Is it a good company at a reasonable price? The stock price is probably reasonable. Given that dividends have been cut to a very low level and the stock price is still around 47% below its peak in 2010, for me it would take a very cheap price for me even to consider this stock again. A good sign to me would be an increase in dividends and would show that the company has confidence in their future. Currently the dividends are so low, I wonder about calling it a dividend paying stock. Also, I do not like their debt ratios. This is a big negative for me.
I do not own this stock of SNC-Lavalin Group Inc (TSX-SNC, OTC-SNCAF). I sold my stock in SNC-Lavalin (TSX-SNC, OTC-SNCAF) om 2019. I had given up hope that there will be any sort of resolution for this company anytime soon. I live off my dividends and they have cut the dividends twice this year. In 2019 the Investment Reporter has removed this stock from their Key Stock List and Issued a sell on the stock.
Also, in 2019 the largest shareholder and a shareholder for lots of Quebec companies of Caisse de Depot et Placement du Quebec seems to be losing patience with this stock also.
When I was updating my spreadsheet, I noticed I had earned a total return of 23.16% with 19.73% from capital gains and 3.43% from dividends for this stock when I sold in 2019. My good return had more to do with my sale of some of my stock in 2008 at $55.76. I had a low ACB because I bought most of my stock in 1998.
If you had invested in this company in December 2012, for $1,008.00 you would have bought 25 shares at $40.32 per share. In December 2022, after 10 years you would have received $166.00. in dividends. The stock would be worth $596.50. Your total return would have been $762.50.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $40.32 | $1,008.00 | 25 | 10 | $166.00 | $596.50 | $762.50 |
The current dividend yield is low with dividend growth non-existent. The current dividend yield is low (below 2%) at just 0.25%. The 5, 20 and historical median dividend yields are also low at 0.29%1.35% and 1.46%. The company started to decrease the dividends in 2019. Now, the current dividend is some 93% below the 2018 dividend. Analysts think that the company might start to raise the dividends again in 2025. However, last year analysts thought the dividends would be raised in 2023 and that has not happened.
The Dividend Payout Ratios (DPR) are fine and expected to improve. The DPR for EPS for 2022 is 89%. I do not have a 5 year coverage because of earnings losses over the past 5 years. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 13% with 5 year coverage at 67%. The DPR for Cash Flow per Share (CFPS) for 2022 is 15% with 5 year coverage at 61%. The DPR for Free Cash Flow for 2022 cannot be calculated because of negative FCF. I cannot calculate the DPR for 5 year coverage because of negative FCF. However, analysts expect the DPR to improve this year and next.
Debt Ratios need improving, especial the Liquidity Ratio. The Long Term Debt/Market Cap Ratio for 2022 is good and low at 0.36. The Liquidity Ratio is too low at 0.85. It does not improve if you add in Cash Flow after dividends. If you add back the current portion of the long term debt you just get to 0.99. It is best if this ratio is 1.50 or better for safety reasons. If it is below 1.00, it means that current liabilities cannot be covered by current assets. The Debt Ratio is fine at 1.44, but I prefer this to be 1.50 or better. The Leverage and Debt/Equity Ratios are too high at 3.29 and 2.29. I prefer these to be less than 3.00 and 2.00.
The Total Return per year is shown below for years of 5 to 34 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | -40.71% | -15.40% | -16.00% | 0.60% |
| 2012 | 10 | -21.32% | -3.16% | -5.11% | 1.96% |
| 2007 | 15 | -10.02% | -2.68% | -4.57% | 1.89% |
| 2002 | 20 | -2.14% | 7.25% | 3.78% | 3.46% |
| 1997 | 25 | 0.73% | 12.35% | 7.88% | 4.47% |
| 1992 | 30 | 4.73% | 9.85% | 6.61% | 3.24% |
| 1988 | 34 | 4.93% | 19.02% | 12.46% | 6.55% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.29, 17.11 and 25.94. The corresponding 10 year ratios are 17.65, 20.25 and 25.55. The corresponding historical ratios are 14.05, 20.50 and 24.93. The current P/E Ratio is 24.96 based a stock price of $31.45 and EPS estimate for 2023 of $1.26. The current P/E Ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and above the median.
