I do not own this stock of Badger Infrastructure Solutions Ltd (TSX-BDGI, OTC-BADFF). I started to follow this stock after reading a couple of articles in February 2012 in the G&M that talked about the company. The first article looked at what the pros who manage small-cap funds are buying. Badger was one of 10 stocks mentioned and it looked like an interesting stock. It is a dividend paying small cap. The second article looked at why stocks might appeal to a conservative investor looking for income.
When I was updating my spreadsheet, I noticed that 2020 was not a good year for this company. Revenue is down 15%, EPS was down 57%. Cash Flow per Share was up 23%, but Cash per Share excluding Working Capital was down 22%. Analysts expect the EPS to drop another 85% in 2021 before reviving in 2022. Still in 2021 they did increase their dividends by 5%.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (less than 2%) at 1.86%. The 5 and 10 year median dividend yields are also low at 1.45% and 1.66%. Since this company used to be an income trust, the dividend yields were originally quite high. They changed to a corporation in 2011 and since then the dividend yield has been low at 1.66%. The dividends were decreased in 2011 and the company again began to increase dividends in 2016. The dividend increases for the past 5 years are moderate (8% to 14% ranges) at 10.5% per year. The last dividend increase was in 2021 and it was for 5%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 was 83% with 5 year coverage at 36%. The DPR for EPS is expected to be very high in 2021, before returning to a lower 40% in 2022. EPS is expected to be very low in 2021. The DPR for CFPS for 2020 is 17% with 5 year coverage a5 13%. The DPR for Free Cash Flow for 2020 is 26% with 5 year coverage at 57%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2020 is 0.08. That is low and good. The Liquidity Ratio for 2020 is goo at 1.60 as is the Debt Ratio for 2020 at 2.12. The Leverage and Debt/Equity Ratios are 2020 are 1.90 and 0.90 and are low and good.
The Total Return per year is shown below for years of 5 to 23 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 | 10.48% | 10.93% | 9.26% | 1.67% |
| 2010 | 10 | 3.50% | 22.74% | 19.57% | 3.17% |
| 2005 | 15 | 4.04% | 16.89% | 13.31% | 3.58% |
| 2000 | 20 | 7.67% | 30.72% | 22.41% | 8.31% |
| 1997 | 23 | 12.20% | 10.29% | 1.91% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 18.74, 24.16 and 59.57. The corresponding 10 year ratios are 14.87, 20.57 and 27.81. The corresponding historical ratios are 9.28, 11.93 and 14.53. The current P/E Ratio is 308.18 based on a stock price of $33.79 and EPS estimate for 2021 of $0.11. The current P/E Ratio is above the high 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
However, in the above calculation, analysts are expecting a drop in EPS of 85% from 2020. The EPS in 2020 was a drop of 57% from that of 2019. EPS estimate for 2022 is $1.59. The P/E Ratio for 2022 based on a stock price of $33.79 is 21.25. This ratio is between the median and high 10 year P/E Ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $4.53. The 10 year low, median, and high median Price/Graham Price Ratios are 1.29, 1.85 and 2.46. The current P/GP Ratio is 7.45 based on a stock price of $33.79. The current ratio is above the high 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
However, in the above calculation, the Graham Price would have been affected by the very low EPS estimate for 2021. In 2022 the Graham Price is calculated to be $17.23. Here the P/GP Ratio based on a stock price of $33.79 would be 1.96. This ratio is between the median and high 10 year median P/GP Ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 3.35. The current P/B Ratio is 4.07 based on a Book Value of $288M, Book Value per Share of $8.30 and a stock price of $33.79. The current ratio is 21% 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 10.88. The current P/CF Ratio is 14.44 based on Cash Flow per Share estimate for 2021 of $2.34, Cash Flow of $81M and a stock price of $33.79. The current ratio is 33% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
However, analysts expect a drop in Cash Flow per Share of 41% in 2021. This again is a big drop. Analysts seem to expect this year of 2021 to be a rather poor year for this company. The P/CF Ratio for 2022 is 9.06. This is based on Cash Flow per Share estimate for 2022 of $3.73. This P/CF Ratio of 9.06 for 2022 is 17% 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 since 2011 of 1.66%. I am using the value since 2011 because this is the year that this company went from an Income Trust to a corporation. Income Trust can afford to pay much higher dividends than corporation. The 10 year median dividend yield is also 1.66%. The current dividend yield is 1.86% based on dividends of $0.63 and a stock price of $33.79. The current dividend yield is 12% above the historical median dividend yield since 2011. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 2.15. The current P/S Ratio is 2.12 based on Revenue estimate for 2021 of $554M, Revenue per Share of $15.97 and a stock price of $33.97. The current ratio is 1.8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable and below the median. The dividend yield test says this and it is confirmed by the P/S Ratio test. A problem with testing is that analysts really expect this company to have a poor year in 2021 and this is reflected in the low EPS and Cash Flow per Share estimates for 2021.
Is it a good company at a reasonable price? The stock price would seem to be reasonable and below the median. One of the problems with this company is that EPS and CFPS has tended to be volatile. This makes an investment in the company risky. In the past shareholders have done well. However, a lot of the past return was because of dividends. In the future, because the company is a corporation, dividends will be a much lower portion of the total return.
When I look at analysts’ recommendations, I find Buy (2), Hold (4) and Sell (1) recommendations. The consensus would be a Hold. The 12 month stock price consensus is $38.07. This implies a total return of 14.53% with 12.67% from capital gains and 1.86% from dividends.
The last couple of recommendations on Stock Chase are Holds. Joey Frenette on Motley Fool says this mid-cap has been choppy but it is likely to dig itself out of its hole in the second half of 2021. The executive summary on Simply Wall Street gives this stock 3 stars out of 5 and list 4 risks. A writer on Simply Wall Street says he is worried about the trend of Returns on Capital and that the ratio of current liabilities to total assets has risen to 21. A writer on Simply Wall Street is worried about unstable dividends because of a dividend cut in the last 10 years. However, this company used to be an income trust, but as all income trust, it was forced to become a corporation. Corporation pay lower dividends yields and most companies, when they had to change to a corporation cut dividends. It was the smart thing to do.
Badger Infrastructure Solutions Ltd is North America's provider of non-destructive excavating services. Its key technology is the Badger Hydrovac, which is used primarily for safe excavation around critical infrastructure and in congested underground conditions. Its web site is here Badger Infrastructure Solutions Ltd.
The last stock I wrote about was about was Superior Plus Corp (TSX-SPB, OTC-SUUIF) ... learn more. The next stock I will write about will be Aecon Group Inc (TSX-ARE, OTC-AEGXF) ... learn more on Monday, August 16, 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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