Is it a good company at a reasonable price? The stock price is probably reasonable. Analysts expect a big increase in the stock price again this year, but that is hard to tell. Analysts also are expecting a recovery this year, like they did last year. I expect this company to recover at some point in the future. In the meantime, they have a problem with debt. This is a risk and problems with debt can become serious in a downturn.
I do not own this stock of SNC-Lavalin Group Inc (TSX-SNC, OTC-SNCAF), but I used to. I sold my stock in SNC-Lavalin (TSX-SNC, OTC-SNCAF) in 2019. I had given up hope that there will be any sort of resolution for this company anytime soon. I live off my dividends and they have cut the dividends twice this year.
In 2019 the Investment Reporter has removed this stock from their Key Stock List and Issued a sell on the stock. Also, in 2019 the largest shareholder and a shareholder for lots of Quebec companies of Caisse de Depot et Placement du Quebec seems to be losing patience with this stock also.
When I was updating my spreadsheet, I noticed analysts expected the EPS for 2021, 2022 and 2023 last year to be $1.71, $1.96, and $1.95. However, for 2021, instead of an EPS of $1.71, the EPS was a lot lower at $0.57. Analysts have reduced the expected EPS in 2022 to $1.75 from $1.95. However, the expected EPS for 2023 in 2020 was $1.96 and now it is $2.45. Also, last year analysts thought that dividends were again be raised in 2022, now they think the next dividend raise will be in 2023.
If you had invested in this company in December 2011, $1,021.60 you would have bought 20 shares at $51.08 per share. In December 2021, after 10 years you would have received $148.80 in dividends. The stock would be worth $618.20. Your total return would have been $767.00.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $51.08 | $1,021.60 | 20 | 10 | $148.80 | $618.20 | $767.00 |
The dividend yields are low with dividend growth has stopped. The current dividend yield is low (below 2%) at 0.28%. Personally, I never buy a stock with dividends below 1%. The company decreased their dividends in 2019. Dividends were decreased some 93%. The dividends have been flat since 2020. Analysts expect dividend to start rising again in 2023.
The Dividend Payout Ratios (DPR) seems fine going forward. The DPR for EPS for 2021 is 14%. I cannot calculate 5 year coverage because of past earning losses. This company provides Adjusted Earnings per Share (AEPS). The DPR for AEPS for 2021 is 9% with 5 year coverage at 53%. The DPR for Cash Flow per Share (CFPS) for 2021 is 6% with 5 year coverage at 39%. The DPR for Free Cash Flow (FCF) for 2021 is 50% with 5 year coverage not calculable due to past negative FCF.
Debt Ratios are not good and need improving. The Long Term Debt/Market Cap Ratio is low and good at 0.29. The Debt Ratio is 1.43. I prefer this to be 1.50 or higher. The Leverage and Debt/Equity Ratios for 2021 are 3.30 and 2.30. These are too high. I prefer them to be below 3.00 and below 2.00, respectively.
The Liquidity Ratio is very low at 0.92 and even adding in Cash Flow after dividends gets you to 0.95 and add back in the current portion of the current debt, we still get only 0.98. So current assets cannot coverage current liabilities. To do that the ratio needs to be at least 1.00 and a decent ratio is 1.50. I looked at the Assets/Current Liabilities Ratio and it is at 2.50. This could be higher. I also looked at the Long Term Debt to Cash Flow (in years) and that is 11.57. A good Long Term Debt to Cash Flow is 3.00 (years).
