Friday, July 20, 2018

Atlantic Power Corp

Sound bite for Twitter and StockTwits is: Utility Stock. This stock is probably relatively cheap. However, it is cheap for a reason and is of relatively high risk. On the other hand, insiders are buying and this might be a good sign that they expect the company to do better in the future. See my spreadsheet on Atlantic Power Corp.

I do not own this stock of Atlantic Power Corp (TSX-ATP, NYSE-AT). Because I like utility companies and in 2010, I have read two columns that recommended this particular utility company (TSX-ATP), I decided to investigate it. After investigating this stock, my impression is that I would not touch it with a barge-pole. However, I will talk about it and upload my spreadsheet so that you can decide for yourself. This company has recently converted from an income trust to a corporation. This company was in the TSX Utility Index. (Perhaps this is why it is recommended?)

When I was updating my spreadsheet, I noticed that insiders are buying shares. The chairman significantly increased his holdings by just under1,500%. The value of his shares went from around $83,000 to $1.2M. the company has a negative book value and this is never good.

They were having trouble with earnings so they cut their dividend in 2016. Analyst do not expect any positive earnings over the next couple of years and also no dividends over this period. They cannot afford to pay dividends.

The Liquidity Ratio is low but this often occurs with utilities. They count on cash flow to properly cover current liabilities. However, with this company, even with cash flow the Liquidity Ratio is low. For 2017 the Liquidity Ratio was 1.27. with a 5 year median of also 1.27. The Liquidity Ratio with cash flow after dividends is still low at 1.44 with a 5 year median of 2.10. I prefer this ratio be 1.50 or higher.

The Debt Ratio at 1.20 for 2017 is low as is the 5 year median ratio at 1.34. I prefer these to be 1.50 or better also. The Leverage and Debt/Equity Ratios cannot be calculated as the book value is negative.

The Total Return per year is show below for years of 5 to 14. 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 by the charts below, shareholders have not make much in the way of money on this company.

The following is CDN$ Statistics

Years Div. Gth Tot Ret Cap Gain Div.
5 0.00% -21.15% -23.39% 2.24%
10 0.00% -2.02% -11.98% 9.96%
14 0.00% 3.25% -8.26% 11.51%

The following is US$ Statistics

Years Div. Gth Tot Ret Cap Gain Div.
5 0.00% -25.11% -27.12% 2.01%
10 0.00% -3.80% -13.97% 10.17%
14 0.00% -1.51% -11.46% 9.95%

The 5 year low, median, and high median Price/Earnings per Share Ratios are -2.70, -3.03 and -3.36. the corresponding 10 year ratios are -7.82, -8.91 and -10.67. The historical ones are -10.95, -1.89 and -15.90. The current P/E Ratio is -16.88 based on a stock price of $2.87 and 2018 EPS estimate of -$0.22 CDN$ (-$0.17 US$). You cannot do a P/E Ratio test with negative value.

I get a Graham Price of $2.12. The 10 year low, median, and high median Price/Graham Price Ratios are 0.85, 0.98 and 1.14. The current P/GP Ratio is 1.36 based on a stock price of $2.87 CDN$. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share of 1.64 CDN$. The current P/B Ratio is -72.32 based on Book Value of -$16.7M CDN$, Book Value per Share of -$0.15 and a stock price of $2.87 CDN$. You cannot do stock price testing with a negative Book Value.

I get an historical median dividend yield of $8.60 CDN$. There are currently no dividends being paid, so I cannot do any stock price testing with no dividends.

The 10 year median Price/Sales (Revenue) Ratio is 0.96 CDN$ and 1.26 US$. The difference is cause by the currency exchange rates varying. Since this company reports on US$, I will use US$ in this test. The 10 year median closing P/S Ratio is 1.26. The current P/S Ratio is 0.77 based on 2018 Revenue of $317M US$, Revenue per Share of $2.81 US$, and a stock price of $2.15 US$. This stock price testing suggests that the stock is relatively cheap.

I think that the last test on P/S Ratio is the only really good test. It is the only test I can do properly. The Graham Price test is not good because of negative earnings, AFFO and book values.

When I look at analysts’ recommendations I find Hold (2) and Underperform (2) recommendations. The consensus would be a Hold. The 12 month stock price is $4.19 CDN$ ($3.19 US$). This implies a total return of 46.02 and all in capital gains.

Marguerite Chambers on What’s on Thorold talks about institutional buying and selling of this stock. Matt Smith of Motley Fool has a rather negative view of this company. See what analysts are saying about this company on Stock Chase. Analysts seem negative about this company also.

Atlantic Power Corp is an independent electric power producer company that owns and operates a diverse fleet of power generation assets in the United States and Canada. Its web site is here Atlantic Power Corp.

The last stock I wrote about was about was Artis REIT (TSX-AX.UN, OTC-ARESF) ... learn more. The next stock I will write about will be Obsidian Energy Ltd TSX-OBE, NYSE-OBE) ... learn more on Monday, July 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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