Friday, July 14, 2017

TMX Group Ltd

I am posting early because I am going on a boat trip, although it might still be rained out. Hasn’t this summer been wonderful.

Sound bite for Twitter and StockTwits is: Dividend Paying Financial. My stock price testing shows some inconsistencies, but it would appear that the stock is getting expensive. I do not like the debt or Goodwill/Intangible situation. I personally would not consider buying this stock because of these situations. See my spreadsheet on TMX Group Ltd.

I do not own this stock of TMX Group Ltd (TSX-X, OTC-TMXXF). I looked at this stock in 2008 after I found it on a list of Strongest Dividend Growth stocks. I am interested in such stocks. However, this has not turned out to be a dividend growth stock after all.

Basically they stopped growing their dividends after 2007. They were mostly flat until 2016 when they increased the dividend by 12.5% and then this year the dividends were increased by 11.1%. Dividends are moderate with, until 2016 negligible growth. The current dividend yield is 2.86% with 5 and 10 year median dividend yields of 3.21% and 3.44%.

The 5 and 10 year dividend growth to the end of 2016 is 0.6% and 2.3% per year. The one to the end of 2017, if no further changes, is 4.6% and 2.8% per year over the past 5 and 10 years. The Dividend Payout Ratio for 2016 is 46% with 5 year coverage of 107%. The DPR is expected to be around 50% in 2017 with 5 year coverage of 79%.

I think that the debt ratios for this stock are really bad. I would not invest in it because of it. I do not think that the Ontario Government would let the company fail, but that is not necessarily good for shareholders. The Liquidity Ratio is for 2016 is 1.00. If you add in cash flow after dividends it rises to only 1.01. The Debt Ratio is just 1.15. I would prefer both of these ratios to be at 1.50 or better for safety's sake.

Another thing that is worrisome is the Goodwill & Intangibles Assets/Market Cap Ratio is 1.10. That means that the market cap of this company (or what investors think this company is worth) is less than the value the company has assigned to Goodwill & Intangibles Assets. This is not good.

The Return on Equity (ROE) is all over the place. The ROE for 2016 is 6.7% but the 5 year median is 1.9%. The ROE on comprehensive income is slightly better with a 2016 ROE of 6.6% and a 5 year median of 3.3%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 18.69, 21.74 and 24.79. The corresponding 10 year ratios are 15.15, 18.46 and 22.94. The corresponding historical ones are 17.35, 21.74 and 25.05. The current P/E Ratio is 17.89 based on a stock price $69.94 and 2017 EPS estimate of $3.91. This stock price testing suggests that the stock price is relatively cheap to reasonable, but below the median.

I get a Graham Price of $42.44. The 10 year low, median and high median Price/Graham Price Ratios are 1.03, 1.42 and 1.63. The current P/GP Ratio is 1.65. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Book Value per Share Ratio is 1.80. The current P/B Ratio is 1.31 based on BV of $2955.5M, BVPS of $53.47 and a stock price of $69.94. The current ratio is 27% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

The historical dividend yield is 3.20%. The current dividend yield is 2.86% based on dividends of $2.00 and a stock price of $69.94. The current dividend yield is 10.6% lower than the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Sales (Revenue) Ratio of 4.52. The current P/S Ratio is 5.19 based on 2017 Revenue estimate of $745M, Revenue per Share estimate of $13.48 and a stock price of $69.94. The current ratio is some 14.7% higher than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most are a Hold recommendation and the consensus recommendation would be a Hold. There are only 5 analysts following this stock and 4 give it a Hold. The 12 month stock target is $78.20. This implies a total return of 14.67% with 11.81% from capital gains and 2.86% from dividends.

Lucy Burton on The Telegraph quotes the boss of the TSX as saying that "You can't just survive as a small regional player". Aziz Abdel-Qader on Finance Magnates talks about TMX trading volumes. Joey Frenette on Motley Fool writes about this stock.

TMX Group Ltd. operates two national stock exchanges, Toronto Stock Exchange serving the senior equity market and TSX Venture Exchange serving the public venture equity market, Natural Gas Exchange (NGX), a North American exchange for the trading and clearing of natural gas and electricity contracts and Shorcan Brokers Limited, a fixed income inter-dealer broker. Its web site is here TMX Group Ltd.

The last stock I wrote about was about was Inter Pipeline Ltd (TSX-IPL, OTC-IPPLF)... learn more. The next stock I will write about will be Artis REIT (TSX-AX.UN, OTC-ARESF)... learn more on Monday, July 17, 2017 around 5 pm.

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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

No comments:

Post a Comment