I do not own this stock of Badger Daylighting Ltd (TSX-BAD, OTC-BADFF). I started to follow this stock after reading a couple of articles in February 2012 in the G&M that talked about the company. The first article looked at what the pros who manage small-cap funds are buying. Badger was one of 10 stocks mentioned and it looked like an interesting stock. It is a dividend paying small cap. The second article looked at why stocks might appeal to a conservative investor looking for income.
When I was updating my spreadsheet, I noticed using the 12 month data from the second quarter of 2019, the Revenue had gone up to $655.1M or up 6.5%. The estimate for 2019 was $688M an increase of 11.8%. What happened was an increase to $654.3M or an increase of 6.3%. So, the estimate showed the right direction, but was off on how much the Revenue would increase. For EPS, the 12 month data showed an EPS for $1.83 which was no change from 2018. The EPS estimate was for $1.79, a decrease of 2.2%. What happened was an EPS for 2019 of $1.67 a decrease of 8.7%. Here the estimate also shows the right direction, but was also off on how much the EPS would decrease.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (under 2%) at 1.65%. The 5 and 10 year median dividend yield are also low at 1.45% and 1.66%. The historical dividend yield is moderate (2% to 4% ranges) at 4.00%. This historical yield is higher because this stock used to be an income trust. The dividends have grown at a moderate rate (8% to 14% ranges) 9.34% per year over the past 5 years. However, the last dividends increase in 2020 was low (under 8%) at 5.3%.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 is 34% with 5 year coverage at 31%. The DPR for CFPS for 2019 is 12% with 5 year coverage at 13%. The DPR for Free Cash Flow for 2019 cannot be calculated because the FCF is negative in 2019. The 5 year coverage is 58%. The 5 year Dividend Coverage Ratio is 1.72.
Debt Ratios are fine. The Long Term Debt/Market Cap is very low and good at just 0.05. The Liquidity Ratio is good at 1.67. The Debt Ratio is also good at 1.98. The Leverage and Debt/Equity Ratios are fine at 2.02 and 1.02
The Total Return per year is shown below for years of 5 to 22 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.
The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.3.5, 23.06 and 27.78. The corresponding 10 year ratios are 12.41, 17.23 and 23.59. The corresponding historical ratios are 9.25, 11.39 and 14.26. The current P/E Ratio is 37.88 based on a stock price of $36.36 and 2020 EPS estimate of $0.96. This stock price testing suggests that the stock price is relatively expensive.
Part of the reason that the stock is expensive for 2020 is that analysts expect the EPS to drop some 42% in 2020. If you look at the P/E Ratio for 2021 when EPS is expected to recover, the P/E Ratio is 19.55 based on a stock price of $36.36 and 2021 EPS estimate of $1.86. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $14.54. The 10 year low, median, and high median Price/Graham Price Ratios are 1.15, 1.71 and 2.13. The current P/GP Ratio is 2.50 based on a stock price of $36.36. This stock price testing suggests that the stock price is relatively expensive.
However, the big drop in expected EPS for 2020 will also affect the Graham Price. The Graham Price for 2021 is 20.24. This would have a P/GP Ratio of 1.80 based on a stock price of $36.36. 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 3.35. The current P/B Ratio is 3.72 based on a stock price of $36.36, Book Value of $341.7M, and Book Value per Share of $9.78. The current P/B Ratio is 11% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 10.88. The current P/CF Ratio is 9.28 based on a stock price of $36.36, Cash Flow per Share estimate for 2020 of $3.92 and Cash Flow of 136.9M. The current P/CF Ratio is 15% 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 4.00%. The current dividend yield is 1.65% based on dividends of $0.60 and a stock price of $36.36. The current dividend yield is 59% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 1.66%. The current dividend yield is 1.65% based on dividends of $0.60 and a stock price of $36.36. The current dividend yield is 0.8% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and at the median.
The 10 year median Price/Sales (Revenue) Ratio is 2.15. The current P/S Ratio is 2.16 based on a Revenue estimate for 2020 of $589M, Revenue per Share of $16.87 and a stock price of $36.36. Analysts expect a 10% drop in Revenue which is a lot less than the drop expected in EPS. The current P/S Ratio is 0.07% above the 10 year median P/S Ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
Results of stock price testing is that the stock price is probably reasonable and at the median. The 10 year dividend yield test and the P/S Ratio test both show a stock price that is relatively reasonable and at the median. This stock used to be an income trust, so past dividend yields would be very high. So, I would think that the 10 year median dividend yield test is better than the historical median yield test. There is nothing wrong with the P/B Ratio or P/CF Ratio testing. There are problems with the P/E Ratio and P/GP testing as indicated above.
Is it a good company at a reasonable price? This is a dividend growth stock. It did cut dividends in the past, but that was to move from an income trust company to a corporation. I think that the stock price is reasonable. I do think that this is a worthwhile dividend growth stock to invest in.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2), and Hold (4). The consensus would be a Buy. The 12 month stock price consensus is $38.88. This implies a total return of 8.58% with 6.93% from capital gains and 1.65% from dividends.
Most analysts seem to like to this stock on Stock Chase. Ambrose O'Callaghan on Motley Fool thinks this can do better in the future. A writer on Simply Wall Street criticizes the stock for cutting dividends in the past. However, this stock used to be an income trust and this stock had to cut dividends when they became corporations. A writer on Simply Wall Street says the intrinsic value of this stock is $31.62 which is lower than the current price of the stock. The company announces its second quarterly results on Global Newswire.
Badger Daylighting is a Canada-based company that provides nondestructive hydrovac excavation services based on its core technology, the Badger Hydrovac System. The Badger Hydrovac System is an excavation unit that is used primarily for digging in areas with buried pipes and cables. Its web site is here Badger Daylighting Ltd.
The last stock I wrote about was about was Superior Plus Corp (TSX-SPB, OTC-SUUIF) ... learn more. The next stock I will write about will be Aecon Group Inc (TSX-ARE, OTC-AEGXF) ... learn more on Wednesday, August 19, 2020 around 5 pm. Tomorrow on my other blog I will write about Women’s Earning Power.... learn more on Tuesday, August 18, 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.
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.
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