I do not own this stock of Methanex Corp (TSX-MX, NASDAQ-MEOH). I started a spreadsheet in November 2010 as I had read some good reports on the stock at that time. It is also got a solid “C” grade in a 2009 Money Sense review of stocks. Money Sense rated the top 100 Canadian Dividend Paying stocks. Money Sense was looking for stocks that provided generous income at reasonable prices. One main reason to buy this stock would be for diversification.
When I was updating my spreadsheet, I noticed Long Term Debt is Climbing. In 2019 it went up 61.05% and it has climbed 34.40% so far this year. I also noticed that Cash Flow Statement Cash is also going up. It climbed 63% in 2019 and 183% so far this year. Cash per share was up 57% in 2019 and 178% so far this year. Also, these is insider buying.
The dividend yields are currently low with dividend growth currently stopped. The current dividend yield is low (less than 2%) at 0.35%. This is because they recently cut their dividends. The 5, 10 and historical dividend yields are moderate (2% to 4%) at 2.33%, 2.40% and 2.46%. They used to rise their dividends, which they have been paying for some 17 years. See chart below. However, the company is expecting an earnings loss this year and have cut the dividends by 90%. This will point to the fact that management does not expect any improvement in the near term to earnings.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2019 was $107% with 5 year coverage at 45%. The DPR for CFPS for 2019 is 20% with 5 year coverage at 16%. The DPR for Free Cash Flow for 2019 is 56% with 5 year coverage at 32%.
Debt Ratios could be improved. The Long Term Debt/Market Cap Ratio for 2019 is 0.59. The Liquidity Ratio for 2019 is 1.90. The Debt Ratio for 2019 is 1.46 and this is a bit low as I would like it to be at 1.50 or higher. The 5 year median Debt Ratio is good at 1.65. The Leverage and Debt/Equity Ratios are higher than what I like at 3.90 and 2.68. I prefer these to be under 3.00 and under 2.00 respectively. The 5 year median ratios are better at 2.71 and 1.56.
The Total Return per year is shown below for years of 5 to 24 to the end of 2019 CDN$. 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 | 10.69% | 1.86% | -1.24% | 3.09% |
| 2009 | 10 | 10.93% | 12.98% | 9.34% | 3.64% |
| 2004 | 15 | 11.95% | 8.48% | 5.68% | 2.81% |
| 1999 | 20 | 15.51% | 18.19% | 13.55% | 4.64% |
| 1995 | 24 | 9.02% | 6.95% | 2.07% |
The Total Return per year is shown below for years of 5 to 24 to the end of 2019 US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 8.22% | -0.52% | -3.36% | 2.84% |
| 2009 | 10 | 8.56% | 10.64% | 7.08% | 3.56% |
| 2004 | 15 | 11.38% | 8.11% | 5.12% | 2.99% |
| 1999 | 20 | 16.84% | 19.93% | 14.40% | 5.53% |
| 1995 | 24 | 9.48% | 7.18% | 2.30% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.70, 14.27, and 16.83. The corresponding 10 year ratios are 9.91, 13.25 and 16.09. The corresponding historical ratios are 9.55, 10.79 and 15.19. The current P/E Ratio is negative so the P/E Ratio is non-calculable. This is in CDN$.
However, the P/E Ratio for 2021, which is getting close, is 57.20 based on a stock price of $54.78 and EPS estimate for 2021 of $0.96. This stock price testing suggests that the stock price is relatively expensive. This is in CDN$.
I estimate a Graham Price of $20.76. The 10 year low, median, and high median Price/Graham Price Ratios are 0.96, 1.27 and 1.22. The current P/GP Ratios is 2.64 based on a stock price of $54.78. This stock price testing suggests that the stock price is relatively expensive. This is in CDN$.
Some people calculate the Graham Price using the EPS for the past 3 years. I have for this stock calculated the Graham Price on this basis. The 10 year low, median, and high median P/GPR Ratios on this basis are 1.22, 1.54 and 1.88. The current P/GP Ratio on this basis is 1.14. On this basis the stock price testing suggests that the stock price is relatively cheap. This is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 2.53. The current P/B Ratio is 2.74 based on a Book Value of $1,194M, Book Value per Share of $15.67 and a stock price of $42.95. The current ratio is 8% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This is in US$, but you will get similar results in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.76. The current P/CF Ratio is 9.81 based on Cash Flow per Share estimate for 2020 of $4.38, Cash Flow of $334M and a stock price of $42.95. This stock price testing suggests that the stock price is relatively expensive. This is in US$, but you will get similar results in CDN$.
For this year, the cash flow is expected to drop 35%. It is expected to rise some 65% in 2021. If we use the P/CF Ratio for 2021 of 5.96, which is based on a Cash Flow per Share estimate for 2021 of $7.21, Cash Flow of $549M and a stock price of $42.95, we get a different answer. Here the ratio is 12% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in US$, but you will get similar results in CDN$.
I get an historical median dividend yield of 2.46%. The current dividend yield is 0.35% based on a stock price of $42.95 and a dividend of $0.15. The current dividend yield is 86% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This is in US$, but you will get similar results in CDN$.
I get a 10 year median dividend yield of 2.40%. The current dividend yield is 0.35% based on a stock price of $42.95 and a dividend of $0.15. The current dividend yield is 85% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This is in US$, but you will get similar results in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 1.32. The current P/S Ratio is 1.35 based on a stock price of $42.95, Revenue Estimate for 2020 of $2,423M and Revenue per Share of $31.80. The current ratio is 2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This is in US$, but you will get similar results in CDN$.
However, the Revenue is expected to fall 13% in 2020 and then recover in 2021. The 10 year median Price/Sales (Revenue) Ratio is 1.32. The P/S Ratio for 2021 is 1.22 based on a stock price of $42.95, Revenue Estimate for 2021 of $2,680M and Revenue per Share of $35.17. The 2021 ratio is 8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in US$, but you will get similar results in CDN$.
Results of stock price testing is that the stock price is probably reasonable. The P/S Ratio testing shows that it is just above and below the median. The dividend yield tests are not valid because the dividends have just recently been cut by 90%. The Graham Price test using 3 years of EPS is probably a better one than the one I generally use because you get an answer without any guessing. The P/B Ratio test is a good one and that is showing the stock price as relatively reasonable.
Is it a good company at a reasonable price? The stock is selling at a reasonable price. However, the dividend future is uncertain so for now I cannot call this a dividend growth stock. It is also risky because it depends on one product only.
When I look at analysts’ recommendations, I find Buy (4), Hold (4), Underperform (1) and Sell (1). The consensus would be a Hold. The 12 month stock price consensus is $48.60 ($38.06 US$). This implies a total loss of 10.93, with a capital loss of 11.28% and dividends of 0.35%.
Analysts have diverging views on this stock on Stock Chase. One analyst called it a one product, commodity company, which it is. Aditya Raghunath of Motley Fool likes this stock, even after the dividend cut. Executive Summary on Simply Wall Street gives the stock 2 stars out of 5 and 2 risk items. A writer on Simply Wall Street talks about who owns shares in this company. A writer on Investing.com talks about what analysts are saying about this stock.
Methanex Corp is the world’s largest producer and supplier of methanol to major international markets in North America, Asia Pacific, Europe, and South America. Its web site is here Methanex Corp.
The last stock I wrote about was about was Stantec Inc (TSX-STN, NYSE-STN) ... learn more. The next stock I will write about will be Magna International Inc (TSX-MG, NYSE-MGA) ... learn more on Friday, December 18, 2020 around 5 pm. Tomorrow on my other blog I will write about TFI International.... learn more on Thursday, December 17, 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.
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