Friday, December 29, 2017

Bird Construction Inc.

Sound bite for Twitter and StockTwits is: Dividend Construction firm. Stock price would seem to be cheap to reasonable and below the median. To do well in the stock market you buy good companies when they are cheap. Of course this company is in construction and would probably be still at a medium risk. 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.

What I noticed is that this company has a lot of cash on hand. It goes up and down a lot over the years depending on how good or not so good the cash flow is. At the end of 2016 there was $6.16 cash for every share and it covered some 68% of the stock's price. Now there is $2.27 per share on hand and this covers 22.7% of the cost of the shares. Cash on hand does not see to go below 20% of the cost of the shares.

The dividend yield is current moderate at 3.90%. Dividend used to be higher but this company used to be an income trust and this would account for the higher rates. Going forward I would suspect dividend yield would be in the moderate range, although they may go to 4%. It is hard to say.

A lot of companies have had trouble switching from income trusts to corporations although with this company when their revenue declined the cost of construction did not decline as much. In other words the cost of construction was a higher proportion of the revenue. This is the cause of the decline in profits.

They really could not afford the dividends they were paying since 2013 when the Dividend Payout Ratio became over 100% at 267.75%. With the decline in dividends the DPR for 2017 is expected to be 116% and then declining to 65% in 2018. No one seems to expect the dividends to grow again within the next few years.

The debt ratios are below what I like to see. The Liquidity Ratio for 2016 is 1.19 with 5 year median of 1.24. Even with adding in cash flow after dividends the ratio is only 1.21 with 5 year median of 1.24. The Debt Ratio for 2016 is 1.25 with 5 year median of 1.35. I like to see both of these at 1.50 or above.

The Leverage and Debt/Equity Ratios are quite high with the current ones at 5.00 and 4.00 respectively. The 5 year median ratios are somewhat better at 3.75 and 2.75. However I would per these ratios to be below 3.00and below 2.00 respectively.

The long term debt compared to the market cap is very low at a ratio of 0.02. However, if you compare the Accounts Payable to the market cap, the ratio is very high and hitting the highest ever in 2016 at 1.19. It has since dropped back 0.89.

The total return for the past 5, 10, 15 and 10 years are 2.33%, 4.10%, 34.54% and 49.91% per year. It is not really surprising that the return is really good over the past 20 years. Stock prices tend to go up when dividends are started and dividends started to be paid some 20 years ago.

The 5 year low median and high Price/Earnings per Share Ratios are 14.92, 19.37 and 23.83. The corresponding 10 year values are 10.67, 13.17 and 16.87. The historical ratios are 6.91, 9.98 and 11.30. The current P/E Ratio is 28.14 based on a stock price of $10.13 and 2017 EPS estimate of $0.36. This stock price testing suggests that the stock price is relatively expensive.

Problem is that the EPS is expected to drop by 395 in 2017 from 0.59 to $0.36. This is probably reasonable as the EPS for the 12 month period to the end of the third quarter is $0.30.

I get a Graham Price of 5.49. The 10 year low, median and high median Price/Graham Price Ratios are 1.07, 1.44 and 1.69. The current P/GP Ratio is 1.85 based on a stock price of $10.13. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Book Value per Share Ratio is 2.99. The current P/B Ratio is 2.73 based on a stock price of $10.31, Book Value of $158M and Book Value per Share of $3.85. The current P/B Ratio is some 9% lower than the 10 years ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

There is not much use in doing a stock price test based on the dividend yield. The dividend yield has dropped because dividends have been cut in 2017.

The 10 year Price/Sales (Revenue) Ratio is 0.41. The current P/S Ratio is 0.30 based on 2017 Revenue estimate of $1.453M, Revenue per Share of $34.17 and a stock price of $10.31. The current P/S Ratio is some 28% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations, I find Strong Buy (1), Buy (2) and Hold (2). The consensus would be a Buy. The 12 month stock price if $11.00. This implied a total return of 12.44% with 3.85% from dividends and 8.59% from capital gains.

There is an interesting analysis of this stock on Capital Cube. The company announced a new contract on Cision. Safety in Value on Seeking Alpha gives a review of this stock. See what analysts are saying about this company on Stock Chase. They generally think it is a good company.

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.

The last stock I wrote about was about was Magna International Inc. (TSX-MG, NYSE-MGA)... learn more. The next stock I will write about will be Metro Inc. (TSX-MRU, OTC-MTRAF)... learn more on Tuesday, January 2, 2018 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.

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