Sound bite for Twitter and StockTwits is: Dividend Growth Consumer. The stock price is currently cheap. Debt Ratios are showing debt problems. The Dividend Payout Ratios (DPR) need to improve for EPS, but fine for CFPS. The dividend yields are moderate with dividend growth high. See my spreadsheet on Waterloo Brewing Ltd.
Is it a good company at a reasonable price? The stock price is currently cheap. However, I do not like the Debt Ratios, especially, the Liquidity Ratio. With a low Liquidity Ratio, companies and get into trouble during hard times. We are going into and are in a recession. I never like a low Liquidity Ratio in the best of times, and certainly not in this climate. So caution is called for.
I do not own this stock of Waterloo Brewing Ltd (TSX-WBR, OTC-BIBLF). This stock has come up on the Dividend All-Star List at Dividend Growth Investing and Retirement site. The company has a financial year ending January 31 each year, so I am reviewing the January 31, 2022 year end and the financial year starting at January 31, 2021 to January 31, 2022.
When I was updating my spreadsheet, I noticed their long term debt is the highest it has ever been. It was low in 2021 because a lot was current debt to roll over. Debt was up by 63% from 2020. The Long Term Debt/Market Cap is still in a good range at 0.10. Alpha Spread says this stock is undervalued by 39% with a DCF Value of $5.10. See Alpha Spread.
If you had invested in this company in December 2011, for $1,000.16 you would have bought 893 shares at $1.12 per share. In December 2021, after 10 years you would have received $593.76 in dividends. The stock would be worth $5,188.33. Your total return would have been $5,782.09.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $1.12 | $1,000.16 | 893 | 10 | $593.76 | $5,188.33 | $5,782.09 |
The dividend yields are moderate with dividend growth high. The current dividend yield is moderate (2% to 4% ranges) at 3.90%. The 5 and 6 year median dividend yield is also moderate at 2.33%. The dividend growth over the past 5 years is good (14% and over) at 18.7% per year. The last dividend increase was for 10% and it occurred in 2022.
The Dividend Payout Ratios (DPR) need to improve for EPS, but fine for CFPS. The DPR for EPS for 2021 is 71% with 5 year coverage at 1312%. The DPR for EPS is expected to be around 152% in 2023 before declining to 72% in 2024. The DPR for Cash Flow per Share (CFPS) for 2022 is 19% with 5 year coverage at 27%. The DPR for Free Cash Flow (FCF) for 2022 could be 110% with 5 year coverage non-calculable due to negative FCF. There is disagreement on what the FCF is.
Debt Ratios are showing debt problems. The Long Term Debt/Market Cap Ratio for 2022 is 010. They increased their debt a lot this year and ratio was only 0.01 last year. The Liquidity Ratio for 2022 is very low at 0.80. Add in Cash Flow after dividends and it is still low at 1.20. I prefer this to be 1.50 or higher. The Debt Ratio is also low at 1.39 and I prefer this to be 1.50 or higher. The Leverage and Debt/Equity Ratios for 2022 are too high at 3.58 and 2.58. I prefer them to be below 3.00 and below 2.00.
The Total Return per year is shown below for years of 5 to 31 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 | 18.72% | 16.44% | 14.06% | 2.38% |
| 2011 | 10 | 15.37% | 19.67% | 17.90% | 1.78% |
| 2006 | 15 | 9.01% | 8.17% | 0.84% | |
| 2001 | 20 | 14.53% | 13.77% | 0.76% | |
| 1996 | 25 | 5.41% | 4.97% | 0.45% | |
| 1991 | 30 | 4.44% | 4.08% | 0.36% | |
| 1990 | 31 | 4.30% | 3.95% | 0.35% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 37.14, 49.63 and 72.38. The corresponding 10 year ratios are 34.51, 48.74 and 65.47. The corresponding historical ratios are 31.88, 47.86 and 57.00. The current P/E Ratio is 39.00 based on a stock price of $3.12 and EPS estimate for 2023 of $0.08. 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. These ratios are very high ratios, but when earnings get bad on a stock, the stock price will only go so low, because of the value of the company.
I get a Graham Price of $1.32 . The 10-year low, median, and high median Price/Graham Price Ratios are 1.71, 2.47 and 3.05. The current P/GP Ratio is 2.36 based on a stock price of $3.12. This ratio is between the low the median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. These ratios are very high ratios, but when earnings get bad on a stock, the stock price will only go so low, because of the value of the company.
I get a 10-year median Price/Book Value per Share Ratio of 2.78. The current P/B Ratio is 3.21 based on a Book Value of $34,830M, Book Value per Share of $0.97 and a stock price of $3.12. The current ratio is 16% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 13.60. The current P/CF Ratio is 7.80 based on a stock price of $3.12, Cash Flow per Share (CFPS) estimate for 2023 of $0.40 and a Cash Flow of $14.4M. The current ratio is 43% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical and 6 year median dividend yield of 2.33%. The current dividend yield is 3.90% based on dividends of $0.1216, and a stock price of $3.12. The current yield is 67% above the 6 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 1.85. The current P/S Ratio is 1.00 based on Revenue estimate for 2023 of $112M, Revenue per Share of $3.12 and a stock price of $3.12. The current ratio is 56% 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 test says this and it is confirmed by the P/S Ratio test. The P/CF Ratio test says the stock is cheap. The other tests say it is reasonable and below the median.
When I look at analysts’ recommendations, I find Strong Buy (3) and Buy (1). The consensus would be a Strong Buy. The 12 month stock price is $5.88. This implies a total return of 92.36% with 88.46% from capital gains and 3.90% from dividends based on a current price of $3.12.
There is nothing recent on Stock Chase. However, analysts thought it was a buy in 2021. Stock Chase gives this stock 4 stars out of 5. It is not on Money Sense list. Ambrose O'Callaghan on Motley Fool thought it was oversold in March 2022. Chen Liu on Motley Fool reviewed this stock in 2019. The company put out a Press Release on their fourth quarter results. The company put out a Press Release on their second quarter of 2023 results.
Simply Wall Street reviews this stock via Yahoo Finance. Simply Wall Street gives 4 warnings on this stock of interest payments are not well covered by earnings; dividend of 3.92% is not well covered by earnings or cash flows; profit margins (1.4%) are lower than last year (4.9%); and does not have a meaningful market cap (CA$111M). Simply Wall Street gives this stock 2 stars out of 5.
Waterloo Brewing Ltd engages in the production and distribution of alcohol-based products. Its products are distributed to end consumers primarily through The Beer Store in Ontario and Provincial Liquor Boards across Canada. Its web site is here Waterloo Brewing Ltd .
The last stock I wrote about was about was Wild Brain Ltd (TSX-WILD, OTC-WLDBF) ... learn more. The next stock I will write about will be Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF) ... learn more on Friday, December 2, 2022 around 5 pm. Tomorrow on my other blog I will write about Emergency Fund .... learn more on Thursday, December 1, 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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