Is it a good company at a reasonable price? This company has certainly grown well in the past, but growth is slowing if you compare the growth between 10 and 5 years. Dividends have grown nicely also for shareholders. I do wonder how much more they can grow. I would worry about the debt ratios. The stock price might still be reasonable, but it would be at the top of the reasonableness range.
I do not own this stock of TMX Group Ltd (TSX-X, OTC-TMXXF). I looked at this stock in 2008 after I found it on a list of Strongest Dividend Growth stocks. I am interested in such stocks.
When I was updating my spreadsheet, I noticed that that the company is growing nicely.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 66.93% | 10.79% |
| 5 | AEPS Growth | 53.33% | 8.92% |
| 5 | Net Income Growth | 47.47% | 8.08% |
| 5 | Cash Flow Growth | 59.47% | 9.78% |
| 5 | Dividend Growth | 70.26% | 11.23% |
| 5 | Stock Price Growth | 89.52% | 13.64% |
| 10 | Revenue Growth | 279.15% | 14.26% |
| 10 | AEPS Growth | 650.53% | 22.33% |
| 10 | Net Income Growth | 3447.06% | 42.89% |
| 10 | Cash Flow Growth | 679.63% | 22.80% |
| 10 | Dividend Growth | 107.50% | 7.57% |
| 10 | Stock Price Growth | 163.21% | 10.16% |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 2.37%. The 5, 10 and historical dividend yields are also moderate at 2.50%, 2.75% and 2.88%. The dividends have been increasing at a moderate rate (8% to 14% ranges) at 11.2% per year over the past 5 years. The last dividend increase was in 2023 and it was for 4.8%.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2022 for EPS is 34% with 5 year coverage at 46%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 47% with 5 year coverage at 47%. The DPR for 2022 for Cash Flow per Share (CFPS) is 29% with 5 year coverage at 29%. The DPR for 2022 for Free Cash Flow (FCF) is 43% with 5 year coverage at 44%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 34.26% | 45.79% |
| AEPS | 46.56% | 47.05% |
| CFPS | 29.03% | 29.30% |
| FCF | 43.09% | 43.82% |
I do not like a lot of the Debt Ratios. The Long Term Debt/Market Cap Ratio is low and good at 0.10. The Liquidity Ratio is too low at just 1.01. This means that there is not safety margin. I like a ratio at 1.50. The Debt Ratio is also low at 1.08, but this is classified as a financial and generally anything over 1.04 is acceptable. I think the Leverage Ratio is too high at 13.31 and Debt/Equity Ratio is also too high at 12.31. I do not think that the current ones at 11.33 and 10.66, respectively are good either.
| Type | Ratio '22 | Ratio Curr |
|---|---|---|
| Lg Term R | 0.10 | 0.09 |
| Intang/GW | 0.55 | 0.69 |
| Liquidity | 1.01 | 1.00 |
| Liq. + CF | 1.01 | 1.06 |
| Debt Ratio | 1.08 | 1.09 |
| Leverage | 13.31 | 11.66 |
| D/E Ratio | 12.31 | 10.66 |
The Total Return per year is shown below for years of 5 to 20 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 | 11.23% | 16.65% | 13.64% | 3.01% |
| 2012 | 10 | 7.57% | 12.90% | 10.16% | 2.74% |
| 2007 | 15 | 5.35% | 8.76% | 6.38% | 2.39% |
| 2002 | 19 | 12.57% | 20.61% | 13.48% | 7.13% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.06, 21.64 and 23.71. The corresponding 10 year ratios are 14.85, 18.62 and 23.71. The corresponding historical ratios are 16.06, 21.64 and 25.00. The current P/E Ratio is 22.90, based on a stock price of $29.31 and EPS estimate for 2023 of $1.28. This 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 but above the median.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 16.06, 18.62 and 20.00. The corresponding 10 year ratios are 13.74, 15.49 and 17.25. The current P/AEPS Ratio is 19.54 based on a stock price of $29.31 and AEPS estimate for 2023 of $1.50. The current ratio is between median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $22.12. The 10-year low, median, and high median Price/Graham Price Ratios are 0.83, 0.94 and 1.05. The current P/GP Ratio is 1.32 based on a stock price of $29.31. The current ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Book Value per Share Ratio of 1.29. The current P/B Ratio is 2.02 based on a stock price of $29.31, Book Value of $4,037M, and Book Value per Share of $14.50. The current ratio is 57% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2023 of $15.20. With a stock price of $29.31 and Book Value of $4,232M, the P/B Ratio is 1.93. This ratio is 50% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 13.64. The current P/CF Ratio is 16.84 based on Cash Flow per Share estimate for 2023 of $1.74, Cash Flow of $484.4M and a stock price of $29.31. The current ratio is 23% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 2.88%. The current dividend yield is 2.37% based on a stock price of $29.31 and dividend of $0.70. The current dividend yield is 18% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and above the median.
I get an historical median dividend yield of 2.75%. The current dividend yield is 2.37% based on a stock price of $29.31 and dividend of $0.70. The current dividend yield is 14% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and above the median.
The 10-year median Price/Sales (Revenue) Ratio is 5.57. The current P/S Ratio is 6.83 based on Revenue estimate for 2023 of $1,195M, Revenue per Share of $4.29 and a stock price of $29.31. The current ratio is 23% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price could still be reasonable, but at the top of the reasonableness range. The dividend yield tests say the stock price is reasonable and above the median. The P/S Ratio test says the stock price is expensive. Basically, you start saying a stock is expensive above 20%. So, the P/S Ratio at 22% is not that far f rom the dividend tests that say the yields are 18% and 14% below the yields. The other testing is showing the stock price as reasonable and above the median or expensive.
When I look at analysts’ recommendations, I find Buy (1) and Hold (7). The consensus would be a Hold. The 12 month stock price consensus is $30.83. This implies a total return of 7.56% with 5.19% from capital gains and 2.37% from dividends.
Some Analysts on Stock Chase say Buy and others say Hold. Stock Chase gives this stock 4 stars out of 5. It is on the Money Sense list at 34. Ambrose O'Callaghan on Motley Fool says this stock did well in another wise disappointing May. Ambrose O'Callaghan on Motley Fool thinks this is a good stock for your TFSA. The company put out a press release on Newswire about their 2022 year end results. The company put out a press release on Newswire about their results for the first quarter of 2023.
Simply Wall Street via Yahoo Finance. Simply Wall Street issued two warnings of large one-off items impacting financial results; and profit margins (16.1%) are lower than last year (47%). Simply Wall Street gives this stock 2 and one half stars out of 5.
TMX Group Ltd is a company that operates several global markets to provide investment opportunities for its clients. TMX Group's key operations include Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange, The Canadian Depository for Securities, Montreal Exchange, Canadian Derivatives Clearing Corporation, and Trayport, which provides listing markets, trading markets, clearing facilities, depository services, technology solutions, data products, and other services to the global financial community. TMX Group operates offices across North America (Montreal, Calgary, Vancouver, and New York), as well as in key international markets including London and Singapore. Its web site is here TMX Group Ltd .
The last stock I wrote about was about was Suncor Energy Inc (TSX-SU, NYSE-SU) ... learn more. The next stock I will write about will be Obsidian Energy Ltd (TSX-OBE, NYSE-OBE) ... learn more on Wednesday, July 12, 2023 around 5 pm. Tomorrow on my other blog I will write about Money Making Habits .... learn more on Tuesday, July 11, 2023 around 5 pm.
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