Monday, December 10, 2012

FirstService Corp

On my other blog I am today writing about the Science Myth...continue...

I do not own this stock of FirstService Corp (TSX-FSV, NASDAQ-FSRV), but I used to. It is a real estate company and I originally bought it for capital gains. I kept it longer than I intended to originally because the company issued dividend paying preferred shares to shareholders in 2007. However, I did sell in 2010 as it was not really a dividend paying stock and at that time, because I had stopped working, I preferred dividend paying stock.

So, there are some complications in reviewing this stock because in 2007 the company distributed to current shareholders preferred shares. Shareholders got 20 preferred shares for each 100 shares that they owned. For people who got these shares, the return on this company is higher than for those who bought the stock later. However, the difference is not that significant.

Over the past 5 years the total return on this stock was a capital loss of 3.26% per year. Over the past 10 years, the total return would be a capital gain of 4.36% per year. For people that got the preferred shares, the 5 year total return would be loss of 1.54% per year with preferred dividends contributing 1% per year and the capital loss being 2.54% per year. Also for these shareholders, the total return over the past 10 years would be a total return of 6.77% per year, with dividends contributing 0.63% per year and a capital gain of 6.14% per year.

Another complication for this stock is that they report in US currency and they have decided to go with US GAAP rules for accounting purposes. Another complication is that they report an "adjusted" EPS as well as the regular EPS. When you look at analysts estimates, it is hard to know if they are using the adjusted EPS or the EPS. As with all companies reporting in US$, this company has done better in US$ than in CDN$.

Outstanding shares have changed marginally with shares growth over the past 5 years at 0.01% per year and share growth over the past 10 years at 0.84% per year. Outstanding shares have changed due to shares issued, stock options exercised and some shared repurchased for cancellation. Outstanding preferred shares have been decreasing at 1.5% per year over the past 4 years.

Revenue has grown over the past 5 and 10 years at 7.7% and 11.4% per year, respectively. Revenue per Share has grown at the rate of 7.7% and 10.5% per year over the past 5 and 10 years. These figures are in CDN$ as is all my figures unless otherwise stated.

The earnings per share growth is good with EPS growing at the rate of 11.8% and 9.1% per year over the past 5 and 10 years respectively. The adjusted EPS growth is not quite as good at 6.5% and 12.1% per year over the past 5 and 10 years, respectively.

The cash flow per share has grown at 6.4% and 5.5% per year over the past 5 and 10 years, respectively. What growth is not good is that for book value per share. For shareholders that got preferred shares, over the past 5 year book value has declined by 4% per year, and has grown at 4% per year over the past 10 years. Excluding the preferred shares over the past 5 years, the book value per share has declined by 19% per year.

The Liquidity Ratio is generally low with the current one be 1.17 which is typical for this stock. The Debt Ratio is also a little low but better than the Liquidity ratio with a current ratio 1.43. I rather see these ratios at 1.50 or higher. The current Leverage Debt/Equity Ratios are a little high at 5.37 and 3.75. For this company they are also a bit high as the 5 year median ratios are 3.47 and 2.37, respectively.

I do not know what to make of the Return on Equity figures. If you look at earnings for common shareholders for the end of 2011 you get an ROE of 62.2% with a 5 year median ROE of 17.6%. However, if you look at net earnings (before NCI, preferred shares) you get an ROE of 26.4% and a 5 year ROE of 12.8%. This last ROE has in the denominator the equity value of NCI, preferred shares and common shares. (However, 2011 was a very good year for this company.)

Well, the company is making money even though earnings do fluctuate. The adjusted EPS helps smooth out the earnings. Debt ratios are a bit high. They are doing better in growing the EPS than the cash flow but I think cash flow is more important. Shareholders have not been making any money recently on these shares. I would not buy again, they do not pay dividends.

This company is a global diversified leader in the rapidly growing real estate services sector, providing services in the following three areas: commercial real estate, residential property management, and property services. This is an international company, having business in North and South America, Europe, Asia, Australia and New Zealand. Its web site is here FirstService. See my spreadsheet at fsv.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.

No comments:

Post a Comment