Wednesday, January 4, 2017

Bird Construction Inc.

Sound bite for Twitter and StockTwits is: Buy for diversification. The stock price testing shows stock price is relatively cheap to reasonable. The stock has vulnerabilities in its debt ratios and the non-growth in BVPS. See my spreadsheet on Bird Construction Inc.

I do not own this stock of Bird Construction Inc. (TSX-BDT, OTC-BIRDF). This was listed as a top stock in ETF of iShares S&P TSX Canadian Dividend Aristocrats Index. I had not heard of it before, so I decided to do a spreadsheet on this stock. It has been a year since I last reviewed this stock.

You would buy this stock for diversification purposes. Since this is an industrial stock, expect volatility in the short term, but expect to earn both capital gains and rising dividend income in the longer term. You should expect volatility especially concerning Earnings and Cash Flow.

This stock used to be an income trust. As such it had high dividends. When it changed to a corporation, it did not lower its dividends. In fact it continued to raise its dividends. However, the dividends have become unaffordable as of the last three years. They just recently decreased the dividends by 48.7% to make them more affordable. This is the proper decision for the company to make.

The financial statements are not yet in for 2016, but the Dividend Payout Ratio is likely to be around 127% and likely decreasing to 83% in 2017. These are still rather high as I would prefer to Dividend Payout Ratio to be at 60% or lower for this type of stock. The potential Dividend Payout Ratio for CFPS is likely to be around 46% in 2017 and declining to a much better rate of 27% in 2017. I prefer DPR for CFPS to be at 40% or less. Until DPRs improve, I believe that the dividend could still be at risk.

A weakness for this stock is the debt ratios. The Liquidity Ratio for 2015 is 1.24. Even when you added in cash flow less dividends it is still low at 1.32. The 5 year median values for these ratios are 1.28 and 1.32 respectively. I prefer to see this ratio for at 1.50 or above for safety's sake. The Debt Ratio is also low at just 1.30 in 2015 and a 5 year median at 1.30. This gives the stock vulnerability in bad times.

The Leverage and Debt/Equity Ratios are a little too high. The ratios for 2015 are 4.30 and 3.30 with 5 year median values at 3.75 and 2.75. Also, their accounts payable is rather high as regards to the market cap of this stock in 2016. It is true that the market cap is falling, probably due to the dividend cut, but this is vulnerability for the company.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.36, 15.71 and 18.49. The 10 year corresponding ratios are 8.67, 10.40 and 13.54. The corresponding historical ratios are 6.70, 9.93 and 11.22. The current P/E Ratio is 14.38 based on 2017 EPS of $0.63 and a stock price of $9.06. This Stock Price testing suggests that the stock price may be relatively reasonable.

I get a Graham Price of $7.26. The 10 year low, median and high median Price/Graham Price Ratios are 1.07, 1.40 and 1.67. The current Price/Graham Price Ratios is 1.25 based on a stock price of $9.06. 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 3.07. The current P/B Ratio is 2.32 based on BVPS of $3.90 and a stock price of $9.06. The current P/B Ratio is some 24% lower than the 10 year median P/B Ratio. This stock price testing suggests that the stock price is relatively cheap. There are some problems here in that the P/B Ratio has been quite high in the past and growth in BVPS is less than 1% over the past 5 years. This shows more vulnerability for this company.

I cannot do any testing on dividend yield as this company has just decreased their dividends. However, the dividends have been rather high and the decrease brings this company's dividend yield more in line with other former income trust companies. The current dividend is 4.30% based on dividends of $0.39 and a stock price of $9.06.

The 10 year P/S Ratio is 0.41. The current P/S Ratio is 0.24 based on a stock price of $9.06 and 2016 Revenue estimate of $1,575.00 or $37.04 per share. The current P/S Ratio is some 40% lower than the 10 year median. This Stock Price testing suggests that the stock price is relatively cheap. A P/S Ratio below 1.00 normally shows a cheap stock price.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most recommendations are a Hold and the consensus recommendation would be a Hold. The 12 month stock price consensus is $10.00. This implies a total return of 14.68% with 10.38% from capital gains and 4.30% from dividends based on a current stock price of $9.06.

The company put out a Press Release about a new project on January 2, 2017. Staff writers on Wall Street Confidential have put out some technical statistics on this stock. The Williams Percent Range is -84.75. A reading between -80 to -100 may be typically viewed as strong oversold territory. This would indicate a low price. See what analysts are saying about this stock on Stock Chase.

The last stock I wrote about was about was Metro Inc. (TSX-MRU, OTC-MTRAF)... learn more . The next stock I will write about will be Bank of Montreal (TSX-BMO, NYSE-BMO)... learn more on Wednesday, January 4, 2017 around 5 pm. Tomorrow on my other blog I will write about Something to Buy January 2017... learn more on Thursday, January 5, 2017 around 5 pm.

The company operates from 12 offices across Canada serving the heavy industrial market in all provinces as well as serving the industrial, commercial and institutional (ICI) markets in all provinces with the exception of Quebec. The work of the company is split almost evenly between the heavy industrial market and the ICI sector. Its web site is here Bird Construction 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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