I do not own this stock of Just Energy Group Inc. (TSX-JE, NYSE-JE). I started to follow this is July 2010. It was one of the high yield Income Trusts that people were talking about, so I decided to check it out.
When I was updating my spreadsheet, I noticed a lot of red ink. They are still using Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) even though it has not been a unit trust since 2009. However, even these values are going down. The EPS is very volatile. With the 5 year running average EPS over the past 5 years, there is a gain because of the huge loss in 2009. Looking at the 5 year running average EPS after over a longer period, the EPS is down.
On the other hand, there is insider buying. There is insider buying by both the CEO and Chairman. Insider buying is at 0.05%. This is high.
Dividend yields are very high. The old income trusts tended to have higher dividends then corporation because income trust can pay higher dividends. However, the yields on this company never went down even with the cuts to dividends. The current dividend yield is 12.53% with 5, 10 and historical yields at 7.22%, 9.41%, and 7.92%.
Since changing to a corporation, the company first increased the dividends, then kept them flat, then decreased them and now they are flat again. It would seem like the company has no idea where they should go on dividends. Most companies have a sense about how much they can afford now and in the future. This company seems to have no idea at all.
The dividends are sufficiently covered by FFO and AFFO. However, the company is now a corporation. Now dividends need to be covered by earnings. The Dividend Payout Ratio for EPS for 2017 is high at 113% with 5 year coverage at 120%. The DPR for CFPS is better with the coverage for 2017 fine at 35%, but the 5 year coverage at 51% is high. Ideally the DPR for CFPS should be 40% or lower.
In August of this year, the company says that they have a strong balance sheet. I think it is very weak. The Liquidity Ratio for 2017 is low at 1.25. I like to see this at 1.50 or above. Adding in Cash Flow after dividends does no good. If you add back in the current portion of the long term debt it only rises to 1.45.
The Debt Ratio is 1.16 in 2017. This has been lower than 1.00 a lot of times. When it is below 1.00 it means that assets cannot cover liabilities. The 5 year median of the Debt Ratio is 0.89. Leverage and Debt/Equity Ratios are high at 20.35 and 17.49 respectively. The 5 year medians of these ratios are -2.81 and -3.79 respectively because of negative book values.
The definition of a strong balance sheet is a company having great debt ratios. You want the Liquidity Ratio and Debt Ratios to be consistency at or above 1.50. You would especially want the current assets to cover current liabilities and assets to cover liabilities. That means these ratios have to be at 1.00 or above. You want the Leverage and Debt/Equity Ratios to be below 2.00 and 1.00 respectively. However, for utilities, below 3.00 and 2.00 is normal.
The Total Return per year is show below for years of 5 to 16. 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.
You can see that even the high dividends cannot cover the losses for shareholders over the past 5 and 10 years.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | -16.61% | -3.05% | -10.66% | 7.62% |
| 10 | -8.22% | -3.07% | -11.49% | 8.42% |
| 15 | -0.51% | 14.72% | -1.43% | 16.15% |
| 16 | 3.24% | 20.28% | 0.99% | 19.29% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 2.66, 3.11 and 3.56. The corresponding 10 year ratios are 2.34, 2.88 and 3.56. The corresponding historical ratios are 5.78, 6.92 and 8.06. These ratios are low because there are some years of earning losses. The current P/E Ratio is 6.54 based on a stock price of $3.99 and EPS estimate for 2019 of $0.61. Using the historical P/E Ratios, this stock price is relatively reasonable and below the median.
Problems with Graham price is not only years with earnings losses, but also years with negative book values. I get a current Graham Price of $2.74. The low, median, and high median Price/Graham Price Ratios are 0.87, 1.11 and 1.33. The current P/GP Ratio is 1.46 based on a stock price of $3.99. This stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 7.31. The 10 year median P/B Ratio is a negative 3.21. The problem with P/B Ratios is there are a number of years with negative book values. However, a P/B ratio is 7.31 is very high. On an absolute basis this stock price is relatively expensive.
I get an historical median dividend yield of 7.92%. The current dividend yield is 12.53% based on dividends of $0.50 and a stock price of $3.99. The current yield is some 58% above the historical yield. Problems with this is that as an income trust it would have had high yields. Also, the dividends have had a number of cuts in a number of years.
The 10 year median Price/Sales (Revenue) Ratio is 0.34. The current P/S Ratio is 0.15 based on 2019 Revenue estimate of $4,054M, Revenue per Share of 27.32 and a stock price of $3.99. the current ratio is some 57% below the 10 year ratio. This stock price is relatively reasonable and below the median.
The only stock price test that is clean is the P/S Ratio test. All the other ones have problems because of earnings losses, negative book values and varying dividends. Also, a very high yield tends to signal a cheap and risky stock.
When I look at analysts’ recommendations I find Strong Buy (1), Buy (2) and Hold (4). The consensus recommendation would a Hold. The 12 month stock price is $5.53. This implies a total return of 51.13% with 38.60 from capital gains and 12.53% from dividends.
Darrell McKinsey on Fairfield Current talks about some recent analysts buys on this stock. Just Energy on Global News Wire proves some comments on recent market activity. Will Ashworth on Motley Fool thinks that the company is oversold but still a risky buy. See what analysts are saying about this company on Stock Chase. Opinions vary, but the last couple were negative.
Just Energy Group Inc is a retail energy provider specializing in electricity and natural gas commodities, energy efficiency solutions and renewable energy options. Its web site is here Just Energy Group Inc..
The last stock I wrote about was about was Smart REIT (TSX-SRU.UN, OTC-CWYUF) ... learn more. The next stock I will write about will be Accord Financial Corp (TSX-ACD, OTC-ACCFF) ... learn more on Monday, September 17, 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.
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