I do not own this stock of Waterloo Brewing Ltd (TSX-WBR, OTC-BIBLF). This stock has come up on the Dividend All-Star List at Dividend Growth Investing and Retirement site. It also just starting paying dividends in 2016. The company’s financial year ends January 31 each year. I am looking at the financial year ending January 31, 2021.
When I was updating my spreadsheet, I noticed there is not much in the way of analysts’ estimates for this company. For example, not all sites are showing estimates for EPS and Net Income. Debt Ratios for the last couple of years have not been good. For example, the current Liquidity Ratio for 2021 is 0.46. If it is under 1.00, it means that current assets cannot cover current liabilities. Even if you add in Cash Flow after dividends, it is just 0.65. Generally, a ratio is 1.50 or higher is what is acceptable.
The dividend yields are moderate with dividend growth good. The current dividend yield is moderate (2% to 4% range) at 2.00%. The 5 and 6 median dividend yields are also moderate at 2.33% and 2.51%. The company just started to pay dividends in 2016. The dividend growth over the past 5 years is good (15% and higher) at 17.28% per year. The last dividend increase was for 4.9% and it was in 2021.
The Dividend Payout Ratios (DPR) are expected to improve. The DPR for EPS for 2021 is 133% with 5 year coverage also at 133%. Analysts expect that the DPR for EPS will be around 53% in 2022 (next financial year). The DPR for CFPS for 2021 is 25% with 5 year coverage at 29%. The DPR for Free Cash Flow is negative. The DPR for FCF for 2022 is expected to be 163%.
Debt Ratios need improving. The Long Term Debt/Market Cap Ratio is 0.01 and so very low and good. The Debt Ratio for 2021 is low at 1.41 and it is best if this ratio is 1.50 or better. The Leverage and Debt/Equity Ratios for 2021 are 3.43 and 2.43 respectively. These are too high. I prefer them to be below 3.00 and below 2.00.
The Liquidity Ratio is very low at 0.46 and not much better when you add in Cash Flow after Dividends which gets you only to 0.65. In a situation like this you want to look at the Assets/Current Liabilities Ratio and with this ratio, the higher the better. However, for Waterloo it is just 2.12. It would appear that the company has a current hard time covering current liabilities. This is not good.
The Total Return per year is shown below for years of 5 to 30 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 | 17.28% | 24.93% | 22.22% | 2.70% |
| 2010 | 10 | 20.57% | 19.10% | 1.47% | |
| 2005 | 15 | 6.77% | 6.11% | 0.66% | |
| 2000 | 20 | 15.30% | 14.66% | 0.63% | |
| 1995 | 25 | 4.87% | 4.49% | 0.38% | |
| 1990 | 30 | 4.13% | 3.83% | 2.21% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 37.14, 49.63 and 72.38. The corresponding 10 year ratios are 42.07, 50.81 and 65.47. The corresponding historical ratios are 32.01, 48.74 and 57.79. The P/E Ratios are very high because of years of low EPS and stock prices will only go so low depending on the perceived value of the company. The current P/E Ratio is 26.33 based on a stock price of $5.53 and EPS estimate for 2022 of $0.21. The current P/E Ratio is below the low of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $2.20. The 10 year low, median, and high median Price/Graham Price Ratios are 1.62, 2.21 and 2.74. The current P/GP Ratio is 2.51 based on a stock price of $5.53. The current ratio is between the median and high of the 10 year median 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 2.05. The current P/B Ratio is 5.40 based on a Book Value of $36M, Book Value per Share of $1.02 and a stock price of $5.53. The current ratio is 163% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. The P/B Ratio is currently very high because of a decreasing Book Value per Share.
I get a 10 year median Price/Cash Flow per Share Ratio of 10.84. The last 12 months cash flow is negative, so I cannot do any testing for P/CF Ratio.
I get an historical (6 year) median dividend yield of 2.51%. The current dividend yield is 2.00% based on dividends of $0.11 and a stock price of $5.53. The current dividend yield is 20% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 5 year median dividend yield of 2.33%. The current dividend yield is 2.00% based on dividends of $0.11 and a stock price of $5.53. The current dividend yield is 14% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.52. The current P/S Ratio is 1.82 based on Revenue estimate for 2022 of $115M, Revenue per Share of $3.25 and a stock price of $5.53. The current ratio is 12% 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 maybe reasonable. It is not relatively cheap. The P/S Ratio test says it is reasonable and above the median, as does the 5 year median dividend yield test. The stock price seems at the top end of the reasonable range.
Is it a good company at a reasonable price? The stock price may currently be reasonable. I worry about the debt level and the ability to pay dividends. I would not be interested in this stock myself at the present time.
When I look at analysts’ recommendations, I find Strong Buy (3) and Buy (2). The consensus would be a Strong buy. The 12 month target stock price is $9.66. This implies a total return of 76.68% with 74.68% from capital gains and 2.00% from dividends.
Analysts on Stock Chase in March and May of this year really liked this stock. Kay Ng on Motley Fool likes the growth in revenue of this company. Ambrose O'Callaghan on Motley Fool thinks this company is in a booming business. The company on Cision talks about winning Bronze in the corresponding category at the 2021 Canadian Brewing Awards. A writer on Simply Wall Street on Yahoo Financial worries about the company being able to afford its dividends.
Waterloo Brewing Ltd engages in the production and distribution of alcohol-based products. Its products are distributed to end consumers primarily through The Beer Store in Ontario and Provincial Liquor Boards across Canada. Its web site is here Waterloo Brewing Ltd.
The last stock I wrote about was about was Wild Brain Ltd (TSX-WILD, OTC-WLDBF) ... learn more. The next stock I will write about will be Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF) ... learn more on Monday, December 6, 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