Is it a good company at a reasonable price? This is a bank, but not a normal one. This means that the risk level to invest in this company is high. It is growing and that is a positive. They have been raising their dividends and the increases are getting larger. This is positive. See the total return chart below under Div. Gth. The price seems reasonable.
I do not own this stock of EQB Inc (TSX-EQB, OTC-EQGPF). I had read a glowing report on investing on this company in 2013, so I decided to check it out. It was interesting as it was loaning money to new immigrants, a class of people who generally have a difficult time getting loans and mortgages from our regular banks. It sounded intriguing.
When I was updating my spreadsheet, I noticed that they have sharply increased their dividends lately. There was no dividend increase in 2021, but in 2022 they went up 63.5% and then up again in 2023 by 22.3%.
This company has been growing well. Analysts expect 2023 to be a good year and they expect 34% increase in Revenue, and 35% increase in EPS and 17% in AEPS. Revenue has increase in the second quarter of 2023 compared to the second quarter of 2022 by 22% and over this time period, the EPS has increased by 23% and AEPS has increase by 13%.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 137.49% | 18.89% |
| 5 | AEPS Growth | 95.59% | 14.36% |
| 5 | Net Income Growth | 91.29% | 13.85% |
| 5 | Cash Flow Growth | -89.08% | -35.78% |
| 5 | Dividend Growth | 163.04% | 21.34% |
| 5 | Stock Price Growth | 58.69% | 9.67% |
| 10 | Revenue Growth | 375.69% | 16.88% |
| 10 | AEPS Growth | 258.86% | 13.63% |
| 10 | Net Income Growth | 225.88% | 12.54% |
| 10 | Cash Flow Growth | 121.46% | 8.28% |
| 10 | Dividend Growth | 384.00% | 17.08% |
| 10 | Stock Price Growth | 247.50% | 13.27% |
If you had invested in this company in December 2012, for $1,012.15 you would have bought 62 shares at $16.33 per share. In December 2022, after 10 years you would have received $352.47 in dividends. The stock would be worth $3,517.26. Your total return would have been $3,869.73. This is a total return would be a total return of 15.09% per year with 13.27% from capital gain and 1.82% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $16.33 | $1,012.15 | 62 | 10 | $352.47 | $3,517.26 | $3,869.73 |
The current dividend yield is moderate with dividend growth good. The current dividend yield is moderate (2% to 4% ranges) at 2.10%. The 5, 10 and historical dividend yields are low (below 2%) at 1.71%, 1.44% and 1.50%. The dividend growth is good (above 15% per year) at 21.3% per year over the past 5 years. The last dividend increase occurred in 2023 and was for 2.7%. However, this was the second increase this year, the first one was for 5.7%. This bank often does several increases in a year and the dividends paid this year so far are 22.3% above those paid in 2022.
The Dividend Payout Ratios (DPR) are good. The DPR for 2022 for Earnings per Share (EPS) is 16% with 5 year coverage at 12%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 13% with 5 year coverage at 11%. The DPR for 2022 for Cash Flow per Share (CFPS) is 11% with 5 year coverage at 7%. The DPR for 2022 for Free Cash Flow (FCF) is 10% with 5 year coverage at 9%. However, for FCF, site vary a lot about what the FCF is.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 16.03% | 11.52% |
| AEPS | 13.20% | 10.86% |
| CFPS | 10.31% | 6.52% |
| FCF | 9.83% | 8.71% |
Debt Ratios are fine. The Long Term Debt/Covering Assets (Lg Term A) Ratio for 2022 is fine at 0.91. The Liquidity Ratio for 2023 is good at 3.81. The Debt Ratio for 2023 is fine for a financial at 1.05.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term A | 0.91 | 0.90 |
| Lg Term R | 21.62 | 0.03 |
| Intang/GW | 0.03 | 0.08 |
| Liquidity | 3.81 | 4.37 |
| Liq. + CF | 3.76 | 4.32 |
| Debt Ratio | 1.05 | 1.05 |
The Total Return per year is shown below for years of 5 to 19 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 | 21.34% | 11.40% | 9.67% | 1.73% |
| 2012 | 10 | 17.08% | 15.09% | 13.27% | 1.82% |
| 2007 | 15 | 12.75% | 11.01% | 9.58% | 1.42% |
