Is it a good company at a reasonable price? There are problems because of the recent volatility of the dividends. The good news is that the company seems optimistic about the future because they are now raising the dividends. This company is in the oil and gas industry and this points to a risky stock. A good thing about this company is that the debt is little and the debt ratios are good. I said the results of the testing is pointing to a reasonable price, but the price could very well be cheap.
I do not own this stock of Pason Systems Inc (TSX-PSI, OTC-PSYTF). I read a report on this stock in the Buy and Sell Advisor in September 2013. I had not heard of this dividend growth company before so I decided to investigate it.
When I was updating my spreadsheet, I noticed that the company did better in 2022 than expected. The Revenue estimate was sort of close with an estimate of $323M and coming in at $335M and increase of 62% compared to estimate of 56%. The EPS difference was much higher coming at $1.30 an 217% increase when the estimate was $0.98 and a 139% increase.
If you had invested in this company in December 2012, for $1,011.85 you would have bought 59 shares at $17.17 per share. In December 2022, after 10 years you would have received $339.84 in dividends. The stock would be worth $940.46. Your total return would have been $1,280.30. This is a total return would be a total return of 2.78% per year with 0.73% from capital loss and 3.51% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $17.15 | $1,011.85 | 59 | 10 | $339.84 | $940.46 | $1,280.30 |
The current dividend yield is moderate with dividend growth restarting. The current dividend yield is moderate (2% to 4%) at 3.47%. The 5, 10 and historical median dividend yields are also moderate at 3.58%, 3.49% and 2.50%. The dividends have decreased by 12% per year over the past 5 years. However, the decreasing of dividends stopped in 2021 and in 2022 dividends were again increased. The last dividend increase was in 2022 and it was a 50% increase. However, dividends are down by 74% from those paid in 2019.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2022 for Earnings per Share (EPS) is 28% with 5 year coverage at 79%. The DPR for 2022 for Funds from Operations (FFO) is 22% with 5 year coverage at 50%. The DPR for 2022 for Cash Flow per Share (CFPS) is 22% with 5 year coverage at 43%. The DPR for 2022 for Free Cash Flow (FCF) is 58% with 5 year coverage at 70%. There is some disagreement on what the FCF is for the company, but most of the values are close.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 27.69% | 78.73% |
| FFO | 22.09% | 49.74% |
| CFPS | 21.76% | 42.62% |
| FCF | 57.82% | 70.74% |
Debt Ratios are good with the company having little debt. The Long Term Debt/Market Cap Ratio for 2022 is 0.01 and is good and low. The Liquidity Ratio for 2022 is good at 4.02. The Debt Ratio is good for 2022 at 5.08. The Leverage and Debt/Equity Ratios are good at 1.22 and 0.23 respectively.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.01 | 0.01 |
| Intang/GW | 0.03 | 0.04 |
| Liquidity | 4.02 | 4.29 |
| Liq. + CF | 5.08 | 5.82 |
| Debt Ratio | 5.28 | 5.23 |
| Leverage | 1.22 | 1.22 |
| D/E Ratio | 0.23 | 0.23 |
The Total Return per year is shown below for years of 5 to 26 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 | -11.94% | 0.27% | -2.61% | 2.88% |
| 2012 | 10 | -1.53% | 2.78% | -0.73% | 3.51% |
| 2007 | 15 | 5.56% | 5.02% | 1.64% | 3.38% |
| 2002 | 20 | 11.70% | 13.45% | 8.73% | 4.72% |
| 1997 | 25 | 13.45% | 9.66% | 3.80% | |
| 1996 | 26 | 19.11% | 13.95% | 5.17% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 20.02, 26.77 and 30.95. The corresponding 10 year ratios are 19.20, 25.02 and 29.55. The corresponding historical ratios are 13.84, 19.89 and 25.21. The current P/E Ratio is 10.04 based on a stock price of $13.85 and EPS estimate for 2023 of $1.38. The current ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. Note: that when a company has problems, it will only lose so much value, depending on what investors think the company is worth. In that case, the P/E Ratios tend to rise and these P/E Ratios are on the high side.
I also have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/ Funds from Operations Ratios are 9.63, 12.90 and 14.96. The corresponding 10 year ratios are 10.12, 12.92 and 15.56. The current P/FFO Ratio is 7.14 based on FFO for the last 12 months of $1.94 and a stock price of $13.85. 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 get a Graham Price of $12.48. The 10-year low, median, and high median Price/Graham Price Ratios are 1.94, 2.70 and 3.16. The current P/GP Ratio is 1.69 based on a stock price of $13.85. The current ratio is below the 1ow ratio 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 3.96. The current P/B Ratio is 2.76 based on a stock price of $13.85, Book Value of $4032M, and Book Value per Share of $5.02. The current ratio is 30% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 13.34. The current P/CF Ratio is 8.10 based on Cash Flow per Share estimate for 2023 of $1.71, Cash Flow of $137M and a stock price of $13.85. The current ratio is 39% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 2.50%. The current dividend yield is 3.47% based on dividends of $0.48 and a stock price of $13.85. The current dividend yield is 0.61% blow 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 3.49%. The current dividend yield is 3.47% based on dividends of $0.48 and a stock price of $13.85. The current dividend yield is 39% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable above the median.
The 10-year median Price/Sales (Revenue) Ratio is 4.94. The current P/S Ratio is 3.12 based on Revenue estimate for 2023 of $356M, Revenue per Share of $4.44 and a stock price of $13.65. The current ratio is 37% 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 reasonable, but could be cheap. See paragraph below on problems with the Dividend Yield tests. The 10 year one is pointing to a reasonable price. However, the P/S Ratio test is pointing to a cheap price. All the other testing is pointing to a cheap price.
There are problems with the dividend yield tests as this works best on companies that are increasing their dividends. This company was decreasing the dividends until 2021 and then started to increase them again. Decreasing dividends are not good. But the company seems to feel optimistic again about the future because they are rising the dividends. So, these are problems with this test.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (4), Hold (1) and Underperform (1). The consensus would be a Buy. The 12 months stock price of $16.93, with a high of $20.00 and low of $12.00. The consensus price of $16.93 implies a total return of 25.70% with 22.24% from capital gains and 3.47% from dividends.
Two out of three comments on Stock Chase say buy. Stock Chase gives this stock 4 stars out of 5. It is not on any of the list that I follow. Karen Thomas on Motley Fool thinks this is a good oil stock to invest in. Iain Butler onMotley Fool says buy this stock as it has been cast aside. The company put out a press release on Newswire about their fourth quarter of 2022 results. The company put out a press release on Newswire about their results for the second quarter of 2023.
Simply Wall Street reviews this stock via Yahoo Finance. Simply Wall Street has two warnings on this stock of high level of non-cash earnings; and unstable dividend track record. Simply Wall Street gives this stock 4 stars out of 5.
Pason Systems Inc is an oilfield specialist with fully integrated drilling data solutions. The company operates in three geographic segments: Canada, the United States, and International (Latin America, Offshore, the Eastern Hemisphere, and the Middle East). Its web site is here Pason Systems Inc.
The last stock I wrote about was about was EQB Inc (TSX-EQB, OTC-EQGPF) ... learn more. The next stock I will write about will be Molson Coors Canada (TSX-TPX.B, NYSE-TAP) ... learn more on Monday, October 16, 2023 around 5 pm.
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