I do not own this stock of Superior Plus Corp (TSX-SPB, OTC-SUUIF). I started to follow this stock as it was an income trust company that was talked about in the Money Reporter from MPL Communications. This company changed to a corporation from Unit Trust (TSX-SPF.UN) in 2009.
When I was updating my spreadsheet, I noticed that they cannot seem to grow their revenue. Revenue is down by 6.4% per year over the past 5 years. Revenue per Share is down even more at 12.3%. Also, they have not been able to bring their Dividend Payout Ratio for EPS under control. They have decreased dividends and kept them flat. They have been flat since 2015. But 2019 has been the only year with a decent DPR for EPS, but in 2020 the EPS is not expected to cover the dividends again. Analysts expect they will be able to cover the dividend again in 2021.
The dividend yields are good with dividend growth non-existent. The current dividend yield is good (5% and 6% ranges) at 5.86%. The 5, and 10 dividend yields are also good at 6.15% and 6.22%. The historical dividend yield is high (7% and above) at 9.22%. This stock used to be an income trust and as an income trusts had very high dividend yields. The dividends have been flat since 2015. However, analysts do not expect any cuts at this point over the next two years.
The Dividend Payout Ratios (DPR) need to be improved for the EPS. The DPR for EPS for 2019 is 88% with 5 year coverage at 138%. As an income trust they could pay out more than the EPS, but when it became a corporation, it needs to get the DPR for EPS under control. The company is not expected to make much in earnings this year. The DPR for CFPS for 2019 is 26% with 5 year coverage at 36%. These are good ratios. The DPR for Free Cash Flow for 2019 is 44% with 5 year coverage at 72%. The current DPR for FCF is good, but the 5 year coverage is too high.
Debt Ratios could be improved. The Long Term Debt/Market Cap Ratio for 2019 is 0.77. This is fine, but it would be nice if it was lower than 0.50. The Liquidity Ratio for 2019 is low at 0.99. It means that the current assets cannot cover the current liabilities. However, if you add in Cash Flow after dividends, it is 1.54. The Debt Ratio for 2019 is 1.40 and this is low. I prefer it to be 1.50 or higher. Leverage and Debt/Equity Ratios at 3.50 and 2.50 are rather high. I prefer these to be below 3.00 and below 2.00, respectively.
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.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 3.37% | 6.83% | 0.93% | 5.90% |
| 2009 | 10 | -7.79% | 4.68% | -1.53% | 6.21% |
| 2004 | 15 | -7.85% | -0.05% | -5.64% | 5.60% |
| 1999 | 20 | -3.67% | 12.40% | -0.25% | 12.65% |
| 1996 | 23 | -1.42% | 11.00% | -0.38% | 11.37% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 4.24, 5.34 and 6.43. The corresponding 10 year ratios are 5.71, 7.59 and 9.48. The corresponding historical ratios are 12.46, 15.32 and 18.86. The current P/E Ratio is 409.67 based on a stock price of $12.29 and 2020 EPS estimate of $0.03. This stock price testing suggests that the stock price is relatively expensive.
The above makes no sense at all. There were a number of EPS losses leading to negative P/E Ratio and so very low P/E Ratios for the past 5 and 10 years. The EPS for 2020 is a drop in EPS of over 96%. The P/E Ratio for 2021 is more reasonable at 15.96, but on the high side. This testing should not be considered for this stock in determining if the stock price is reasonable or not.
I get a Graham Price of $2.03. The 10 year low, median, and high median Price/Graham Price Ratios are 1.01, 1.18 and 1.46. The current P/GP Ratio is 6.07 based on a stock price of $12.29. This stock price testing suggests that the stock price is relatively expensive.
However, the current P/GP Ratios is greatly affected the big drop in EPS for 2020. The Graham Price for 2021 is 10.26, a more reasonable value. The P/GP Ratio for 2021 is 1.20. This stock price testing suggests that the stock price is relatively reasonable but above the median. You have to wonder about this test also.
I get a 10 year median Price/Book Value per Share Ratio of 2.40. The current P/B Ratio is 2.02 based on a Book Value of $1069.8M, Book Value per Share of $6.08 and a stock price of $12.29. The current P/B Ratio is 16% below the 10 year median 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 7.35. The current P/CF Ratio is 6.15 based on 2020 Cash Flow per Share estimate of $2.00, Cash Flow of $352M and a stock price of $12.29. The current ratio is 16% 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 9.22%. The current dividend yield is 5.86% based on dividends of $0.72 and a stock price of $12.29. The current yield is 36% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 6.22%. The current dividend yield is 5.86% based on dividends of $0.72 and a stock price of $12.29. The current yield is 5.9% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.47. The current P/S Ratio is 0.84 based on 2020 Revenue estimate of $2,587M, Revenue per Share of $14.70 and a stock price of $12.29. The current ratio is 78% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is expensive because the company is not expected to do well in the short term in terms of Revenue and Earnings. The stock price is probably relatively high for this company. The tests that I find no problems with are the P/S Ratio, the P/B Ratio, and the P/CF Ratio tests. The rest all have problems. The Dividend Yield problem is the lack the dividend growth and also yields used to be very high in the past as this company used to be an income trust.
Is it a good company at a reasonable price? I do not think the price is reasonable at this time. I hope this company will do better in the future, but it is hard to tell if it will.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (6), Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $13.33. This implies a total return of 14.32% with 8.46% from capital gains and 5.86% from dividends.
Several analysts on Stock Chase says this stock is their top pick. Robin Brown on Motley Fool thinks this is a top dividend stock. A writer on Simply Wall Street thinks that this stock is not a good bet because earnings are expected to decline over the near term. A writer on Simply Wall Street says the intrinsic value of the stock is $19.38 which is above the current price. The company talks about the second quarterly results on the Financial Post via Newswire.
Superior Plus is a Canadian-based company that distributes energy and specialty chemicals. The company is organized into three business segments: Canadian propane distribution, U.S. propane distribution, and specialty chemicals. Its web site is here Superior Plus Corp.
The last stock I wrote about was about was Evertz Technologies (TSX-ET, OTC-EVTZF) ... learn more. The next stock I will write about will be Badger Daylighting Ltd (TSX-BAD, OTC-BADFF) ... learn more on Monday, August 17 around 5 pm.
Also, on my book blog I have put a review of the book The Storm Before the Calm by George Friedman learn more...
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