Valener Inc.

Sound bite for Twitter and StockTwits is: Buy for Diversification. The stock price seems a little high. It has vulnerability of a very low Liquidity Ratio and I had a hard time finding the information I wanted in the accounting statements. Why I think this is a vulnerability is that it is easier to make a mistake in reading the financial statements. See my spreadsheet on Valener Inc.

I do not own this stock of Valener Inc. (TSX-VNR, OTC-VNRCF). Since this is a utility you should expect a good dividend and low dividend growth. I would be cautious about investing in this company. They at least put out the financial statements for Gaz Metro in which they have a big investment. The problem I find is that I cannot always find the information I am looking for. It has a history of lowering as well as raising the dividends.

I have dividend information going back to 1993, some 24 years. They have a habit of dividend decreases as well as dividend increases. They just started to raise the dividends again since having problems since 2005. The dividend growth over the past 5 years is 1.4% per year. Dividends are down by 2.2% per year over the past 10 years.

The last dividend increase was for this year and it was for 3.7%. They just started to raise the dividends again in 2015 after a 19% decrease in 2011 and 3 years of flat dividends. The current dividend yield is 5.47% based on dividends of $1.12 and a stock price of $20.46. This used to be considered a dividend growth stock, but this might be questionable at the moment.

They really have income rather than revenue. Income has been growing at 11.9% and 7% per year over the past 5 and 10 years. EPS growth is currently recent. The 5 and 10 year growth in EPS is at 14.5% and 2.7% per year. But if you look at the 5 year running EPS, growth it is down by 1.7% and 2.2% per year over the past 5 and 10 years. That means that the last 5 and 10 years growth in EPS is lower than the previous 5 and 10 year periods.

The debt ratio that I do not like is the Liquidity Ratio. This ratio for the last financial year ending in September 2016 is 0.77. This means that current assets cannot cover current liabilities. If you add in cash flow after dividends, the ratio becomes 1.52. This is an acceptable ratio. This also implies that the company is counting on cash flow to cover current liabilities. This is a vulnerability of the company.

The 5 year low, median and high median Price/Earnings per Share Ratios are 15.66, 16.11 and 16.57. The corresponding 10 year values are 14.38, 15.47 and 16.23. The corresponding historical values are 12.45, 13.80 and 15.01. The current P/E Ratio is 15.74 based on a stock price of $20.46 and 2017 EPS estimate of $1.30. This stock price testing suggests that the stock price is relatively reasonable but above the median and also getting close to relatively expensive.

I get a Graham Price of $22.13. The 10 year low, median and high median Price/Graham Price Ratios are 0.85, 0.92 and 1.03. The current P/GP Ratio is 0.92 based on a stock price of $20.46. This stock price testing suggests that the stock price is relatively reasonable.

I get a 10 year median Price/Book Value per Share of 1.11. The current P/B Ratio is 1.22 a values some 10% higher. The current P/B Ratio is based on a stock price of $16.74 and a stock price of $20.46. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get an historical median dividend yield is 7.11%. The current dividend yield is 5.47% based on dividends of $1.12 and a stock price of $20.46. The current P/B Ratio is some 23% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. The problem with this test is that dividends have gone down over the past 10 years.

When I look at analysts' recommendations I find Buy and Hold recommendations. Most of the recommendations are a Hold and the consensus recommendation would be a Hold. The 12 month stock price is $22.83. This implies a total return of 17.06% with 5.47% from dividends and 11.58% from capital gains.

David Glaser on Sports Perspectives says that Valener has a consensus rating of Hold from 5 ratings firms. Rives staff on Rives Journal does some technical analysis on this stock. They say that the Williams Percent Range is -92.92. This Williams Percent Range oscillates in a range from 0 to -100. A reading between 0 and -20 would indicate an overbought situation. A reading from -80 to -100 would indicate an oversold situation. This would place Valener in the oversold situation. That is the price is relatively low. Joseph Solitro of Motley Fool likes this stock. Some analysts on Stock Chase like this stock also.

The last stock I wrote about was about was Canadian Imperial Bank of Commerce (TSX-CM, NYSE-CM)... learn more . The next stock I will write about will be Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR)... learn more on Friday, February 3, 2017 around 5 pm. Tomorrow on my other blog I will write about Go Forward Basis... learn more on Thursday, February 2, 2017 around 5 pm.

Valener owns 29% of Gaz Metro and also owns a stake in the Seigneurie de Beaupré wind power projects located northeast of the city of Québec. Gaz Metro is Quebec's leading natural gas distributor. Its web site is here Valener 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.