Is it a good company at a reasonable price? This stock did not turn out to be the dividend stock I had hoped, but I have also done well with this stock. Currently I am keeping this stock as it still seems like to good company to hold on to their stock. Unlike the analysts consensus, I think that the price is currently on the relatively expensive side.
I own this stock of WSP Global Inc (TSX-WSP, OTC-WSPOF). This company used to be called Genivar Income Fund (GNV.UN) and then Genivar Inc. (GNV). Genivar was in an article I read so I investigated it and decided to buy. In Sept 2011, I rationalized my portfolio. I sold stocks that did not make it into my core and bought stocks that could of the same type. In this case selling Stantec and buying Genivar.
When I was updating my spreadsheet, I noticed that they have stopped increasing their dividends, which I do not particularly like, but I have certainly done well with this stock. I have had it for almost 13 years and make a total return of 24.23% with 21.80% from capital gains and 2.43% from dividends. This stock used to be an income trust. Income Trust can pay out a lot more in dividends than corporations. Most of the companies changing from Income Trust to Corporations are having a hard time getting the dividends right. However, dividends were never that high and now are very low with a yield of just 0.70%.
If you had invested in this company in December 2005, for $1,000.00 you would have bought 100 shares at $10.00 per share. In December 2023, after 18 years you would have received $2,455.60 in dividends. The stock would be worth $18.574.00. Your total return would have been $21,019.09. This would be a total return of 22.77% per year with 17.62% from capital gain and 5.15% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $10.00 | $1,370.00 | 100 | 18 | $2,445.60 | $18,574.00 | $21,019.60 |
If you had invested in this company in December 2013, for $1,009.28 you would have bought 32 shares at $31.54 per share. In December 2023, after 10 years you would have received $480 in dividends. The stock would be worth $5,943.68. Your total return would have been $6,423.68. This would be a total return of 21.90% per year with 19.40% from capital gain and 2.50% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $31.54 | $1,009.28 | 32 | 10 | $480.00 | $5,943.68 | $6,423.68 |
The current dividend yield is low with dividend growth non-existent. The current dividend yield is low (below 2%) at a very low rate of just 0.70%. So low that it is hard to even call this stock a dividend stock. The 5 year median dividend yield is also low at 1.01%. The 10 year and historical median dividend yields are moderate (2% to 4% ranges) at 2.15% and 4.04%. The dividends have been flat since 2009. The company says it expects the dividend to remain at this level subject to the Board’s ongoing assessment of the Corporation’s future cash requirements, financial performance, liquidity, and other factors that the Board may deem relevant. There is a trade-off in paying dividends and providing cash flow for company growth.
The Dividend Payout Ratios (DPR) are good and the company is right that payouts are at an appropriate level for a growing company. The DPR for 2023 for Earnings per Share (EPS) is good at 34% with 5 year coverage at 42%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 22% with 5 year coverage at 33%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 12% with 5 year coverage at 15%. The DPR for 2023 for Free Cash Flow (FCF) is good at 20% with 5 year coverage at 12%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 34.09% | 42.35% |
| AEPS | 21.74% | 33.49% |
| CFPS | 11.64% | 15.15% |
| FCF | 20.12% | 12.19% |
Debt Ratios are generally fine, but Liquidity could be improved. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.13 and currently at 0.12. The Liquidity Ratio for 2023 is low at 1.15. If you added in Cash Flow after dividends, the ratios are still low at 1.32 and currently at 1.39. I prefer this ratio to be 1.50 or higher. The Debt Ratio for 2023 is good at 1.68 and 1.68 currently. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.46 and 1.46.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.13 | 0.12 |
| Intang/GW | 0.36 | 0.31 |
| Liquidity | 1.15 | 1.15 |
| Liq. + CF | 1.32 | 1.39 |
| Debt Ratio | 1.68 | 1.68 |
| Leverage | 2.46 | 2.46 |
| D/E Ratio | 1.46 | 1.46 |
The Total Return per year is shown below for years of 5 to 18 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 | 0.00% | 27.63% | 25.92% | 1.71% |
| 2013 | 10 | 0.00% | 21.90% | 19.40% | 2.50% |
| 2008 | 15 | 1.47% | 17.33% | 14.24% | 3.08% |
| 2005 | 18 | 6.47% | 22.77% | 17.62% | 5.15% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 27.21, 37.53 and 44.62. The corresponding 10 year ratios are 24.34, 31.67 and 36.69. The corresponding historical ratios are 17.34, 20.98 and 24.62. The current ratio is 33.75, based on a stock price of $213.26 and EPS estimate for 2024 of $6.32. 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 but above the median. The P/E Ratios are high, but fast growing companies tend to have rather high P/E Ratios.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 21.65, 26.14 and 31.42. The corresponding 10 year ratios are 19.67, 24.64 and 28.81. The current ratio is 27.13 based on a stock price of $213.26 and AEPS estimate for 2024 of $7.86. 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 but above the median.
