I do not own this stock of Finning International Inc (TSX-FTT, OTC-FINGF). When I was in the market to buy an industrial stock in this area in 2007, I look at this stock was well as Toromont Industries (TSX-TIH). At the time I liked Toromont better, so that is what I bought.
When I was updating my spreadsheet, I noticed that this company did well at first coming out of the 2008 recession, but they hit a peak in 2013/14 and they have really slowed down from there. They have gradually doing better, but Covid has hit their progress. This year of 2020 is not expected to be a good year.
The dividend yields are currently moderate with dividend growth currently low. The current yield is moderate (2% to 4% range) at 3.52%. The 5 and 10 years median dividend yields are also moderate at 2.82% and 2.57%. The historical dividend yield is low (below 2%) at 1.69%. The dividend growth over the past 5 years is low (below8%) at 3.5% per year. The most recent dividend increase was in 2019 and it was for 2.5%. There has been no increase in 2020, but analysts expect one in 2021.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2019 was 55% with 5 year coverage at 105.4%. The problem was a earnings loss in 2015. The DPR for CFPS for 2019 was 18% with 5 year coverage at 20.6%. The DPR for Free Cash Flow is 360% with 5 year coverage at 70%. However, all three sites that I looked at did not agree on what the FCF was and one said DPR for 2019 was 29%.
Debt Ratios are fine. The Long Term Debt Market Cap Ratio for 2019 is 0.32 and this is a good ratio. The Liquidity Ratio is also good at 1.81 and is the Debt/Ratio at 1.55. The Leverage and Debt/Equity Ratios are fine at 2.83 and 1.83.
The Total Return per year is shown below for years of 5 to 31 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 | 3.54% | 3.06% | 0.06% | 3.01% |
| 2009 | 10 | 6.36% | 7.48% | 4.25% | 3.23% |
| 2004 | 15 | 9.82% | 5.02% | 2.49% | 2.53% |
| 1999 | 20 | 11.06% | 9.82% | 6.83% | 2.99% |
| 1994 | 25 | 10.64% | 9.40% | 6.73% | 2.67% |
| 1989 | 30 | 7.24% | 9.42% | 6.91% | 2.51% |
| 1988 | 31 | 8.49% | 10.78% | 7.86% | 2.93% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 18.22, 20.79 and 24.66. The corresponding 10 year ratios are 12.47, 15.85 and 18.12. The corresponding historical ratios are 12.58, 16.44 and 19.76. The current P/E Ratio is 18.55 based on a stock price of $24.67 and EPS estimate for 2020 of $1.33. This stock price testing suggests that the stock price is relatively expensive.
The above EPS for 2020 is a decrease of over 10% in EPS. EPS is expected to improve in 2021. The P/E Ratio for 2021 is 16.02 based a stock price of $24.67 and EPS for 2021 of $1.54. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $20.08. The 10 year low, median, and high median Price/Graham Price Ratios are 1.19, 1.47 and 1.74. The current P/GP Ratio is 1.23 based on a stock price of $24.67. 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 2.28. The current P/B Ratio is 1.83 based on a stock price of $24.67, Book Value of $2,184M and a Book Value per Share of $13.47. The current ratio is 19.5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median and almost cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 10.71. The current P/CF Ratio is 6.08 based on a stock price of $24.67, Cash Flow per Share estimate for 2020 of $4.06 and Cash Flow of $658M. The current ratio is 43% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. My problem with this is that this is an increase in CFPS of 247% and CFPS has never before been this high. So, I do wonder.
I get an historical median dividend yield of 1.83%. The current dividend yield is 3.32% based on dividends of $0.78 and a stock price of $24.67. The current dividend yield is 82% higher than 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 2.57%. The current dividend yield is 3.32% based on dividends of $0.78 and a stock price of $24.67. The current dividend yield is 29% higher than the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.67. The current P/S Ratio is 0.69 based on Revenue estimate for 2020 of $5,824M and a stock price of $24.67. The current ratio is 2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The problem is that analysts think that the Revenue for 2020 will decrease by 25%. If we look at the Revenue estimate for 2021, we get a P/S Ratio of 0.62. This is based on a stock price of $24.67 and Revenue estimate for 2021 of $6,400M. 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 and around the median and maybe below the median. The dividend yield tests are showing the stock price as relatively cheap. This is not confirmed by the P/S Ratio testing, which is showing the stock price as reasonable. However, we do have ongoing problems with the recovery from 2008 recession and the Covid situation. The stock price testing does vary, but most say the stock price is in the reasonable range.
Is it a good company at a reasonable price? This is a dividend growth stock company, which is the sort that I like. The reason I do not buy this is because I have Toromont Industries Ltd which is in basically the same industry. I do think it is a good company.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (3) and Hold (3). The consensus would be a buy. The 12 month stock price consensus is $25.25. This implies a total return of 5.67% with 2.35% from capital gains and 3.32% from dividends.
Analysts have varying views on this stock on Stock Chase. Ambrose O'Callaghan on Motley Fool thinks this is a great stock for your TFSA. A writer on Simply Wall Street thinks shareholders should keep an eye on this company’s debt. A writer on Simply Wall Street says this company has an intrinsic stock price of $29.57. The blogger Freedom Thirty Five likes this stock.
Finning International Inc is a dealer and distributor of heavy-duty machinery and parts of the Caterpillar brand. The company sells and rents Caterpillar machinery. The company operates in Canada, South America, UK and Ireland, and others. Its web site is here Finning International Inc.
The last stock I wrote about was about was Crescent Point Energy Corp (TSX-CPG, NYSE-CPG) ... learn more. The next stock I will write about will be Quarterhill Inc (TSX-QTRH, NASDAQ-QTRH) ... learn more on Wednesday, November 25, 2020 around 5 pm. Tomorrow on my other blog I will write about TFSA Successor Holder.... learn more on Tuesday, November 24, 2020 around 5 pm.
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