Is it a good company at a reasonable price? I generally invest in resource stocks for short term, never long term. They tend to be cyclical. The current price seems near the top for this stock, if you long at its chart. Analysts give it a consensus of a Strong Buy, but then suggest a rather low stock price for this stock over the next 12 months. It seems to me that most analyst’s consensuses are a Strong Buy, especially if a stock is going up. However, there are analysts that say Hold and Sell. I think the stock price is probably expensive.
I do not own this stock of Teck Resources Ltd (TSX-TECK.B, NYSE-TECK). The time to buy this stock is when it is low. For example, I bought this stock in 2008 and sold in 2009. I bought this stock because the company purchased Fording Canadian Coal Trust at exactly the wrong time and got into financial difficulties and the stock price dropped off a cliff as they had to cut dividends. When the stock recovered somewhat in 2009, I sold for a profit.
When I was updating my spreadsheet, I noticed a decline in revenues, earnings, and cash flow for 2023 and for the first two quarters of 2024. For example, revenue went down 13% in 2023 from 2022 and then a further 3.7% for the 12 months ending at the end of the second quarter. Analyst expect the 2024 Revenue to be lower than the 2023 by 8%.
If you had invested in this company in December 2013, for $1,023.05 you would have bought 37 shares at $27.65 per share. In December 2023, after 10 years you would have received $188.70 in dividends. The stock would be worth $2,072.37. Your total return would have been $2,261.07. This would be a total return of 8.68% per year with 7.31% from capital gain and 1.37% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $27.65 | $1,023.05 | 37 | 10 | $188.70 | $2,072.37 | $2,261.07 |
The current dividend yield is low with dividend growth good. The current dividend yield is low (below 2%) at 0.71%. The 5, 10 and historical median dividend yields are also low at 0.90%, 0.86% and 1.23%. The dividend growth is good (15% or higher) at 20.1% per year over the past 5 years. The last dividend increase was in 2022 and it was for 150%. There are no other increases in the last 5 years.
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 19%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 10% with 5 year coverage at 9%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 5% with 5 year coverage at 6%. The DPR for 2023 for Free Cash Flow (FCF) is negative with 5 year coverage also negative. The sites I looked at have different values for FCF, but all agree that the FCF for 2023 is negative. As usual, I am ignoring FCF.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 10.89% | 19.42% |
| AEPS | 9.71% | 8.93% |
| CFPS | 5.10% | 5.64% |
| FCF | -36.44% | -143.58% |
Debt Ratios are mostly fine, but they do have a lot of debt. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.21 and currently at 0.17. The Liquidity Ratio for 2023 is low at 1.10 and 1.48 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.75 and currently at 2.11. The Debt Ratio for 2023 is good at 2.03 and 2.13 currently. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.03 and 1.01 and currently at 2.22 and 1.04.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.21 | 0.17 |
| Intang/GW | 0.04 | 0.03 |
| Liquidity | 1.10 | 1.48 |
| Liq. + CF | 1.75 | 2.11 |
| Debt Ratio | 2.01 | 2.13 |
| Leverage | 2.03 | 2.22 |
| D/E Ratio | 1.01 | 1.04 |
The Total Return per year is shown below for years of 5 to 30 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 | 20.11% | 14.99% | 13.77% | 1.22% |
| 2013 | 10 | -5.71% | 8.68% | 7.31% | 1.37% |
| 2008 | 15 | -4.52% | 19.51% | 16.03% | 3.47% |
| 2003 | 20 | 8.38% | 11.25% | 8.45% | 2.79% |
| 1998 | 25 | 6.65% | 12.65% | 9.79% | 2.87% |
| 1993 | 30 | 5.51% | 6.87% | 5.44% | 1.43% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 4.27, 5.62 and 6.96. The corresponding 10 year ratios are 4.43, 6.11 and 7.63. The corresponding historical ratios are 6.38, 10.93 and 14.04. The current P/E Ratio is 29.30 based on a stock price of $70.70 and EPS estimate for 2024 of $2.41. 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. These ratios are low as generally speaking P/E Ratios below 10 are considered low.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 4.92, 8.07 and 11.21. The corresponding 10 year ratios are 5.40, 9.44 and 11.93. The current P/AEPS Ratio is 28.39 based on a stock price of $70.70 and AEPS estimate for 2024 of 2.49. 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. These ratios are low as generally speaking P/AEPS Ratios below 10 are considered low.
