Methanex Corp

Sound bite for Twitter and StockTwits is: Dividend Growth Materials. As far as I can see this is showing as relatively expensive or very close to expensive. The 20 years return is 9.6% per year is very good, but now may not be the time to buy this stock. Note that dividends have only been paid for 15 years. See my spreadsheet on Methanex Corp.

I do not own this stock of ). I started a spreadsheet in November 2010 as I had read some good reports on the stock at that time. It is also got a solid "C" grade in a 2009 Money Sense review of stocks. Money Sense rated the top 100 Canadian Dividend Paying stocks. Money Sense was looking for stocks that provided generous income at reasonable prices.

The year 2016 was not a good year for this company. They mainly had an earnings loss because of a drop in revenue and higher depreciation and amortization resulting in very low operating income. Analysts expect better this year with revenue rising some 53%. If you compare the 12 months period to the end of the third quarter of 2017 with 2016 the revenue is up some 39%. The analysts are probably correct or at least they sound reasonable.

Earnings are volatile for this company. When earnings are volatile, then 5 year running average are important. This is where you compare current 5 years to years 6 to 10 and compare current 5 years to 10 and 15 years back. In this case I am comparing 5 years average ending in 2016 to 5 year average ending in 2011 and 5 year average ending in 2016 to 5 year average ending in 2006.

For this stock the 5 year running average to years 2016 compared to 5 year running average to 2011 has EPS growing at 1.09% per year. For the 5 year running average to years 2016 to 5 year running average to 2006, the EPS has grown by 1.36%. Since the reporting is in US$, I am using US$ amounts. Growth is very low as far as earnings go.

Growth is better when looking at revenue. Revenue per Share declined by 4.47% and climbed by 1.11% per year over the past 5 and 10 years. However, looking at 5 year running averages they are at 5.13% and 7.51% per year over the past 5 and 10 years. These are better than EPS growth.

Cash Flow for the past 5 is good. Cash Flow per Share is up by 9.8% and down by 4.3% per year over the past 5 and 10 years. However, if you look at 5 year running averages they are better with the 5 and 10 years growth at 13.9% and 5.3% per year.

Earnings, Revenue and Cash Flow have been retreating over the past 2 years, but analysts expect these to improve in 2017, but then retreat somewhat in 2018 and 2019. Of course, the further out analysts look the less reliable are their estimates.

Dividends are moderate with dividend growth also moderate. The current dividend yield is 2.02% with a 5 year median yield at 2.31% and historical median yield at 2.46%. The dividends have grown 10.6% and 8.53% per year over the past 5 and 10 years. This is in US$ as dividends are paid in US$.

Since the EPS was negative in 2016, I will use only the 5 year coverage in the Dividend Payout Ratio. The 5 year coverage to 2016 was 51%. This is fine. The DPR for CFPS for 2016 was 33% and the 5 year coverage is 16%. This is also fine. They can afford their dividends.

It is important that a stock make money over the longer term for shareholders who buy and hold. With price and dividends the total return per year over 5, 10, 15 and 20 years is at 23.55%, 8.33%, 16.68% and 9.60%. If a stock can make you 9.6% per year over a 20 year period, that is a good stock. However with this stock there is volatility and you have to be able to look pass that to long term.

The 5 year low, median and high median P/E Ratios are 8.68, 12.37 and 15.19. The corresponding 10 year ratios are 9.12, 12.59 and 15.27. The historical ones are 7.41, 10.40 and 14.64. The current P/E Ratio is 16.64 based on a stock price of $75.59 and 2017 EPS estimate of $4.54 CDN$ ($3.56 US$) and a stock price of $75.59 CDN$. This stock price testing suggests that the stock is relatively expensive.

I get a Graham Price of $47.02 CDN$. The 10 year low, median and high median Price/Graham Price Ratios are 0.88, 1.21 and 1.46. The current P/GP Ratio is 1.61 based on a stock price of $75.59 CDN$. This stock price testing suggests that the stock is relatively expensive.

The 10 year median Price/Book Value per Share Ratio is 2.03 CDN$. The current P/B Ratio is 3.49 CDN$ a value some 72%. The current P/B Ratio is based on Book Value of $1943M CDN$, Book Value per Share of $21.63 CDN$ and a stock price of $75.59 CDN$. This stock price testing suggests that the stock is relatively expensive. (You get similar results in US$.)

The current dividend yield is 2.02% in US$ based on dividends of $1.20 US$ and a stock price of $59.50 US$. The historical median dividend yield is 2.47% a value some 18% higher. This stock price testing suggests that the stock price is reasonable but above the median. (You get a similar result in CDN$.)

I get a 10 year median Price/Sales (Revenue) Ratio of 1.13 US$. The current P/S Ratio is 1.75 US$, a value some 55% higher. The P/S Ratio is based on 2017 Revenue estimate of $3,061M US$, Revenue per Share of $34.08 US$ and a stock price of $59.50 US$. This stock price testing suggests that the stock is relatively expensive. (You get similar results in US$.)

When I look at analysts' recommendations I find Strong Buy (2), Buy (5), Hold (2) and Underperform (1) recommendations. The consensus would be a Buy. The 12 month stock price is $62.09 US$ or $79.25 CDN$. This implies a total return of 6.85% CDN$ with 4.82% from capital gains and 2.03% from dividends.

An EBU Staff Writer The Business Union thinks that the stock is expensive and may have reached or is close to its top. A Baxter contributor on Baxter Review also thinks this stock is overbought. Louis Casey on Frisco Fastball talks about some recent analysts ratings. (Note they are in US$.) See what analysts are saying about this stock on Stock Chase. Reviews are rather mixed.

Methanex is the world's largest supplier of methanol to major international markets in North America, Asia Pacific, Europe and Latin America. Methanol is an important ingredient in many of the essential industrial and consumer products. Head Office is in Vancouver, B. C. Canada. Its web site is here Methanex Corp.

The last stock I wrote about was about was Stantec Inc. (TSX-STN, NYSE-STN)... learn more. The next stock I will write about will be Magna International Inc. (TSX-MG, NYSE-MGA)... learn more on Thursday, December 28, 2017 around 5 pm. Today on my other blog I will write about RRSP Accounts.... learn more on Wednesday, December 27, 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.

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