I do not own this stock of Aecon Group Inc (TSX-ARE, OTC-AEGXF). This stock has been coming up on Canada Stock Channel Weekly email. Site is Canada Stock Channel.
When I was updating my spreadsheet, I noticed that they have been giving decent dividend increases over the past 5 years. They increased the dividend by 9% in 2021. This points to management being optimistic about the future. Analysts think that dividend increases will continue but at a lower level. One problem is the Dividend Payout Ratios for EPS which is currently rather high at 70%, but analysts do expect that to come down.
The dividend yields are moderate with dividend growth moderate. The current dividend yields are moderate (2% to 4% ranges) at 3.42%. The 5, 10 and historical dividend yields are also moderate at 2.91%, 2.82% and 2.27%. The dividend growth is moderate (8% to 14% ranges) at 9.89% per year over the past 5 years. The last dividend increase was for 9.37%. However, analysts do expect lower increases over the short term.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 are fine at 48% with 5 year coverage at 57%. The DPR for CFPS for 2020 are fine at 18% with 5 year coverage also at 18%. The DPR for Free Cash Flow is also fine at 28% with 5 year coverage at 53%. However, analysts expect the DPR for FCF to climb in 2021, but then moderate again in 2022.
Debt Ratios could improve. Long Term Debt/Market Cap Ratio for 2020 is 0.51 and moving to 0.42 in 2021. Debt increased but stock price also increased. The Liquidity Ratio for 2020 is 1.44. This a bit low, but add in Cash Flow after dividends and it is 1.58. The Debt Ratio for 2020 is 1.36. This is also low and I prefer this at 1.50 or higher, but it has always been low for this stock. The Leverage and Debt/Equity Ratios for 2020 are 3.76 and 2.76 respectively. These are a bit too high and I prefer them to be less than 3.00 and less than 2.00, respectively.
The Total Return per year is shown below for years of 5 to 24 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 | 9.89% | 4.53% | 1.23% | 3.30% |
| 2010 | 10 | 12.07% | 7.92% | 4.81% | 3.11% |
| 2005 | 15 | n/a | 10.75% | 7.80% | 2.95% |
| 2000 | 20 | 9.60% | 11.28% | 8.76% | 2.52% |
| 1996 | 24 | 8.43% | 6.57% | 1.86% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.26, 18.26 and 21.26. The corresponding 10 year ratios are 15.02, 17.71 and 20.27. The current P/E Ratio is 21.07 based on a stock price of $20.44 and EPS estimate for $0.97. This ratio is above the 10 year high P/E Ratio. This stock price testing suggests that the stock price is relatively expensive.
The EPS for 2021 is expected to drop 25% but recover in 2022. The EPS for 2020, 2021 and 2022 are $1.29, $0.97, and $1.24. The P/E Ratio in 2022 is expected to be 16.48 based on a stock price of $20.44 and EPS estimate for 2022 of $1.24. This P/E Ratio is between the low and median ratios of 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $17.63. The 10 year low, median, and high median Price/Graham Price Ratios are 0.82, 1.01 and 1.16. The current P/GP Ratio is 1.16 based on a stock price of $20.44. This ratio is at the 10 year median high ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The Graham Price is affected by the EPS estimates. A 25% drop in EPS for 2021 is a big drop. The Graham Price estimate for 2022 is $19.94. The 2022 P/GP Ratio for 2022 is 1.03 based on a stock price of $20.44. This ratio is between the low and median 10 year P/GP Ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.21. The current P/B Ratio is 1.43 based on a Book Value of $859M, Book Value per Share of $14.25 and a stock price of $20.44. The current ratio is 18% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 5.59. The current P/CF Ratio is 8.18 based on Cash Flow per Share estimate for 2021 of $2.50, Cash Flow of $151M and a stock price of $20.44. The current ratio is 46% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I would guess analysts do not expect this company to have a good year in 2021 as the Cash Flow per Share estimate for 2021 is a drop of 45% in Cash Flow per Share from 2020. The P/CF Ratio for 2022 is 6.05 based on Cash Flow per Share of $3.38, Cash Flow of $204M and a stock price of $20.44. This 2022 ratio of 6.05 is 8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 2.27%. The current dividend yield is 3.42% based on a stock price of $20.44 and dividends of $0.70. The current dividend yield is 51% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.82%. The current dividend yield is 3.42% based on a stock price of $20.44 and dividends of $0.70. The current dividend yield is 22% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.27. The current P/S Ratio is 0.31 based on Revenue estimate for 2021 of $4,038M, Revenue per Share of $66.95 and a stock price of $20.44. The current dividend yield is 13% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests are saying that the stock is cheap, but this is not confirmed by the P/S Ratio test which says the stock price is reasonable but above the median.
Is it a good company at a reasonable price? The stock price would seem to be reasonable. I would like the debt ratios to improve, but this stock is a dividend growth stock and I like that about it.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (6) and Hold (2). The consensus would be a Strong Buy. The 12 month stock price consensus is $23.54. This implies a total return of 18.59% with 15.17% from capital gains and 3.42% from dividends.
Analysts like this stock on Stock Chase and think it will benefit from infrastructure projects. Vishesh Raisinghani on Motley Fool says this stock is one of the best value stocks to buy now. The executive summary on Simply Wall Street gives this stock 4 stars out of 5 and lists 2 risks. A writer on Simply Wall Street likes that there is insider buying. A writer on Simply Wall Street likes that the dividend is covered by both EPS and Cash Flow. Danish Ghazi on YouTube talks about this stock (starting at 5.37 minutes into the video).
Aecon Group Inc is a Canada-based company that operates in two major segments: Construction and Concessions. Aecon generates the majority of its revenue from the Construction segment. Its web site is here Aecon Group Inc.
The last stock I wrote about was about was Badger Infrastructure Solutions Ltd (TSX-BDGI, OTC-BADFF) ... learn more. The next stock I will write about will be Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF) ... learn more on Wednesday, August 18, 2021 around 5 pm. Tomorrow on my other blog I will write about Best Online Brokers.... learn more on Tuesday, August 17, 2021 around 5 pm.
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