| 2003 | 19 | 9.40% | 10.01% | 8.72% | 1.29% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 5.41, 7.51 and 9.94. The corresponding 10 year ratios are 8.70, 7.27 and 8.70. The corresponding historical ratios are 5.67, 7.20 and 8.72. The current P/E Ratio is 7.10 based on a stock price of $72.46 and EPS estimate for 2023 of $10.20. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 5.00, 6.73 and 8.68. The corresponding 10 year ratios are 5.20, 6.93 and 8.55. The current P/AEPS Ratio is 6.74 based on a stock price of $72.46 and AEPS estimate for 2023 of $10.75. The current ratio is between the low and median ratio 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 $127.57. The 10-year low, median, and high median Price/Graham Price Ratios are 0.36, 0.81 and 0.66. The current P/GP Ratio is 0.57 based on a stock $72.46. The current ratio is between the low and median ratios of 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/Book Value per Share Ratio of 1.04. The current P/B Ratio is 1.08 based on a stock price of $72.46, Book Value of $2,538M and Book Value per Share of $67.28. The current ratio is 3.8% 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 Book Value per Share estimate for 2023 of $72.50. The implies a P/B Ratio of 1.01 with a Book Value of $2,698M when the stock price is $72.46. The current ratio is 2% 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 3.30. The current P/CF Ratio is 65.78 based on Cash Flow for the last 12 months of $41.6M, Cash Flow per Share of $1.10 and a stock price of $72.46. The current ratio is 1892% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, for most financials analysts do not think the cash flow is important. That is why I do not find any Cash Flow estimate and I am looking at Cash Flow for the last 12 months.
I get an historical median dividend yield of 1.50%. The current dividend yield is 2.10% based on dividends of $1.52 and a stock price of $72.46. The current dividend yield is 40% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 1.44%. The current dividend yield is 2.10% based on dividends of $1.52 and a stock price of $72.46. The current dividend yield is 45% above the 10 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 3.24. The current P/S Ratio is 2.78 based on Revenue estimate for 2023 of $982M, Revenue per Share of $26.03 and a stock price of $72.46. The current ratio is 14% 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 dividend yield tests shows that the stock price is relatively cheap, but this is not confirmed by the P/S Ratio test that says the stock price is reasonable. Other tests say the stock is either cheap or reasonable and below the median.
When I look at analysts’ recommendations, I find Buy (8) recommendations. The consensus would be a Buy. The 12 month stock price is $95.00 with a high of $100.00 and low of $90.00. The 12 months stock price of $95.00 implies a total return of 33.20% with 31.11% from capital gains and 2.10% from dividends.
Analysts on Stock Chase seem to like this company, but does not say buy. Stock Chase gives this stock 3 stars out of 5. It is on the Marple Money and Aristocrats lists, but not on the Money Sense List. Andrew Button on Motley Fool thinks this is a top bank stock. Aditya Raghunath on Motley Fool thinks this is a cheap stock to buy. The company put out a press release via Newswire about its fourth quarter of 2022 results. The company put out a press release via Newswire about their second quarter results of 2023.
Simply Wall Street via Yahoo Finance issues a review of this stock. Simply Wall Street gives one warning of shareholders have been diluted in the past year.
EQB Inc operates through its wholly owned subsidiary, Equitable Bank, Canada's Challenger Bank. It serves Canadians through two business lines, Personal Banking and Commercial Banking. The company differentiates by providing a host of challenger bank deposit services, alternative single-family lending, reverse mortgage lending, insurance lending, Specialized finance, Commercial finance group and Equipment financing. Its web site is here EQB Inc.
The last stock I wrote about was about was Medtronic PLC (NYSE-MDT) ... learn more. The next stock I will write about will be Pason Systems Inc (TSX-PSI, OTC-PSYTF) ... learn more on Friday, October 14, 2023 around 5 pm. Tomorrow on my other blog I will write about HLS Therapeutics Inc .... learn more on Thursday, October 13, 2023 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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