Is it a good company at a reasonable price? The stock price is reasonable. The company has a debt problem. The problem when debts are too high is that they can get into trouble quickly in a recession. On the other hand, this company has been in this business since 1977. They have increased their dividends in 17 years over the past 33 years (or 52%) of the time.
I do not own this stock of Parkland Fuel Corp (TSX-PKI, OTC-PKIUF). I decided to do a spreadsheet on this stock as it was a stock recommended by Roger Conrad in Money Show 2013.
When I was updating my spreadsheet, I noticed that they just started to use Adjusted Earnings per Share data in 2021 annual report. They had, for a number of years used Adjusted EBITDA data, but EBITDA is not something I personally follow, although I know a number of analysts have always valued this data.
The analysts last year expected Sales to grow 25% in 2021, but they grew 53%. They also expected the EPS to grow some 230% to $1.78. However, EPS only increased 19% to 0.64. This is probably why the company is now showing Adjusted EPS, which in 2021 is $2.45.
If you had invested in this company in December 2011, $1002.51 you would have bought 79 shares at $12.69 per share. In December 2021, after 10 years you would have received $888.87 in dividends. The stock would be worth $2,746.83. Your total return would have been $3,635.70.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $12.69 | $1,002.51 | 79 | 10 | $888.87 | $2,746.83 | $3,635.70 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.7%. The 5, 10 and historical dividend yields are also moderate at 3.22%, 4.25% and 3.36%. The dividend growth has been low (below 8% per year), actually very low, with dividend growth at 1.88% per year over the past 5 years. In 2022 they have switched to a quarterly dividend (Cycle 1) and have increased the dividends by 5.28%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 192% with 5 year coverage at 99.9%. This is high, but the DPR for the other measures is fine. The DPR for AEPS for 2021 is 50% with 5 year coverage at 39.5%. The DPR for Cash Flow per Share for 2021 is 15% with 5 year coverage at 24%. The DPR for Free Cash Flow for 2021 is 26% with 5 year coverage at 31%.
Debt Ratios are not good and the company does have a debt problem. The Long Term Debt/Market Cap Ratio is too high at 1.01. The current one is even higher at 1.16. The Liquidity Ratio for 2021 is low 1.39. If you add in cash flow after dividends, it is better at 1.71. The Debt Ratio is too low at 1.25. The Leverage and Debt/Equity Ratio for 2021 are too high at 5.83 and 4.65.
Some analysts think that a Long Term Debt/Market Cap Ratio is this is ok up to 1.00, but other say it should not be over 0.50. The current one is too high and this is partly due to falling stock price, but also due to increasing Debt. It is best that both the Liquidity Ratio and Debt Ratio be at 1.50 or higher. I prefer the Leverage and Debt/Equity Ratio to be below 3.00 and below 2.00.
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 | 1.88% | 8.22% | 4.33% | 3.89% |
| 2011 | 10 | 1.69% | 16.57% | 10.60% | 5.96% |
| 2006 | 15 | 3.47% | 14.28% | 6.87% | 7.41% |
| 2001 | 20 | 19.77% | 23.93% | 11.34% | 12.59% |
| 1996 | 25 | 18.77% | 19.18% | 11.25% | 7.93% |
| 1991 | 30 | 15.42% | 16.53% | 10.78% | 5.74% |
| 1988 | 33 | 13.92% | 13.34% | 9.09% | 4.25% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 34.28, 40.43 and 46.59. The corresponding 10 year ratios are 30.42, 35.55 and 40.68. The corresponding historical ratios are 10.73, 13.51 and 16.10. The current P/E Ratio is 14.85 based on a stock price of $34.90 and EPS estimate for 2022 of 2.35. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. However, the 10 year P/E Ratios are very high and normally a P/E Ratio of 10.00 or less is considered cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.50, 23.75 and 29.99. The corresponding 10 year ratios are 20.94, 27.21 and 32.38. The current P/AEPS Ratio is 14.13 based on a stock price of $34.90 and AEPS estimate for 2022 of $2.47. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. However, the 10 year P/E Ratios are high and normally a P/AEPS Ratio of 10.00 or less is considered cheap.
I get a Graham Price of $26.37. The 10 year low, median, and high median Price/Graham Price Ratios are 1.65, 2.00 and 2.28. The current P/GP Ratio is 1.32 based on a stock price of $34.90. The current ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. However, the 10 year P/GP Ratios are high and normally a P/GP Ratio of up to 1.50 is considered reasonable.
I get a 10 year median Price/Book Value per Share Ratio of 2.94. The current P/B Ratio is 2.65 based on a Book Value of $2,028M, Book Value per Share of $13.15 and a stock price of $34.90. The current ratio is 10% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. Any P/B Ratio under 3.00 is considered reasonable, so this ratio is not high like some other ratios.
I get a 10 year median Price/Cash Flow per Share Ratio of 9.71. The current P/CF Ratio is 4.50 based on Cash Flow per Share of $7.75, Cash Flow of $1,195M and a stock price of $34.90. The current ratio is 54% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. The current ratio is a reasonable one. However, analysts estimate is showing a big increase (32%) in Cash Flow per Share.
I get an historical median dividend yield of 3.36%. The current dividend yield is 3.72% based on a stock price of $34.90 and dividends of $1.30. The current ratio is 11% above the historical 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 dividend yield of 4.25%. The current dividend yield is 3.72% based on a stock price of $34.90 and dividends of $1.30. The current ratio is 12% below the 10 year median ratio. 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 0.33. The current P/S Ratio is 0.19 based on a stock price of $34.90, Revenue estimate for 2022 of $28,380M and Revenue per Share of $184.08. The current ratio is 43% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. The ratios for P/S are low, but analysts are also expecting an increase in Revenue of 32%.
Results of stock price testing is that the stock price is the stock price is probably reasonable. The dividend yield tests show the stock price as reasonable and above and below the median. The P/S Ratio shows the stock price as cheap and has a really low P/S Ratio but analysts expect a big raise in Revenue. The P/B Ratio is showing the stock price as reasonable. This is a good clean test.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (7) and Hold (2). The consensus would be a Strong Buy. The 12 month stock price is $47.47. This implies a total return of 39.74% with 36.02% from capital gains and 3.72% from dividends.
Analyst on Stock Chase think it might be a buy, some are worried about the company. Aditya Raghunath on Motley Fool think this stock is a current buy. Kay Ng on Motley Fool says it is passive income stock that is changing the dividends from monthly to quarterly. In a News Release the company talks about their fourth quarter results for 2021. In a News Release the company talks about its first quarterly results for 2021.
Simply Wall Street report on Yahoo Finance says this stock is undervalued. Simply Wall Street talks about 4 risks for this stock of debt is not well covered by operating cash flow; dividend of 3.74% is not well covered by earnings or forecast to be in the next 3 years; large one-off items impacting financial results and profit margins (0.5%) are lower than last year (1.4%).
Parkland Corp distributes and markets fuels and lubricants. Refined fuels and other petroleum products are among the variety of offerings the company delivers to motorists, businesses, consumers, and wholesalers in the United States and Canada. Its web site is here Parkland Fuel Corp.
The last stock I wrote about was about was Computer Modelling Group Ltd (TSX-CMG, OTC-CMDXF) ... learn more. The next stock I will write about will be Saputo Inc (TSX-SAP, OTC-SAPIF) ... learn more on Thursday, June 30, 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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