I get a Graham Price of $94.75. The 10-year low, median, and high median Price/Graham Price Ratios are 1.25, 1.54 and 1.81. The current P/GP Ratio is 2.25 based on a stock price of $213.26. 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.
I get a 10-year median Price/Book Value per Share Ratio of 2.23. The current P/B Ratio is 4.20 based on a Book Value of $6,329M, Book Value per Share of $50.77 and a stock price of $213.26. The current ratio is 88% above the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 13.76. The current P/CF Ratio is 20.51 based on Cash Flow per Share estimate for 2024 of 10.40, Cash Flow of $1,297M and a stock price of $213.26. The current ratio is 49% 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 4.04%. The current dividend yield is 0.70% based on dividends of $1.50 and a stock price of $213.26. The current dividend 83% 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 2.15%. The current dividend yield is 0.70% based on dividends of $1.50 and a stock price of $213.26. The current dividend 67% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This test is best with rising dividends, but it is not good when dividends do not rise either.
The 10-year median Price/Sales (Revenue) Ratio is 1.23. The current P/S Ratio is 2.29 based on Revenue estimate for 2024 of $11,616M, Revenue per Share of 93.18 and a stock price of $213.26. The current ratio is 86% above the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. The best tests for this stock at this time are probably the P/S Ratio and P/GP Ratio tests. They both show the stock price as expensive. The problem with the dividend yield tests is that the dividends are flat. I also think that the P/GP Ratio tests are better than the P/E Ratio and P/AEPS Ratio tests.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (8) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $238.80, with a high of $255.00 and low of $220.00. The consensus price of $238.80 implies a total return of 12.68% with 11.98% from capital gains and 0.70% from dividends. I do not think that a Strong Buy consensus matches a total return of 12.68%. I would expect a much higher expected consensus price.
There are a number of entries on Stock Chasefor this stock and they are mostly all buys, but all comment favorably on this stock. Stock Chase gives this stock 5 stars out of 5. Interestingly, Adam Othman on Motley Fool says sell because this stock is being targeted by a short seller. Amy Legate-Wolfe on Motley Fool suggests buying this stock because it is a growth stock. The company put out a press release on Globe Newswire about this company’s fourth quarter of 2023.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street gives this stock 2 and one half stars out of 5. It has one warning of has a high level of debt.
Stocks can get targeted for various reasons by short sellers. The Short Sellers are not always right and they do not always win. The stock price has declined already because of the short seller, but I noticed that one analyst has suggested that the short seller has already gotten out of his short-sell position. So be careful what you do.
WSP Global Inc provides engineering and design services to clients in the Transportation and Infrastructure, Property and Buildings, Environment, Power and Energy, Resources, and Industry sectors. It also offers strategic advisory services. The firm operates through four reportable segments namely, Canada, Americas (United States and Latin America), EMEIA (Europe, Middle East, India, and Africa), and APAC (Asia Pacific, comprising Australia, New Zealand, and Asia). Its web site is here WSP Global Inc.
The last stock I wrote about was about was Fortis Inc (TSX-FTS, OTC-FRTSF) ... learn more. The next stock I will write about will be Algoma Central Corporation (TSX-ALC, OTC-AGMJF) ... learn more on Monday, May 6, 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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