I do not own this stock of Pason Systems Inc (TSX-PSI, OTC-PSYTF). I read a report on this stock in the Buy and Sell Advisor in September 2013. I had not heard of this dividend growth company before so I decided to investigate it.
When I was updating my spreadsheet, I noticed that they just cut their dividend this year by 74%. This means that the dividend growth for years 5, 10 and 15 years is -21.71%, -3.97% and 6.30% per year. If you take into account the almost 60% drop in the stock price this year, the chart of dividends and total return to date, can look different from the one to the end of 2019 below. It appears that shareholders who have been invested over 20 years, have still make money. However, it is not surprising this stock has been hit as it services the oil industry.
|From||Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The dividend yields are moderate with dividend growth currently stopped. The current dividend yield is moderate (2% to 4% ranges) at 3.76%. The 5, 10 and historical dividend yields are also moderate at 3.58%, 3.30% and 2.44%. The dividends were getting high before the stock tanked, but the company also has recently cut the dividend by 74% this year so the yield is still moderate.
The Dividend Payout Ratios (DPR) are much too high. The DPR for EPS for 2019 is 117% with 5 year coverage at 345%. The company has not been able to cover the dividends by EPS since 2014. The DPR for CFPS for 2019 is 56% with 5 year coverage at 66%. However, analysts do not think this company will be able to cover their dividends with cash flow in 2020 as the expected coverage for 2020 is 141%. The DPR for Free Cash Flow for 2019 is 75% with 5 year coverage at 92%. Analysts do not think that this company will be covering the dividend with FCF in 2020 as expected ratio for 2020 is 145%.
Debt Ratios are very good. The company does not have much debt. The Long Term Debt/Market Cap for 2019 is 0.01 and it is the same currently. The Liquidity Ratio for 2019 is 4.15. The Debt Ratio for 2019 is 4.79. These are both very good and very high. The Leverage and Debt/Equity Ratios are low and good at 1.26 and 0.26.
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.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 20.02, 26.77 and 30.95. The corresponding 10 year ratios are 21.30, 26.79 and 32.12. The corresponding historical ratios are 13.59, 19.77 and 24.74. The current R/E Ratio is negative 106.40 and so this test cannot be done. The P/E Ratio for 2021 is negative 53.20 so this is not help.
I estimate a Graham Price of $7.57. I have to estimate because of the earning losses. The 10 year low, median, and high median Price/Graham Price Ratios are 1.85, 2.24 and 2.71. The current P/GP Ratio is 0.70 based on a stock price of $5.32. 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 3.96. The current P/B Ratio is 1.32 based on a Book Value of $341.35M, Book Value per Share of $4.04 and a stock price of $5.32. The current ratio is 67% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 13.06. The current P/CF Ratio is 15.65 based on Cash Flow per Share estimate for 2020 of $0.34, Cash Flow of $28.7M and as stock price of $5.32. The current ratio is 19.8% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
The problem with the P/CF Ratio is that analysts expect the Cash Flow per Share to drop 74% in 2020. If we use the Cash Flow per Share estimate for 2021 of $0.41, the P/CF Ratio is 12.98 and .6% below the 10 year median. If we use the Cash Flow per Share estimate for 2022 of $0.76, the P/CF Ratio of 2022 is 25% below the 10 year median ratio.
I get an historical median dividend yield of 2.44%. The current dividend yield, even with the 74% drop in dividends, is 3.76%, based on dividends of $0.20 and a stock price of $5.32. The current dividend yield is 54% 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 3.30%. The current dividend yield, even with the 74% drop in dividends, is 3.76%, based on dividends of $0.20 and a stock price of $5.32. The current dividend yield is 14% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 4.77. The current P/S Ratio is 3.00 based on Revenue estimate for 2020 of $150M, Revenue per Share of $1.77 and a stock price of $5.32. The current ratio is 37% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The stock price has fallen 60% this year. There are problems with some of the tests as noted above. Only the P/S Ratio and the P/B Ratio tests have no problems and both these tests show the stock price as cheap.
Is it a good company at a reasonable price? The stock price seems to be cheap. Since this industrial serves the oil industry, it is risky. I do not personally invest in oil and gas stocks, but I have invested in some that services the oil and gas industry. What I like about this company is the very conservative debt ratios. This sets up the company to survive a lot of difficult conditions. Todays conditions for such a company is certainly difficult.
When I look at analysts’ recommendations, I find only Hold (6) recommendations. The consensus would be a Hold. The 12 month stock price is $6.83. This implies a total return of 32.14% with 28.38% from capital gains and 3.76% from dividends.
Analysts seem to have lost interest in this company on Stock Chase as last entries are dated in 2019. Aditya Raghunath on Motley Fool thinks this company has great upside potential . A writer on Simply Wall Street thinks this is not a good dividend stock. . .
Pason Systems Inc is an oilfield specialist with fully integrated drilling data solutions. A host of products allow customers to collect, manage, report, and analyze drilling data for performance optimization and cost control. The company operates in three geographic segments: Canada, the United States, and International (Latin America, Offshore, the Eastern Hemisphere, and the Middle East). Its web site is here Pason Systems Inc.
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