I do not own this stock of Pason Systems Inc. (TSX-PSI, OTC-PSYTF). I read a report on this stock in the Buy and Sell Advisor in September 2013. I had not heard of this dividend growth company before so I decided to investigate it.
When I was updating my spreadsheet, I noticed there is still a lot of red ink, but things are improving. This company has very good debt ratios. There is no long term debt and the Liquidity Ratio is 5.68 where a good ratio is 1.50 or above. On the other hand, there is a relatively large amount of insider selling, but the CEO and CFO are not selling and there only a small amount of insider selling by the Chairman.
The dividend yields are in the moderate range (2 and 3% ranges). The current dividend is 3.66%, with 5, 10 and historical median dividend yields at 3.42%, 2.63% and 2.29%. The dividend growth is moderate (8% to 14% range) to good (over 15%) over the past 13 years for which dividends have been paid. However, growth has been low recently. There were no increases in 2016 and 2017. The last increase was in 2018 and it was for 5.9%. Dividends have been paid over the past 13 years.
The short answer is currently they cannot afford their dividends. I understand why they continue as companies that cut dividends are treated harshly by dividend investors. The last time they could afford dividends was in 2014. They are not expected to be able to afford dividends again until 2019. The Dividend Payout Ratio for 2017 was 226% with 5 year coverage of 256%. The DPR for 2018 is expected to be 116% and for 2019, it is expected to be 94%.
The DPR for CFPS is higher than what I would like with 2017 payout ratio at 66% with 5 year coverage at 49%. This is also expected to get lower next year. I prefer the DPR for CFPS to be 40% or less but they are covering the dividends. It has been a long slow recovery from the 2008 recession and this recover has been hard on a lot of companies.
They have very good debt ratios. This is important for companies as it means that they can survive in hard times. They have no long term debt so the Long Term Debt/Market Cap Ratio is 0.00. The Liquidity Ratio 5.68. The Debt Ratio is 7.82. These are great ratios because good ratios start at 1.50 or above.
The Leverage and Debt/Equity Ratios are also very good at 1.15 and 0.15 respectively, with 5 year median ratios at 1.21 and 0.21.
The Total Return per year is shown below for years of 5 to 21. 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.
They have had problems lately and total return is low for the past 5 years.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 10.12% | 4.91% | 1.18% | 3.73% |
| 10 | 15.57% | 6.87% | 3.83% | 3.04% |
| 13-15 | 20.53% | 16.43% | 12.79% | 3.64% |
| 20 | 15.59% | 12.96% | 2.63% | |
| 21 | 21.66% | 18.28% | 3.37% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.86, 21.00 and 26.15. The corresponding 10 year ratios are 14.60, 19.90 and 25.21. The historical ratios are 13.24, 19.22 and 23.95. The current P/E Ratio is 32.80 based on a stock price of $19.68 and 2018 EPS estimate of $0.60. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $7.54. The 10 year low, median, and high median Price/Graham Price Ratios are 1.75, 2.15 and 2.61. The current P/GP Ratio is 2.61 based on a stock price of $19.68. This stock price testing suggests that the stock price is relatively reasonable but above the median and almost expensive.
I get a 10 year median Price/Book Value per Share Ratio of 3.40. The current P/B Ratio is 4.68 based on Book Value of $359M, Book Value per Share of $4.21 and a stock price of $19.68. The current P/B Ratio is some 38% above the 10 year median. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 2.29%. The current dividend yield is 3.66% based on a stock price of $19.68 and dividends of $0.70. The current yield is some 60% above the historical yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 4.41. The current P/S Ratio is 5.66 based on Revenue, of $297M, Revenue per Share of $3.48 and a stock price of $19.68. The current ratio is some 28% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
This is a hard stock to valuate the stock price. Ratios are high because this stock has experienced problems and it is associated with the oil and gas industry in Canada. For a company for which the earnings drop you are going to see high ratios. That is because the price does not drop as much as the earnings. Investor realize (or are not stupid enough) to go too low on the price because that would not reflect the real value of a company that has temporary problems.
Things are improving both Revenue wise and earnings wise for this company. The price of the shares is some 35% below the last high. The debt ratios are very good. The dividend yield test is showing this stock as relatively cheap. I think that this stock is at a very good current price. The recent dividend increase shows that management is expecting to earn more in the future.
When I look at analysts’ recommendations I find Buy (2) and Hold (4). The consensus would be a Hold. The 12 month stock price is $22.67. This implies a total return of $18.35 with 15.19% from capital gains and $3.66% from dividends.
Brandy Kinsey on Simply Wall Street says that the P/E Ratio on this stock is very high because investors are overvaluing the company’s earnings. However, what investors are doing are recognizing that earnings have been low and they are not stupid enough to lower the price too much for a temporary period of low earnings. Lisa Matthews on Fairfield Current talks about some recent analysts remarks. Simon Ball on Bay City Observer says that the company has a Book to Market of 0.2135 where a value less than 1 says a company is undervalued.. Brian Pacampara on Motley Fool likes this company because it has no long term debt. See what analysts are saying about this stock on Stock Chase. They like the company but some feel it is too expensive.
Pason Systems Inc provides data management systems for drilling rigs. Its products include electronic drilling recorder, pit volume totalizer, communications, data hub software, automatic driller,gas analyzer/total gas system & hazardous gas alarm system. Its web site is here Pason Systems Inc.
The last stock I wrote about was about was North West Company (TSX-NWC, OTC-NWTUF) ... learn more. The next stock I will write about will be Molson Coors Canada (TSX-TPX.B, NYSE-TAP) ... learn more on Monday, October 29, 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