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 first impression is that I would not touch it with a barge-pole.
When I was updating my spreadsheet, I noticed there is a large difference between basic and diluted shares outstanding. This is because of convertible debentures. They have repurchased some 7.8M shares for $16.6M. They said that they were stopping the dividends partly to use the money to buy back shares.
There are no longer any dividends being paid. The company wants to use the money it has to pay down debt (which I agree with) and to buy back shares (which they probably cannot afford to do.)
The company has a lot of preferred shares and it is because of their value that shareholders book value is negative. The company also has convertible debentures and this causes a large difference in basic and diluted EPS,
Debt Ratios are a big vulnerability. The debt level is much too high with Liquidity Ratio and Debt Ratio being too low. The Long Term Debt/Market Cap is 2.01. This is very high and you would like it below 1.00 and some analysts like it to be below 050. The Liquidity Ratio is low at 1.18 but becomes very good when you added in cash flow and then it is 2.36. The Debt Ratio is quite low at 1.23. I cannot calculate Leverage and Debt/Equity Ratios because of the negative book value.
The Total Return per year is shown below for years of 5 to 15 to the end of 2018 in CDN$. 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 chart below.
As you can see from the chart below only Canadian shareholders eked out return of 3.38% because of dividends.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 0.00% | -1.85% | -4.42% | 2.57% |
| 2008 | 10 | 0.00% | 1.33% | -9.29% | 10.62% |
| 2003 | 15 | 0.00% | 3.14% | -7.79% | 10.93% |
The Total Return per year is shown below for years of 5 to 15 to the end of 2018 in US$. The US shareholders have not done well.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 0.00% | -6.74% | -9.01% | 2.28% |
| 2008 | 10 | 0.00% | -4.59% | -13.83% | 9.24% |
| 2003 | 15 | 0.00% | -1.68% | -11.21% | 9.53% |
I cannot do any P/E Ratio testing because the P/E Ratios are all negative. This includes for the 5, 10 and historical periods. However, the current P/E is 8.15 based on a stock price of $3.24 and 2019 EPS estimate of $0.05 CDN$ ($0.04 US$). A P/E Ratio of 8.15 is a low P/E Ratio. This is in CDN$
I cannot calculate a Graham Price because this stock’s book value is negative.
I get a 10 year median Price/Book Value per Share Ratio of 1.32. However, I cannot calculate a new P/B Ratio because the book value is negative.
I cannot do a dividend yield test because they have cancelled the dividends.
The 10 year median Price/Sales (Revenue) Ratio is 0.80. The current P/S Ratio is 0.87 based on 2019 Revenue estimate of $311M, Revenue per Share of $2.84 and a stock price of $2.48. The current ratio is 10% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This is in US$.
Results of stock price testing is that the stock price is probably cheap. Most tests cannot be run because of problems like a negative book value and no past P/E Ratios that I can use in testing.
Is it a good company at a reasonable price? Personally, I would not buy this stock. Not only is it not a dividend growth company, its revenue is falling and it has a negative book value. It also has a high debt load. It is also a utility and even if it recovers, how much would you make on a recovering utility stock?
When I look at analysts’ recommendations, I find Buy (1) and Hold (3). The 12 months stock price consensus is $3.13. This implies a total return of 26.10% with it all from capital gains.
See what analysts are saying on Stock Chase. There are few analysts writing on this stock and over the years most do not like it. Rich Smith on Motley Fool talks about this tock dropping in May with positive news. Matt Smith on Motley Fool thinks the company will be unable to unlock value for investors at any time soon. A writer on Simply Wall Street says it is cheap but not posed to produced positive earnings in the new future. A writer on Zacks via Nasdaq talks about this stock being undervalued..
Atlantic Power Corp owns and operates a fleet of power generation assets in the United States and Canada. Its power generation projects sell electricity to utilities and other commercial customers. Atlantic Power's segments include Eastern U.S., Western U.S., 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 Wednesday, July 24, 2019 around 5 pm. Tomorrow on my other blog I will write about 20 American Dividend Stocks.... learn more on Tuesday, July 23, 2019 around 5 pm.
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