Is it a good company at a reasonable price? Dividends were cut in 2020 and even though they have been raised since, they are still 48% below the high of 2019. Dividend cuts are never a positive sign. Also, the company has a lot of debt and this is also a negative. Earnings have been volatile. Over the past 20 years, its return to shareholders have been ok. But for an ok return it would seem to be a risky stock. It would not be a favourite of mine. The results of the stock testing shows the stock price is probably cheap.
I do not own this stock of Methanex Corp (TSX-MX, NASDAQ-MEOH). I started a spreadsheet in November 2010 as I had read some good reports on the stock at that time. It is also got a solid “C” grade in a 2009 Money Sense review of stocks. Money Sense rated the top 100 Canadian Dividend Paying stocks. Money Sense was looking for stocks that provided generous income at reasonable prices.
When I was updating my spreadsheet, I noticed that they have a new CEO and CFO. Although both of these has worked for the company in other capacities. They also have several new directors. The Chairman has been in place since around 2017. Analysts expect that both AEPS and EPS will drop significantly in 2023, AEPS by 57% and EPS by 32%. However, both tend to be quite volatile. It is interesting that its biggest market is China.
The current dividend yield is low with dividend growth restarting. The current dividend yield is low (below 2%) at 1.71%. The 5 and 10 median dividend yields are also low at 1.67% and 1.86%. The historical median dividend yield is moderate (2% to 4% ranges) at 2.32%. The Dividend growth has restarted after dividends were cut in 2020. The last dividend increase was for 9.1% and it was in 2023 and it was for 5.7%. Dividends are still 47% below the high dividends of 2019. Over the past 20 years, dividends were raised in 17 years and decreased in 2 years (2020 and 2021). Dividends are paid in US$.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2022 for Earnings per Share (EPS) is 9% with 5 year coverage at 25%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 13% with 5 year coverage at 30%. The DPR for 2022 for Cash Flow per Share (CFPS) is 4% with 5 year coverage at 8%. The DPR for 2022 for Free Cash Flow (FCF) is 11% with 5 year coverage at 18%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 9.48% | 24.64% |
| AEPS | 12.94% | 29.57% |
| CFPS | 4.25% | 7.58% |
| FCF | 10.72% | 17.69% |
Some Debt Ratios could be improved like the Leverage and Debt/Equity Ratios. The Long Term Debt/Market Cap Ratio for 2022 is good at 0.81, although I know some analysts like this to be 0.50 or less. The Liquidity Ratio for 2022 is good at 1.99 and 1.64 currently. The Debt Ratio for 2022 is fine at 1.58 and 1.46 currently. The Leverage and Debt/Equity Ratios for 2022 are too high at 3.14 and 1.99. They are still too high currently at 3.24 and 2.08. I prefer them to be below 3.00 and 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.81 | 0.72 |
| Intang/GW | 0.00 | 0.00 |
| Liquidity | 1.99 | 1.64 |
| Liq. + CF | 2.99 | 2.31 |
| Debt Ratio | 1.58 | 1.56 |
| Leverage | 3.14 | 3.24 |
| D/E Ratio | 1.99 | 2.08 |
The Total Return per year is shown below for years of 5 to 27 to the end of 2022 in CDN$. 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 | -10.64% | -5.98% | -7.61% | 1.63% |
| 2012 | 10 | 1.53% | 8.07% | 4.93% | 3.14% |
| 2007 | 15 | 3.01% | 6.96% | 4.22% | 2.73% |
| 2002 | 20 | 8.71% | 10.38% | 6.98% | 3.40% |
| 1997 | 25 | 8.62% | 6.22% | 2.41% | |
| 1995 | 27 | 8.44% | 6.24% | 2.20% |
The Total Return per year is shown below for years of 5 to 27 to the end of 2022 in US$. 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 | -12.00% | -7.38% | -8.96% | 1.59% |
| 2012 | 10 | -1.55% | 4.48% | 1.74% | 2.74% |
| 2007 | 15 | 0.86% | 5.51% | 2.78% | 2.74% |
| 2002 | 20 | 9.55% | 12.14% | 7.83% | 4.31% |
| 1997 | 25 | 9.23% | 6.45% | 2.78% | |
| 1995 | 27 | 8.76% | 6.28% | 2.48% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.02, 8.41 and 10.80. The corresponding 10 year ratios are 7.69, 10.67 and 13.21. The corresponding historical ratios are 8.68, 9.49 and 14.94. The current P/E Ratio is 13.24 based on a stock price of $58.29 and EPS estimate for 2023 of $4.40. This ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a Graham Price of $61.87. The 10-year low, median, and high median Price/Graham Price Ratios are 0.83, 1.19 and 1.48. The current P/GP Ratio is 0.94 based on a stock price of $58.29. The current ratio is between the low and medina ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in CDN$.
