. A lot of these companies are having a hard time transitioning to a corporation. Part of this is the high dividends paid by income trusts. This company paid good dividends and only marginally reduced the dividends when changing to an income trust.

They were at one time looking like a dividend growth company, but not currently. Dividends have been flat since 2009. Dividend growth is at 0 and 0.3% over the past 5 and 10 years. They also cannot afford their dividends. Over the past 5 years they have an average earnings loss per year of $0.13 yet they are still paying dividends. (Total loss over the past 5 years is $0.65.) The company would have been better off if they had cut or suspended the dividends and get their debt under control.

The 5 year low, median and high median Price/Earnings per Share Ratios are negative as it's the corresponding 10 year ratios. The historical ratios are 12.94, 15.31 and 17.86. The current P/E Ratio is 56.51 based on a stock price of $23.17 and 2016 EPS estimate of 0.41. The P/E Ratio for 2017 is 37.98 based on a stock price of $23.17 and 2017 EPS estimate of $0.61. This testing suggests that the stock is relatively expensive.

I get a Graham Price of $5.55. The 10 year low, median and high median Price/Graham Price Ratios are 3.01, 3.46 and 3.91. These ratios are extremely high for a utility stock. The current P/GP Ratio is 4.18 based on a stock price of $23.17. This testing suggests that the stock is relatively expensive.

I get a Price/Book Value per Share Ratio of 2.58. The current P/B Ratio is 6.94 based on BVPS of $3.34 and a stock price of $23.17. The current P/B Ratio is some 168% above the 10 year ratio. This testing suggests that the stock is relatively expensive.

I cannot do Dividend Yield testing on this stock as it used to be an Income Trust company and these sorts of companies had very high yields. It was expected that old income trusts would end up with dividend yields between 4 and 5% when they became corporations. This would be accomplished by decline in dividends and/or increases in stock price. This is where this stock ended up due to stock price increases.

Another price check would be for Revenue using P/S Ratio. The 10 year P/S Ratio is 4.24. The current P/S Ratio is 3.96 a value some 6.8% lower. This stock price testing suggests that the stock price is relatively reasonable and below the median. However, a P/S Ratio of 4.24 and 3.96 are both rather high for a Utility Stock.

When I look at analysts' recommendations I see Strong Buy, Buy, Hold and Underperform recommendations. Most are Buy recommendations and the consensus is a Buy recommendation. The 12 month consensus stock price is $24.94. This implies a total return of 12.30% with 7.64% from capital gains and 4.66% from dividends based on a current stock price of $23.17.

There is some technical analysts at Wall Street Confidential. The Williams Percent Range shows that the stock is neither overbought nor oversold. It looks like companies are bidding to buy this company. See what analysts are saying about this company on 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 Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF)... learn more . The next stock I will write about will be DHX Media Ltd. (TSX-DHX.B, OTC- DHXMF)... learn more on Monday, December 12 around 5 pm.

Northland Power Inc. indirectly owns interests in power projects. Northland's assets comprise facilities that produce electricity from "clean" natural gas and "green" renewable sources such as wind and biomass. Electricity generation is sold under long-term PPAs with creditworthy customers, and any fuel for natural-gas-fired projects, where required, is purchased under long-term contracts to assure stability of operating margins. This company operates in Canada, US and Germany. Its web site is here Northland Power 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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