Is it a good company at a reasonable price? This financial has done very well for investors since being listed on the TSX 20 years ago. It is on the current Money Sense dividend stock list. The analysts on Stock Chase speak well of this bank, but are concerned about the next credit cycle. Even though it is rated as a Buy, analysts do not expect much in the way of growth over the next year. The stock price seems to be in the reasonableness space at this time.
I do not own this stock of EQB Inc (TSX-EQB, OTC-EQGPF). I had read a glowing report on investing on this company in 2013, so I decided to check it out. It was interesting as it was loaning money to new immigrants, a class of people who generally have a difficult time getting loans and mortgages from our regular banks. It sounded intriguing.
When I was updating my spreadsheet, I noticed that they changed their financial reporting dated from December 31 each year to October 31. Therefore, the financial statements I am reviewing are for 10 months ending in October 31, 2023. Even though the coverage was for 10 months, Revenue, Earnings and Cash Flow all went up. For example, Revenue was up 14% for the 10 months ending October 2023 compared to Revenue for the 12 months ending December 2022.
Also, the stock price between December 2022 and 2023 is up by 54% and up by 19% so far this year. Analysts do not expect much growth this year as the 12 month consensus stock price would see a total return of 3.10% with 1.32 from capital gains and 1.78% from dividends based on a current stock price of $105.47.
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 this year. There is good growth except for the expected negative cash flow for 2024.
| Yr | Item | Tot. Gwth | Per Year | Gwth | Coverage |
|---|---|---|---|---|---|
| 5 | Revenue Growth | 140.62% | 19.20% | 10.01% | <-12 mths |
| 5 | AEPS Growth | 86.21% | 13.24% | 4.89% | <-12 mths |
| 5 | Net Income Growth | 126.65% | 17.78% | 12.38% | <-12 mths |
| 5 | Cash Flow Growth | 209.68% | 25.37% | -2371% | <-12 mths |
| 5 | Dividend Growth | 109.52% | 15.94% | 58.18% | <-12 mths |
| 5 | Stock Price Growth | 195.09% | 24.16% | 20.93% | <-12 mths |
| 10 | Revenue Growth | 380.29% | 16.99% | 51.38% | <-this year |
| 10 | AEPS Growth | 219.57% | 12.32% | 22.02% | <-this year |
| 10 | Net Income Growth | 289.81% | 14.57% | 62.92% | <-this year |
| 10 | Cash Flow Growth | 111.97% | 7.80% | -2371% | <-this year |
| 10 | Dividend Growth | 279.31% | 14.26% | 59.64% | <-this year |
| 10 | Stock Price Growth | 243.70% | 13.14% | 22.53% | <-this year |
If you had invested in this company in December 2013, for $1,015.20 you would have bought 40 shares at $25.38 per share. In December 2023, after 10 years you would have received $259.80 in dividends. The stock would be worth $3,489.20. Your total return would have been $3,749.00. This would be a total return of 14.49% per year with 13.14% from capital gain and 1.35% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $25.38 | $1,015.20 | 40 | 10 | $259.80 | $3,489.20 | $3,749.00 |
The current dividend yield is low with dividend growth good. The current dividend yield is low (below 2%) at 1.80%. The 5, 10 and historical dividend yields are low at 1.66%, 1.58% and 1.55%. The dividends have grown at a good rate (15% or higher) over the past 5 years. The last dividend increase was in 2024 and it was for 4.4%. (However, this company tends to raise the dividends every quarter.)
