Is it a good company at a reasonable price? Personally, I like to buy companies that can produce earnings. This company seems to have a problem with that. Some people like to buy companies with high dividend yields and wait for the companies to recover. There is, of course, a risk to that. Companies can reduce the dividend payments, or worse go bankrupt. No one seems to think this will happen to this company. I am not generally interested in this sort of investing. It can sometimes be profitable on a short term basis. The stock price seems to be cheap.
I do not own this stock of Innergex Renewable Energy (TSX-INE, OTC-INGXF). In 2006 I bought Innergex Power on a buy rating and favorable report from TD although it has only been going from 2003. In 2008 I sold Innergex as I did not think that it is a stock I want to hold as dividend increased less than the rate of inflation.
When I was updating my spreadsheet, I noticed that this company does have a hard time earning a profit. In the last 10 years, there have been earning losses in 6 years and profit in 4 years. Even with the Adjusted Earnings per Share, there were losses in 3 years and profits in 7 years over the past 10 years. Also, the debt ratios are awful.
The current dividend yield is high with dividend growth stopping. The current dividend yield is high (7% and above) at 7.35%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 4.14%, and 4.76%. The historical median dividend yield is good (5% to 5% ranges) at 5.74%. The dividend growth is low (below 8%) at 1.9% per year over the past 5 years. The last dividend increase was in 2020 and it was for 2.9%. Dividend have been flat since then and they are not expected to raise within the next 3 years.
The Dividend Payout Ratios (DPR) can be covered by Cash Flow, but not earnings. The DPR for 2022 for Earnings per Share (EPS) cannot be calculated. This is because of an earnings loss. The DPR for 5 year coverage cannot be calculated because earning losses are higher than the dividends. The DPR for 2022 for Adjusted Earnings per Share (AEPS) cannot be calculated because of an earnings loss, but with 5 year coverage at 173%. This means that the dividends cannot be covered by AEPS as AEPS is lower than dividends paid. You certainly want a value under 100% and better still under 75%. The DPR for 2022 for Cash Flow per Share (CFPS) is 22% with 5 year coverage at 31%. These are fine. The DPR for 2022 for Free Cash Flow (FCF) is 48% with 5 year coverage at 980%. Sites do not agree on what the FCF is.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | N/C | N/C |
| AEPS | N/C | 173.43% |
| CFPS | 22.40% | 31.38% |
| FCF | 47.96% | 979.84% |
Debt Ratios are awful. The Long Term Debt/Market Cap Ratio for 2022 is far too high in 2022 at 1.66 and currently at 2.91. This means that the long term debt is higher than the market value of this stock. It is a bad situation. The Liquidity Ratio for 2022 is too log at 0.81 and currently at 0.99. Currently if you add in cash Flow after dividends it is 1.25. This is low for safety’s sake. I prefer it to be at 1.50 or higher. The Debt Ratio for 2022 is too low at 1.21 and currently at 1.19. I prefer it to be at 1.50 or higher. The Leverage and Debt/Equity Ratios for 2022 are far too high at 5.79 and 4.79 and even worse currently.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 1.66 | 2.91 |
| Intang/GW | 0.43 | 0.77 |
| Liquidity | 0.81 | 0.99 |
| Liq. + CF | 0.63 | 1.25 |
| Liq. CF DB | 2.29 | 1.91 |
| Debt Ratio | 1.21 | 1.19 |
| Leverage | 5.79 | 6.39 |
| D/E Ratio | 4.79 | 5.39 |
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 | 1.91% | 7.06% | 2.38% | 4.67% |
| 2012 | 10 | 2.19% | 9.83% | 4.58% | 5.25% |
| 2007 | 15 | 0.36% | 10.71% | 4.69% | 6.02% |
| 2003 | 19 | 0.75% | 9.68% | 3.60% | 6.09% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are negative and therefore useless. The corresponding 10 year ratios are also negative and useless. The corresponding historical ratios are also negative and useless. The current P/E Ratio is 48.95 based on a stock price of $9.79 and EPS estimate for 2023 of $0.20. This is a very high ratio. Ratios are negative or high because of earnings losses or very low earnings.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are negative and therefore useless. The corresponding 10 year ratios are 46.40, 54.12 and 61.85. The current P/AEPS Ratio is 32.63 based on a stock price of $9.79 and AEPS estimate for 2023 of $0.30. By this measure, this stock price testing suggests that the stock price is relatively cheap. However, the ratios are very high because of very low earnings.
