I do not own this stock of Pason Systems Inc (TSX-PSI, OTC-PSYTF). I read a report on this stock in the Buy and Sell Advisor in September 2013. I had not heard of this dividend growth company before so I decided to investigate it.
When I was updating my spreadsheet, I noticed that although analysts expect the company to pick up this year, the second quarterly results are not showing this. For example, analysts expect the Revenue to be 193M for 2022, up 23% from $156M in 2020. However, the last 12 months to the end of the second quarter, the revenue is down 9% to $142M.
You see the same sort of results with EPS. Analysts expect the EPS for 2021 to be $0.28, up 250% from $0.08 in 2020. However, the last 12 months to the end of the second quarter, the EPS is down 38% to $0.05.
The dividend yields are moderate with dividend growth currently flat. The current dividend yield is moderate (2% to 4% ranges) at 2.10%. The 5, 10 and historical dividend yields are moderate at 3.91%, 3.49% and 2.50%. Dividends in the past have gone up 12 of the 16 years I have covered and have gone down 2 times. The dividends were lowered in 2020 and have remained flat since. Analysts do not expect any dividend increases in the near future.
The Dividend Payout Ratios (DPR) are expected to improve. The DPR for EPS for 2020 was 600% with 5 year coverage at 260%. Dividends have not been well covered by EPS since 2015. Analysts expect the DPR for EPS to be 71% this year and 42% in 2022. The DPR for CFPS for 2020 is 98% with 5 year coverage at 71%. Analysts expect this to drop to 29% this year. The DPR for Free Cash Flow for 2020 is 76% with 5 year coverage at 95%. Analysts expect this to drop to 41% this year. However, analysts do not agree on what the FCF is, but they are pretty close in range.
Debt Ratios are good. The company has no long term debt. The Liquidity Ratio is quite high and good at 6.69. The Debt Ratio is also high and good at 6.44. The Leverage and Debt/Equity Ratios are good at 1.18 and 0.18.
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 | -6.73% | -11.64% | -16.48% | 4.84% |
| 2010 | 10 | 4.81% | -0.10% | -5.56% | 5.46% |
| 2005 | 15 | 12.69% | 0.21% | -3.96% | 4.17% |
| 2000 | 20 | 15.09% | 14.74% | 8.20% | 6.54% |
| 1996 | 24 | 18.36% | 11.86% | 6.50% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 22.59, 26.82 and 33.62. The corresponding 10 year ratios are 21.30, 26.79 and 32.28. The corresponding historical ratios are 13.84, 19.89 and 25.21. The current P/E Ratio is 33.96 based on a stock price of $9.51 and EPS estimate for $2021 of $0.28. The current ratio is above the 10 year high median ratio. This stock price testing suggests that the stock price is relatively expensive.
When earnings go down for a company, the P/E Ratio often is high because the value of the company will only go down so far. This is one reason why using the P/E Ratio to test the stock price does not always work.
I get a Graham Price of $4.76. The 10 year low, median, and high median Price/Graham Price Ratios are 1.94, 2.70 and 3.16. The current P/GP Ratio is 2.00 based on a stock price of $9.51. The current ratio is between the low and median 10 year median 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 3.96. The current P/B Ratio is 2.65 based on a Book Value of $298.6M, Book Value per Share of $3.59 and a stock price of $9.51. The current ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 13.34. The current P/CF Ratio is 13.59 based on Cash Flow per Share estimate for 2021 of $0.70, Cash Flow of $58.2M and a stock price of $9.51. The current ratio is 1.9% above 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 2.50%. The current dividend yield is 2.10% based on dividends of $0.20 and a stock price of $9.51. The current dividend yield is 16% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 3.49%. The current dividend yield is 2.10% based on dividends of $0.20 and a stock price of $9.51. The current dividend yield is 40% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 4.94. The current ratio is 4.09 based on Revenue estimate for 2021 of $193M, Revenue per Share of $2.32 and a stock price of $9.51. The current ratio is 17% 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 reasonable. The P/S Ratio test shows this. The dividend yield tests do not, but dividends have recently been cut by some 74%. The P/B Ratio test says the stock price is cheap. This would confirm the P/S Ratio test. This company comes out fairly well with the P/CF Test.
Is it a good company at a reasonable price? I think that the stock price is reasonable. This company services the old and gas industry, so is risky. There is probably still money to be made in the oil and gas industry, but the future is uncertain. I would bet that it will be at least 20 years before we are off oil and gas for energy.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (3) and Hold (2). The consensus would be a Buy. The 12 month stock price is $11.88. This implies a total return of 27.02% with 24.92% from capital gains and 2.10% from dividends based on a current stock price of $9.51.
Not well followed on Stock Chase as last entry is dated 2019. Nikhil Kumar on Motley Fool says their focus on R&D is likely to serve long-term shareholders well. The executive summary on Simply Wall Street gives this company 4 stars out of 5 and list 3 risks. A writer on Simply Wall Street talks about institutional investors. A writer on Simply Wall Street does not think that this company makes a good dividend stock to buy because of dividend cuts. The company talks about its second quarterly results on News Wire.
Pason Systems Inc is an oilfield specialist with fully integrated drilling data solutions. The company operates in three geographic segments: Canada, the United States, and International (Latin America, Offshore, the Eastern Hemisphere, and the Middle East). Its web site is here Pason Systems Inc.
The last stock I wrote about was about was Equitable Group Inc (TSX-EQB, OTC-EQGPF) ... learn more. The next stock I will write about will be Molson Coors Canada (TSX-TPX.B, NYSE-TAP) ... learn more on Friday, October 15, 2021 around 5 pm. Tomorrow on my other blog I will write about Canadian REITs .... learn more on Thursday, October 14, 2021 around 5 pm.
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Great post...good luck for your next blog.
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