Is it a good company at a reasonable price? I think that the stock price is expensive. I will not be buying any more as I have enough of the stock. I am happy with this stock for now. It is paying a dividend, but it is flat. I am earning 6% on my original investment. For now, the company is growing and hopefully, in the future they will increase the dividends.
I own this stock of WSP Global Inc (TSX-WSP, OTC-WSPOF). In Sept 2011 I rationalized my portfolio. I sold stocks that did not make it into my core and bought stocks that could of the same type. In this case selling Stantec and buying Genivar. In October 2011 I wanted to sell Enerflex because it is not a company I had bought, but a distribution from Toromont. I bought more Genivar, now called WSP Global.
When I was updating my spreadsheet, I noticed I have done well with this stock. My total return, to the end of March 2022 is 26.45% with 23.37% from capital gains and 3.08% from dividends. Yes, I know that the stock price has fallen lately as it has for most stocks. However, for my purposes, I am looking at my value at the end of March 2022.
We may or may not be in a bear market, but I do not care. I have been through them before. What happens to good dividend paying stock portfolio like mine is that my dividend increases go down.
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If you had invested in this company in 25 November 2016, $1,000.00 you would have bought 100 shares at $10 per share. In December 2021, after 10 years you would have received $570 in dividends. The stock would be worth $6,977.94. Your total return would have been $7,547.94.
If you had invested in this company in December 2011, $1,000.16 you would have bought 38 shares at $26.32 per share. In December 2021, after 16 years you would have received $2,296.90 in dividends. The stock would be worth $18,296.90. Your total return would have been $20,659.90.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $10.00 | $1,000.00 | 100 | 16 | $2,296.90 | $18,363.00 | $20,659.90 |
| $26.32 | $1,000.16 | 38 | 10 | $570.00 | $6,977.94 | $7,547.94 |
The dividend yields are Low with dividend growth non-existent. The current dividend yield is low (below 2%) at 1.05%. The 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 2.04%, 2.32% and 4.39%. However, these really do not matter has dividends have been flat since 2009. This company used to be an income trust and income trusts have high yields. Since dividends have been flat for so long, there is no dividend growth and currently you cannot expect any. It is disappointing that management has no plans to raise the dividend.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 37% with 5 year coverage at 55%. DPRs have been coming down for some time. As an income trust, the company could pay out more then its EPS in dividends. However, as a corporation it should not. So DPR for EPS has been declining and they would probably feel better if it was lower. However, it is expected to be around 29% in 2022. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 29% with 5 year coverage at 48%. The DPR for Cash Flow per Share for 2021 is 36% with 5 year coverage at 51%. The DPR for Free Cash Flow (FCF) for 2021 is 9% with 5 year coverage at 11%.
Debt Ratios are fine, but the Liquidity Ratio is low and that is a risk. The Long Term Debt/Market Cap Ratio for 2021 is low and good at 0.07. The Liquidity Ratio for 2021 is 1.14 and even adding in Cash Flow after Dividends, it is still low at 1.38. I prefer it to be at 1.50 or higher. The Debt Ratio for 2021 is good at 1.71. The Leverage and Debt/Equity Ratios are fine at 2.41 and1.41.
