I do not own this stock of Equitable Group Inc (TSX-EQB, OTC-EQGPF). I had read a glowing report on investing on this company in 2013, so I decided to check it out. It was interesting as it was loaning money to new immigrants, a class of people who generally have a difficult time getting loans and mortgages from our regular banks. It sounded intriguing.
When I was updating my spreadsheet, I noticed a lot of green, with bits of blue for values over the past 5 and 10 years and other durations. The EPS growth is good except for the past 10 years for 5 year running averages. This points to the fact the EPS growth for the past 10 years may not be quite as good as it appears. EPS has grown by 12.94% and 14.43% per year over the past 5 and 10 years. If I look at the 5 year running averages over the past 5 and 10 years, the growth is 15.45% and 6.89%.
The 10 year 5 year running averages covers the last 5 years compared to the 5 years ending 10 years ago. The last 5 years is to the end of the last financial statement which is December 2017. So, it covers 5 years from 2013 to 2017 inclusive compared to the 5 years from 2003 to 2007 inclusive.
The dividend yield is low. The current dividend is 1.51%. The 5, 10 and historical median dividend yields are 1.38%, 1.63% and 1.47%. Dividend growth is moderate (8% to 14% range) with growth for the past 5, 10 and 12 years at 12.97%, 8.69% and 9.49%. So, the latest growth is the best. Dividends tend to be increased 2 or 3 times a year. The last increase is recent and was by 3.8%.
The Dividend Payout Ratio for EPS for 2017 was 9.8% with 5 year coverage also at 9.8%. So, the answer is that they can afford their dividends.
For financials, there is no point really to compare Long Term Debt to the Market Cap. What you want to compare is the Deposits and Securitization Liabilities to cash and investments. For this bank the Debt/Investments Ratio is running at 0.92. This is fine.
The Liquidity Ratio is quite high for this bank at 7.04, where 1.50 or higher is considered to be a good ratio, but this ratio is really not important for banks. The Leverage and Debt/Equity Ratios are very high at 18.13 and 17.13 for 2017. These ratios are considered good if they are below 2.00 or 1.00 respectively. These are not considered to be important ratios either for banks. These ratios are generally very high for banks.
The one that is important for banks is the Debt Ratio and for this bank it is at 1.06 for 2017. You would want this ratio to be 1.04 or higher. This bank has a good debt ratio.
The Total Return per year is shown 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.
Shareholders have done well with this stock. Although it has recently done better in the past 5 years than in the past 14.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 12.97% | 18.62% | 16.97% | 1.65% |
| 10 | 8.69% | 10.83% | 9.54% | 1.29% |
| 14 | 9.49% | 9.55% | 8.38% | 1.17% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 5.67, 7.20 and 8.43. The corresponding 10 year ratios are 5.46, 6.88 and 8.03. The historical ratios are 5.87, 7.10 and 8.57. The P/E Ratios have been quite low. It is not because of negative P/E Ratios as is generally the case for low ratios. The current P/E Ratio is 6.34 based on a stock price of $61.13 and 2018 EPS estimate of $9.65. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $122.42. The 10 year low, median, and high median Price/Graham Price Ratios are 0.45, 0.55 and 0.66. The current P/GP Ratio is 0.50 based on a stock price of $61.18. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.03. The current P/B Ratio is 0.89 based on a stock price of $61.18, Book Value of $1140M and a Book Value per Share of $69.03. The current ratio is some 14.00% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 1.47%. The current dividend yield is 1.77% based on dividends of $1.08 and a stock price of $61.18. The current dividend yield is 20.09% below the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap. A stock is considered cheap when the difference is 20% or greater so it is just at the cheap place.
The 10 year median Price/Sales (Revenue) Ratio is 3.43. The current P/S Ratio is 2.94 based on 2018 Revenue estimate of $344M, Revenue per Share of $20.82 and a stock price of $61.18. The current ratio is some 14.27% below the 10 year 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 Buy (4) and Hold (3). The consensus would be a Buy. The 12 month consensus stock price is $75.38. this implies a total return of 24.98% with 23.21% from capital gains and 1.7% from dividends based on a current price of $61.18.
Cameron Brookes on Simply Wall Street thinks this stock is selling below its intrinsic value. Alfredo Boyd on Northfield Review says this company has a Gross Margin Score of 13 which is good. Ambrose O'Callaghan on Motley Fool likes this bank at the current price. See what analysts are saying about this company on Stock Chase. Some like this bank and some do not.
Equitable Group Inc is a financial services company. The company through its subsidiary serves retail and commercial customers across Canada providing savings solutions and mortgage lending products. It also runs a digital bank under the EQ Bank brand. Its web site is here Equitable Group Inc.
The last stock I wrote about was about was Medtronic Inc. (NYSE-MDT) ... learn more. The next stock I will write about will be North West Company (TSX-NWC, OTC-NWTUF) ... learn more on Wednesday, October 24, 2018 around 5 pm. Tomorrow on my other blog I will write about Money Show 2018 – Fireside Chat.... learn more on Tuesday, October 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.
No comments:
Post a Comment