I do not own this stock of FirstService Corp (TSX-FSV, NASDAQ-FSV). I bought FirstService Corp in 2002 as it a good solid company that knows how to make money. At that time, I was still buying companies to earn capital gains. Their initial way of paying dividends by issuing preferred shares was interesting. However, only if you held shares at the time of the special dividend of preferred shares would you get any dividends. Preferred shares are not by favorite why of getting dividends. I held it for just over 8 years and made just over 3% per year, which is a very low return.
When I was updating my spreadsheet, I noticed that the company had a good year. Their Revenue is up 17%, with 5 year growth at 13% per year. Last year there was a loss due to special charge, but this year EPS was up by 12% over 2018 and 5 year growth is at 28% per year. Cash Flow was up in 2020 by 170% and 5 year growth is 23% per year. This is all in US$ which is their reporting currency. The Stock Price in CDN$ was up from last year or year to date by 69% with 5 year growth at 21% per year and 5 year total return at 22% per year.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2% at 0.36%. The 5 and 7 year median dividend yields are also low at 0.69% and 0.80%. The highest dividend yield was in 2003 and it was at 2.03%. The dividend increases are moderate (8% to 14% ranges) with the 5 year dividend increases at 10% per year.
Is this really a dividend stock? Dividend yield is very low. If the company increases the dividend at the same rate as they used per year over the past 10 years of 10.03%, then in 25 years’ time, the dividend yield on your original investment would be at 4.06%. A long time to wait for a decent yield?
| Div Yd | Years | At IRR | Div Inc |
|---|---|---|---|
| 0.60% | 5 | 10.03% | 61.25% |
| 0.97% | 10 | 10.03% | 160.02% |
| 1.56% | 15 | 10.03% | 319.28% |
| 2.52% | 20 | 10.03% | 576.08% |
| 4.06% | 25 | 10.03% | 990.18% |
| 6.55% | 30 | 10.03% | 1657.92% |
The Dividend Payout Ratios (DPR) are currently fine. The DPR for EPS for 2020 is 32%. I cannot calculate the 5 year coverage because of EPS losses. The DPR for CFPS for 2020 is 14% with 5 year coverage at 15%. The DPR for Free Cash Flow for 2020 is 9% with 5 year coverage at 18%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is good and very low at 0.09. The Liquidity Ratio is good at 1.51. The Debt Ratio is good at 1.64. The Leverage and Debt/Equity Ratios are fine at 2.57 and 1.57.
The Total Return per year is shown below for years of 5 to 25 to the end of 2020 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 8.19% | 22.28% | 21.37% | 0.91% |
| 2010 | 10 | 8.63% | 26.62% | 25.47% | 1.15% |
| 2005 | 15 | 17.12% | 16.61% | 0.51% | |
| 2000 | 20 | 17.42% | 17.03% | 0.39% | |
| 1995 | 25 | 21.89% | 21.52% | 0.38% |
The Total Return per year is shown below for years of 5 to 25 to the end of 2020 in US$. 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 | 10.03% | 28.42% | 27.60% | 0.82% |
| 2010 | 10 | 7.06% | 25.20% | 24.49% | 0.70% |
| 2005 | 15 | 17.67% | 17.32% | 0.35% | |
| 2000 | 20 | 19.61% | 19.33% | 0.28% | |
| 1995 | 25 | 22.95% | 22.69% | 0.26% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 32.98, 42.62 and 50.41. The corresponding 10 year ratios are 31.11, 39.56 and 46.76. The corresponding historical ratios are 13.99, 18.67 and 23.23. The current P/E Ratio is 68.80 based on a stock price $253.90 and EPS estimate for 2021 of $3.69 ($2.92 US$). The current P/E Ratio is above the 10 year median high ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a Graham Price of $41.74. The 10 year low, median, and high median Price/Graham Price Ratios are 3.16, 4.04 and 5.09. The current P/GP Ratio is 6.08 based on a stock price of $253.90. The current ratio is above the 10 year median high ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 8.18. The current P/B Ratio is 12.09 based on a stock price of $200.64, Book Value of $724M and Book Value per Share of $16.60. The current ratio is 48% above the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 13.80. The current P/CF Ratio is 34.47 based on Cash Flow per Share estimate for 2021 of $5.82, Cash Flow of $254M and a stock price of $200.64. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get a 7 year and historical median dividend yield of 0.90%. The current dividend yield is 0.36% based on dividends of $0.73 and a stock price of $200.64. The current dividend yield is 60% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 0.98. The current P/S Ratio is 2.70 based on Revenue estimate for 2021 of $3,234M, Revenue per Share of $74.20 and a stock price of $200.64. The current ratio is 175% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is relatively expensive. All the testing shows this. The dividend yield over the short period of dividends shows this and it is confirmed by the P/S Ratio test. The P/S Ratio test is probably the most important one, but there were no problems in the other tests except for the ratio being high.
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 it would seem that the P/S Ratio is most important and the current one is high relative to past ones. The P/E Ratio are very high and have been very high lately. They have not paid dividends for long.
In the following chart the total return for the 10 years to December 31, 2020 is 28.67% per year. There is no yield as dividend have only been paid for 7 years. The P/E Ratio and the P/S Ratio were at 274.00 and 0.46. Does this chart change my opinion of the stock price? No, stock price still looks relatively expensive.
| # Years | Total Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | 26.39% | 68.42 | 1.15 | 0.91% |
| 10 | 28.67% | 274.00 | 0.46 | |
| 15 | 18.39% | 11.23 | 0.69 | |
| 20 | 18.37% | 17.85 | 0.51 | |
| 25 | 22.67% | 10.35 | 0.28 | |
| current | 68.80 | 2.70 | 0.36% |
Is it a good company at a reasonable price? This company has done very well for its shareholders lately. I did not do well with this stock which I held for over 8 years from 2002 to 2010 making just over 3% per year. Now 10 years after I got rid of it, it is doing well. I think at present the stock price is on the expensive side.
When I look at analysts’ recommendations, I find Strong Buy (1), Hold (5). The consensus would be a Hold. The 12 month consensus stock price is $199.06. This implies a loss of 21.24 with a capital loss of $21.60 and dividends of 0.36%.
Analysts on Stock Chase think this company is a buy. Adam Othman on Motley Fool thinks that investing in growth stocks like this one is the way to go with your TFSA. Adam Othman on Motley Fool says some companies that are Dividend Aristocrats, you do not buy for Dividends. The executive summary on Simply Wall Street gives this stock 3 stars out of 5 and lists two risks of Has a high level of debt and Significant insider selling over the past 3 months. There is a Zack report of this company’s third quarterly earnings on Yahoo Finance.
FirstService Corp operates in two business divisions: FirstService Residential and FirstService Brands. The company earns the majority of its revenue in the United States, with the remaining revenue generated in Canada. Its web site is here FirstService Corp.
The last stock I wrote about was about was Northland Power Inc (TSX-NPI, OTC-NPIFF) ... learn more. The next stock I will write about will be First Capital REIT (TSX-FCR.UN, OTC- FCXXF) ... learn more on Friday, November 26, 2021 around 5 pm. Tomorrow on my other blog I will write about My Investing Adventure.... learn more on Thursday, November 25, 2021 around 5 pm.
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