Is it a good company at a reasonable price? I think that the price is reasonable. Testing is pointing to that, although on some tests it is cheap. When I was going to buy Toromont Industries Ltd (TSX-TIH, OTC-TMTNF) I looked at this company also. I must admit, I am glad I bought Toromont as it has done better than Finning. You would not want to buy both as they are into big heavy-duty machinery. This company does seem to have its fan though.
I do not own this stock of Finning International Inc (TSX-FTT, OTC-FINGF). When I was in the market to buy an industrial stock in this area in 2007, I look at this stock was well as Toromont Industries (TSX-TIH). At the time I liked Toromont better, so that is what I bought.
When I was updating my spreadsheet, I noticed that EPS grow is a break from the past. Last 4 EPS from 2017 are $1.31, $1.38, $1.48, and $1.43. Analysts expected earnings of $2.13, an increase of 49%. Instead, earnings came in at $2.25, an increase of 57%. The analysts expected a big increase and they were not far off.
If you had invested in this company in December 2011, for $1,021.66 you would have bought 46 shares at $22.21 per share. In December 2021, after 10 years you would have received $336.61 in dividends. The stock would be worth $1,466.48. Your total return would have been $1,803.09.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $22.21 | $1,021.66 | 46 | 10 | $336.61 | $1,466.48 | $1,803.09 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 2.88%. The 5, 10 year median dividend yields are moderate at 2.75% and 2.71%. The historical median dividend yield is low (below 2%) at 1.97%. The current dividend growth is low (below 8% per year) at 3.33% per year over the past 5 years. The last increase was 4.9% and was done in 2022.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 38% with 5 year coverage at 51%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 39% with 5 year coverage at 53%. The DPR for Cash Flow per Share (CFPS) for 2021 is 15% with 5 year coverage 18%. The DPR for Free Cash Flow (FCF) for 2021 is 48% with 5 year coverage also at 48%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021 is good and low at 0.18. The Liquidity Ratio for 2021 is good at 1.68. The Debt Ratio for 2021 is good at 1.65. The Leverage and Debt/Equity Ratios are fine at 2.57 and 1.56.
The Total Return per year is shown below for years of 5 to 34 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 | 3.33% | 6.77% | 3.93% | 2.84% |
| 2011 | 10 | 5.36% | 6.45% | 3.68% | 2.77% |
| 2006 | 15 | 7.90% | 4.19% | 1.94% | 2.25% |
| 2001 | 20 | 11.36% | 8.65% | 5.97% | 2.68% |
| 1996 | 25 | 8.99% | 8.37% | 6.03% | 2.34% |
| 1991 | 30 | 9.95% | 10.36% | 7.77% | 2.60% |
| 1987 | 34 | 8.15% | 10.95% | 8.11% | 2.84% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.37, 19.50 and 19.58. The corresponding 10 year ratios are 12.26, 14.96 and 18.12. The corresponding historical ratios are 12.39, 16.00 and 19.67. The current P/E Ratio is 11.27 based on a stock price of $32.80 and EPS estimate for 2022 of $2.91. This ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earning per Share (AEPS) Data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 13.69, 17.39 and 21.09. The corresponding 10 year ratios are 12.42, 16.34 and 17.88. The current P/AEPS ratio is 11.47 based on a stock price of $32.80 and AEPS estimate for 2022 of $2.86. This ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $31.75. The 10-year low, median, and high median Price/Graham Price Ratios are 1.11, 1.34 and 1.49. The current P/GP Ratio is 1.03 based on a stock price of $32.80. 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.
I get a 10-year median Price/Book Value per Share Ratio of 2.22. The current P/B Ratio is 2.13 based on a Book Value of $2,430M, Book Value per Share of $15.40 and a stock price of $32.80. The current ratio is 4% below the 10 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 Price/Cash Flow per Share Ratio of 10.86. The current P/CF Ratio is 9.27 based on a stock price of $32.80, Cash Flow per Share estimate for 2022 of $3.54 and a Cash Flow of $559M. The current ratio is 15% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 1.97%. The current dividend yield is $2.88% based on dividends of $0.944 and a stock price of $32.80. The current dividend yield is 6% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 2.71%. The current dividend yield is $2.88% based on dividends of $0.944 and a stock price of $32.80. The current dividend yield is 44% above the historical median dividend yield. 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 0.67. The current P/S Ratio is 0.64 based on Revenue estimate for 2022 of $7,791M, Revenue per Share of $49.37 and a stock price of $32.80. The current ratio is 0.2% 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 10 year median dividend test shows this and it is confirmed by the P/S Ratio test. However, these are several tests that show that the stock price might be cheap. These are the P/E Ratio test, the P/AEPS Ratio test, and the P/GP Ratio test.
When I look at analysts’ recommendations, I find Strong Buys (3), Buy (5). The consensus would be a Strong Buy. The 12 month stock price consensus is $39.75. This implies a total return of 24.07% with 21.19% from capital gains and 2.88% from dividends based on a stock price of $32.80.
The analysts writing on Stock Chase in 2022, said it was their Top Pick. Stock Chase gives this stock 4 stars out of 5. It is on the Money Sense list with a C Rating. Christopher Liew on Motley Fool reviews this stock and says it could be a Multi-Bagger this year. Ambrose O'Callaghan on Motley Fool thinks the stock is undervalued. The company has put out a Press Release on their 2021 results. The released a Press Release on their third quarter of 2022 results. Simply Wall Street reviews this stock on Yahoo Finance. Simply Wall Street lists 2 warnings on this company of debt is not well covered by operating cash flow and high level of non-cash earnings.
Finning International Inc is a dealer and distributor of heavy-duty machinery and parts of the Caterpillar brand. The company sells and rents Caterpillar machinery to the mining, construction, petroleum, forestry, and power system application industries. The company operates in Canada, South America, UK and Ireland, and others. Its web site is here Finning International Inc.
The last stock I wrote about was about was Crescent Point Energy Corp (TSX-CPG, NYSE-CPG) ... learn more. The next stock I will write about will be Quarterhill Inc (TSX-QTRH, OTC-QTRHF) ... learn more on Monday, November 14, 2022 around 5 pm.
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