I get a 10-year median Price/Book Value per Share Ratio of 2.53. The current P/B Ratio is 1.51 based on a Book Value of $1,981M, Book Value per Share of $28.60 and a stock price of $43.16. The current P/B Ratio is 40% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$. You will get a similar result in CDN$.
I also have Book Value per Share estimate for 2023 of $29.40. This implies a ratio of 1.47 based on a stock price of $43.16 and Book Value of $2,036M. This ratio is 42% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$.
I get a 10-year median Price/Cash Flow per Share Ratio of 6.03. The current P/CF Ratio is 4.57 based on Cash Flow per Share estimate for 2023 of $9.45 and a stock price of $43.16. The current ratio is 39% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$. You will get a similar result in CDN$.
I get an historical median dividend yield of 2.32%. The current dividend yield is 1.71% based on stock price of $43.16 and dividends of $0.74. The current dividend yield is 26% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get a 10 year median dividend yield of 1.86%. The current dividend yield is 1.71% based on stock price of $43.16 and dividends of $0.74. The current dividend yield is 8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$. You will get a similar result in CDN$.
The 10-year median Price/Sales (Revenue) Ratio is 1.32. The current P/S Ratio is 0.81 based on a stock price of $43.16, Revenue estimate for 2023 of $3,671M and Revenue per Share of $53.02. The current P/S Ratio is 38% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably cheap. The dividend test says the stock price is reasonable, but since dividends have been cut, this is not a good test. On the other hand, a company cutting dividends is never a good sign. The P/S Ratio test is good and it says the stock price is cheap. Some of the other tests say the same thing, but I do get mixed results.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (5) and Hold (4). The consensus would be a Buy. The 12 month stock price consensus is $70.91 ($52.50 US$), with a high of $81.04 ($60.00 US$) and Low of $60.78 ($45 US$). The 12 month stock price consensus of $70.91 ($52.50 US$) implies a total return of 23.37% with 21.65% from Capital Gains and 1.71% from dividends.
Some analysts on Stock Chase like this stock and some do not. Stock Chase gives this stock 4 stars out of 5. Christopher Liew on Motley Fool thinks this stock has long term growth potential. Adam Othman on Motley Fool says this is the lead company in its market. The company put out aPress Release on their 2022 results. The company put out a press release on their third quarter of 2023 results.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street has two warnings on this stock of has a high level of debt; and profit margins (4.8%) are lower than last year (11.2%). Simply Wall Street gives this stock 2 and one half stars out of 5.
Methanex Corp manufactures and sells methanol. Methanex distributes its products through a global supply chain that includes the operation of port terminals, tankers, barges, rail cars, trucks, and pipelines. China generates the most revenue of any geographical segment. Its web site is here Methanex Corp.
The last stock I wrote about was about was Stantec Inc (TSX-STN, NYSE-STN) ... learn more. The next stock I will write about will be Magna International Inc (TSX-MG, NYSE-MGA) ... learn more on Wednesday, December 6, 2023 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks December 2023 .... learn more on Tuesday, December 5 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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