I do not own this stock of SNC-Lavalin Group Inc (TSX-SNC, OTC-SNCAF). This stock was one from Mike Higgs' list of dividend growth stocks. I liked the idea of low dividends and high dividend increases. When you are building up a portfolio, low dividends are good for tax reasons. High dividend increases are attractive for the future.
When I was updating my spreadsheet, I noticed that I sold this stock in 2019 because I lost hope of it recovering. However, I sold at a relatively low. If I still had this stock, the stock would be worth 44% more than what I sold it at. You can just never tell what will happened. They have done a lot of dividend cutting since I sold.
The dividend yields are low with lots of recent dividend cuts. The current dividend yield is low (below 2%) at 0.29%. The 5 year dividend yield is just into the moderate range (2% to 4%). The 10 and historical dividend yields are low at 1.98% and 1.48%. Dividends were cut over 93% in 2019.
The Dividend Payout Ratios (DPR) need to improve and it looks like they will. I cannot calculate the DPR for EPS for either 2020 or 5 year coverage because of EPS losses. Analysts expect the DPR for EPS to be 4.5% in 2021. I cannot calculate the DPR for CFPS for 2020 because of negative cash flows. The 5 year coverage is 55%. Analysts expect the DPR for CFPS to be 3.8% in 2021 with a 5 year coverage of 34%. The DPR for Free Cash flow for 2020 is 31%. I cannot calculated the 5 year coverage due to negative FCFs.
Debt Ratios need improving. The Long Term Debt/Market Cap Ratio for 2020 is fine at 0.46. The Liquidity Ratio is very low. For 2020 it is 0.95. If you added in cash flow after dividends and add back in the current portion of the long term debt it rises to 1.02. You need a margin of safety and that is usually with a ratio of 1.50 or above. The Debt Ratio is also low at 1.33. Here you also want a ratio of 1.50 or above. The Leverage and Debt/Equity Ratios are too high at 4.03 and 3.03. Generally, you like to see these under 3.00 and 2.00 respectively.
The Total Return per year is shown below for years of 5 to 32 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | -39.66% | -9.88% | -11.98% | 2.10% |
| 2010 | 10 | -19.27% | -7.53% | -9.62% | 2.10% |
| 2005 | 15 | -6.80% | 1.92% | -1.04% | 2.96% |
| 2000 | 20 | -0.20% | 13.05% | 8.01% | 5.04% |
| 1995 | 25 | 2.18% | 12.65% | 8.33% | 4.33% |
| 1990 | 30 | 2.53% | 13.43% | 9.32% | 4.11% |
| 1988 | 32 | 5.25% | 19.29% | 12.96% | 6.33% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.29, 17.11, and 25.16. The corresponding 10 year ratios are 14.88, 18.80 and 25.05. The corresponding historical ratios are 13.69, 17.73 and 22.88. The current P/E Ratio of 15.32 based on a stock price of $27.43 and EPS estimate for 2021 of $1.79. The current ratio is between the low and median 10 year ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $24.27. The 10 year low, median, and high median Price/Graham Price Ratios are 1.24, 1.46 and 1.73. The current P/GP Ratio is 1.13 based on a stock price of $27.43. The current ratio is below the low P/GP 10 year ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 2.06. The current P/B Ratio is 1.88 based on a stock price of $27.43 and Book Value of $2,567M and a Book Value per Share of $14.62. The current ratio is 9% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 17.01. The current P/CF Ratio is 13.06 based on CFPS estimate for 2021 of $2.10, Cash Flow of $368.67M and a stock price of $27.43. The current P/CF Ratio is 23% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.48%. The current dividend yield is 0.29% based on dividends of $0.08 and a stock price of $27.43. The current yield is 80% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. However, dividends have been cut by over 90% in the last two years.
I get a 10 year median dividend yield of 1.98%. The current dividend yield is 0.29% based on dividends of $0.08 and a stock price of $27.43. The current yield is 85% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive. However, dividends have been cut by over 90% in the last two years.
The 10 year median Price/Sales (Revenue) Ratio is 0.86. The current P/S Ratio is 0.66 based on a stock price of $27.43, Revenue estimate for 2021 of $7,304M and Revenue per Share of $41.61. The current ratio is 23% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably reasonable to cheap. You cannot use the dividend yield tests because the dividends have been reduced some 93%. The P/S Ratio test says that the stock is cheap, other tests show the same thing or that the stock price is reasonable and below the median.
Is it a good company at a reasonable price? The stock price is probably reasonable to cheap. It could be a turn around situation, but such situations are always risky. Some analysts feel that it is worth the risks. However, I am not anxious to own this at the present time.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (6) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $33.96. This implies a total return of 24.10%, with 23.81% from capital gains and 0.29% from dividends based on a stock price of $27.43.
Analysts do not think this is the time to buy SNC on Stock Chase . One analyst says he likes WSP better. Nikhil Kumar on Motley Fool says that the company delivers quality projects on budget and on time and this should benefit long term shareholders. The Executive Summary on Simply Wall Street lists one risk gives it two stars out of 5. A writer on Simply Wall Street talks about the company having debt, but no earnings.
Based in Montreal, SNC-Lavalin is a fully integrated professional services and project management firm that offers a wide range of services, including financing, consulting, engineering and construction, procurement, and operations and maintenance. Its web site is here SNC-Lavalin Group Inc.
The last stock I wrote about was about was Barclays PLC ADR (LSE-BARC, NYSE-BCS) ... learn more. The next stock I will write about will be Fortis Inc (TSX-FTS, OTC-FRTSF) ... learn more on Friday, April 30, 2021 around 5 pm. Tomorrow on my other blog I will write about Best Stocks for 2021 by Hardbacon .... learn more on Thursday, April 29, 2021 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