I get a Graham Price of $6.15. The 10-year low, median, and high median Price/Graham Price Ratios are 3.12, 3.47 and 3.86. The current P/GP Ratio is 1.59 based on a stock price of $9.79. The current ratio is below the low ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. These ratios are very high due to very low earnings. Normally a P/GP Ratio is 1.20 is considered high.
I get a 10-year median Price/Book Value per Share Ratio of 3.75. The current P/B Ratio is 1.75 based on a Book Value of $1,139M, Book Value per Share of $5.60 and a stock price of $9.79. The current ratio is 53% 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 estimate for 2023 of $4.96. This implies a Book Value of $1,010M, and P/B Ratio of 1.97 with a stock price of $9.79. The analyst calculated the book value differently than I do and their 10 year median ratio is 2.86. The ratio of 1.97 is 31% below the 10 year ratio of 2.86. 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 10.52. The current P/CF Ratio is 6.94 based on Cash Flow per Share estimate for 2023 of $1.41, Cash Flow of $287M and a stock price of $9.79. The current ratio is 34% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 5.74%. The current dividend yield is 7.35% based on a stock price of $9.79 and dividends of $0.72. The current dividend yield is 28% 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 4.76%. The current dividend yield is 7.35% based on a stock price of $9.79 and dividends of $0.72. The current dividend yield is 55% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 4.53. The current P/S Ratio is 2.00 based on Revenue estimate for 2023 of $996M, Revenue per Share of $4.89 and a stock price of $9.79. The current ratio is 58% 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 cheap. After all, the stock price is down by 40% year to date. It is down by 64% from its high of $27.37 in 2020. Both the dividend yield tests and the P/S Ratio test says that the stock price is cheap. All the testing is pointing to a cheap price, although this stock has very high ratios due especially to the lack of earnings.
When I look at analysts’ recommendations, I find Buy (6), Hold (2) and Sell (1). The consensus would be a Buy. The 12 months stock price consensus is $14.89 with a high of $20.00 and low of $10.00. The price consensus of $14.89 implies a total return of $59.45% with 52.09% from capital gains and 7.35% from dividends.
The only comments on Stock Chase in 2023 says it is highly leveraged and they would like to see profitability before recommending this stock. This stock is on the Maple Money list and the Dividend Aristocrat lists, but not on the Money Sense dividend list. Stock Chase gives this stock 1 star out of 5. Aditya Raghunath on Motley Fool wonders if the dividends are sustainable. Demetris Afxentiou on Motley Fool likes this stock because it is into green energy. The company put out a press release on Newswire about their results for 2022. The company put out a press release on Newswire about their second quarter results of 2023.
Simply Wall Street via Yahoo Finance put out a report on this company. They have one warning out on this stock of dividend of 7.4% is not well covered by earnings or cash flows. Simply Wall Street gives this stock 3 and one half stars out of 5. I am surprised that they have no warning out on this company’s debt.
Innergex Renewable Energy Inc is an independent Canadian renewable power producer. It develops, acquires, owns, and operates hydroelectric, wind, and solar facilities in Canada, the United States, France, and Chile. Its web site is here Innergex Renewable Energy.
The last stock I wrote about was about was Johnson and Johnson (NYSE-JNJ) ... learn more. The next stock I will write about will be Crescent Point Energy Corp (TSX-CPG, NYSE-CPG) ... learn more on Wednesday, November 8, 2023 around 5 pm. Tomorrow on my other blog I will write about Frances Horodelski.... learn more on Tuesday, November 07, 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.
Also, on my book blog I have put a review of the book The Whisper on the Night Wind by Adam Shoalts learn more...
No comments:
Post a Comment