I do not own this stock of Finning International Inc (TSX-FTT, OTC-FINGF). When I was in the market to buy an industrial stock in this area in 2007, I look at this stock was well as Toromont Industries (TSX-TIH). At the time I liked Toromont better, so that is what I bought.
When I was updating my spreadsheet, I noticed that since they did not give a dividend increase in 2020, they gave a good one in 2021 of 9.8% and more than double recent increases. A lot of companies paused on increases in 2020 because of uncertainty.
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 2.45%. The 5 and 10 year median dividend yields are moderate at 2.82% and 2.70%. The historical median dividend yield is low (below 2%) at 1.97%. In the past this company had low dividend yields, but moderate dividend increases (8% to 14% ranges). The dividend increases are low (below 8%) with 5 year increases at 2.5% per year. The last dividend increase was for 9.8%, and it was paid in 2021. There was no increase in 2020.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 was 57% with 5 year coverage at 65%. This is expected to be lower this year at 40%. The DPR for CFPS for 2020 wat 18% with 5 year coverage at 20%. The DPR for Free Cash Flow for 2020 was 16% with 5 year coverage at 45%. Sites seem to agree on what the FCF is.
Debt Ratios are fine. The Long Term Debt/Market Cap ratio is low and fine at 0.25. The Liquidity Ratio is high and fine at 1.98. The Debt Ratio is high and fine at 1.68. The Leverage and Debt/Equity Ratios are low and fine at 2.47 and 1.47, respectively.
The Total Return per year is shown below for years of 5 to 33 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 | 2.49% | 11.28% | 7.67% | 3.61% |
| 2010 | 10 | 5.72% | 2.53% | -0.02% | 2.55% |
| 2005 | 15 | 9.17% | 5.11% | 2.53% | 2.57% |
| 2000 | 20 | 11.09% | 10.81% | 7.51% | 3.30% |
| 1995 | 25 | 8.78% | 9.92% | 7.09% | 2.83% |
| 1990 | 30 | 6.77% | 10.11% | 7.45% | 2.66% |
| 1987 | 33 | 8.25% | 10.77% | 7.82% | 2.95% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 18.22, 20.79 and 24.66. The corresponding 10 year ratios are 12.47, 15.85 and 19.00. The corresponding historical ratios are 12.50, 16.16 and 19.76. The current P/E Ratio is 17.23 based on a stock price of $36.69 and EPS estimate for 2021 of $2.13. The current ratio is between the median and high 10 year ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $25.80. The 10 year low, median, and high median Price/Graham Price Ratios are 1.13, 1.41 and 1.62. The current P/GP Ratio is 1.42 based on a stock price of $36.69. The current ratio is around the median P/GP 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get a 10 year median Price/Book Value per Share Ratio of 2.23. The current P/B Ratio is 2.64 based on a Book Value of $2,252M, Book Value per Share of $13.89 and a stock price of $36.69. 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 9.37. The current P/CF Ratio is 10.05 based on Cash Flow per Share estimate for 2021 of $3.65, Cash Flow of $592M and a stock price of $36.69. The current ratio is 7% 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 1.97%. The current dividend yield is 2.45% based on a stock price of $36.69 and dividends of $0.90. The current dividend yield is 25% 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 2.70%. The current dividend yield is 2.45% based on a stock price of $36.69 and dividends of $0.90. The current dividend yield is 9% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. Company seems to have changed from a low yield and moderate growth to moderate yield and low growth. This is a reason I like the 10 year median dividend yield test.
The 10 year median Price/Sales (Revenue) Ratio is 0.67. The current P/S Ratio is 0.88 based on Revenue estimate for 2021 of $6,762M, Revenue per Share of $41.71 and a stock price of $36.69. The current ratio is 32% above the 10 year median ratio. This stock price testing suggests that the stock price is expensive.
Results of stock price testing is that the stock price is above the median and probably expensive. The P/S Ratio test shows the stock as expensive. The problem with the historical dividend yield test is that the Dividend Payout Ratio are currently higher than the historical median one, and are still a bit higher than the 10 year median ones. Most of the other tests is showing a current stock price as above the median.
I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below, the P/S Ratios and the dividend yields do a fairly good job in predicting good total returns.
In the following chart the total return for the 15 years to December 31, 2020 is 5.11% per year. The beginning yield was at 1.18%, and the P/E Ratio and the P/S Ratio were at 20.30 and 0.69. Does this chart change my opinion of the stock price? No.
| # Years | Total Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | 11.28% | -19.87 | 0.51 | 3.88% |
| 10 | 2.53% | -58.89 | 1.00 | 1.73% |
| 15 | 5.11% | 20.30 | 0.69 | 1.18% |
| 20 | 10.81% | 13.51 | 0.39 | 1.57% |
| 25 | 9.92% | 9.96 | 0.43 | 2.05% |
| 30 | 10.11% | 14.56 | 0.40 | 3.67% |
| 33 | 10.77% | 12.74 | ||
| current | 17.23 | 0.88 | 2.45% |
Is it a good company at a reasonable price? The stock price might be relatively high and it is certainly above the median. I still like this company. I did not buy it because I have Toromont and both these companies are in the same business.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (2) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $43.44. This implies a total return of $20.85% with 18.40% from capital gains and 2.45% from dividends.
Last year I said that the results of stock price testing were that the stock price is probably reasonable and around the median and maybe below the median. Last year analyst consensus was a Buy with the 12 month stock price consensus of $25.25. This implied a total return of 5.67% with 2.35% from capital gains and 3.32% from dividends based on a current price of $24.67. What happened is a 12 month total return of 52.04% with 48.72% from capital gains and 3.32% from dividends
David Burrows on Stock Chase says this stock is his top pick with a target price of $41.67. Nikhil Kumar on Motley Fool thinks the company’s resilient business model and financial flexibility position it well to capture attractive growth opportunities, as markets recover following the global pandemic. The Executive Summary on Simply Wall Street gives this company 4 stars out of 5 and lists one risk. A writer on Simply Wall Street likes that the dividend is being increased and the dividend’s sustainability. A writer on Simply Wall Street thinks this stock is one to keep an eye on. He has seen insiders buying shares even though they already own plenty. The company reports its third quarter results on Global Newswire.
Finning International Inc is a dealer and distributor of heavy-duty machinery and parts of the Caterpillar brand. The company operates in Canada, South America, UK and Ireland, and others. Its web site is here Finning International Inc.
The last stock I wrote about was about was Crescent Point Energy Corp (TSX-CPG, NYSE-CPG) ... learn more. The next stock I will write about will be Quarterhill Inc (TSX-QTRH, OTC-QTRHF) ... learn more on Wednesday, November 17, 2021 around 5 pm. Tomorrow on my other blog I will write about Getting Schooled in Risk .... learn more on Tuesday, November 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.
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