Tuesday, December 4, 2012

Finning International Inc 2

I do not own this stock (TSX-FTT, OTC- FINGF). I am following this stock as it is a dividend paying stock and it is on the Dividend Aristocrats list, (see indices). I do not own any of this stock as the company is quite similar to Toromont Industries Ltd (TSX-TIH, OTC-TMTNF), which I do own.

When I look at insider trading, I find a minimal of insider buying and lots of insider selling. Insider selling is at $2.7M and net insider selling is at $2.4M. Insiders not only have options, but other option like things like Units Deferred Share Units, Rights (Share Appreciation Rights) and Performance Share Units.

There does seem to be a lot of outstanding options. For example, the CEO has around $4.3M in common shares and $22.8M in options. An officer has some $0.3M in common shares and $4.2M in options.

There are some 153 institutions holding 39% of the outstanding shares. Over the past 3 months they have increased their ownership by 4.9%. This is a positive.

The 5 year low, median and high median Price/Earnings Ratios are 13.18, 18.50 and 21.90. The current P/E Ratio is 11.93 based on a stock price $22.79 and 2012 earnings of $1.91. This shows that the current stock price is relatively cheap.

The current Graham Price is $19.13. The 10 year low, median and high median Price/Graham price Ratios are 1.18, 1.45 and 1.62. The current P/GP Ratio is 1.19. The low Ratio shows that the stock price is relatively reasonable. Earnings are expected to jump for this year. However, if we use last year earnings, the P/GP is 1.34. This good ratio still shows that the current stock price is reasonable.

The 10 year Price/Book Value per Share Ratio is 2.46. The current P/B Ratio is 2.68 a value 9% higher. The current ratio points to a reasonable to slightly high stock price. The problem with this test is the book value has been declining lately.

The 5 year median dividend yield is 2.09% and the current dividend yield is almost 18% higher at 2.46%. This test shows that the stock price is cheap.

There is mixed results on my stock price testing. However, the dividend yield is an important test, so the stock price is probably cheap or reasonable to cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy and Underperform. The most recommendations in in the Buy category and the consensus recommendation would be a Buy. (See my site for information on analyst ratings.) The 12 month stock price is $31.40. This implies a total return of 40.24%, with 2.46% from dividends and 37.78% from capital gains.

One analyst gave this stock a buy rating as he thought the stock price was good. Some analysis points to improving EPS. This is true as the EPS was $1.51 in 2011 and the 12 month EPS to September 2012 is at $1.76. One analysis points to the low P/E and high dividend yield as proof that investors have low expectations for this company.

One analyst suggested that this stock would be a bet on an improving economy. Peter Kennedy on Stock House has a bearish stance on Caterpillar and this company. The Happy Capitalism site has some interesting things to say about the stock and feels caution is in order. However, the Apprentice Millionaire puts up a buy rating at the end of October on this stock.

It is interesting that Bar Chart says that technical indicators point to a sell.

Stock price is good. You can do well in the long term to buy a stock you want to own at a relatively low price. This stock's improvement probably does depend on an improving economy. However, it is difficult to predict what the economy is going to do.

This company sells, rents and provides customer support services for Caterpillar equipment and engines. They cover Canada, UK, Argentina, Bolivia, Chile and Uruguay. Its web site is here Finning. See my spreadsheet at ftt.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

1 comment:

Anonymous said...

This company has had negative cash flow for the past two years (cash from operations is less than capital expenditures).

There are much better things to buy, in my opinion.