I do not own this stock of LifeWorks Inc (TSX-LWRK, OTC-MSIXF). Every once in a while, I go through the stocks that my brokerage, TD Waterhouse, is recommending to find promising new stocks. In February 2013 this stock was rated a buy by TD Waterhouse. It was under Diversified Financials.
When I was updating my spreadsheet, I noticed that this stock has changed its name and used to be Morneau Shepell Inc (TSX-MSI, OTC-MSIXF). Also, the EPS is unusually high because of selling a business. Without this sale, the EPS would probably be between $0.23 and $0.30.
I also wonder about the EPS estimates given. For 2021, estimate is $0.67. The EPS in 2018 and 2019 were $0.36 and $0.28. The 2020 EPS as noted above was high due to an asset sale. If you start with EPS for 2020 and subtract the Q1 EPS for 2020 and add in the Q1 EPS for 2021, the EPS for last 12 months is $0.38. The EPS for last 12 months is much lower than 2021 EPS estimate and seems more in line with past EPS.
The dividend yields are moderate with dividend growth non-existent. The current dividend yield is moderate (2% to 4% ranges) at 2.33%. The 5 and 10 year median dividend yields are also moderate at 3.05% and 4.73%. The historical median dividend yield is good (5% and 6% ranges) at 5.27%. This company used to be an income trust and this accounts for past higher dividend yields. The dividends have been flat since 2012. Analysts have been expecting the dividends to increase again, but the company needs to get the DPR for EPS down below 100% first.
The Dividend Payout Ratios (DPR) for CFPS is fine, but others need improving, especially the DPR for EPS which analysts expect to happen. The DPR for EPS for 2020 is 98% with 5 year coverage at 153%. The DPR for CFPS for 2020 is 305 with 5 year coverage at 37%. The DPR for CFPS is the only ratios that are good. The DPR for Free Cash Flow for 2020 is 67% with 5 year coverage at 97%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is 0.19. This is good. The Liquidity Ratio for 2020 is also good at 1.50 as is the Debt Ratio for 2020 at 1.77. The Leverage and Debt/Equity Ratios are fine at 2.31 and 1.31.
The Total Return per year is shown below for years of 5 to 16 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 | 0.00% | 20.57% | 16.47% | 4.11% |
| 2010 | 10 | -0.62% | 16.60% | 11.57% | 5.03% |
| 2005 | 15 | -0.41% | 11.25% | 6.39% | 4.85% |
| 2004 | 16 | 12.31% | 7.33% | 4.98% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 30.78, 37.46 and 44.15. The corresponding 10 year ratios are 30.23, 36.06 and 42.80. The corresponding historical ratios are 28.78, 35.82 and 39.67. The current P/E Ratio is 49.87 based on a stock price of $33.41 and EPS estimate for 2021 of $0.67. The current ratio is above the high 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $33.41. The 10 year low, median, and high median Price/Graham Price Ratios are 1.89, 2.20 and 2.50. The current P/GP Ratio is 2.79 based on a stock price of $33.41. The current ratio is above the high 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 2.53. The current P/B Ratio is 3.52 based on a stock price of $33.41, Book Value of $652M and a Book Value per Share of $9.48. The current ratio is 39% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 14.21. The current P/CF Ratio is 12.62 based on last 12 month Cash Flow of $182M, Cash Flow per Share of $2.65 and a stock price of $33.41. The current ratio is 15% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 5.27%. The current dividend yield is 2.33% based on a stock price of $33.41 and dividends of $0.78. The current dividend yield is 56% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 4.73%. The current dividend yield is 2.33% based on a stock price of $33.41 and dividends of $0.78. The current dividend yield is 51% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.47. The current P/S Ratio is 2.21 based on Revenue estimate for 2021 of $1,042M, Revenue per Share of $15.15 and a stock price of $33.41. The current ratio is 50% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. The P/S Ratio testing is pointing to the stock price being expensive. The dividend yield tests are showing this too, but this company used to be an income trust, so it is debatable how reliable the dividend yield tests are. However, the P/B Ratio test shows the stock price as expensive. The P/CF Ratio tests points to a reasonable test, but this test uses the 12 month cash flow which seems not to be as reliable as the test with a 2021 estimate.
Is it a good company at a reasonable price? I think that the stock price is on the expensive side, so therefore not currently reasonable. The main problem with this stock is that it has not brough the DPR for EPS to a reasonable level after becoming a corporation in 2009.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (4). The consensus would be Buy. The 12 month stock price consensus is $39.60. This implies a total return of $20.86% with 18.53% from capital gains and 2.33% from dividends.
Analysts have not been much interested in this stock on Stock Chase. Nikhil Kumar Motley Fool thinks this company’s success during covid 19 will lead to a significantly higher stock price. The executive summary on Simply Wall Street lists 4 risks and 4 stars out of 5. A writer on Simply Wall Street thinks the fair value of this stock is $62.26 CDN$. A writer on Simply Wall Street does not like the fact the earnings cannot cover dividends, but is encouraged because of growing earnings. The site of Financill has some interesting remarks and stats about this stock.
LifeWorks Inc is engaged in delivering technology-enabled solutions that help clients support the total wellbeing of their people and build organizational resiliency. Its solutions span employee and family assistance, health and wellness, recognition, pension and benefits administration, retirement consulting, actuarial and investment services. Its web site is here LifeWorks Inc.
The last stock I wrote about was about was Suncor Energy Inc (TSX-SU, NYSE-SU) ... learn more. The next stock I will write about will be TMX Group Ltd (TSX-X, OTC-TMXXF) ... learn more on Monday, July 12, 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.
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