I do not own this stock of Quarterhill Inc. (TSX-QTRH, NASDAQ-QTRH), but I used to. I am still following stock because I once owned it. I held it from 2000 to 2006 and basically lost all my investment.
When I was updating my spreadsheet, I noticed this company has very good debt ratios. However, because of the big drop in the stock price the Intangibles and Goodwill/Market Cap Ratio is over 1.00 at 1.10. There is also a lot of insider buying in the past year. The Net Insider Buying (NIB) is 0.06% for past 12 months, which is lower than last year when it was 0.11%. This is a percentage of the market cap and of course, the market cap has fallen with the stock price. The stock price is down by 40% in 2018.
One thing that is quite good is the cash flow. They do have positive cash flow over the past 5 years and this has been growing with Cash Flow up by 8.92% per year and CFPS up by 9.435 per year over the past 5 years.
They started to pay dividends in 2009 some 8 years ago. Dividends are paid in CDN$ even though the reporting is in US$. Dividends were increasing until 2016 and in 2017 they were cut over 76%. They cannot afford their current dividend so they certainly cannot grow them. The company is expected to have an EPS loss this year and basically have no EPS in 2019.
Dividends needed to be cut because the company could not afford them. The Dividend Payout Ratios for 2016 was 172% with 5 year coverage 1907%. The DPR improved in 2017 after the cut with DPR for EPS at 44% and 5 year coverage at 284%. Their DPR for CFPS was acceptable in 2017 at 8.5% with 5 year coverage at 34%. However, most years in the past the DPR for CFPS was above 40%.
The company has so little debt that the Long Term Debt/Market Cap Ratio is 0%. The other debt ratios are really good, with the Liquidity Ratio for 2017 at 3.32 and the Debt Ratio at 6.23. What I look for is for these ratios to be 1.50 or better, so these are really good. The Leverage and Debt/Equity Ratios for 2017 are 1.19 and 0.19. Since these ratios are under 2.00 and 1.00 respectively, they are very good also.
The Total Return per year is show below for years of 5 to 19 in CDN$. 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 from this chart, shareholders have not done well in the long term in this stock.
|Years||Div Gth||Tot Ret||Cap Gain||Div|
The Total Return per year is show below for years of 5 to 16 in US$. The US shareholders have done even worse than the CDN ones.
|Years||Div Gth||Tot Ret||Cap Gain||Div|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.75. 21.68 and 31.61 CDN$. The corresponding 10 year ratios are 0.22, -0.81 and -2.35 CDN$. The corresponding historical ratios are -4.29, -11.17 and -19.44 CDN$. The reason they make no sense is they were mostly EPS losses for the years before 2013.
We cannot do current testing with the P/E Ratio as analysts expect an earning loss in 2018 with a negative 6.57 P/E Ratio CDN$. The company is expected to earn a minimum amount in 2019 so the P/E Ratio is quite high at 105 CDN$. The P/E Ratio for 2020 is expected to be a more reasonable 9.55 CDN$.
I get a Graham Price of 0.87 CDN$. The 10 year low, median, and high median Price/Graham Price Ratios are 0.68, 1.06 and 1.45 in CDN$. The current P/GP Ratio is 1.60 based on a stock price of $1.39 CDN$. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.52 US$. The current P/B Ratio is 0.57 based on Book Value of $227M US$, Book Value per Share of $1.92 US$ and a stock price of $1.09 US$. The current ratio is some 63% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 2.29% CDN$. The current dividend yield is 3.60% based on dividends of $0.05 CDN$ and a stock price of $1.39 CDN$. The current yield is some 57% above the historical median. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 4.70 US$. The current P/S Ratio is 1.69 based on Revenue estimate for 2018 of $77M US$, Revenue per Share of $0.65 US$ and a stock price of 1.09 US$. The current P/S Ratio is some 64% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
The 10 year Price/Cash Flow per Share Ratio is 18.23 US$. The Current P/CF Ratio is 4.14 US$ based on 2018 CFPS $0.26 US$ and a stock price of $1.09 US$. The current P/CF Ratio is some 76% below the 10 year median. This stock price testing suggests that the stock price is relatively cheap.
In a lot of ways testing the stock price is rather silly by my normal methods. Problems are lack of positive earnings, rapidly declining dividends, and book value. The stock has some positive growth in both Revenue and Cash Flow, so this is where testing probably really counts. Both the P/S Ratio and P/CF Ratio testing is show that the stock is cheap. Note: that testing in CDN$ or US$ will basically show the same results.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2) and Hold (1) recommendations. The consensus would be a Buy. The 12 months stock price consensus is $1.95 US$ (or $2.58 CDN$. This implies a total return of 89.20% CDN$, with 85.60% CDN$ from capital gains and $3.60% CDN$ from dividends.
Gary James on Marea Informative compares this company and Micro Imaging Tech, a small US stock. Jenifer Prater on Simply Wall Street says this company is not really a dividend stock. Will Ashworth of Motley Fool thinks the company is a microcap worth watching. See what analysts are saying on Stock Chase. They talk about the company having no debt and new management changing the company’s strategy.
Quarterhill Inc is a diversified investment holding company focused on acquiring technology companies in the Industrial Internet of Things segment. It targets companies which capture, analyze, and interpret data. Its web site is here Quarterhill Inc.
The last stock I wrote about was about was Finning International Inc. (TSX-FTT, OTC-FINGF) ... learn more. The next stock I will write about will be Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF) ... learn more on December 3, 2018 around 5 pm.
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