Friday, December 1, 2017

Finning International Inc.

Sound bite for Twitter and StockTwits is: Dividend Growth Industrial. I think that the best test on price is the dividend yield test and this is showing that the company is relatively cheap. See my spreadsheet on Finning International Inc.

I do not own this stock of Finning International Inc. (TSX-FTT, OTC-FINGF). When I was in the market to buy an industrial stock in this area in 2007, I look at this stock was well as Toromont Industries (TSX-TIH). At the time I liked Toromont better, so that is what I bought. Now, the only reason I would not buy this company is because I own Toromont Industries Ltd. They are both involved with Caterpillar equipment, although the companies are often classified in different sectors. I classify these companies as industrials, but Stock Channel classifies Finning as Construction and Finning as Industrial.

2016 was the first year since 2009 that this company did not increase their dividends. There was an increase for 2017 but it was only for 4.1%. The average increase for the 5 years to 2009 was 17.5%. The average increase for the 5 year to 2016 was 7.5%. Current for this dividend growth stock, dividends are moderate and the dividend increases are low. The current dividend yield is 2.51% and the dividend growth for the past 5 and 10 years is at 7.4% and 8.2% per year. Prior to 2009, the dividend yield was low (1% range) and the dividend increases were good (above 15% per year).

In 2015 they had an earnings loss. The reason for the earnings loss was because they took a loss on assets and goodwill. Without these write-offs they would have had earnings of around $1.36. Revenue was down by 10% also in 2015. Revenue was again down 9% in 2016. Revenue is expected to be higher in 2017.

I think that they can afford their dividends. The Dividend Payout Ratio for 2016 was 192%, which is high. However, the 5 year DPR is 63%. Earnings are expected to be higher in 2017 and the DPR to be 56% and the 5 year DPR to be 77%.

The debt ratios are good. This means that the company can well survive bad times. If there will be volatility in earnings and cash flow, good debt ratios are required. The Liquidity Ratio is 2.74 with a 5 year median of 2.53. The Debt Ratio is 1.63 with a 5 year median of 1.63. Leverage and Debt/Equity Ratios are 2.58 and 1.58 with 5 year medians of 2.59 and 1.59. These last ratios are rather normal for this sort of company.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.13, 13.17 and 15.20. The 10 year values are 12.47, 15.85 and 19.23. The historical ratios are 12.28, 15.54 and 18.42. The current P/E Ratio is 22.98 based on a stock price of $30.33 and 2017 EPS estimate of $1.32. The 2018 P/E Ratio is 17.84 based on a stock price of $30.33 and 2018 EPS estimate of $1.70. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a Graham Price of $18.45 for 2017 and $20.93 for 2018. The 10 year low, median and high median Price/Graham Price Ratios are 1.15, 1.54 and 1.87. The 2017 P/GP Ratio is 1.64 and the one for 2018 is 1.45. This stock price testing suggests that the stock price is relatively reasonable and around the median.

The 10 year Price/Book Value per Share Ratio is 2.34. The current P/B Ratio is 2.65 based on a stock price of $30.33, Book Value of $1,926M and BVPS of $11.46. The current P/B Ratio is some 13% higher than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The historical dividend yield is 1.64%. The current dividend is 2.51% based on dividends of $0.76 and a stock price of $30.33. The current dividend yield is 52.8% higher than the historical one. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations, I find Strong Buy (2), Buy (5) and Hold at (1). The consensus would be a Buy. The 12 month stock price is 35.72. This implies a total return of $20.28% based on a current stock price of $30.33. The return is made up of 17.77% from capital gains and 2.51% from dividends.

Joseph Solitro on Motley Fool likes this stock and feels it is still inexpensive. Market Desk at Union Trade Journal says that the current Value Composite Score says the stock is slightly undervalued. Kyle Sanford on Simply Wall Street talks about buying dividend stocks and Finning stock in particular. See what analysts think of this stock on Stock Chase. Stephen Groff thinks that the worst is over and that the business has bounced off the bottom.

This company sells, rents and provides customer support services for Caterpillar equipment and engines. They cover Canada, UK, Argentina, Bolivia, Chile and Uruguay. Its web site is here Finning International Inc.

The last stock I wrote about was about was Crescent Point Energy Corp. (TSX-CPG, NYSE-CPG)... learn more. The next stock I will write about will be Quarterhill Inc. (TSX-QTRH, NASDAQ-QTRH)... learn more on Monday, December 4, 2017 around 5 pm. Quarterhill Inc. used to be WiLan Inc. (TSX-WIN, OTC-WILN).

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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