I do not own this stock of TMX Group Ltd (TSX-X, OTC-TMXXF). I looked at this stock in 2008 after I found it on a list of Strongest Dividend Growth stocks. I am interested in such stocks. However, this has not turned out to be a dividend growth stock after all. Dividends were flat from 2008 to 2015.
When I was updating my spreadsheet, I noticed that the company has very low Liquidity Ratio. The Liquidity Ratio for 2018 is 0.99. Adding in Cash Flow after dividends just gets you to 1.00. If this ratio is below 1.00, it means current assets cannot cover current liabilities. I prefer this ratio to be 1.50 or great.
Also, the Intangible/Market Cap Ratio is high at 1.01 for 2018. If this ratio includes both goodwill and intangibles the ratio is 1.42. These are very high. This means that goodwill and intangibles is higher than the what the market values this stock at (that is the market cap).
Dividend yields have been low (under 2%) to Moderate (2 to 4% range). The current dividend is 2.68%. The 5, 10 and historical median dividend yields are 2.94%, 3.31% and 3.11%.
Dividend Growth has been very uneven. Dividends grow rapidly in the first few years, then they flat from 2005 to 2015 and then they started to do good increases again in 2017. The dividends were flat from that long period because of Dividend Payout Ratios being high, especially for EPS. The last dividend increase was for 2019 and it was for 6.9%. Individual increases were sometimes high, but the overall effect is dividends in the low range (under 8%).
The Dividend Payout Ratios are currently fine. They have been high in the past. The DPR for EPS for 2018 is 44% with 5 year coverage at 56%. The DPR for CFPS for 2018 is 28% with 5 year coverage at 27%.
Debt Ratios are a vulnerability as they are not in good ranges. The Long Term Debt/Market Cap for 2018 is low and good at 0.19. The Liquidity Ratio for 2018 is too low at just 0.99. That means that the current assets cannot coverage the current liabilities. It does not get much better adding cash flow after dividends, nor adding back in debt. That is because current assets and liabilities are high number and cash flow is relatively much lower as is current portion of the long term debt.
The Debt Ratio are low at 1.12. I prefer this to be 1.50 or higher as I prefer the Liquidity Ratio to be in that range too. The Leverage and Debt/Equity Ratios are too high at 9.36 and 8.36 respectively.
The Total Return per year is shown below for years of 5 to 16 to the end of 2018. 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.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 6.96% | 9.83% | 6.75% | 3.08% |
| 2008 | 10 | 3.95% | 15.26% | 10.88% | 4.39% |
| 2003 | 15 | 13.17% | 12.37% | 8.31% | 4.06% |
| 2002 | 16 | 20.64% | 12.56% | 8.08% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.09, 15.18 and 17.55. The corresponding 10 year ratios are 12.75, 15.39 and 18.91. The corresponding historical ratios are 13.65, 21.08 and 25.00. The current P/E Ratio is 18.98 based on a stock price of $92.61 and 2019 estimate of $4.88. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $81.58. The 10 year low, median, and high median Price/Graham Price Ratios are 0.93, 1.07 and 1.24. The current P/GP Ratio is 1.14 based on a stock price of $92.61. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.14. The current P/B Ratio is 1.53 based on a stock price of $92.61, Book Value of $3.382M, and Book Value per Share of $60.62. The current P/B Ratio is some 34% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 3.11%. The current dividend yield is 2.68% based on dividends of $1.98 and a stock price of $92.61. The current yield is 14% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 4.70. The current P/S Ratio is 6.28 based on 2019 Revenue estimate of $823M, Revenue per Shae of $14.75 and a stock price of $92.61. The current ratio is 34% above the 10 year median. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is above the median to expensive and probably expensive. The testing shows the stock price as relatively above the median or relatively expensive. Especially telling is the P/S Ratio and P/B Ratio tests. The dividend growth has such a checkered past that it is hard to say if this is a good test or not.
Is it a good company at a reasonable price? This would not be a company I would personally buy because of the Liquidity Ratio and the Debt Ratios. I think in this case it is a vulnerability. Another negative is that the if you compare the intangibles to the market cap the ratio is 1.01. If you use goodwill and intangibles the ratio is 1.42. The positive is that there has been some good dividend increases, but the last one for 2019 is much lower at 6.9%. The increase for 2017 was 11.1% and for 2018 was 16%.
When I look at analysts’ recommendations, I find Buy (5) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus is $102.67. This implies a total return of 13.54% with 10.86% from capital gains and 2.68% from dividends based on a current stock price of $62.61.
See what analysts are saying on Stock Chase. They think it is a good financial stock and one worthwhile buying. Vishesh Raisinghani on Motley Fool thinks that now maybe a good time to start to accumulate this stock. A writer on Simply Wall Street says that shareholders have been doing well lately in Total Shareholder Return. The company gave some statistics and compared them to past periods on News Wire. Vishesh Raisinghani on Motley Fool says that buying this company you can be on Canada’s rebounding IPO Market.
TMX Group is an integrated, multi-asset class exchange group based in Canada with global exposure and services offered to the international financial community. TMX Group's businesses operate cash and derivatives markets for equities, fixed income, and energy, among other asset classes. The company also provides clearing facilities, data products, and other related services. Its web site is here TMX Group Ltd.
The last stock I wrote about was about was Inter Pipeline Ltd (TSX-IPL, OTC-IPPLF) ... learn more. The next stock I will write about will be Artis REIT (TSX-AX.UN, OTC-ARESF) ... learn more on Friday, July around 5 pm. Tomorrow on my other blog I will write about Boring Investing 2.... learn more on Thursday, July 18, 2019 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