Is it a good company at a reasonable price? Last year analysts gave a Strong Buy and a consensus stock price was $62.67 for one year later, but the stock price just reached $119.70. Analysts this year still says a strong buy and expect a price in one year of $162.30. In my stock price testing, I am getting a result of the current stock price being relatively expensive.
However, the stock price has been shooting and sometimes such momentum does not stop. The stock price might continue to shoot up and never again get as low as $119.70. It is hard to say. I have seen this happen in the past. A good thing to look at is possibly expect future growth. See chart below.
In the chart below, I am showing 5 and 10 year total growth and per year growth in columns 3 and 4. Column 5 shows growth expected over 12 months to the first quarter in 2024 and expected growth over the next year. This chart shows that past growth has been good, but growth to the end of the first quarter of 2024 and to the end of this year is mostly lower.
| Yr | Item | Tot. Gwth | Per Year | Gwth | Coverage |
|---|---|---|---|---|---|
| 5 | Revenue Growth | 126.08% | 17.72% | 2.75% | <-12 mths |
| 5 | EPS Growth | 584.55% | 46.92% | -12.20% | <-12 mths |
| 5 | Net Income Growth | 590.82% | 47.19% | -12.26% | <-12 mths |
| 5 | Cash Flow Growth | 581.31% | 46.78% | 37.98% | <-12 mths |
| 5 | Dividend Growth | 129.17% | 18.04% | 77.27% | <-12 mths |
| 5 | Stock Price Growth | 1333.33% | 70.32% | 46.51% | <-12 mths |
| 10 | Revenue Growth | 192.28% | 11.32% | 9.09% | <-this year |
| 10 | EPS Growth | 925.00% | 26.20% | 6.57% | <-this year |
| 10 | Net Income Growth | 942.23% | 26.41% | 6.63% | <-this year |
| 10 | Cash Flow Growth | 5665.75% | 50.00% | 37.98% | <-this year |
| 10 | Dividend Growth | 175.00% | 10.65% | 78.18% | <-this year |
| 10 | Stock Price Growth | 1068.81% | 27.87% | 46.51% | <-this year |
I own this stock of Hammond Power Solutions Inc (TSX-HPS.A, OTC-HMDPF). I bought this stock as my main purchase for the TFSA in 2013 and 2014. I picked Hammond initially in 2013 as my main buy because it has good growth and reasonable dividend. Also, I think that it important to try out newer smaller companies for investment purposes. Companies on the TSX are always changing and it is good to get into new industries and new companies. The problem of this, of course, is you do not always know what industries and companies will be long lasting.
When I was updating my spreadsheet, I noticed this company has done very well lately. My total return is 28.86% per year with 27.29% from capital gains and 1.57% from dividends. I have had this stock for 11 years and bought with my fooling around money.
If you had invested in this company in December 2013, for $1,006.56 you would have bought 144 shares at $6.99 per share. In December 2023, after 10 years you would have received $445.68 in dividends. The stock would be worth $11,764.80. Your total return would have been $12,210.48. This would be a total return of 29.49% per year with 27.87% from capital gain and 1.62% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $6.99 | $1,006.56 | 144 | 10 | $445.68 | $11,764.80 | $12,210.48 |
The current dividend yield is low with dividend growth good. The dividend yield is low (below 2%) at a very low 0.92%. The 5, 10 and historical median dividend yields are moderate (2% to 4% ranges) at 3.29%, 3.25% and 3.00%. The dividend growth is good (15% and over) at 18.04% per year over the past 5 years. The last dividend increase was in 2024 and it was for 83%. The problem with the very low yield is that the stock price is growing faster than the dividends. See total return below.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is good at 10% with 5 year coverage at 15%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 5% with 5 year coverage at 8%. The DPR for 2023 for Free Cash Flow (FCF) is good at 28% with 5 year coverage at 24%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 10.32% | 15.08% |
| CFPS | 5.47% | 7.91% |
| FCF | 27.79% | 23.78% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.01 and currently at 0.01. The Liquidity Ratio for 2023 is good at 1.87 and 1.84. The Debt Ratio for 2023 is good at 2.29 and 2.29 currently. The Leverage and Debt/Equity Ratios for 2023 are good at 1.77 and 0.77 and currently at 1.77 and 0.77.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term | 0.01 | 0.01 |
| Intang/GW | 0.02 | 0.01 |
| Liquidity | 1.87 | 1.84 |
| Liq. + CF | 2.10 | 2.12 |
| Debt Ratio | 2.29 | 2.29 |
| Leverage | 1.77 | 1.77 |
| D/E Ratio | 0.77 | 0.77 |
The Total Return per year is shown below for years of 5 to 22 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 18.04% | 72.95% | 70.32% | 2.63% |
| 2013 | 10 | 10.65% | 29.49% | 27.87% | 1.62% |
| 2008 | 15 | 12.95% | 18.63% | 17.47% | 1.16% |
| 2003 | 20 | 31.86% | 29.56% | 2.30% | |
| 2001 | 22 | 24.27% | 23.06% | 1.21% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 3.71, 7.61 and 9.45. The corresponding 10 year ratios are 6.18, 8.83 and 11.84. The corresponding historical ratios are 5.76, 8.06 and 9.52. The current P/E Ratio is 21.07 based on a stock price of $119.70 and EPS estimate for 2024 of $5.68. The current ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive. Although the stock 5, 10 and historical ratios are rather low, a ratio of 21.07 is rather high.
