I do not own this stock of Element Fleet Management Corp (TSX-EFN, OTC-ELEEF). I was looking for stocks to follow and I found this stock in 100 best Dividend Stocks Money Sense for 2018. It was also on Raymond James' top 19 Canadian stocks for 2019 list.
When I was updating my spreadsheet, I noticed that they are growing their Revenue quite well, but not their EPS. However, analyst expect better EPS in the future. Revenue grew by 24% per year over the past 5 years and Revenue per share by 13% per year. Revenue also grew by 90% per year over the past 8 years and Revenue per Share by 50% per year over the past 8 years. EPS is down by 4% per year over the past 5 years. Eight years ago, EPS was negative. However, analyst expect EPS growth of 417% in 2020 to EPS at $0.62. In 2021 EPS is expected to be $0.82 and then $0.91 in 2022.
The dividend yields are low with dividend growth good. The current dividend yield is low (below 2%) at 1.97. The 3 year median dividend yields are moderate (2% to 4% ranges) at 2.08%. Dividends have only been paid since 2016. The dividend growth rate is 21.6% per year over the past 3 years. Although dividends have increased for 2 years and decreased for 1 year in the past 3 years. The last dividend increase occurred in 2020 and it was for 44%.
The Dividend Payout Ratios (DPR) are fine, or will be. The DPR for EPS for 2019 was 150% with 3 year coverage at 371%. Analysts expect the DPR for EPS to be around 42% in 2020. The DPR for CFPS for 2019 was 8% with 3 year coverage at 27%. The DPR for Free Cash Flow for 2019 was 11% with 5 year coverage at 247%. (But here again sites do not agree with each other about the FCF for each year.)
Debt Ratios need improvement. The Long Term Debt/Market Cap is high at 2.48. However, the company has assets to coverage the debt. The Assets to Debt Ratio is 0.96. This is a financial company, so Assets to Debt Ratio is what counts. The Liquidity Ratio for 2019 is 0.73. However, if you added in Cash Flow after dividends, the ratio is good at 1.71. The Debt Ratio is lower than what I like at 1.28. I prefer this to be at 1.50 or higher, but this is a financial company, so there is more leeway in this. The Leverage and Debt/Equity Ratios are too high at 5.56 and 4.35. I prefer these to be low than 3.00 and 2.00, but finance companies tend to have higher ratios.
The Total Return per year is shown below for years of 5 to 8 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 | 21.64% | 8.27% | 0.02% | 8.26% |
| 2011 | 8 | 18.22% | 11.26% | 6.96% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.11, 29.17 and 28.89. The corresponding 8 year ratios are 9.72, 11.61 and 13.50. The current P/E Ratio is 21.24 based on a stock price of $13.17 and EPS estimate for 2020 of $0.62. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $9.92. The 8 year low, median, and high median Price/Graham Price Ratios are 1.12, 1.45 and 1.71. The current P/GP Ratio is 1.33 based on a stock price of $13.17. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an 8 year median Price/Book Value per Share Ratio of 1.18. The current P/B Ratio is 1.87 based on a stock price of $13.17, Book Value per Share of $7.05 and a Book Value of 43,054M. The current P/B Ratio is 58% above the 8 year ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an 8 year median Price/Cash Flow per Share Ratio of 8.91. The current P/CF Ratio is 16.88 based on a stock price of $13.17, Cash Flow per Share estimate for 2020 of $0.78 and Cash Flow of 338M. The current ratio is some 89% above the 8 year ratio. This stock price testing suggests that the stock price is relatively expensive.
Analysts expect that Cash Flow per Share would decrease by some 67% in 2020. The Cash Flow per Share estimate for 2021 is $0.78 and Cash Flow of 455M. Based on a stock price of $13.17m this gives a P/CF Ratio of 12.54. The 9 year P/CF Ratio for 2021 is 10.18. This P/CF Ratio is 23% above the 9 year ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical and 3 year median dividend yield of 2.08%. The current dividend yield is 1.97% based on dividends of 0.26 and a stock price of $13.17. The current dividend yield is 5% below the 3 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 8 year median Price/Sales (Revenue) Ratio is 6.77. The current P/S Ratio 5.99 based on Revenue estimate for 2020 of $953, Revenue per Share of $2.20 and a stock price of $13.17. The current ratio is 12% below the 8 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. The P/S Ratio testing suggests that the stock is reasonable. The dividend yield test says the same thing. Although, I must admit most of the other rest show that the stock price is relatively expensive. However, I take the view that Revenue is what ultimately drives EPS and Cash Flow.
Is it a good company at a reasonable price? I think that this is an interesting company, but it is rated as risky. The price would seem to be current reasonable. It has only been paying dividends since 2016, but they have been inconsistent in dividend increases, but will probably be a dividend growth company.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (8) and Underperform (1). The consensus is a Buy. The 12 month stock price consensus is $15.88. This implies a total return of 22.55% with 20.58% from capital gains and 1.97% from dividends
There are few entries on Stock Chase, but the last on March 2020 is positive. Amy Legate-Wolfe on Motley Fool thinks this company is a strong buy if you have little money. The Executive Summary on Simply Wall Street gives this stock 3 stars out of 5 and 4 points of risk analysis. A writer on Simply Wall Street says the rise in total shareholder return over the past year points to the company doing better recently. Global New Wire on Yahoo Finance talks about the company’s Third Quarter.
Element Fleet Management provides management services and financing for commercial vehicle and equipment fleets. The company's suite of fleet management services deals with acquisition and financing, to program management and remarketing. Its web site is here Element Fleet Management Corp.
The last stock I wrote about was about was Bird Construction Inc (TSX-BDT, OTC-BIRDF) ... learn more. The next stock I will write about will be Metro Inc (TSX-MRU, OTC-MTRAF) ... learn more on January 1, 2021 around 5 pm. Tomorrow on my other blog I will write about Pembina Pipelines.... learn more on Thursday, December 31, 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.
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