The Total Return per year is shown below for years of 5 to 16 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 | 0.00% | 34.74% | 32.66% | 2.08% |
| 2011 | 10 | 0.00% | 24.30% | 21.44% | 2.86% |
| 2006 | 15 | 7.36% | 23.36% | 18.89% | 4.47% |
| 2005 | 16 | 24.96% | 19.95% | 5.01% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 24.04, 27.83 and 33.37. The corresponding 10 year ratios are 20.92, 26.00 and 30.20. The corresponding historical ratios are 16.23, 20.27 and 24.25. The current P/E Ratio is 31.12 based on a stock price of $143.46 and EPS estimate for 2022 of $4.61. The current ratio is above the high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I also have an Adjusted Earnings per Share (AEPS). The 5 year low, median, and high median P/AEPS are 19.13, 23.71 and 29.17. The corresponding 10 year ratios are 17.70, 23.05 and 26.05. The current P/AEPS Ratio is 25.30 based on a stock price of $143.46 and AEPS estimate for 2022 of $5.67. The current ratio is between the median and high ratios of the 10 year ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $64.09. The 10 year low, median, and high median Price/Graham Price Ratios are 1.24, 1.46 and 1.66. The current P/GP Ratio is 2.24 based on a stock price of $143.46. This ratio is above the high of the 10 year median Ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.65. The current P/B Ratio is 3.62 based on a Book Value of $4,665M, Book Value per Share of $39.60 and a stock price of $143.46. The current ratio is 120% 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 11.92. The current P/CF Ratio is 15.21 based on Cash Flow per Share estimate for 2022 of $9.43, Cash Flow of $1,111M and a stock price of $143.46. The current ratio is 28% 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 4.39%. The current dividend yield is 1.05% based on dividends of $1.50 and a stock price of $143.46. The current yield is 76% 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 3.23%. The current dividend yield is 1.05% based on dividends of $1.50 and a stock price of $143.46. The current yield is 68% 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 1.14. The current P/S Ratio is 1.96 based on Revenue estimate for 2022 of $8,620M, Revenue per Share of $73.19 and a stock price of $143.46. The current ratio is 72% 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 expensive. The P/S Ratio test says this. The problem with the dividend yield tests is the flat dividends, so these are not valid tests. All the testing is showing the stock price as expensive except for the P/AEPS Ratio test. With that test, I supplemented the AEPS with EPS for years 2011 to 2014 as there is only 6 years of data. Since I do not believe in selling good stocks when they become expensive, I would give this stock a Hold rating.
Last year, as a results of my stock price testing, I said that the stock price was probably expensive. First, we should exclude the dividend tests because this company was an income trust that converted to a corporation. Income trusts could pay out higher dividends. The dividends have been flat since 2009. However, all the tests come back with a stock price that is expensive, including a favourite of mine of the P/S Ratio test.
When I look at analysts’ recommendations, I find Strong Buy (4), Outperform (8) and Hold (2). The consensus would be a Buy. The 12 month stock price is $195.43. This implies a total return of 37.29% with 26.25% from capital gains and 1.05% from dividends based on a current stock price of $143.46.
When I looked at analysts’ recommendations last year, I found Strong Buy (4), Buy (6) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $134.92. This implies a total return of 7.29% with 6.11% from capital gains and 1.18% from dividends based on a stock price of 127.15. What happened was a price move to $143.46 and a total return of 14.01% with 12.83% from capital gains and 1.18% from dividends. So, analysts were off last year. Also, if you consider the fact this stock reached a price of $183.63 at the 2021 year end and has been going down, with the stock market ever since, then analysts were way off.
Analysts like this stock on Stock Chase, but some think it is too expensive at present. Stock Chase gives this stock 4 stars out of 5. Robin Brown Motley Fool is impressed with the size of this company and last 10 years of returns. He says do regular investments and so current valuation does not matter so much. Adam Othman on Motley Fool admits price is high, but thinks it will keep growing at its current rate. The company talks about its fourth quarter in a Press Release. A Simply Wall Street report on Yahoo Finance talks about the share price growing faster than the EPS. They list not risks for this company.
WSP Global Inc provides engineering and design services to clients in the Transportation & Infrastructure, Property and Buildings, Environment, Power and Energy, Resources, and Industry sectors. It also offers strategic advisory services. The firm operates through four reportable segments namely, Canada, Americas (US and Latin America), EMEIA (Europe, Middle East, India, and Africa), and APAC (Asia Pacific, comprising Australia, New Zealand, and Asia). Its web site is here WSP Global Inc.
The last stock I wrote about was about was Algoma Central Corporation) ... learn more. The next stock I will write about will be Thomson Reuters Corp (TSX-TRI, NYSE-TRI) ... learn more on Monday, May 9, 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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