Is it a good company at a reasonable price? The stock price seems cheap at the present. I bought this stock for diversification and will continue to hold it. I am not planning on buying more at the present time. I worry about the debt ratios, especially the Liquidity Ratio.
I own this stock of Ag Growth International (TSX-AFN, OTC-AGGZF). I wanted to review all the income trust stocks touted in the Money Show of 2009. There was a lot of talk at this show about some of the Unit Trust being currently good buys with very good yields. Its median yield in 2009 was 7.9%. It was on the Canadian Dividend Aristocrats and this is why I first investigated this company. By 2011 when I bought this stock, I have been interested in AFN for some time. This stock is a play on the agricultural sector.
When I was updating my spreadsheet, I noticed that debt ratios are getting worse since 2019. The Liquidity Ratio for 2021 is 1.23. If you added in Cash Flow after Dividends, it is still low at 1.29. The Debt Ratio for 2021 is also very low at 1.20. I prefer both these ratios to be at least at 1.50. The problem with low ratios, especially for Liquidity Ratio is that if you need to raise cash and there is a recession going on, it can be difficult. You may have to sell assets at fire sale prices and this is never good.
If you had invested in this company in December 2011, $1,011.96 you would have bought 27 shares at $37.48 per share. In December 2021, after 10 years you would have received $855.36 in dividends. The stock would be worth $855.36. Your total return would have been $1,418.31.
If you had invested in this company in December 2016, $1,050.40 you would have bought 20 shares at $52.52per share. In December 2021, after 5 years you would have received $177.00 in dividends. The stock would be worth $633.60. Your total return would have been $810.60.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $37.48 | $1,011.96 | 27 | 10 | $562.95 | $855.36 | $1,418.31 |
| $52.52 | $1,050.40 | 20 | 5 | $177.00 | $633.60 | $810.60 |
The dividend yields are low with dividends have been declining. The current dividend yield is low (below 2%) at 1.88%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 4.38% and 4.81%. The historical median dividend yield is good (5% to 6% ranges) at 5.82%. The dividends flat between 2011 and 2019 and then they declined. This is another income trust company that is having a hard time getting its dividend right with the change to a corporation.
The Dividend Payout Ratios (DPR) are moving to good values. The DPR for EPS for 2021 is 120% with 5 year coverage at 518%. Analysts expect the DPR for EPS to be around 18% this year (because of the lower dividend, and increase in EPS). The DPR for CFPS for 2021 is 14% with 5 year coverage at 47%. I also have Adjusted Earnings per Share (AEPS), and its DPR for 2021 is 21% with 5 year coverage also at 21%. There is also Funds from Operations (FFO). Its DPR for 2021 is 46% with 5 year coverage at 20%. The DPR for Free Cash Flow (FCF) for 2021 is negative because of negative FCF. Analysts expect the DPR for 2022 is be 13%.
Debt Ratios are generally awful and this could get the company into difficulties. The Liquidity Ratio is 1.23 and if you add in cash flow after dividends, it is still low at 1.29. The Debt Ratio is low at 1.20. I prefer both these to be at 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 5.93 and 4.93. I prefer these to be below 3.00 and 2.00.
The Total Return per year is shown below for years of 5 to 18 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 | -24.21% | -5.62% | -9.62% | 4.00% |
| 2011 | 10 | -12.94% | 4.44% | -1.67% | 6.11% |
| 2006 | 15 | -6.09% | 16.28% | 5.11% | 11.17% |
| 2003 | 18 | -1.54% | 19.31% | 6.50% | 12.82% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 28.62, 34.82 and 41.02. The corresponding 10 year ratios are 21.56, 28.61 and 35.82. The corresponding historical ratios are 14.42, 21.36 and 26.57. The historical ratios are a better judge of stock price. The others are weird due to low and negative earnings. The current P/E Ratio is 9.59 based on a stock price of $31.95 and EPS for 2022 of $3.30. The current P/E Ratio is below the low of the historical median ratio. This stock price testing suggests that the stock price is relatively cheap. Also, a P/E Ratio below 10 is looked as a good price.
