I do not own this stock of Chesswood Group Ltd (TSX-CHW, OTC-CHWWF). A reader wrote me in 2012 that he was researching and found a company that he hoped I could give him a brief outlook on. He said that the company is Chesswood Group and they are basically a financial leasing company. From 2009 to 2012 they increased their dividends from 2.5 cents to 5.5 cents per month. This is a 120% increase.
When I was updating my spreadsheet, I noticed that they suspended their dividend this year. Usually, when I company does that is because they expect bad times coming or at least uncertain times. Analysts certainly do not expect them to do well this year, but do expect better times starting in 2021. However, the company has restarted dividends this year, but at a lower level. Management obviously feels they can handle the dividends at the new lower level. This is a positive development.
The dividend yields are moderate with dividend growth currently non-existent, but dividend restarted. This company cancelled the dividends partway through this year then restarted it at a lower level. The current dividend yield is moderate (2% to 4% ranges) at 2.82%. The dividend yields have been high (7% to 8/%) with the 5, 10 and historical dividend yields at 7.52%, 7.58% and 8.12%. This company used to be an income trust and changed to a corporation in 2011. This is why dividend yields were high, especially in the past.
The Dividend Payout Ratios (DPR) were fine in the past and perhaps they will still be fine in the future. The DPR for EPS for 2019 was 118% with 5 year coverage at 69%. The company is not expected to have positive earnings this year, but 5 year coverage is expected at 83%. Analysts do not expect the company to cover the dividend with EPS in the near future. The DPR for CFPS for 2019 was 14% with 5 year coverage at 16%. The DPR for CFPS for this year is just 4% with 5 year coverage at 13%.
Debt Ratios are fine for a financial. Because this company is in finance, I look at Debt/Covering Assets Ratio which is 0.87 and fine. The Liquidity Ratio is good at 2.56 for 2019. The Debt Ratio for 2019 is 1.20. The Leverage and Debt/Equity Ratios are 5.92 and 4.92 respectively for 2019.
The Total Return per year is shown below for years of 5 to 13 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 | 1.49% | 4.53% | -3.54% | 8.07% |
| 2009 | 10 | 9.96% | 21.53% | 9.24% | 12.29% |
| 2006 | 13 | 0.00% | 11.30% | 2.60% | 8.70% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.43, 9.36 and 10.55. The corresponding 10 year ratios are 8.15, 9.72 and 11.65. The historical ratios are 7.74, 9.38 and 11.60. The current P/E Ratio is negative based on a stock price of $8.50 and EPS loss of $0.44.
The P/E Ratio for 2021 is not much help either. That P/E Ratio is 50.00. This is because the expected EPS for 2021 is just $0.17 which is 76% below the EPS for 2019.
My best guess for a current Graham Price is $5.59 The 10 year low, median, and high median Price/Graham Price Ratios are 0.67, 0.79 and 0.92. The current P/GP Ratio is 1.52 based on a stock price of $8.50. This stock price testing suggests that the stock price is relatively expensive
If we use last year’s Graham Price of $11.86, the current P/GP Ratio would be 0.72 based on a stock price of $8.50. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.32. The current P/B Ratio is ratio is 1.04 based on a Book Value of $133M, Book Value per Share of $8.18 and a stock price of $8.50. The current ratio is 21% 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 2.91. The current P/CF Ratio is 3.50 based on last 12 month Cash Flow of $39.6M, Cash Flow per Share of $2.43 and a stock price of $8.50. The current ratio is 20% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. The problem is that there are lots of P/CF Ratio that are negative, so the 10 year median ratio is very low.
If we look at Price/Cash Flow per Share Ratio for Cash Flow less Working Capital, I get a 10 year 2.63. The current P/CF (less WC) Ratio is 1.23 based on a Cash Flow of $112M, Cash Flow per Share of $6.90 and a stock price of $8.50. The current ratio is 53% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 8.12%. The current dividend yield is 2.82% based on dividends of $0.24 and a stock price of $8.50. The current dividend yield is 65% below the 10 historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. The problem is that dividends have been cut by over 70% recently.
I get a 10 year median dividend yield of 7.68%. The current dividend yield is 2.82% based on dividends of $0.24 and a stock price of $8.50. The current dividend yield is 63% below the 10 historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. The problem is that dividends have been cut by over 70% recently.
The 10 year median Price/Sales (Revenue) Ratio is 1.44. The current P/S Ratio is 1.19 based on Revenue estimate for 2020 of $116M, Revenue per Share 7.12 and a stock price of $8.50. The current ratio is 17% 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 if not cheap. I cannot use the dividend yield tests because of recent dividend tests. The P/S Ratio testing says that the stock is reasonable and below the median. A problem being is that Revenue is expected to decline this year and next. The P/B Ratio testing says that the stock is cheap and there is no problem with this testing. The P/CF Ratio (less WC) may be more valid and this shows the stock price as relatively cheap.
Is it a good company at a reasonable price? The stock price seems reasonable. Until recently, this company was making money for its shareholders. It is a small cap. It is also rather risky at present. The stock price is down just 17% this year. This is not bad considering how other companies have fared.
When I look at analysts’ recommendations, I find a Buy (1) recommendation. The consensus would be a Buy. The 12 month stock price is $8.25. This implies a total loss of 0.12% with a capital loss of 2.94% and dividends of 2.82%.
The last entries were in 2019 on Stock Chase so analysts have lost interest in this stock. Jason Hoang on Motley Fool says this company is cheap and a good long term bet. The Executive Summary on Simply Wall Street has some red flags and two stars out of 5. A writer on Simply Wall Street has concerns about this stock. The company announces third quarter results on Seeking Alpha and restarts dividends.
Chesswood Group Ltd is a Canada based company focused on commercial equipment finance for small and medium-sized businesses. The company's operations consist of segments of Equipment Financing-US; and Equipment Financing-Canada. Its web site is here Chesswood Group Ltd.
The last stock I wrote about was about was Quarterhill Inc (TSX-QTRH, NASDAQ-QTRH) ... learn more. The next stock I will write about will be Northland Power Inc (TSX-NPI, OTC-NPIFF) ... learn more on Monday, November 30, 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.
No comments:
Post a Comment