I do not own this stock of Ritchie Bros Auctioneers Inc (TSX-RBA, NYSE-RBA). This was a stock suggestion I got and also it was a dividend growth stock found in the Canadian All Star List. Canadian All Star List.
When I was updating my spreadsheet, I noticed that although the stock price went down when all stock prices did, this stock price is back to where it was at the end of 2019. Their first quarter of 2020 is not bad. Their revenue is down a bit and their earnings are up a bit. This company reports in US$ and their dividends are paid in US$.
The dividend yields are low to moderate with dividend growth low. The current dividend yield is just in the Low range (below 2%) at 1.98%. The 5 and 10 year median dividend yields are in the moderate range at 2.15% and 2.14% with the historical median dividend yield low (less than 2%).
Dividend growth has been low (under 8%) in US$ and we should be looking at it in US$ because dividends are paid in US$. See charts below. However, the last increase which occurred this year was higher at 11.1% and this would put it into the moderate range (8% to 14% ranges).
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 was 56% with 5 year coverage at 64%. The DPR for CFPS for 2019 was 32% with 5 year coverage at 39%. The DPR for Free Cash Flow for 2019 was 28% with 5 year coverage at 45%.
Debt Ratios are fine. The Long Term Debt Market Cap for 2019 is 0.13 and is even lower currently at just 0.07. The Liquidity Ratio for 2019 is at 1.36. If you add in cash flow after dividends, the ratio is much better at 1.85. The Debt Ratio is good at 1.69. The Leverage and Debt/Equity Ratios are fine at 2.47 and 1.47.
The Total Return per year is shown below for years of 5 to 21 to the end of 2019 in CDN$. 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.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 9.52% | 14.59% | 12.28% | 1.31% |
| 2009 | 10 | 9.52% | 10.84% | 8.93% | 1.91% |
| 2004 | 15 | 13.46% | 12.06% | 10.04% | 2.02% |
| 1999 | 20 | 13.55% | 12.89% | 11.19% | 1.70% |
| 1998 | 21 | 12.00% | 10.48% | 1.52% |
The Total Return per year is shown below for years of 5 to 21 to the end of 2019 in US$. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 7.07% | 11.92% | 9.82% | 2.10% |
| 2009 | 10 | 7.18% | 8.59% | 6.71% | 1.88% |
| 2004 | 15 | 3.71% | 11.67% | 9.49% | 2.18% |
| 1999 | 20 | 13.51% | 13.78% | 11.78% | 2.00% |
| 1998 | 21 | 13.18% | 11.35% | 1.82% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 25.31, 29.30 and 33.30. The corresponding 10 year ratios are 25.35, 29.77 and 34.18. The corresponding historical ratios are 25.35, 29.66 and 33.06. These are quite consistent. The current P/E Ratio is 32.57 based on a stock price of $56.60 and 2020 EPS estimate of $1.74 (1.24 US$). This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
I get a Graham Price of $14.87. The 10 year low, median, and high median Price/Graham Price Ratios are 2.02, 2.40 and 2.75. The current P/GP Ratio is 3.81 based on a stock price of $56.60. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 4.29. The current P/B Ratio is 5.30 based on a Book Value of $860M, Book Value per Share of $7.76 and a stock price of $41.10. The current ratio is 23% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 17.96. The current P/CF Ratio is 63.23 based on 2020 CFPS estimate of $0.65, Cash Flow of $70.33 and a stock price of $41.10. The current ratio is 252% higher than the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get an historical median dividend yield of 1.97%. The current dividend yield is 1.98% based on dividends of $1.12 (0.80 US$) and a stock price of $56.60. The current dividend yield is 0.6% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and at the median. This testing is in CDN$.
I get a 10 year median dividend yield of 2.14%. The current dividend yield is 1.98% based on dividends of $1.12 (0.80 US$) and a stock price of $56.60. The current dividend yield is 7.5% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 5.34. The current P/S Ratio is 3.58 based on 2020 Revenue estimate of $1,243M, Revenue per Share of $11.49 and a stock price of $41.10. The current P/S Ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably reasonable. The historical median and 10 year median dividend yield tests show the stock price as relatively reasonable with the P/S Ratio testing show the stock price as relatively cheap. I know that the P/B Ratio and P/GP Ratio tests show that the stock price is relatively expensive and I see nothing wrong with these tests. For the P/CF Ratio test, I wonder about the very low CFPS estimates.
Is it a good company at a reasonable price? I think that this is a good company and has produced some good long term results. It would be a good stock to have when building a dividend portfolio. The stock price is probably reasonable. Although, I must admit the P/B Ratio is very high.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (2), Hold (5) and Underperform (1). The consensus would be a Buy. The 12 month stock price if $44.33 US$ or $62.13 CDN$. This implies a total return of 11.75% with 9.77% from capital gains and 1.98% from dividends in CDN$.
On Stock Chase there are no recent entries but most are complementary. Adam Othman on Motley Fool says this business is recession-resistant. A writer on Simply Wall Street says that this company’s higher than its industry’s P/E Ratio says that there is optimism towards this stock. A writer on Simply Wall Street says the dividend is well covered by earnings and cash flow. Maurice Goldstein on The Enterprise Leader says that some institutions have raised their stakes in this company.
British Columbia-based Ritchie Brothers operates the world's leading marketplace for heavy equipment. Started in 1958 as a live auctioneer of industrial equipment, it has greatly expanded its operations to include the sale of construction, agricultural, oilfield, and transportation equipment in a variety of venues. Its web site is here Ritchie Bros Auctioneers Inc.
The last stock I wrote about was about was Reitmans (Canada) Ltd (TSX-RET.A, OTC-RTMAF) ... learn more. The next stock I will write about will be IA Financial Corp (TSX-IAG, OTC-IDLLF) ... learn more on Friday, May 29, 2020 around 5 pm. Tomorrow on my other blog I will write about Top Canadian Stocks.... learn more on Thursday, May 28, 2020 around 5 pm.
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