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is good at 11% with 5 year coverage at 12%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 12% with 5 year coverage at 11%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 7% with 5 year coverage at 6%. The DPR for 2023 for Free Cash Flow (FCF) is good at 7% with 5 year coverage at 9%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 11.47% | 11.59% |
| AEPS | 11.70% | 11.12% |
| CFPS | 6.98% | 5.58% |
| FCF | 7.39% | 8.99% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2023 is 14.07 and currently at 12.00. However, we need also to look at the Long Term Debt/Covering Assets Ratio for 2023 which is good at 0.89 and currently at 0.90 because this is a more important one for a financial. The Liquidity Ratio for 2023 is good at 2.93 and 2.65 currently, but this is not an important one for financials. The Debt Ratio for 2023 is fine for a financial at 1.06 and 1.06 currently.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term A | 0.89 | 0.90 |
| Lg Term R | 14.07 | 12.00 |
| Intang/GW | 0.02 | 0.03 |
| Liquidity | 2.93 | 2.65 |
| Liq. + CF | 2.91 | 2.36 |
| Debt Ratio | 1.06 | 1.06 |
The Total Return per year is shown below for years of 5 to 20 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 | 15.94% | 26.05% | 24.16% | 1.98% |
| 2013 | 10 | 14.26% | 14.49% | 13.14% | 1.48% |
| 2008 | 15 | 12.04% | 21.88% | 19.70% | 2.24% |
| 2003 | 20 | 8.34% | 11.73% | 10.62% | 1.20% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 4.87, 7.17 and 9.44. The corresponding 10 year median ratios are 5.43, 7.04 and 6.74. The corresponding historical ratios are 5.47, 6.85 and 8.98. The current P/E Ratio is 9.39 based on a stock price of $105.49 and EPS estimate for 2024 of $11.23. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 4.94, 7.06 and 9.28. The corresponding 10 year median ratios are 5.09, 6.9 and 8.57. The current P/E Ratio is 9.20 based on a stock price of $105.49 and AEPS estimate for 2024 of $11.47. 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 Graham Price of $143.53. The 10-year low, median, and high median Price/Graham Price Ratios are 0.40, 0.54 and 0.69. The current P/GP Ratio is 0.73 based on a stock price of $105.49. The current ratio is above the high ratio of the 10 year median ratio. 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 0.99. The current P/GP Ratio is 1.32 based on a Book Value of $3,064M, Book Value per Share of $79.83 and a stock price of $105.49. The current ratio is 34% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2024 of $79.56. This implies a ratio of 1.33 with a stock price of $105.49 and Book Value of $3,054M. This ratio is 34% above the 10 year median ratio. 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 3.47. However, the 12 month Cash Flow to the end of the second quarter is negative, so I cannot do any testing here.
I get an historical median dividend yield of 1.55%. The current dividend yield is 1.78% based on dividends of $1.88 and a stock price of $105.49. The current dividend yield is 15% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 1.58%. The current dividend yield is 1.78% based on dividends of $1.88 and a stock price of $105.49. The current dividend yield is 13% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 3.19. The current P/S Ratio is 3.19 based on a Revenue estimate for 2024 of $1,269M, Revenue per Share of $33.06 and a stock price of $105.49. The current ratio is at the ratio for the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and at the median.
Results of stock price testing is that the stock price could be still reasonable. The dividend yield testing says that the stock price is reasonable and below the median. The P/S Ratio test says that the stock price is reasonable and at the median. The other tests all say that the stock price is expensive. However, a problem with all the rest of the testing is the ratios are very low. For example, all the P/E Ratios and P/AEPS Ratios are below 10.00 and a ratio is 10.00 is considered a low ratio.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4), Hold (1) and Underperform (1). The consensus would be a Buy. The 12 month stock price consensus is $106.88 with a high of $116.00 and low of $88.00. The consensus stock price of $106.88 implies a total return of 3.10% with 1.32 from capital gains and 1.78% from dividends based on a current stock price of $105.47.
Generally, analyst on Stock Chase like this bank, but some worry about the next credit cycle. Stock Chase gives this stock 3 stars out of 5. Aditya Raghunath on Motley Fool talks about his favourite stocks to buy now. Andrew Button on Motley Fool reviews this stock and thinks it is a buy. The company put out a press release via Newswire about the results for 2023. The company put out a press release via Newswire about its third quarter of 2024.
Simply Wall Street reviews this stock via Yahoo Finance. They issue one warning of Significant insider selling over the past 3 months. (It looks like insiders are not taking up all their options rather than selling. Over the past year the CEO, CFO and Chairman all increased their holdings.) Simply Wall Street gives this stock 3 and one half stars out of 5.
EQB Inc operates through its wholly owned subsidiary, Equitable Bank, Canada's Challenger Bank. It serves Canadians through two business lines, Personal Banking and Business Banking. The company differentiates by providing a host of challenger bank deposit services, alternative single-family lending, reverse mortgage lending, insurance lending, Specialized finance, Commercial finance group, Equipment financing, credit union services and trust services. Its web site is here EQB Inc.
The last stock I wrote about was about was Medtronic PLC (NYSE-MDT) ... learn more. The next stock I will write about will be Pason Systems Inc (TSX-PSI, OTC-PSYTF) ... learn more on Friday, October 11, 2024 around 5 pm. Tomorrow on my other blog I will write about EQ Bank and Wealthsimple.... learn more on Thursday, October 10, 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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