I do not own this stock of FirstService Corp (TSX-FSV, NASDAQ-FSV) but I used to. I bought FirstService Corp in 2002 as it looked like a good solid company that knows how to make money. By 2010 the company was underperforming so I sold the stock and kept the preferred shares until the end of the year before selling them too. Preferred shares are not by favorite why of getting dividends. The company is now paying dividends.
When I was updating my spreadsheet, I noticed it would appear that the company had a bad year because of the $6.58 EPS loss for 2019. However, a $314,379 charge was made against the earnings because of the settlement of made with Jay S. Hennick, the Company’s Founder and Chairman to eliminate the multiple voting shares and his long-term incentive arrangement (the “LTIA”). Otherwise, the EPS for 2019 would be $8.14.
The dividend yields are low with dividend growth low. Dividends are paid in US$. The current dividend is low (below 1%) at just 0.52%. The 5 and 6 year median dividend yields are also low at 0.77% and 0.88%. Dividends were started in 2013. The growth is low (under 8% per year) at 7.90% per year for the last 5 years. The last dividend increase was higher at a moderate level (8% to 14% ranges) at 10% and was done in 2020.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS is non-calculable for 2019 and the 5 year coverage is also non-calculable. This is because of the big earnings loss in 2019. However, this is also because of one-time special charge. The DPR for EPS is expected to be 33% in 2020 and this is good. The CPR for CFPS for 2019 is 25% with 5 year coverage at 17%. This is a good rate. The DPR for Free Cash Flow for 2019 is 36% with 5 year coverage at 23%.
Debt Ratios could be improved. The Long Term Debt/Market Cap Ratio for 2019 is 0.20. The Liquidity Ratio for 2019 is 1.44. The Debt Ratio is a bit lower than what I like at 1.44. I prefer this to be 1.50 or higher. Leverage and Debt/Equity Ratios for 2019 at 3.26 and 2.26. These are also a bit high as I prefer hem to be under 3.00 and 2.00, respectively.
The Total Return per year is shown below for years of 5 to 24 to the end of 2019 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 10.36% | 33.46% | 32.11% | 1.35% |
| 2009 | 10 | 8.72% | 29.08% | 27.94% | 1.14% |
| 2004 | 15 | 17.03% | 16.55% | 0.48% | |
| 1999 | 20 | 18.63% | 18.25% | 0.38% | |
| 1995 | 24 | 21.87% | 21.51% | 0.36% |
The Total Return per year is shown below for years of 5 to 24 to the end of 2019 in US$. 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 | 7.90% | 30.42% | 29.27% | 1.15% |
| 2009 | 10 | 6.54% | 26.17% | 25.38% | 0.78% |
| 2004 | 15 | 16.49% | 16.11% | 0.38% | |
| 1999 | 20 | 19.22% | 18.91% | 0.31% | |
| 1995 | 24 | 22.06% | 21.77% | 0.28% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 32.48, 42.62 and 50.41. The corresponding 10 year ratios are 31.11, 39.56 and 46.76. The corresponding historical ratios are 13.70, 18.48 and 25.12. The current P/E Ratio is 66.08 based on a stock price of $163.26 and EPS estimate for 2020 of $2.47 ($1.93 US$). This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a Graham Price of $32.28. The 10 year low, median, and high median Price/Graham Price Ratios are 3.26, 4.04 and 5.09. The current P/GP Ratio is 5.06 based on a stock price of $163.26. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 8.47. The current P/B Ratio is 8.73 based on a stock price of $127.88, Book Value of $638M, and Book Value per Share of $14.64. The current P/B Ratio is 3% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$. (This testing is slightly different is CDN$ where the difference is 0% and so the stock price testing suggests that the stock price is relatively reasonable but at the median.)
I get a 10 year median Price/Cash Flow per Share Ratio of 12.72. The current P/CF Ratio is 26.64 based on a Stock price of $127.88, Cash Flow per Share estimate of $4.80 and Cash Flow $209M. The current P/CF ratio is 109% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You get similar results in CDN$. The estimate Cash Flow per Share is some 92% above the Cash Flow per Share for 2019, so you have to wonder?
I get an historical and 6 year median dividend yield of 0.90%. The current dividend yield is 0.52% based on dividends of $0.66 and a stock price of $127.88. The current dividend yield is 43% below the historical and 6 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You get similar results in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 0.78. The current P/S Ratio is 2.05 based on Revenue estimate for 2020 of $2,718M, Revenue per Share of $62.38 and a stock price of $127.88. The current ratio is 162% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You get similar results in CDN$.
Results of stock price testing is that the stock price is probably expensive. The dividend yield test shows this and it is confirmed by the P/S Ratio test. The P/E Ratios, the P/GP Ratios and the P/B Ratios for this stock are very high over the past 10 years.
Is it a good company at a reasonable price? I think that the stock price is relatively expensive. Looking at long term return now, the company has done quite well for Shareholders. I like dividend growth companies, but this company currently and mostly has very low dividend yields. You would not buy this company for the dividend. The last dividend increase was moderate (at 10%) and this is a good sign.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2) and Hold (4) recommendations. The consensus recommendation would be a buy. The 12 month stock price consensus is $172.81 ($135.00 US$). This implies a total return of 6.37% with 5.85% from capital gains and 0.52% from dividends.
Analysts like this stock on Stock Chase. Adam Othman on Motley Fool thinks this is a great stock to buy in the next market crash. A writer on Simply Wall Street says that the CEO of this company is paid a higher remuneration than the industry median. A writer on Simply Wall Street talks about ownership of this company. The blogger Dividend Earner takes a look at this stock.
FirstService Corp operates in two business divisions: FirstService Residential and FirstService Brands. FirstService Residential has service contracts to manage thousands of residential communities. FirstService Brands provides property services to residential and commercial customers. The company earns the majority of its revenue in the United States, with the remaining revenue generated in Canada. Its web site is here FirstService Corp.
The last stock I wrote about was about was Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF) ... learn more. The next stock I will write about will be Stantec Inc (TSX-STN, NYSE-STN) ... learn more on Monday, December 14, 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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