Is it a good company at a reasonable price? First of all, I am not interested in a company that gives big dividend increases and them big decreases. Dividends went down 60% in 2020, up 45% in 2022 then then down by 71% in 2024. To me, this points to a risky investment. On the other hand, stock price testing implies the stock price is cheap.
I do not own this stock of Chesswood Group Ltd (TSX-CHW, OTC-CHWWF). A reader wrote me in 2012 that he was researching and found a company that he hoped I could give him a brief outlook on. He said that the company is Chesswood Group and they are basically a financial leasing company. From 2009 to 2012 they increased their dividends from 2.5 cents to 5.5 cents per month. This is a 120% increase.
When I was updating my spreadsheet, I noticed that this company is not having a good year in 2023. The 9 month EPS has gone from $1.19 last year to $0.17 this year in September. Last year, analysts thought EPS for 2023 and 2024 would be $1.84 and $2.80, now they are $0.19, and $0.71, with 2025 at $1.55. The 9 month AEPS has gone from $3.18 last year to $0.74 this year in September. However, revenue is holding, but dividends are not as dividends were cut 80% in 2023. The dividends over the past 18 years have been increased in 9 years and decreased in 6 years.
If you had invested in this company in December 2012, for $1,008.00 you would have bought 54 shares at $9.00 per share. In December 2022, after 10 years you would have received $803.60 in dividends. The stock would be worth $1,281.28. Your total return would have been $2,084.88. This is a total return would be a total return of 10.10% per year with 2.43% from capital gain and 7.67% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $9.00 | $1,008.00 | 112 | 10 | $803.60 | $1,281.28 | $2,084.88 |
The current dividend yield is low with dividends declining. The current dividend yield is low (below 2%) at 1.88%. It is low because of a recent dividend cut. The 5 year median dividend yield is moderate (2% to 4% ranges) at 4.68%. The 10 year median dividend yield is good (5% to 6% ranges) at 5.88%. The historical median dividend yield is high (7% and above) at 7.84%. The company used to be an income trust and income trust could have much higher yields than corporations. The last dividend change was dividends were decreased by 80% in 2023. However, shareholders will see the big decrease next year as the decreased occurred late in 2023
The Dividend Payout Ratios (DPR) are fine for 2022 as 2023 is the problem. The DPR for 2022 for Earnings per Share (EPS) is 31% with 5 year coverage at 60%. The DPR for 2022 for Free Cash Flow (FCF) as determined by the company is 22% with 5 year coverage at 18%. The DPR for 2022 for Cash Flow per Share (CFPS) is 6% with 5 year coverage at 9%. The DPR for 2022 for Free Cash Flow (FCF) is negative with 5 year coverage also negative. There is disagreement on what the FCF is. However, the company expects low earnings in 2023 and 2024. The DPR for 2023 is expected 221%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 30.61% | 59.55% |
| FCF Co. | 21.59% | 18.22% |
| CFPS | 5.67% | 9.31% |
| FCF | -1.48% | -18.53% |
Debt Ratios are fine, I think. The Long Term Debt/Covering Assets Ratio is fine at 0.95 and currently at 0.96. The Long Term Debt/Market Cap Ratio for 2022 really high at 11.02 and 18.49, but because it is a financial, I am also looking at the debt compared to the covering assets. The Liquidity Ratio for 2022 is good at 3.53 and 3.03 currently. The Debt Ratio for 2022 is low at 1.10, but this is a financial. The Leverage and Debt/Equity Ratios for 2022 are high at 11.10 and 10.10, but this is a financial.
| Type | Year End | Ratio Curr |
|---|---|---|
| D/A Ratio | 0.95 | 0.96 |
| Lg Term R | 11.02 | 18.49 |
| Intang/GW | 0.32 | 0.38 |
| Liquidity | 3.53 | 3.03 |
| Liq. + CF | 7.68 | 6.88 |
| Debt Ratio | 1.10 | 1.10 |
| Leverage | 11.10 | 10.53 |
| D/E Ratio | 10.10 | 9.53 |
The Total Return per year is shown below for years of 5 to 16 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 | -11.74% | 4.88% | -0.07% | 4.95% |
| 2012 | 10 | -3.39% | 10.10% | 2.43% | 7.67% |
| 2007 | 15 | -5.86% | 19.14% | 7.72% | 11.42% |
| 2006 | 16 | -3.83% | 10.88% | 2.85% | 8.03% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.53, 7.82 and 9.12. The corresponding 10 year ratios are 7.37, 9.10 and 10.46. The corresponding historical ratios are 7.31, 8.84 and 10.55. The current P/E Ratio is 33.58 based on a stock price of $6.38 and EPS estimate for 2023 of $0.19. This ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
However, the P/E Ratio for 2024 is better at 8.99 based on a stock price of $6.38 and EPS estimate for 2024 of $0.71. 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 and below the median.