I get a Graham Price of $33.03. The 10 year low, median, and high median Price/Graham Price Ratios are 1.63, 2.23 and 3.01. The current P/GP Ratio is 0.97 based on a stock price of $31.95. This is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. the P/GP Ratios are high, but any ratio below 1.00 is suggestive of a cheap stock price.
I get a 10 year median Price/Book Value per Share Ratio of 2.55. The current ratio is 2.19 based on a Book Value of $274M, Book Value per Share of $14.57 and a stock price of $31.95. The current 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 also have a Book Value per Share Ratio estimate for 2022. This gives a current ratio of 1.97 based on a Book Value of $305M, Book Value per Share estimate of $16.20 for 2022 and a stock price of $31.95. The current ratio is 23% 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 15.57. The current P/CF Ratio is 5.34 based on Cash Flow per Share estimate for 2022 of $5.98, Cash Flow of $112.39 and a stock price of $31.95. The current ratio is 66% below the 10 year median ratio. I get a 10 year median Price/Book Value per Share Ratio of 2.55. This stock price testing suggests that the stock price is relatively cheap. I sort of wonder about the CFPS estimates, since the estimate for 2022 is an increase CFPS by 187% over the CFPS for 2022 and is also higher than any CFPS in the past. However, CFPS in the past has fluctuated a lot.
I get an historical median dividend yield of 5.82%. The current dividend yield is 1.88% based on dividends of $0.60 and a stock price of $31.95. The current dividend yield is 68% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 4.81%. The current dividend yield is 1.88% based on dividends of $0.60 and a stock price of $31.95. The current dividend yield is 61% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.16. The current P/S Ratio is 0.44 based on a stock price of $31.95, Revenue estimate for 2022 of $1,357M and Revenue per Share of $72.11. The current ratio is 62% 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 cheap. It is not surprising that the dividend yield tests say the stock is expensive as dividends have been cut by 75%. It is never a good sign when dividends are cut. Analysts expect a nice increase in Revenue and the P/S Ratio test shows that the stock is cheap. Most of the testing, except for the P/B Ratio test, says the stock is cheap.
When I look at analysts’ recommendations, I find Strong Buy (2) and Buy (8). The consensus would be a Strong Buy. The 12 month stock price consensus is $51.20. This implies a total return of 62.32% with 60.44% from capital gains and 1.88% from dividends. Note that this company hit a high of $44.05 in March and have been falling ever since.
Analysts on Stock Chase really like this stock. Analysts expect the company to grow. One analyst says he thinks there will be a dividend increase or stock buyback within 2 years. Stock Chase gives this stock 5 stars out of 5. Amy Legate-Wolfe on Motley Fool says analysts think the stock has a great upside. Nikhil Kumar on Motley Fool takes a look at this company and talks about its business.
The company had a Press Release on their fourth quarter results. The company announces on Business Wire via Yahoo Finance new credit facility. Simply Wall Street reviews this company via Yahoo Finance. Simply Wall Street gives two warnings on this company of interest payments are not well covered by earnings and large one-off items impacting financial results. (This last item is why a number of companies, including this one, has Adjusted Earnings per Share (AEPS).
Ag Growth International Inc manufactures portable and stationary grain handling, storage, and conditioning equipment, including augers, belt conveyors, grain storage bins, grain handling accessories, grain aeration equipment, and grain drying systems. It has manufacturing facilities in Canada, the United States, Italy, Brazil, France, United Kingdom, and India. Its geographical segments are Canada, United States, and the International. Its web site is here Ag Growth International.
The last stock I wrote about was about was Power Corp of Canada (TSX-POW, OTC-PWCDF) ... learn more. The next stock I will write about will be Hammond Power Solutions Inc (TSX-HPS.A, OTC-HMDPF) ... learn more on Wednesday, May 18, 2022 around 5 pm. Tomorrow on my other blog I will write about A Future Worth Getting Excited About.... learn more on Tuesday, May 10, 2022 around 5 pm.
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