Is it a good company at a reasonable price? The stock price seems reasonable. However, this is a resource and so it is cyclical and I never consider these sorts of companies as a long term buy. However, you can make money by buying them relatively low and selling them relatively high. I personally would not buy at this price as the price is not low enough for me.
I do not own this stock of Teck Resources Ltd (TSX-TECK.B, NYSE-TECK). In 2008, I wanted to cover some resource stocks and this is one that I decided to look at. I held this stock for a short period of time after it cut its dividend in 2008 and sold it after it recovered.
When I was updating my spreadsheet, I noticed that analysts expected very good growth in Revenue and EPS and the company surpassed what the analysts expected. Revenue was expected to grow 39% to $29,445M, but it grew 50% to $13,481M. EPS was expected to grow 360% from a loss of $1.62 to $4.22, but it came in at $5.31.
I also noted that estimates are higher in 2022 than in 2023 or 2024. For example, Revenue estimates for 2022 to 2024 are $19,084, $17,370, and $17,157. EPS estimate for 2022 to 2024 are $9.36, $6.05, and $5.73. According to Alpha Spread, number of analysts for 2022 and 2023 are 19, and for 2024 they are 13. I looked for the number of analysts because sometimes you get changes like this and it is due to fewer analysts in later years. This does not seem to be the case here.
If you had invested in this company in December 2011, for $1,005.48 you would have bought 28 shares at $35.91 per share. In December 2021, after 10 years you would have received $134.40 in dividends. The stock would be worth $1,020.01. Your total return would have been $1,154.44.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $35.91 | $1,005.48 | 28 | 10 | $134.40 | $1,020.01 | $1,154.44 |
The dividend yields are low with dividend growth currently moderate. The current dividend yield is low (below 2%) at 1.15%. The 5, 10 and historical dividend yields are also low at 0.74%, 1.08% and 0.31%. The current increases in dividends are moderate at 14.9% (8% to 14% ranges) per year over the past 5 years. The last dividend increase was in 2022 and it was for 150%. Over the last 28 years, the annual dividend was increased 7 times and decreased 3 times. Dividends are down over the 10 and 15 year periods and up over the 20 to 28 year periods. See chart below.
The Dividend Payout Ratios (DPR) are low and good. The DPR for 2021 for EPS is 4% with 5 year coverage at 12%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 4% with 5 year coverage at 9%. The DPR for Cash Flow per Share (CFPS) for 2021 is 2% with 5 year coverage at 4%. The DPR for Free Cash Flow for 2021 is 424% with 5 year coverage at 33%. There is disagreement on what the FCF is.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021is low at 0.37. The Liquidity Ratio is good at 1.62. The Debt Ratio is high and good at 2.01. The Leverage and Debt/Equity Ratios for 2021 are fine at 2.05 and 1.02.
The Total Return per year is shown below for years of 5 to 28 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 | 14.87% | 7.31% | 6.28% | 1.04% |
| 2011 | 10 | -10.40% | 1.50% | 0.14% | 1.36% |
| 2006 | 15 | -10.17% | 0.09% | -1.17% | 1.27% |
| 2001 | 20 | 3.53% | 12.84% | 9.08% | 3.76% |
| 1996 | 25 | 2.81% | 5.29% | 3.65% | 1.64% |
| 1993 | 28 | 2.51% | 5.86% | 4.22% | 1.64% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 4.27, 5.62 and 6.96. The corresponding 10 year ratios are 4.43, 6.11 and 7.63. The corresponding historical ratios are 6.38, 10.93 and 14.04. The current P/E Ratio is 4.67 based on a stock price of $43.40 and EPS estimate for 2022 of $9.25. 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 have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 4.92, 8.07 and 11.21. The corresponding 10 year ratios are 8.03, 13.97 and 18.57. The current P/AEPS Ratio is 4.64 based on a stock price of $43.40 and AEPS estimate for 2022 of $9.36. The current ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $100.37. The 10-year low, median, and high median Price/Graham Price Ratios are 0.33, 0.52 and 0.80. The current P/GP Ratio is 0.43 based on a stock price of $43.40. The current 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 0.67. The current P/B Ratio is 0.90 based on a Book Value of $25,631M, Book Valuer per Share of $48.41 and a stock price of $43.40. The current P/B Ratio is 34% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. By the way, these P/B Ratios are very low. A normal one is thought to be around 1.50.
I get a 10-year median Price/Cash Flow per Share Ratio of 3.93. The current P/CF Ratio is 2.93 based on Cash Flow per Share estimate for 2022 of $14.80 and a stock price of $43.40. The current ratio is 25% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.29%. The current dividend yield is 1.15% based on a stock price of $43.40 and dividends of $0.50. The current dividend yield is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 1.08%. The current dividend yield is 1.15% based on a stock price of $43.40 and dividends of $0.50. The current dividend yield is 7% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 1.25. The current P/S Ratio is 1.20 based on a stock price of $43.40, Revenue estimate for 2022 of $19,084M and Revenue per Share of $36.04. The current ratio is 3% 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 reasonable. The P/S Ratio test says this. I wonder about the dividend tests because this stock is not a dividend growth stock, but has mucked around with the dividends over time with dividends up, down, and flat. Most of the test say that the stock price is reasonable. However, this is a resource stock and stock price tend to be cyclical. The stock price is off the high, but it is far from the low points.
When I look at analysts’ recommendations, I find Strong Buy (12), Buy (10) and Hold (3). The consensus is a strong Buy. The 12 month stock price consensus is $51.55. It is not an unreasonable consensus as the last 3 peaks in the stock price was $52.22 July 2007, $62.22 in January 2011, $55.30 in June 2022. The consensus stock price implies a total return of $19.93%, with 18.78% from capital gains and 1.15% from dividends.
There are both Buy and Sell recommendations this year on Stock Chase. Stock Chase gives this stock 4 stars out of 5. It is on the Money Sense list latest list with a C rating. Ambrose O'Callaghan on Motley Fool thinks this stock is undervalued. Demetris Afxentiou on Motley says this company is into copper, zinc and steelmaking coal which are currently in high demand. The company put out a News Release on their fourth quarter of 2021. The company put out a News Release on their second quarter of 2022 results.
Simply Wall Street has a report on this stock via Yahoo Finance. Simply Wall Street has one warning on this company of earnings are forecast to decline by an average of 12.4% per year for the next 3 years.
Teck is a diversified miner with coal, copper, zinc, and oil sands operations in Canada, the United States, Chile, and Peru. Metallurgical coal is Teck's primary commodity in terms of EBITDA contribution, closely followed by copper, with zinc and oil sands contributing smaller amounts to earnings. Teck ranks as the world's second-largest exporter of seaborne metallurgical coal and is a top-three zinc miner. Its web site is here Teck Resources Ltd.
The last stock I wrote about was about was Linamar Corporation (TSX-LNR, OTC-LIMAF) ... learn more. The next stock I will write about will be Logistec Corp (TSX-LGT.B, OTC-LTKBF) ... learn more on Wednesday, October 5, 2022 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks October 2022 .... learn more on Tuesday, October 04, 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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