Is it a good company at a reasonable price? A number of analysts like WSP better than Aecon and I must admit that I have WSP and I have done well with it. I would not buy this stock because it is in construction and this is the same as for WSP. I bought WSP for diversification and that would be a reason to buy this stock. If you like a stock an appropriate time to buy is when it is relatively cheap, which this stock appears to be at present.
I do not own this stock of Aecon Group Inc (TSX-ARE, OTC-AEGXF). This stock has been coming up on Canada Stock Channel Weekly email in 2020. Site is Canada Stock Channel.
When I was updating my spreadsheet, I noticed that the two directors I was following, the CFO and an officer I was follow all have gone since last year. I seldom see such a changeover.
Analysts do not expect this company to do well in 2024, but to improve in 2025. Revenue is expected to drop by 10% in 2024 and then go up 10% in 2025. Analysts expect the EPS to drop 141% to an earnings loss of $0.86 in 2024 and then have EPS of $1.36 in 2025, an increase of 257%. Analysts expect the Cash Flow per Share for 2024 to be a loss of $0.46, then have Cash Flow per Share at $1.76 in 2025.
If you had invested in this company in December 2013, for $1,013.67 you would have bought 63 shares at $16.09 per share. In December 2023, after 10 years you would have received $347.41 in dividends. The stock would be worth $823.41. Your total return would have been $1,170.86. This would be a total return of 1.65% per year with 2.06% from capital loss and 3.70% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $16.09 | $1,013.67 | 63 | 10 | $347.45 | $823.41 | $1,170.86 |
The current dividend yield is moderate with dividend growth moderate. The current dividend is moderate (2% to 4% ranges) at 4.26%. The 5, 10 and historical median dividend yields are moderate at 4.23%, 2.95% and 2.38%. The dividend growth is moderate (8% to 14% ranges) at 8.2% per year over the past 5 years. The last dividend increase was in 2024 and it was for 2.7%. Dividend increases have slowed since 2023.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is good at 35% with 5 year coverage at 58%. The DPR for 2023 for Cash Flow per Share (CFPS) is too high at 71% with 5 year coverage good at 26%. The DPR for 2023 for Free Cash Flow 1 (FCF) is not calculable due to negative FCF with 5 year coverage negative. The DPR for 2023 for Free Cash Flow 2 (FCF) is too high at 98%ative FCF with 5 year coverage also too high at 84%. I do not particularly like FCF as there seems to be no standard method of calculating it.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 35.24% | 57.99% |
| CFPS | 71.14% | 26.37% |
| FCF 1 | #DIV/0! | -197.20% |
| FCF 2 | 98.27% | 84.86% |
Some Debt Ratios are fine, but debt is too high. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.13 and currently at 0.09. The Liquidity Ratio for 2023 is a bit low at 1.42 and 1.41 currently. If you added in Cash Flow after dividends, the ratios do not improve at 1.42 and currently at 1.39. The Debt Ratio for 2023 is good at 1.50 and low currently at 1.41 currently. The Leverage and Debt/Equity Ratios for 2023 are too high at 3.00 and 2.00 and currently at 3.42 and 2.42. I prefer these ratios to be below 3.00 and 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.13 | 0.09 |
| Intang/GW | 0.15 | 0.11 |
| Liquidity | 1.42 | 1.41 |
| Liq. + CF | 1.42 | 1.39 |
| Debt Ratio | 1.50 | 1.41 |
| Leverage | 3.00 | 3.42 |
| D/E Ratio | 2.00 | 2.42 |
The Total Return per year is shown below for years of 5 to 27 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 | 8.16% | -1.51% | -5.79% | 4.28% |
| 2013 | 10 | 9.09% | 1.65% | -2.06% | 3.70% |
| 2008 | 15 | 9.11% | 4.62% | 1.16% | 3.47% |
| 2003 | 20 | 8.93% | 5.42% | 3.51% | |
| 1998 | 25 | 9.09% | 9.22% | 6.06% | 3.15% |
| 1996 | 27 | 7.55% | 4.95% | 2.61% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 15.05, 17.17 and 19.28. The corresponding 10 year ratios are 16.08, 19.53 and 22.98. The corresponding historical ratios are 8.84, 12.65 and 18.51. The current ratio is a negative 20.66. So, this testing cannot be done.
The ratio for 2025 is 13.14 based on a stock price of $17.83 and EPS estimate for 2025 of $1.36. This ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $21.23. The 10-year low, median, and high median Price/Graham Price Ratios are 0.84, 1.02 and 1.22. The current ratio is 0.84 based on a stock price of $17.83. The current ratio is at the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. However, it is close to cheap.
I get a 10-year median Price/Book Value per Share Ratio of 1.22. The current ratio is 1.21 based on a stock price of $17.83, Book Value of $919.10 and Book Value per Share of $14.76. The current ratio is 1% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.22. The current ratio is negative, so I cannot test that. The ratio for 2025 is 10.13 based in a stock price of $17.83 and Cash Flow per Share estimate for 2025 of $1.76.. This ratio is 84% 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 2.38%. The current dividend yield is 4.26% based on dividends of $0.76 and a stock price of $17.83. The current dividend yield is 79% 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 2.95%. The current dividend yield is 4.26% based on dividends of $0.76 and a stock price of $17.83. The current dividend yield is 44% 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 0.29. The ratio is 0.27 based on Revenue for 2024 of $4,162M, Revenue per Share of $66.84 and a stock price of $17.83. Current ratio is 8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. 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 reasonable and maybe even cheap. The dividend yield tests say that it is cheap. The P/S Ratio test says it is reasonable. However, analysts do expect a decline in 2024 for Revenue. If for the P/S Ratio test, I use the Revenue for the past 12 months to the end of the second quarter, the ratio is 0.23 and 20% below the 10 year median ratio and this gives a cheap stock price. The rest of the testing is mixed with testing showing the stock price from cheap to expensive. The P/GP Ratio test shows the stock price as close to cheap.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (3) and Hold (4). The consensus would be a Buy. The 12 months stock price consensus is $19.82 with a high of $25.00 and a low of $16.00. The consensus stock price of $19.82 implies a total return of 15.42% with 11.16% from capital gains and 4.26% from dividends.
Most analysts on Stock Chase give positive remarks, but the Do Not Buy remarks say they like WSP better. Stock Chase gives this stock 3 stars out of 5. Amy Legate-Wolfe on Motley Fool compared WSP and Aecon and likes Aecon better. Christopher Liew on Motley Fool thinks this is a buying opportunity for Aecon. The company put out a Press Release about the results from year end 2023. The company put out a Press Release about their second quarter of 2024.
Simply Wall Street via Yahoo Finance talks about the dividends on this stock. Simply Wall Street via Yahoo Finance talks about Aecon being a top TSX stock. Simply Wall Street gives this stock 3 and one half stars out of 5. Simply Wall Street lists 3 warnings of dividend of 4.27% is not well covered by earnings; profit margins (0.3%) are lower than last year (1.5%); and large one-off items impacting financial results.
Aecon Group Inc is a Canada-based company that operates in two segments: Construction and Concessions. The company generates the majority of its revenue from the Construction segment. Its web site is here Aecon Group Inc.
The last stock I wrote about was about was GFL Environmental Inc (TSX-GFL, NYSE-GFL) ... learn more. The next stock I will write about will be Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF) ... learn more on Monday, August 19, 2024 around 5 pm.
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