The Total Return per year is shown below for years of 5 to 33 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | -40.13% | -10.73% | -11.76% | 1.03% |
| 2011 | 10 | -20.95% | -3.13% | -4.90% | 1.77% |
| 2006 | 15 | -8.43% | 2.12% | -0.12% | 2.24% |
| 2001 | 20 | -0.94% | 9.19% | 6.00% | 3.19% |
| 1996 | 25 | 1.39% | 11.08% | 7.86% | 3.22% |
| 1991 | 30 | 2.34% | 13.42% | 9.92% | 3.50% |
| 1988 | 33 | 5.09% | 19.51% | 13.75% | 5.76% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.29, 17.11 and 25.16. The corresponding 10 year ratios are 15.42, 19.65 and 25.55. The corresponding historical ratios are 13.87, 19.11 and 23.90. The current P/E Ratio is 16.61 based on a stock price of $29.07 and EPS estimate for 2022 of $1.75. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
This company also provides Adjusted Earnings per Share (AEPS). The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.13, 34.06 and 43.79. (These are high because the AEPS was low.) The corresponding 10 year ratios are 16.61, 21.16 and 25.71. The current P/AEPS is 16.90 based on AEPS estimate for 2022 of $1.72 and a stock price of $29.07. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $21.72. The 10 year low, median, and high median Price/Graham Price Ratios are 1.31, 1.56 and 1.85. The current P/GP Ratio is 1.34 based on a stock price of $29.07. The current ratio is between the low and median ratios of the 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 1.85. The current P/B Ratio is 2.43 based on a stock price of $29.07, Book Value of $2,102M and a Book Value per Share of $11.98. This current ratio is 31% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have an estimate for Book Value per Share (BVPS) for 2022. I get a 10 year median Price/Book Value per Share Ratio of 1.85. The P/B Ratio with the estimate is 1.59 based on an BVPS estimate for 2022 of $18.30, Book Value of $3,213M and a stock price of $29.06. This ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 24.37. The current ratio is 14.25 based on a stock price of $29.06, Cash Flow per Share (CVPS) estimate for 2022 of $2.04 and Cash Flow of $358M. The current ratio is 42% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.47%. The current dividend yield is $0.28% based on dividends of $0.08 and a stock price of $29.07. The current yield is 81% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 1.98%. The current dividend yield is $0.28% based on dividends of $0.08 and a stock price of $29.07. The current yield is 86% 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 0.85. The current P/S Ratio is 0.69 based on a stock price of $29.06, Revenue estimate for 2022 of $7,386M and Revenue per Share of $42.07. The current ratio is 19% 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. The P/S Ratio says this. It is not confirmed by the dividend yield tests as dividends have been drastically reduced over the past few years. Most of the other testing support this conclusion.
Last year I said that the results of stock price testing were that the stock price was probably reasonable to cheap. You cannot use the dividend yield tests because the dividends have been reduced some 93%. The P/S Ratio test says that the stock is cheap, other tests show the same thing or that the stock price is reasonable and below the median.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (7) and Hold (2). The consensus would be a Strong Buy. The 12 month stock price consensus is $40.43. This implies a total return of 39.35% with 39.08% from capital gains and 0.28% from dividends based on a stock price of $29.07.
When I looked at analysts’ recommendations last year, I found Strong Buy (5), Buy (6) and Hold (3). The consensus was Buy. The 12 month stock price consensus is $33.96. This implies a total return of 24.10%, with 23.81% from capital gains and 0.29% from dividends based on a stock price of $27.43. What happened was a move to $29.07 with a total return of 6.27% with 5.98% from capital gains and 0.29% from dividends. So, analysts thought there would be a big recovery in 2021 and now they think that for 2022. This stock will probably recover, we just do not know when.
The two analysts’ remarks this year on Stock Chase are Do Not Buy and Hold. This is a rather negative result. Stock Chase gives this stock 4 stars out of 5. Amy Legate-Wolfe on Motley Fool thinks this stock will continue to perform but it will not be a steady ride. She likes the $41.00 target price. Christopher Liew on Motley Fool says is winning investors over of late. This company in a Press Release talk about their fourth quarter results. There is a Simply Wall Street report on this company on Yahoo Finance.
Based in Montreal, SNC-Lavalin is a fully integrated professional services and project management firm that offers a wide range of services, including financing, consulting, engineering and construction, procurement, and operations and maintenance. Its web site is here SNC-Lavalin Group Inc.
The last stock I wrote about was about was Barclays PLC ADR (LSE-BARC, NYSE-BCS) ... learn more. The next stock I will write about will be Fortis Inc (TSX-FTS, OTC-FRTSF) ... learn more on Monday, May 02, 2022 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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Whenever I read something like Debt Ratios are not good and need improving coming from your reviews, I know its not a good stock for me to invest in. In my opinion, WSP is a better choice. Thanks for your review Susan and happy spring! :-)
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