Friday, April 20, 2018

SNC-Lavalin Group Inc.

Sound bite for Twitter and StockTwits is: Dividend Growth Industrial. Except for the P/E Ratio test this stock is showing mostly as relatively cheap. See my spreadsheet on SNC-Lavalin Group Inc.

I own this stock of SNC-Lavalin Group Inc. (TSX-SNC, OTC-SNCAF). Why I bought this stock. This stock was one from Mike Higgs' list of dividend growth stocks. I liked the idea of low dividends and high dividend increases. By 2008 this stock had grown so much it was too high a percentage of my portfolio. I sold 1/3 of my stock.

In 2012 I bought 100 shares for my trading account. I was selling low paying dividend stocks from my Pension RRSP and I still wanted SNC as part of my portfolio. In the end SNC was not one of the low paying dividend stocks I sold, but I still bought some shares for my Trading Account.

For some reason, different sites give different EPS for 2017 than the financial statements. TD WebBroker gives $2.15 as does Reuters. The 4-Traders site says $1.08. If you divide the Net Income of $382,035T by the Diluted Number of Shares of 163.029M you get $2.34 which is what the financial statements say. WebBroker, Reuters, 4-Traders are close on 2018 EPS Estimate with WebBroker and Reuters at $2.74 and 4-Traders at $2.73. 4-Traders have Net Income for 2017 as $176M and TD WebBroker has $382,035T .

The recovery from the last recession has been hard on a lot of companies. It has been a long slow recovery. As EPS increases declined, the company properly decreased the dividend increases. The dividend growth over the past 5, 10, 15, 20 and 25 years are 4.41%, 10.84%, 15.65%, 15.00% and 14.14%.

Yes they can afford their dividends. The Dividend Payout Ratio for 2017 was 47% with 5 year coverage of 32%. The DPR for CFPS is 22% with 5 year coverage of 41%. The 41% is a bit high as generally you do not want it above 40%. However, should be lower next year.

The Liquidity Ratio is low at 1.02. I like to see this at 1.50. The ratio shows that the current assets can barely cover the current liabilities. Cash Flow after dividends is not much help as it raises the ratio to just 1.03. If you take into account the current portion of long term debt then the ratio becomes 1.11. The Debt Ratio is good at 1.61.

The Leverage and Debt/Equity Ratios are fine at 2.63 and 1.63. These are rather normal for this sort of company. The Long Term Debt/Market Cap Ratio at 0.36 is also fine.

The Total Return is show below for years of 5 to 25. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.

As you can see the Total Return has been very good for shareholders except for the 10 year duration. There was a scandal about SNC contracts in Libya from 2001. See Bertrand Marotte article in the Globe and Mail. Because of the sandal the stock price fell and they had some financial difficulties. This is why the 10 year Total Return is low.

Years Div Gth Tot Ret Cap Gain Div
5 4.41% 9.35% 7.19% 2.16%
10 10.84% 3.32% 1.71% 1.61%
15 15.65% 13.66% 11.37% 2.29%
20 15.00% 17.46% 14.84% 2.62%
25 14.14% 13.60% 11.81% 1.79%

The 5 year low, median and high median Price/Earnings per Share Ratios are 21.61, 23.39 and 25.16. The 10 year corresponding ratios are 15.35, 20.77 and 25.05. The historical ratios are 14.34, 19.77 and 25.05. The current P/E Ratio is 20.52 based on a stock price of $56.03 and 2018 EPS estimate of $2.73. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a Graham Price of $42.71. The 10 year low, median and high median Price/Graham Price Ratios are 1.34, 1.80 and 2.21. The current P/GP Ratio 1.31 based on a stock price of $56.03. This stock price testing suggests that the stock price is relatively cheap.

I get a 10 year median Price/Book Value per Share of 3.32. The current P/B Ratio is 1.88 based on Book Value of $5,225M, Book Value per Share of $29.77 and a stock price of $56.03. The current P/B Ratio is some 43% below the 10 year median. This stock price testing suggests that the stock price is relatively cheap.

I get an historical median dividend yield of 1.47%. The current dividend yield is 2.05% based on dividends of $1.15 and a stock price of $56.03. The current yield is some 39% above the historical median yield. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median Price/Sales (Revenue) Ratio is 0.91. The current P/S Ratio is 0.84 based on 2018 Revenue estimate of $11,466M, Revenue per Share of $65.34 and a stock price of $56.03. The current P/S Ratio is 6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

When I look at analysts' recommendations I find Strong Buy (2) and Buy (9). The consensus would be a Buy. The 12 month stock price consensus would be $70.25. This implies a total return of 27.43% with 25.38% from capital gains and 2.05% from Dividends based on a current price of $56.03.

Becky Mayes on Simply Wall Street has concerns about the balance sheet of this company. SBN Contributor on Stanley Business News gives this stock a Piotroski F-Score of 4 for financial strength where 1 is low and 9 is high. See what analysts are saying about this stock on Stock Chase. They have varying views.

SNC-Lavalin Group Inc. is a global engineering and construction company offering engineering, construction and commissioning services in international markets. It serves the oil and gas, mining and metallurgy, infrastructure, and power sectors. Its web site is here SNC-Lavalin Group Inc.

The last stock I wrote about was about was Barclays PLC ADR (LSE-BARC, NYSE:-BCS)... learn more. The next stock I will write about will be Fortis Inc. (TSX-FTS, OTC-FRTSF)... learn more on Monday, April 23, 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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