I do not own this stock of Innergex Renewable Energy (TSX-INE, OTC-INGXF), but I used to. In 2006 I bought Innergex Power on a buy rating and favorable report from TD although it has only been going from 2003. In 2008 I sold Innergex as I did not think that it is a stock I want to hold as dividend increased less than the rate of inflation.
When I was updating my spreadsheet, I noticed that the company has beaten the Revenue and EPS estimates for 2018. I got Revenue estimate for 2018 at $554M and Revenue came in at $576.6M. I got EPS estimate for 2018 at $0.15 and EPS came in at $0.21. They have a lot of debt. The long Term Debt/Market Cap Ratio for 2018 was 2.42. Debt has come down but it is still very high at 1.70. If the ratio is over 1.00 it means that the Long Term Debt is higher than the market cap.
This stock used to be an income trust company so it had higher dividends in the past and is still having problems covering the dividends with EPS. The dividend yield is currently Moderate (2% to 4% ranges), but used to be good (5% and above). The current dividend is 4.13%, with 5, 10 and historical yields at 5.18%, 5.57% and 6.04%.
They started to grow dividends again in 2014, but dividend growth is low (under 8%). Dividends have grown at 3.08% per year over the past 5 years. They changed from an income trust to a corporation in 2010 and reduced the dividends by 33% and switched from monthly to quarterly dividends. See chart below.
The Dividend Payout Ratios are not good for DPR or 5 year coverage. The current DPR for EPS is 321% for 2018. I cannot calculate the 5 year coverage because they had too many years of earning losses. The DPR for CFPS for 2018 is 23% with 5 year coverage at 32%. The DPR for FCF for 2018 is 76%. However, I cannot calculate the 5 year coverage for FCF because of the number of years with negative FCF
Debt Ratios are a problem area. The Long Term Debt/Market Cap Ratio for 2018 is 2.42. It is better currently at 1.70 because of decrease in debt and increase in Market Cap. It is really bad when this ratio is over 1.00 because it seems that the market does not think the company worth is as high as the Long Term Debt. The Liquidity Ratio for 2018 is 0.36. If you added in cash flow after dividends it is 0.54. This means that they cannot cover their current liabilities.
The Debt Ratio is 1.17 with 5 year coverage at 1.17 also. This is a very low ratio. The Leverage and Debt/Equity Ratios are very high at 6.75 and 5.75 respectively. The 5 year median is 4.20 and 2.20
The Total Return per year is shown below for years of 5 to 14 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 | 3.08% | 9.02% | 3.42% | 5.60% |
| 2008 | 10 | -0.15% | 14.62% | 7.12% | 7.50% |
| 2003 | 15 | 0.52% | 9.37% | 2.81% | 6.56% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 36.32, 46.20 and 56.07. The corresponding 10 year ratios are all negative at 2.73, 2.97 and 3.20. The corresponding historical ratios are 14.66, 16.46 and 17.83. The current P/E Ratio is 154 based on a stock price of $16.74 and 2019 EPS estimate of $0.11. This stock price testing suggests that the stock price is relatively expensive. The problem with the P/E Ratio is that they rotate between large negative values and large positive values. This testing makes no sense.
I get a Graham Price of $4.19. The 10 year low, median, and high median Price/Graham Price Ratios are 1.74, 1.87 and 1.99. The current P/GP Ratio is 4.03 based on a stock price of $16.94. 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 2.51. The current P/B Ratio is 2.39 based on a stock price of $16.94, Book Value of $941M, and Book Value per Share of $7.08. The current ratio is 4.6% below the 10 year median. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 6.04%. The current dividend yield is 4.13% based on a stock price of 16.94 and Dividends of $0.70. The current yield is 32% below the historical median yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median dividend yield is 5.57%. With the current dividend yield at 4.13%, the current yield is still relatively low. The current yield is 26% below the 10 year median yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 4.72. The current P/S Ratio is 3.95 based on 2019 Revenue estimate of $570M, Revenue per Share of $4.29 and a stock price of $16.94. The current ratio is 23% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable cheap.
Results of stock price testing is that the stock price is probably reasonable. The best test is the P/S Ratio test and that is showing the stock as relatively cheap. The other test that is fine in some respects is the P/B Ratio test. But it has the problem of a falling Book Value per Share which has fallen almost 5% per year over the past 5 years and 1.8% per year over the past year. The Dividend Yield test is a problem because this company used to be an income trust. Most income trust have cut dividends or kept them flat trying to get a better DPR for EPS. The P/E test has problems as noted above.
Is it a good company at a reasonable price? I personally would not buy this stock. It may be increasing their revenue, but it cannot make a profit. Book Value is falling. They cannot yet cover their Dividends by their EPS and they have a heavy debt load and awful debt ratios. Most of the stock price tests have problems features. This tells you some right there when most of the testing has problems. I think there are better green energy companies to invest in.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $17.25. This implies a total return of 5.96% with 1.83% from capital gains and 4.13% from dividends.
See what analysts are saying on Stock Chase . Most say it is good because of yield and only one worried about debt. Demetris Afxentiou on Motley Fool likes it for its yield. A writer on Simply Wall Street says the CEO is paid less than others in same industry. A writer on Simply Wall Street talks about the company’s debt load. Zacks Equity Research on Yahoo Finance talks about the company buying wind turbines from GE.
Innergex Renewable Energy Inc is an independent Canadian renewable power producer. It develops, acquires, owns, and operates hydroelectric, wind, and solar facilities in Canada, the United States, France, and Chile. Its web site is here Innergex Renewable Energy.
The last stock I wrote about was about was PFB Corp (TSX-PFB, OTC-PFBOF) ... learn more. The next stock I will write about will be Crescent Point Energy Corp (TSX-CPG, NYSE-CPG) ... learn more on Friday, November 22, 2019 around 5 pm. Tomorrow on my other blog I will write about Money Show 2019 – Patrick Ceresna.... learn more on Thursday, November 21, 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.
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