I do not own this stock of Molson Coors Canada (TSX-TPX.B, NYSE-TAP). In 2008 I did a spreadsheet on this stock as it has recently been recommended and generally, beer companies make good money. Labatt’s was one of the original companies that I purchased and I did very well with it before it was bought out.
When I was updating my spreadsheet, I noticed that this stock hit a peak in 2016 and has been going down ever since. The company suspended the dividend this year of 2020. However, analysts expect that the dividend will be reinstated in 2021.
The dividend yields have been moderate to low but dividends are currently suspended, although analysts expect that they will reinstated next year. The dividend yield was moderate (2% to 4%) at 3.64% before the dividend was suspended. The 5, and 10 median dividend yields are moderate at 2.05% and 2.07%. The historical median dividend yield is low (below 2%) at 1.88%. After dividends being flat for a few years, the company had raised the dividends by 39% in early 2020 before suspending the dividends. Analysts expect dividends to come in at a lower level when they are reinstated.
The Dividend Payout Ratios (DPR) were fine, but dividends are suspended. The DPR for EPS for 2019 was 176% with 5 year coverage at 34%. 2019 was not a good year for the company. The DPR for CFPS for 2019 was 20% with 5 year coverage also at 20%. The DPR for Free Cash Flow for 2019 was 33% with 5 year coverage at 32%.
Debt Ratios could be improved, especially, the Liquidity Ratio. The Long Term Debt/Market Cap Ratio for 2019 was 0.67. The current ratio is 1.01. This is because of a drop in the stock price. The stock has dropped 35% this year, but it has been dropping since 2016. The Liquidity Ratio for 2019 is 0.59. If you add in cash flow after dividends it is just 0.98. If you add back in the current portion of the long term debt you get to 1.22. This ratio is not good. The Debt Ratio at 1.90 is good, however. The Leverage and Debt/Equity Ratios are fine at 2.15 and 1.13.
The Total Return per year is shown below for years of 5 to 23 to the end of 2019 and symbol TPX.B. 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 | 8.20% | -0.92% | -3.72% | 2.81% |
| 2009 | 10 | 10.22% | 7.39% | 4.34% | 3.05% |
| 2004 | 15 | 8.23% | 6.60% | 3.19% | 3.41% |
| 1999 | 20 | 8.48% | 13.18% | 8.28% | 4.90% |
| 1996 | 23 | 6.73% | 10.29% | 6.52% | 3.77% |
The Total Return per year is shown below for years of 5 to 29 to the end of 2019 in US$ and symbol TAP. 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 | 5.78% | -3.66% | -6.27% | 2.61% |
| 2009 | 10 | 7.86% | 4.91% | 1.90% | 3.01% |
| 2004 | 15 | 10.99% | 4.98% | 2.37% | 2.61% |
| 1999 | 20 | 9.44% | 6.13% | 3.69% | 2.44% |
| 1994 | 25 | 8.59% | 11.10% | 7.73% | 3.37% |
| 1990 | 29 | 7.36% | 8.52% | 5.89% | 2.63% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.01, 14.12 and 16.61. The corresponding 10 year ratios are 12.30, 14.76 and 17.41. The corresponding historical ratios are 11.92, 14.18 and 16.64. The current P/E Ratio is 13.55 based on a stock price of $47.02 and EPS estimate for 2020 of $3.47 ($2.63 US$). This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in CDN$.
I get a Graham Price of $77.01. The 10 year low, median, and high median Price/Graham Price Ratios are 0.82, 0.92 and 1.05. The current P/GP Ratio is 0.61 based on a stock price of $47.02. This stock price testing suggests that the stock price is relatively cheap. This is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.13. The current P/B Ratio is 0.61 based on a Book Value of $13,003M, Book Value per Share of $57.59 and a stock price of $35.40. The current ratio is 56% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result using CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 9.68. The current P/CF Ratio is 8.89 based on Cash Flow per Share estimate for 2020 of $3.98, Cash Flow of 898.7M and a stock price of $35.40. The current ratio is 8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in US$. You will get a similar result using CDN$.
Problem with the P/CF Ratio test is that analysts expect a big drop in Cash Flow for 2020 of some 53%. They expect the Cash Flow to recover in 2021. If you use the P/CF Ratio for 2021 of 4.38, the ratio drops by 55%. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result using CDN$.
I cannot do an historical median dividend yield test because the dividends have been suspended.
The 10 year median Price/Sales (Revenue) Ratio is 2.30. The current P/S Ratio is 0.83 based on Revenue estimate for 2020 of $9,678M, Revenue per Share of $42.86 and a stock price of $35.40. The current ratio is 64% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap. This is in US$. You will get a similar result using CDN$.
Results of stock price testing is that the stock price is probably cheap. The P/S Ratio test, which is a favourite of mine says the stock price is cheap. The P/B Ratio test is also a good one and it says the stock is cheap. The other tests mostly show the stock price as reasonable and below the median.
Is it a good company at a reasonable price? The stock price is relatively cheap. This company used to be a dividend growth company and it will probably be that again. However, it does have problems with debt and it has had a hard time growing since the 2008 recession from which there been a long slow recovery. A lot of companies are having this problem.
When I look at analysts’ recommendations, I find Strong Buy (7), Hold (8), Underperform (3) and Sell (1). The consensus would be a Buy. The 12 month stock price is $58.26 ($44.16 US$). This implies a total return of 23.90% in CDN$ and 24.75 %
There is not many analysts following this stock and the latest entry on Stock Chase is negative. Vishesh Raisinghani on Motley Fool thought last year they it was trading below its book value and so was a bargain. The site Simply Wall Street gives this stock 2 stars out of 5 and says a negative is declining earnings. A writer on Simply Wall Street thinks the company has too much debt.
Molson Coors Canada Inc is a large global brewer that produces and sells beer and other malt beverages. Major brands include Coors Light, Molson Canadian, Staropramen, Carling, Miller Lite, Keystone, Creemore Springs, Cobra and Doom Bar, Blue Moon, and Leinenkugel. Most of the firm's revenue is generated in the United States. Molson's other large markets are Canada, Central and Eastern Europe, and the United Kingdom. Its web site is here Molson Coors Canada.
The last stock I wrote about was about was Pason Systems Inc (TSX-PSI, OTC-PSYTF) ... learn more. The next stock I will write about will be Brookfield Asset Management Inc (TSX-BAM.A, NYSE-BAM) ... learn more on Monday, October 26, 2020 around 5 pm.
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Good article. The stock is very good value. They are paying down debt rapidly and now with the dividend suspended they can do so even faster.
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