I do not own this stock of Finning International Inc (TSX-FTT, OTC-FINGF). When I was in the market to buy an industrial stock in this area in 2007, I look at this stock was well as Toromont Industries (TSX-TIH). At the time I liked Toromont better, so that is what I bought.
When I was updating my spreadsheet, I noticed that although dividend increases have varied over the years, the last increase was low at 2.5% which is at the low end of their yearly increases. The yearly increases over the past 5 years was at 5.74% per year. Also, both Revenue and EPS came in lower than expected. Expected Revenue was $7,053M and expected EPS was $1.62. Revenue came in at $6,996 and EPS at $1.38.
The dividend yield is low (under 2%) to moderate (2% to 4% range). The current yield is 3.41% with 5, 10 and historical median dividend yields at 2.75%, 2.57% and 1.69%. Dividend yields were low until about 2008. Dividend growth has varied over time as you can see from the chart below. They are currently at the low range with growth for the past 5 years at 5.74% per year and the last dividend increase for 2019 at 2.50%
The Dividend Payout Ratios are higher than what I would like to see. This is probably the reason for the lower dividend increase in 2019. The DPR for EPS for 2018 is 57% with 5 year coverage at 93%. The DPR for CFPS is 20% with 5 year coverage at 19%. Because of a negative Free Cash Flow for 2018, the DPR for FCF cannot be calculated for 2018. The 5 year coverage is at 111%.
Debt Ratios are fine but lower than they have been in the last 5 years. The Long Term Debt/Market Cap Ratio for 2018 is 0.35. The Liquidity Ratio for 2018 is 1.97 with 5 year median ratio at 2.53. The Debt Ratio for 2018 is 1.59 with 5 year median at 1.63. The Leverage and Debt/Equity Ratios for 2018 are 2.70 and 1.70 with 5 year median ratios at 2.60 and 1.60.
The Total Return per year is shown below for years of 5 to 31 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 | 5.74% | 0.25% | -2.60% | 2.85% |
| 2008 | 10 | 6.27% | 8.67% | 5.26% | 3.40% |
| 2003 | 15 | 10.36% | 5.71% | 3.13% | 2.59% |
| 1998 | 20 | 10.89% | 10.70% | 7.62% | 3.08% |
| 1993 | 25 | 12.14% | 9.22% | 6.66% | 2.56% |
| 1988 | 30 | 7.93% | 10.30% | 7.56% | 2.73% |
| 1987 | 31 | 8.67% | 10.80% | 7.91% | 2.90% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 16.37, 20.79 and 24.66. The corresponding 10 year ratios are 12.47, 15.89 and 19.23. The corresponding historical ratios are 12.50, 1616 and 19.77. The current P/E Ratio is 14.66 based on a stock price of $24.05 and 2019 EPS estimate of $1.64. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $21.79. The 10 year low, median, and high median Price/Graham Price Ratios are 1.13, 1.47 and 1.74. The current P/GP Ratio is 1.10 based on a stock price of $24.05. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 2.28. The current P/B Ratio is 1.87 based on a stock price of $24.05, Book Value of $2,102M and Book Value per Share of 12.87. The current ratio is 18% 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 1.69%. The current dividend yield is 3.41% based on dividends of $0.82 and a stock price of $ 24.05. The current dividend is 102% above the historical median. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.57%. With the current dividend yield at 3.41%, it is some 33% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.67. The current P/S Ratio is 0.53 based on 2019 Revenue estimate of $7,393M, Revenue per Share of $45.27 and a stock price of $24.05. The current ratio is 21% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The best tests are the P/S Ratio test and the Dividend Yield tests which show the stock price is relatively cheap. For the P/S Ratio test, the ratio is just below the cheap line. The P/B Ratio test is close the cheap line.
Is it a good company at a reasonable price? I think the price is certainly reasonable if not cheap. The basic reason that I have not bought this stock is that I own Toromont and this company is also into selling heavy-duty machinery.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4) and Hold (4). The consensus would be a Buy. The 12 month stock price consensus is $27.80. This implies a total return of 19.00% with 15.59% from capital gains and 3.41% from dividends.
See what analysts are saying on Stock Chase. They it is affected by the global slowdown. Chen Liu on Motley Fool thinks this stock is currently a buy. A writer on Simply Wall Street says do not buy as they are buying out more in dividends than their FCF. A writer on Simply Wall Street says the company is slowing down. Steve Fairfield on Slater Sentinel says the Nation Bank Financial has up the target price for this stock.
Finning International Inc is a dealer and distributor of heavy-duty machinery and parts of the Caterpillar brand. The company sells and rents Caterpillar machinery to the mining, construction, petroleum, forestry, and power system application industries. Its web site is here Finning International Inc.
The last stock I wrote about was about was Crescent Point Energy Corp (TSX-CPG, NYSE-CPG) ... learn more. The next stock I will write about will be Quarterhill Inc (TSX-QTRH, NASDAQ-QTRH) ... learn more on Wednesday, November 27, 2019 around 5 pm. Tomorrow on my other blog I will write about Money Show 2019 – Ziad Jasani.... learn more on Tuesday, November 26, 2019 around 5 pm.
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