I get a Graham Price of $50.58. The 10-year low, median, and high median Price/Graham Price Ratios are 0.45, 0.62 and 0.78. The current P/GP Ratio is 2.37 based on a stock price of $119.70. 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.
I get a 10-year median Price/Book Value per Share Ratio of 0.81. The current P/B Ratio is 5.98 based on a Book Value of $238M, Book Value per Share of $20.02 and a stock price of $119.70. The current ratio is 637% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. Although a P/B Ratio of 0.81 is low, a ratio of 5.98 is very high. A reasonable ratio is generally considered to be 1.50.
I also have a Book Value per Share estimate for 2024 of $24.10. This implies a P/B Ratio of 4.97 based on a stock price of $119.70 and a Book Value of $287M. This P/B Ratio is 512% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. Although a P/B Ratio of 0.81 is low, a ratio of 4.97 is very high. A reasonable ratio is generally considered to be 1.50.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.17. The current P/CF Ratio is 23.42 based on Cash Flow for the last 12 months of $60.86, Cash Flow per Share of $5.11 and a stock price of $119.70. The current ratio is 353% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 3.00%. The current dividend yield is 0.92% based on dividends of $1.10 and a stock price of $119.17. The current dividend yield is 69% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 3.75%. The current dividend yield is 0.92% based on dividends of $1.10 and a stock price of $119.17. The current dividend yield is 72% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10-year median Price/Sales (Revenue) Ratio is 0.30. The current P/S Ratio is 1.84 based on Revenue estimate for 2024 of $774.6M, Revenue per Share of $65.07 and a stock price of $119.70. The current ratio is 508% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably relatively expensive. All the testing I have done points to an expensive stock price.
When I look at analysts’ recommendations, I find Strong Buy (2), and Buy (1). The consensus is a Strong Buy. The 12 months stock is $162.30 with a high of $167.00 and a low of $156.00. The consensus stock price of $162.30 implies a total return of 36.51% with 35.59% from capital gains and 0.92% from dividends based on a current stock price of $11.9.70.
Last year, when I look at analysts’ recommendations, I found Strong Buy (3). The consensus would be a strong buy. The 12 months stock price consensus was $62.67. This implies a total return of 48.53% with 47.35% from capital gains and 1.18% from dividends based on a current stock price of $42.53. What happened a stock price movement to $119.70 and a total return of $182.63 with a capital gain of 181.45% and dividends of $1.81%.
Analysts in 2024 give this stock Stock Chase two Buys and one Do Not Buy. The Do Not Buy says the company is small and he does not buy companies where the stock has shot up. Stock Chase gives this stock 3 stars out of 5. Christopher Liew on Motley Fool thinks this stock could deliver superior returns in 2024 and beyond. Christopher Liew on Motley Fool says this stock is more expensive than other stock, but the returns have been enormous. The company put out a press release via Globe Newswire about their fourth quarter of 2023 results. The company put out a press release via Globe Newswire about their results for the first quarter of 2024.
Simply Wall Street via Yahoo Finance reviews this stock and says it will do worse than others in the industry. Simply Wall Street gives this stock 3 and one half stars out of 5. They have no warnings out on this stock. They say earnings are forecast to grow.
Hammond Power Solutions Inc is engaged in designing and manufacturing custom electrical magnetics, cast resin, custom liquid-filled distribution and power transformers, and standard electrical transformers, serving the electrical and electronic industries. The company has manufacturing plants in Canada, the United States, Mexico, and India. The company operates in various geographical markets including Canada, the United States, Mexico, and India from which it derives majority revenue in the United States and Mexico. Its web site is here Hammond Power Solutions Inc.
The last stock I wrote about was about was Ag Growth International (TSX-AFN, OTC-AGGZF) ... learn more. The next stock I will write about will be Mullen Group Ltd (TSX-MTL, OTC-MLLGF) ... learn more on Monday, May 20, 2024 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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