Is it a good company at a reasonable price? The stock price is cheap. Shareholders have done well over the long term. It has a reasonable dividend yield and reasonable growth. This is not one of the big 5 banks of Canada, so the stock price will have volatility.
I do not own this stock of EQB Inc (TSX-EQB, OTC-EQGPF). I had read a glowing report on investing on this company in 2013, so I decided to check it out. It was interesting as it was loaning money to new immigrants, a class of people who generally have a difficult time getting loans and mortgages from our regular banks. It sounded intriguing.
When I was updating my spreadsheet, I noticed that this company did a stock split in 2021. Stock splits are becoming rarer and rarer these days. The company is in the Financial Services sector. It is rather small, but it has produced very good results for its shareholders.
If you had invested in this company in December 2011, for $1,000.00 you would have bought 80 shares at $12.50 per share. In December 2021, after 10 years you would have received $378.00 in dividends. The stock would be worth $5,512.80. Your total return would have been $5,890.80.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $12.50 | $1,000.00 | 80 | 10 | $378.00 | $5,512.80 | $5,890.80 |
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 2.45%. The 5, 10 and historical dividend yields are low (below 2%) at 1.69%, 1.44% and 1.47%. The dividend growth is moderate (8% to 14% ranges) with the growth for the last 5 years at 12.5% per year. The last dividend increase was in 56.8% and it was for 2022. Note that an increase was skipped in 2021.
The Dividend Payout Ratios (DPR) are low and good. The DPR for EPS for 2021 are 8.9% with 5 year coverage at 10%. The DPR for Cash Flow per Share for 2021 is 5.7% with 5 year coverage at 4.7%. The DPR for Free Cash Flow (FCF) for 2021 is 3.8% with 5 year coverage at 7.5%. (Although sites do not agree on FCF value.)
Debt Ratios are fine. Since this is a bank (Financial Services Sector), I am looking at Long Term Debt/Covering Assets Ratio and for 2021 it is 0.90 and this is fine. I get a Liquidity Ratio of 8.21, however, this is not important ratio for banks. The Debt Ratio is 1.06 and this is fine for banks.
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 | 12.54% | 19.36% | 17.91% | 1.44% |
| 2011 | 10 | 13.16% | 20.28% | 18.61% | 1.67% |
| 2006 | 15 | 9.49% | 11.51% | 10.41% | 1.10% |
| 2003 | 18 | 6.85% | 11.50% | 10.41% | 1.08% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 5.08, 6.34 and 8.68. The corresponding 10 year ratios are 5.42, 6.81 and 8.56. The corresponding historical ratios are 5.58, 7.10 and 8.70. The current P/E Ratio is 5.70 based on a stock price of $47.35 and EPS estimate for 2022 of $8.30. The current P/E ratio is between the low and median ratios for 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 $105.83. The 10-year low, median, and high median Price/Graham Price Ratios are 0.44, 0.57 and 0.69. The current P/GP Ratio is 0.45 based on a stock price of $47.35. 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 1.04. The current ratio is 0.79 based on a stock price of $47.35 and Book Value of $2,024M, and a Book Value per Share of $59.98. The current ratio is 24% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have Book Value estimate for 2022. This estimate produces a ratio of 0.75 based on an estimated Book Value per Share of $63.40, Book Value of $2,140M and a stock price of $47.35. This ratio is 28% 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 0.48. The current P/CF Ratio is 5.20 based on last 12 months Cash Flow of $307M, Cash Flow per Share of $9.10 and a stock price of $47.35. The current ratio is 973% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, the 10 year median ratio is extremely low because of years of negative cash flow. A P/CF ratio of 5.20 is a relatively low P/CF ratio.
I get an historical median dividend yield of 1.47%. The current dividend yield is 2.45% based on dividends of $1.16 and a stock price of $47.35. The current dividend yield is 67% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 1.44%. The current dividend yield is 2.45% based on dividends of $1.16 and a stock price of $47.35. The current dividend yield is 70% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 3.24. The current P/S Ratio is 2.24 based on Revenue estimate for 2022 of $712M, Revenue per Share of $21.10 and a stock price of $47.35. The current ratio is 31% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The dividend yield tests show this and it is confirmed by the P/S Ratio test. Other tests show this and some show the stock price as reasonable.
When I look at analysts’ recommendations, I find Buy (8) recommendations only. The consensus would be a Buy. The 12 month stock price consensus is $79.56. This implies a total return of 70.48% with 68.03% from capital gains and 2.45% from dividends based on a current stock price of $47.35.
Analysts in 2022 give this stock on Stock Chase 3 Buys and 1 Hold. Stock Chase gives this stock 3 stars out of 5. Money Sense gives this dividend stock a rating of C. Aditya Raghunath on Motley Fool says that analysts expect this stock to surge in the next year. Andrew Button on Motley Fool thinks you should buy this bank’s GIC paying 4.7%. The company talks about their fourth quarter of 2021 on Newswire. The company reports on Newswire their second quarter results for 2022.
Simply Wall Street has a review of this stock via Yahoo Finance. Simply Wall Street has one warning risk of high level of non-cash earnings.
EQB Inc is a Canadian company that operates business through Equitable Bank, the company's subsidiary. It owns several business lines, including single-family lending services, commercial lending services, commercial mortgage, and deposit services. The company operates in one segment namely, deposit-taking institution investing in mortgages. Its web site is here EQB Inc.
The last stock I wrote about was about was Medtronic PLC (NYSE-MDT) ... learn more. The next stock I will write about will be Pason Systems Inc (TSX-PSI, OTC-PSYTF) ... learn more on Monday, October 17, 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.
No comments:
Post a Comment