Is it a good company at a reasonable price? The current price is probably relatively expensive. The company seems to be doing much better than it has in the past, but it has not yet passed the stock price it had in 2008. It has done well over the past two years, but it has done better for a couple of years before in the past and then not much for a while. However, I have no current plans to sell my shares.
I own this stock of Hammond Power Solutions Inc (TSX-HPS.A, OTC-HMDPF). I bought this stock as my main purchase for the TFSA in 2013 and 2014. I picked Hammond initially in 2013 as my main buy because it has good growth and reasonable dividend. Also, I think that it important to try out newer smaller companies for investment purposes. Companies on the TSX are always changing and it is good to get into new industries and new companies. The problem of this, of course, is you do not always know what industries and companies will be long lasting.
When I was updating my spreadsheet, I noticed I done mediocre on this stock. After 9 years, my total return is 7.86% per year with 5.13% from capital gains and $2.73% from dividends. I obvious did not buy it at a good time. If you look at the return over time, people who bought this stock 10 to 15 years ago, have not done well.
I note that analysts expected Sales to increase by 3%, but they instead increased by 18%. Analysts also expected the EPS to drop 25%, but EPS increased by 7%.
If you had invested in this company in December 2011, $1000.00 you would have bought 125 shares at $8.00 per share. In December 2021, after 10 years you would have received $330.00 in dividends. The stock would be worth $1,498.75. Your total return would have been $1,282.75.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $8.00 | $1,000.00 | 125 | 10 | $330.00 | $1,498.75 | $1,828.75 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 2.68%. The 5, 10 and historical dividend yields are also moderate at 3.65%, 3.25% and 3.05%. The dividends have increased at a low rate (below 8%) over the past 5 years. The growth has been 7.21% per year. The last dividend increase was in 2022 and it was for 17.6%, but this was after no dividend increase in 2021.
The Dividend Payout Ratios (DPR) are currently good. The DPR for EPS for 27% with 5 year coverage at 50%. The DPR for Cash Flow per Share (CFPS) for 2021 is 13% with 5 year coverage at 13%. The DPR for Free Cash Flow (FCF) for 2021 is 28% with 5 year coverage at 37%. The sites, more or less, agree on FCF.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2021 is quite low and good at 0.05. The Liquidity Ratio for 2021 is currently good at 1.57. The Debt Ratio for 2021 is good at 2.15. The Leverage and Debt/Equity Ratios are also good at 1.87 and 0.87.
The Total Return per year is shown below for years of 5 to 20 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 | 7.21% | 18.21% | 14.62% | 3.59% |
| 2011 | 10 | 8.53% | 6.86% | 4.13% | 2.73% |
| 2006 | 15 | 10.74% | 5.76% | 3.72% | 2.04% |
| 2001 | 20 | 17.02% | 14.15% | 2.88% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 5.76, 7.61 and 9.45. The corresponding 10 year ratios are 8.62, 10.41 and 12.20. The corresponding historical ratios are 6.51, 8.06 and 9.52. The corresponding historical ratios are 6.51, 8.06 and 9.52. It would seem that this stock has always had rather low P/E Ratios. The current P/E Ratio is 9.20 based on a stock price of $14.90 and EPS estimate for 2022 of $1.62. The current ratio is between the low and the 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 $20.34. The 10 year low, median, and high median Price/Graham Price Ratios are 0.52, 0.66 and 0.81. The current P/GP Ratio is 0.73 based on a stock price of $14.90. This ratio, although low, 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 0.81. The current P/B Ratio is 1.31 based on a Book Value of $134M, Book Value per Share of $11.35 and a stock price of $14.90. The current ratio is 32% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 5.10. The current P/CF Ratio is 6.31 based on Cash Flow for the last 12 months of $27.8M, Cash Flow per Share of $6.31 and a stock price of $14.90. The current ratio is 24% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 3.05%. The current dividend yield is 2.68% based on a stock price of $14.90 and dividends of $0.40. The current dividend yield is 12% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 3.25%. The current dividend yield is 2.68% based on a stock price of $14.90 and dividends of $0.40. The current dividend yield is 17% 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 0.30. The current P/S Ratio is 0.38 based on a stock price of $14.90, Revenue estimate for 2022 of $460M and Revenue per Share of $39.02. The current ratio is 26% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably on the expensive side at the moment. The dividend yield tests are saying the stock price is above the median and the P/S Ratio test is saying it is expensive. The P/B Ratio and P/CF Ratio tests are also saying the stock price is expensive. The P/GP Ratio test says it is above the median. Currently, the Revenue is growing, but we may be heading into a recession so it is anyone guess if estimates will hold up in 2022.
Last year I said that the results of stock price testing were that the stock price was probably on the expensive side. I know the dividend yield tests are showing the stock price as reasonable, but the P/S Ratio test does not confirm this. The problem is lack of growth in Revenue. There also seems to be a lack of growth in cash flow too. The testing results is a mixed bag as some show the stock price as reasonable and other as expensive.
When I look at analysts’ recommendations, I find only a Strong Buy. The consensus would be a Strong Buy. The 12 month stock price consensus is $19.25. This implies a total return of 31.88% with 29.19% from capital gains and 2.68% from dividends.
When I looked at analysts’ recommendations last year, I found only one recommendation and it was a Buy. The consensus would be a Buy. I can find a target price of $9.50. This implies a total loss of 9.56%, with a capital loss of 12.68% and dividends of 3.13% based on a stock price of 10.88. The recommendation and the target price do not match up. What happened a price increase to $14.90 was a total return of 40.08% with 36.95% from capital gains and 3.13% from dividends.
There have been no analysts’ comments on Stock Chase since 2019. It is a small company that has not been doing well, so analysts lost interest. Stock Chase gives this company 1 star out of 5. The last comments on this stock via Motley Fool was even longer at 2013. Their fourth quarterly results are on Newswire. Their first quarter results are also on Newswire. A report by Simply Wall Street talks on Yahoo Finance about the increasing dividend. This is true, but their comment on decreasing EPS over the next year is not what I picked up. Analysts I looked at say EPS will increase in 2022 by 27%.
Hammond Power Solutions Inc is engaged in designing and manufacturing of custom electrical magnetics, cast resin, custom liquid filled distribution and power transformers and standard electrical transformers, serving the electrical and electronic industries. The company has manufacturing plants in Canada, the United States, Mexico, and India. Its web site is here Hammond Power Solutions Inc.
The last stock I wrote about was about was Ag Growth International (TSX-AFN, OTC-AGGZF) ... learn more. The next stock I will write about will be Mullen Group Ltd (TSX-MTL, OTC-MLLGF) ... learn more on Friday, May 20, 2022 around 5 pm. Tomorrow on my other blog I will write about DIY Investors.... learn more on Thursday, May 19, 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.
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.
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