I do not own this stock of Aecon Group Inc (TSX-ARE, OTC-AEGXF). This will replace Onex Corp (TSX-ONEX, OTC-ONEXF) which I will no longer follow. I will try to find another Financial stock also.
When I was updating my spreadsheet, I noticed that there was a big difference between the Basic EPS and the Diluted EPS. For 2019 it was 6.67% and for 2018 it was 5.05%. Most of this difference is because of convertible debentures. For 2019 the difference in these EPS for Convertible Debentures was 5.28% and for 2018 it was 4.05%. For 2019 the difference in these EPS for Stock Options was 1.38% and for 2018 it was 1.00%.
Also, the shareholder who have held this stock for 10 years, have not made much money. The Total Return for the 10 year period is just 3.80% with a capital gain of 1.57%. The different ratios where not especially high in 2009 (10 years ago). The only thing I noticed is that the stock price increased some 36% in 2009. This might have suggested caution.
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 4.39%. The 5, 10 and historical dividend yields are lower, but still moderate at 2.91%, 2.62% and 2.24%. The Dividend growth over the past 5 years is moderate (8% to 14% ranges) at 9.86% per year. The last dividend increase was this year and it was for 10.34%.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2019 for EPS was 50% with 5 year coverage at 55%. The DPR for CFPS for 2019 was 18% with 5 year coverage also at 18%. The DPR for 2019 for Free Cash Flow is 21% with 5 year coverage at 84%.
Debt Ratios are fine, but could improve. The Long Term Debt/Market Cap Ratio for 2019 is 0.48. Because the stock price has declined some 23% year to date, the current ratio is higher at 0.60. The Liquidity Ratio for 2019 is 1.57. The Debt Ratio is low for 2019 at 1.38. I prefer to see this at 1.50 or higher. The 5 year median is better but still low at 1.44. Leverage and Debt/Equity Ratios for 2019 are high at 3.63 and 2.63. I prefer to see them under 3.00 and under 2.00.
The Total Return per year is shown below for years of 5 to 23 to the end of 2019. 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. Note that the company did not pay dividends from 2003 to 2007.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 9.86% | 13.98% | 10.34% | 3.64% |
| 2009 | 10 | 10.84% | 3.80% | 1.57% | 2.23% |
| 2004 | 15 | n/a | 8.93% | 6.75% | 2.18% |
| 1999 | 20 | 9.49% | 10.97% | 8.79% | 2.19% |
| 1996 | 23 | 8.84% | 7.19% | 1.65% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.26, 18.26 and 21.26. The corresponding 10 year ratios are 15.15, 18.46 and 21.81. The corresponding historical ratios are 8.39, 12.65 and 18.51. The current P/E Ratio is 29.90 based on a stock price of $14.65 and 2020 EPS estimate of $0.49. This stock price testing suggests that the stock price is relatively expensive.
This test is based on EPS for 2020 that drops some 56% from the EPS of 2019. The P/E Ratio for 2021 is 13.86 based on a stock price of $14.65 and 2021 EPS estimate of $1.02. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $12.42. The 10 year low, median, and high median Price/Graham Price Ratios are 0.84, 1.01 and 1.19. The current P/GP Ratio is 1.18 based on a stock price of $14.65. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The Graham Price formula uses EPS and it would be affected by the big expected drop in earnings in 2020. For 2021, I get a Graham price of $17.92. The P/GP Ratio for 2021 is 0.82 based on a stock price of $14.65. 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 1.22. The current P/B Ratio is 1.05 based on a Book Value of $838M, Book Value per Share of $14.00 and a stock price of $14.65. The current ratio is 15% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 5.59. The current P/CF Ratio is 4.53 based on last 12 months Cash Flow of $193.7M, Cash Flow per Share of $3.24 and a stock price of $14.65. The current ratio is 19% below the 10 year median 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 2.24%. The current dividend yield is 4.27% based on dividends of $0.64 and a stock price of $14.65. The current yield is 95% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.62%. The current dividend yield is 4.27% based on dividends of $0.64 and a stock price of $14.65. The current yield is 67% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.30. The current P/S Ratio is 0.25 based on 2020 Revenue estimate of $3448M, Revenue per share of $57.59 and a stock price of $14.65. The current ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. Both the dividend yield tests show this stock is cheap, but the P/S Ratio test shows the stock as reasonable and below the median. A potential problem with the P/S Ratio test is that the Revenue is expected to fall a bit in 2020 and then be better in 2021. There are no problems with the P/B Ratio test nor the P/CF Ratio test. Both these test show that the stock price is relatively reasonable and below the median.
Is it a good company at a reasonable price? I think that the stock price is reasonable at the present time. The stock is down by about 16% from 2019. This is a dividend growth company and this is the sort of company I do like. It is currently on the Aristocrats list.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (4) and Hold (1). The consensus would be a Buy. The 12 month stock price is $19.95. This implies a total return of $40.35% with 36.18% from capital gains and 4.37% from dividends.
The last few entries on Stock Chase for this company thinks that it will do well with Covid. Jitendra Parashar on Motley Fool thinks this is an opportunity buy. A writer on Simply Wall Street says their ROE of 8.5% is at the industry’s average. A writer on Simply Wall Street says this stock’s intrinsic value is $20.79. There is an article on Small Cap Power saying this company could benefit from infrastructure spending by governments in Canada. The Blogger Dividend Earner does a review of this stock. Tom Drake on Maple Money has this stock as one of the top 100 Canadian Stocks.
Aecon Group Inc is a Canada-based company that operates in two major segments: Construction and Concessions. Its web site is here Aecon Group Inc.
The last stock I wrote about was about was Badger Daylighting Ltd (TSX-BAD, OTC-BADFF) ... learn more. The next stock I will write about will be Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF) ... learn more on Friday, August 21, 2020 around 5 pm. Tomorrow on my other blog I will write about Stantec Inc.... learn more on Thursday, August 20, 2020 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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