Is it a good company at a reasonable price? This is a small cap, so there are risks because of that. You should not invest in small cap stock money that you cannot afford to lose. This company is also dependent on the oil and gas industries which are cyclical, so this is another risk. It is a positive that the dividends have been restarted and are getting close to what they used to be. Most of the testing is showing the stock price as cheap, and this is especially true of the P/S Ratio test. So, the current stock price could very well be cheap.
I do not own this stock of Pason Systems Inc (TSX-PSI, OTC-PSYTF). I read a report on this stock in the Buy and Sell Advisor in September 2013. I had not heard of this dividend growth company before so I decided to investigate it.
When I was updating my spreadsheet, I noticed insiders either kept the shares they had or sold some. None that I follow have bought any shares. Revenue and Cash Flow went up in 2023, but Earnings went down. Revenue, Cash Flow and Earnings are expected to rise this year. The stock price went up a bit in 2023, but is down 11% this year
If you had invested in this company in December 2013, for $1,011.12 you would have bought 44 shares at $22.98 per share. In December 2023, after 10 years you would have received $246.84 in dividends. The stock would be worth $711.48. Your total return would have been $958.32. This would be a total loss of .61% per year with 3.45% from capital loss and 2.48% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $22.98 | $1,011.12 | 44 | 10 | $246.84 | $711.48 | $958.32 |
The current dividend yield is moderate with dividend growth restarting. The current dividend yield is moderate (2% to 4% ranges) at 3.63%. The 5, 10 and historical median dividend yields are also moderate at 3.46%, 3.51% and 2.50%. Dividends were cut over 70% in 2020. The company started to increase the dividends again in 2021, but they are still almost 30% below the dividends given in 2019. Dividends to date are down by 6.8% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are currently good. The DPR for 2023 for Earnings per Share (EPS) is good at 40% with 5 year coverage high at 62%. The DPR for 2023 for Funds from Operations (FFO) is good at 25% with 5 year coverage at 45%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 24% with 5 year coverage at 36%. The DPR for 2023 for Free Cash Flow (FCF) is good at 42% with 5 year coverage is high at 62%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 39.67% | 62.26% |
| FFO | 25.00% | 45.47% |
| CFPS | 24.76% | 36.11% |
| FCF | 42.45% | 62.36% |
Debt Ratios are good and some are very good like the Liquidity Ratio which is an important one. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.02 and currently at 0.01. The Liquidity Ratio for 2023 is very good at 4.84 and 2.62 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.53 and currently at 1.76. The Debt Ratio for 2023 is very good at 5.61 and 5.05 currently. With both these ratios a ratio is 1.50 or higher is good. The Leverage and Debt/Equity Ratios for 2023 are good at 1.20 and 0.21 and currently at 1.23 and 0.24.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.02 | 0.01 |
| Intang/GW | 0.03 | 0.19 |
| Liquidity | 4.84 | 2.62 |
| Liq. + CF | 6.59 | 3.90 |
| Debt Ratio | 5.61 | 5.05 |
| Leverage | 1.20 | 1.23 |
| D/E Ratio | 0.21 | 0.24 |
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 | -7.27% | 0.16% | -2.43% | 2.60% |
| 2013 | 10 | -2.68% | -0.61% | -3.45% | 2.84% |
| 2008 | 15 | 6.96% | 4.27% | 0.94% | 3.33% |
| 2003 | 20 | 13.99% | 8.50% | 4.83% | 3.67% |
| 1998 | 25 | 19.14% | 13.19% | 5.95% | |
| 1996 | 27 | 18.89% | 13.46% | 5.44% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 18.39, 23.27, and 28.15. The corresponding ratios for 10 year median ratios are 17.12, 22.14 and 27.15. The corresponding historical ratios are 13.59, 19.77 and 24.74. The current P/E Ratio is 9.37 based on a stock price of $14.34 and EPS estimate for 2024 of $1.53. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/ Funds from Operations Ratios are 9.20, 11.63 and 14.07. The corresponding ratios for 10 year median ratios are 10.04, 12.92 and 15.56. The current ratio is 7.47 based on FFO for the past 12 months of $1.98 and a stock price of $14.34. The current ratio is below the low ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $ 14.32. The 10-year low, median, and high median Price/Graham Price Ratios are 1.79, 2.37 and 2.74. The current ratio is 1.00 based on a stock price of $14.34. This ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Book Value per Share Ratio of 3.62. The current ratio is 2.41 based on a Book Value for the last 12 months of $474M, Book Value per Share of $5.95 and a stock price of $14.34. The current ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 13.01. The current ratio is 8.73 based on Cash Flow per Share estimate for 2024 of $1.64, Cash Flow of $131M and a stock price of $14.34. The current ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 2.50%. The current dividend yield is 3.63% based on Dividends of $0.52 and a Stock Price of $14.34. The current dividend yield is 45% 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 3.51%. The current dividend yield is 3.63% based on Dividends of $0.52 and a Stock Price of $14.34. The current dividend yield is 3% 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 4.94. The current ratio is 2.74 based on Revenue estimate for 2024 of $417.5M, Revenue per Share of $5.24 and a stock price of $14.34. The current ratio is 45% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
The dividend yield testing for the last 10 years show that the stock price is reasonable. This test works best when dividends are increasing. The dividends on this stock were cut and then restarted. The P/S Ratio test says that the stock price is cheap. This could be right. All the rest of the testing is showing the stock price was cheap.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $18.40 with a high of $20.00 and low of $18.00. The consensus stock price of $18.40 implies a total return of 31.94%, with 28.31% from capital gains and 3.63% from dividends based on a current stock price of $14.34.
There is only one entry for 2024 on Stock Chase and the recommendation is a Hold. Problem is current lower level of drilling activity. Good sign that the company recently increased dividends by 8%. Stock Chase gives this stock 3 stars out of 5. Karen Thomas on Motley Fool looks at this company in late 2023 and says it is a technological leader in the oil patch.. Iain Butler on Motley Fool said mid 2023 that commodities stocks have been cast aside so now was a good time to invest. The company put out a press release via Newswire about their fourth quarter of 2023. The company put out a press release via Newswire about their second quarter of 2024.
Simply Wall Street via Yahoo Finance put out a report Undervalued Small Caps in Canada with insider Buying and include this stock. Simply Wall Street via Yahoo Finance talks about who owns shares in this company. Simply Wall Street put out 2 warnings on this stock of large one-off items impacting financial results; and unstable dividend track record. Simply Wall Street gives this stock 3 and one half stars out of 5.
Pason Systems Inc is a provider of instrumentation and data management systems for drilling rigs. The company reports on three strategic business units: The North American (Canada and the United States) and International (Latin America, including Mexico, Offshore, the Eastern Hemisphere, and the Middle East) business units, all of which offer technology services to the oil and gas industry, and the Solar and Energy Storage business unit, which provides technology services to solar and energy storage developers. Its web site is here Pason Systems Inc.
The last stock I wrote about was about was EQB Inc (TSX-EQB, OTC-EQGPF) ... learn more. The next stock I will write about will be Molson Coors Canada (TSX-TPX.B, NYSE-TAP) ... learn more on Monday, October 14, 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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