I get a Graham Price of $53.58. The 10-year low, median, and high median Price/Graham Price Ratios are 0.32, 0.49 and 0.74. The current P/GP Ratio is 1.32 based on a stock price of $70.70. 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. These ratios are low as generally speaking the median P/GP is considered normal around 1.00.
I get a 10-year median Price/Book Value per Share Ratio of 0.67. The current ratio is 1.38 based on a stock price of $70.70, Book Value of $26,509M and Book Value per Share of 51.24. The current ratio is 106% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. The P/B Ratio is low. Generally speaking, a ratio of around 1.50 is considered normal.
I also have a Book Value per Share value of $49.37 for 2024. This implies a ratio of 1.43 based on a stock price of $70.70 and a Book Value of $25,540M. The current ratio is 114% 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 3.74. The current P/CF Ratio is 10.97 based on Cash Flow per Share estimate for 2024 of $6.44, Cash Flow of $3,333M and a stock price of $70.70. The current ratio is 194% 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 1.23%. The current dividend yield is 0.71% based on dividends of $0.50 and a stock price of $70.70. The current ratio is 43% 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 0.86%. The current dividend yield is 0.71% based on dividends of $0.50 and a stock price of $70.70. The current ratio is 18% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 1.25. The current P/S Ratio is 2.66 based on Revenue estimate for 2024 of $13,704M, Revenue per Share of $2.66 and a stock price of $70.70. The current ratio is 113% above the 10 year median dividend yield. 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 10 year dividend yield testing is almost to the expensive range although it is still in the reasonable range, but above the median. The P/S Ratio test shows the stock price as being expensive. All the rest of the testing is showing the stock price as expensive.
When I look at analysts’ recommendations, I find Strong Buy (12), Buy (6), Hold (2), Underperform (1), Sell (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $73.92 with a high of $88.00 and low of $45.00. The stock price consensus of $73.92 implies a total return of 5.26% with 4.55% from capital gains and 0.71% from dividends based on a current stock price of $70.70. I think a consensus of a Strong Buy does not go with a 12 month stock price total return of 5.26%.
There are lots of entries on Stock Chase for 2024. Most are a buy, but there are also some Do Not Buy, Sell and Wait comments. Stock Chase gives this stock 5 stars out of 5. Amy Legate-Wolfe on Motley Fool thinks this company has long term potential especially with copper. Jitendra Parashar on Motley Fool thinks this is a mining stock to buy and hold forever. The company put out a Press Release about their results for 2023 . The company put out a Press Release about their second quarter of 2024.
Simply Wall Street via Yahoo Finance reviews this stock talking about both its strength and weakness. Simply Wall Street gives this stock 2 and one half stars. Simply Wall Street gives out two warnings of earnings are forecast to decline by an average of 1.9% per year for the next 3 years; and profit margins (9.4%) are lower than last year (18.1%).
Teck is a base metals miner with copper and zinc operations in Canada, the United States, Chile, and Peru. Its web site is here Teck Resources Ltd.
The last stock I wrote about was about was Linamar Corporation (TSX-LNR, OTC-LIMAF) ... learn more. The next stock I will write about will be North West Company (TSX-NWC, OTC-NWTUF) ... learn more on Friday, October 4, 2024 around 5 pm. Tomorrow on my other blog I will write about Something to Buy October 2024.... learn more on Thursday, October 3, 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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