I also have Adjusted Earnings per Share Ratios. The 5-year low, median, and high median Price/Earnings per Share Ratios are 24.33, 40.15 and 46.43. The corresponding 10 year ratios are 19.51, 26.99 and 33.87. The current P/AEPS Ratio is 22.46 based on a stock price of $31.45 and a AEPS estimate for 2023 of $1.40. 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 Graham Price of $22.69. The 10-year low, median, and high median Price/Graham Price Ratios are 1.15, 1.70 and 2.11. The current P/GP Ratio is 1.39 based on a stock price of $31.45. This 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 1.82. The current P/B Ratio is 1.92 based on a stock price of $31.45, Book Value of $2,870M and Book Value per Share of $16.35. The current ratio is 6% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have a Book Value per Share estimate for 2023 of $19.90. This implies a ratio of 1.58 with a stock price of $31.45 and Book Value of $3,494M. This ratio is 13% below the 10 year median ration. 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 24.34. The current P/CF Ratio is 30.24 based on a stock price of $31.45, Cash Flow per Share estimate for 2023 of $1.40 and Cash Flow of $183M. The current ratio is 24% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable expensive.
I get an historical median dividend yield of 1.46%. The current dividend yield is $0.25% based on a stock price of $31.45 and dividends of $0.08. The current dividend yield is 83% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 1.35%. The current dividend yield is $0.25% based on a stock price of $31.45 and dividends of $0.08. The current dividend yield is 81% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10-year median Price/Sales (Revenue) Ratio is 0.78. The current P/S Ratio is 0.73 based on a stock price of $31.45, Revenue estimate for 2023 of $7,533 and Revenue per Share of $42.91. The current ratio is 6% 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. The dividend yield tests say expensive and this is because of the drop in dividends. Of course, a drop in dividends is a bad sign so there is some logic at looking at these tests. Most of the other tests says the stock is reasonable and either above or below the median.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (6) and Hold (2). The consensus would be a Buy. The 12 months stock price consensus is $36.67. This implies a total return of $16.85% with 16.60% from capital gains and 0.25% from dividends.
All the analysts’ recommendations in 2023 on Stock Chase say Do not Buy. They are critical of the company and think it is overbought. Stock Chase gives this stock 3 stars out of 5. It is not on the Money Sense list. Last year Andrew Button on Motley Fool say the company was cheap but came with risks. Last year Andrew Button also on Motley Fool says that the company was once plagued by Scandal, but it is doing fine now. The company put out a press release on Newswire about their 2022 results.
Simply Wall Street report on Yahoo Finance says that this company is still selling below its intrinsic value. Simply Wall Street has four warnings on this stock of interest payments are not well covered by earnings; large one-off items impacting financial results; profit margins (0.2%) are lower than last year (1.4%); and significant insider selling over the past 3 months. Simply Wall Street gives this stock 2 and one half stars out of 5.
Based in Montreal, SNC-Lavalin is a fully integrated professional services and project management firm that offers a wide range of services, including financing, consulting, engineering and construction, procurement, and operations and maintenance. The firm serves clients in the infrastructure, nuclear, and engineering design and project management industries. Additionally, the company owns infrastructure projects through its capital segment. Its web site is here SNC-Lavalin Group Inc.
The last stock I wrote about was about was Barclays PLC ADR (LSE-BARC, NYSE-BCS) ... learn more. The next stock I will write about will be Fortis Inc (TSX-FTS, OTC-FRTSF) ... learn more on Wednesday, May 3, 2023 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks May 2023.... learn more on Tuesday, May 2, 2023 around 5 pm.
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