I get a Graham Price of $7.14. The 10-year low, median, and high median Price/Graham Price Ratios are 0.55, 0.68 and 0.82. The current P/GP Ratio is 0.89 based on a stock price of $6.38. This ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Here also, if you look at the expected Graham Price for 2024 it is $13.80. With this price the P/GP is 0.46. This ratio is below the low ratio of the 10 year median ratio. 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 1.19. The current P/B Ratio is 0.53 based on a stock price of $6.38, Book Value of $210M, and Book Value per Share of $11.93. The current ratio is 55% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have Book Value per Share (BVPS) estimate for 2023 of $11.30. The estimate of $11.30 and a stock price of $6.38 implies a P/B Ratio of 0.56 and Book Value of $199M. The ratio of 0.56 is below the current P/B Ratio of 1.19 by 53%. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio is negative. The current P/CF Ratio is also negative. I can do not stock price testing here.
I get an historical median dividend yield of 7.84%. The current dividend yield is 1.88% based on a stock price of $6.38 and dividends of $0.12. The current dividend yield is 76% 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 5.88%. The current dividend yield is 1.88% based on a stock price of $6.38 and dividends of $0.12. The current dividend yield is 68% 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 1.44. The current ratio is 0.35 based on Revenue estimate for 2023 of $321M, Revenue per Share of $18.22 and a stock price of $6.38. The current ratio is 76% 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 tests are not valid as this test does not work for companies that both increase and decrease their dividends over time. The P/S Ratio test says the stock price is relatively cheap. I would go with that. There are a number of other tests that say the stock price is relatively cheap.
When I look at analysts’ recommendations, I find Buy (1), Hold (2) and Underperform (1) recommendations. The consensus would be a Hold. The 12 month stock price consensus is $7.25 with a high of $9.00 and low of $6.00. The consensus price of $7.25 implies a total return of 15.52% with 1.88% from dividends and 13.64% from capital gains. The high price of $9.00 implies a total return of 42.95% with 41.07% from capital gains and 1.88% from dividends. The low price of $6.00 implies a total loss of 4.08% with a capital loss of 5.96% and dividends of 1.88%.
The last analyst on Stock Chase said because of recent problems, he was trimming is holdings. Stock Chase gives this stock 4 stars out of 5. It is not on any of the dividend lists I follow. There is nothing recent on Motley Fool. Nikhil Kumar on Motley Fool talked about this company in February 2021. The company put out a press release on Newswire about their 2022 results. The company put out a press release on Newswire about their third quarter of 2023.
Simply Wall Street via Yahoo Finance put out a recent report on this stock talking about insider buying. Simply Wall Street put out 5 warnings on this stock of debt is not well covered by operating cash flow; does not have a meaningful market cap (CA$125M); shareholders have been diluted in the past year; dividend of 8.36% is not well covered by earnings and profit margins (7.2%) are lower than last year (19.4%). Simply Wall Street gives this stock 3 and one half stars out of 5.
Chesswood Group Ltd is a holding company whose subsidiaries engage in the business of specialty finance (including equipment finance throughout North America, and vehicle finance in Canada), as well as the origination and management of private credit alternatives for North American investors. The US Equipment Financing business, which is the key revenue driver, is located in the US and is involved in small-ticket equipment leasing and lending to small and medium-sized businesses. Its web site is here Chesswood Group Ltd.
The last stock I wrote about was about was Quarterhill Inc (TSX-QTRH, OTC-QTRHF) ... learn more. The next stock I will write about will be Northland Power Inc (TSX-NPI, OTC-NPIFF) ... learn more on Friday, November 17, 2023 around 5 pm. Tomorrow on my other blog I will write about Toromont and Finning.... learn more on Thursday, November 16, 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.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment