Buy rating - Jan. 15 Report Date: January 15, 2016
Stuart Olson Inc.
Toronto Stock Exchange: C.SOX
Price as of 01/15/2016
C$5.25
Copyright ©2016 Ford Equity Research www.fordequity.com
BUY
Reiteration 1/15/16
We project that C.SOX will outperform the market over the next 6 to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation, and recent price movement.
Previous Rating
Strong Buy (1/02/16 - 1/08/16)
52-Week Price Range
C$4.55 - C$7.16
Market Capitalization
C$0.14 Billions
Annual Dividend Yield
9.1%
Annual Dividend Rate
C$0.48
Industry
Construction & Real Est
Earnings Strength VERY POSITIVE
very negative neutral very positive
EPS increased from C$0.36 to an estimated C$0.40
over the past 5 quarters indicating an improving growth rate. Analyst forecasts have recently been raised. Company recently reported better than expected results.
Relative Valuation POSITIVE
very negative neutral very positive
Operating Earnings Yield of 7.6% ranks above 77% of
the companies covered by Ford.
Price Movement NEUTRAL
very negative neutral very positive
1-year price down 18.7%: NEUTRAL
1-quarter down 10.3%: NEUTRAL
1-month down 13.7%: POSITIVE
Stuart Olson is engaged in the provision of building construction, commercial electrical contracting, industrial insulation contracting, industrial electrical and instrumentation contracting, civil construction and related services within Canada.
Peer Group Comparsion
Overall Quality Recent Market EPS P/E P/B 1 year
Ticker Company Name Rating Rating Price Cap(B) (ttm) (mrq) (ttm) Price Change
C.SOX Stuart Olson Inc. Buy Average C$5.25 $0.139 C$0.35 15.00 0.62 -18.70
AEGN Aegion Corp. Hold Average $16.64 $0.602 $1.37 12.15 0.98 5.20
LAYN Layne Christensen Co. Strong Sell Low $5.28 $0.105 $-2.46 -- 0.74 -37.10
MYRG MYR Group Inc. Hold Average $18.79 $0.387 $1.65 11.39 1.11 -23.90
2011 2012 2013 2014 2015 2016
Highest expected Price at 56 x Trailing EPS
Lowest expected Price at 9 x Trailing EPS
Trailing 10 Months Average Price
C$19.51
C$5.96
C$5.25
C$2.97
C.SOX Price Performance
Ford Valuation Bands
Valuation bands based on the highest and lowest P/E ratio in the past five years applied to the trailing 12 month operating earnings.
Price (CAD$)
Fiscal Year End - DEC 2011 2012 2013 2014 TTM
2011 2012 2013 2014 TTM
Net Profit on Sales 1.5% -0.1% 0.4% 0.7% 0.7%
Cash Flow/share C$2.10 C$-1.42 C$1.11 C$1.06 --
Book Value/share C$12.75 C$9.63 C$9.50 C$8.63 C$8.50
Return on Equity 7.1% -0.5% 2.1% 4.2% 4.1%
Debt to Equity 44.0% 56.0% 56.0% 33.0% --
Glossary Disclaimer Page 1 of 3
Report Date: January 15, 2016
Stuart Olson Inc.
Toronto Stock Exchange: C.SOX
Price as of 01/15/2016
C$5.25
BUY
Glossary Disclaimer Copyright ©2016 Ford Equity Research www.fordequity.com
Recommendation Summary
Ford's Buy recommendation on Stuart Olson Inc. is the result of our systematic analysis on three basic characteristics: earnings strength, relative valuation, and recent stock price movement. The company has enjoyed a very positive trend in earnings per share over the past 5 quarters and while recent estimates for the company have remained steady, C.SOX has posted better than expected results. Based on operating earnings yield, the company is undervalued when compared to all of the companies we cover. Share price changes over the past year indicates that C.SOX will perform in line with the market over the near term.
Earnings Strength is VERY POSITIVE
Ford's earnings momentum measures the acceleration or deceleration in trailing 12 month
operating earnings per share growth. The upward curvature of the plotted points in the graph on
the right indicates that while Stuart Olson Inc.'s earnings have increased from C$0.36 to an
estimated C$0.40 over the past 5 quarters, they have shown strong acceleration in quarterly
growth rates when adjusted for the volatility of earnings. This indicates an improvement in future
earnings growth may occur.
Nearly 40 years of research have shown that the change in the growth of earnings per share is an important factor that drives stock price performance. Ford measures earnings momentum and analysts' forecast changes to get an early indication of changing earnings patterns.
Recent changes to analysts’ forecasts and variances between reported and estimated earnings
provide important information about a company’s future earnings performance. Ford uses this
information, in conjunction with earnings momentum, as early evidence of a catalyst to near-term stock price performance. Earnings forecasts for Stuart Olson Inc. have been unchanged which indicates that expectations of future earnings growth remain steady. The company has also reported higher earnings than those predicted in earlier estimates. This indicates an ability to exceed analysts’ expectations and the potential for improving earnings growth in the future.
TTM Operating EPS in CAD ($)
Positive earnings trend over past 5 quarters
0.36
12/14
0.33
3/15
0.26
6/15
0.35
9/15
0.40
12/15E
Earnings Momentum VERY POSITIVE
very negative neutral very positive
Current FY Estimate Change NEUTRAL
very negative neutral very positive
Next Fiscal Year Estimate Change POSITIVE
very negative neutral very positive
Reported vs Expected EPS NEUTRAL
very negative neutral very positive
Relative Valuation is POSITIVE
Stuart Olson Inc.'s operating earnings yield of 7.6% ranks above 77% of the other companies in
the Ford universe of stocks, indicating that it is undervalued. Ford measures the relative valuation of each company against all other companies in our research universe. Operating earnings yield, an earnings-to-price ratio based on the last 3 quarters of operating earnings and the current quarter's estimate, has proven to be the most reliable relative valuation measure. A stock may stay undervalued or overvalued for a long period of time. For this reason, it is important to combine this factor with shorter-term predictive factors such as earnings momentum or price momentum to identify more imminent valuation adjustments.
Operating Earnings Yield(%) within the Ford Universe
min max
Top 20%
Above Average
Average
Below Average
Bottom 20%
Earnings Yield -5 -100 3 6 8 1000+
C.SOX 7.6%
Operating Earnings Yield POSITIVE
very negative neutral very positive
Price Movement is NEUTRAL
Stuart Olson Inc.'s stock price is down 18.7% in the last 12 months, down 10.3% in the past
quarter and down 13.7% in the past month. This historical performance should lead to average
price performance in the next one to three months.
Historical price action of a company's stock is an especially helpful measure used to identify
intermediate and short term performance potential. Long term historical performance is a good
predictor of future price performance, but much more importantly, large price movements over
the intermediate and short term tend to reverse themselves. Ford's price momentum measure
integrates historical long, intermediate and short term price changes, creating ratings that are
highest for stocks with strong twelve month price performance that have had a price
consolidation in the past quarter and month.
Stock Price is down 18.7% in the past year
C.SOX
C$5.25
01/15 2016
1 Year Price Change of -18.7% NEUTRAL
very negative neutral very positive
1 Quarter Price Change of -10.3% NEUTRAL
very negative neutral very positive
1 Month Price Change of -13.7% POSITIVE
very negative neutral very positive
Page 2 of 3
Report Date: January 15, 2016
Stuart Olson Inc.
Toronto Stock Exchange: C.SOX
Price as of 01/15/2016
C$5.25
BUY
Copyright ©2016 Ford Equity Research www.fordequity.com
Ford Stock Ratings: Ford covers approximately 4,000 stocks using a proprietary
quantitative model that evaluates a company’s earnings strength, its relative valuation
and recent price movement. Ford’s five recommendation ratings include strong buy, buy,
hold, sell, strong sell. For all stocks in our coverage universe, ratings are generated each
week and reflect the fundamental and price data as of the last trading day of the week.
Ford Stock Percentage of 12-month Relative
Rating Universe With Rating Return Forecast
STRONG BUY 8.7% Significantly above average
BUY 16.6% Above average
HOLD 57.8% Average
SELL 11.9% Below average
STRONG SELL 5.0% Significantly below average
Earnings Strength: Earnings strength is a weighted combination of factors that
measure a company’s earnings growth performance. These include Ford’s proprietary
Earnings Momentum model, changes in analysts’ estimates for the current and next fiscal
year, and earnings surprises as compared to estimates. Combined score ratings and
percentiles are as follows: Very Positive – top 20%, Positive - next highest 20%, Neutral –
middle 20%, Negative - second lowest 20%, Very Negative – lowest 20%.
Relative Valuation: The coverage universe is sorted in descending order based on
Ford’s operating earnings yield measure. Operating earnings yield is the ratio of 12-month
operating earnings per share (including the current quarter estimated EPS) to closing
share price on the report date. Relative valuation ratings and percentiles are as follows:
Very Positive – top 20%, Positive - next highest 20%, Neutral – middle 20%, Negative -
second lowest 20%, Very Negative – lowest 20%.
Price Movement: Price movement is a proprietary evaluation based on a company’s
relative share price change in the past 1-year, 1-quarter and 1-month period. In the Ford
analysis, positive price changes in the past 1-year period are a favorable indication of
nearterm price gain. Conversely, positive price changes in the past quarter or month
periods can indicate a short-term overbought condition resulting in negative near-term
price change. Price movement score ratings and percentiles are as follows: Very Positive –
top 20%, Positive - next highest 20%, Neutral – middle 20%, Negative - second lowest
20%, Very Negative – lowest 20%.
Industry Performance: Ford measures the relative performance of the 88 industry
groups that we cover. The top 20% of industries based on our metric are expected to
have above average near-term performance and are classified as Positive. The bottom
20% based on the same metric are expected to have below average near-term
performance and are classified as Negative. The remaining middle 60% of industries are
expected to have average performance and are classified as Neutral.
Operating Earnings per Share: Earnings per share figures in the Ford Valuation
Bands, quarterly earnings series and 5-quarter earnings trend plot reflect Ford’s
operating earnings per share. Operating earnings per share are earnings per share from
continuing operations and before accounting changes that have been adjusted to
eliminate non-recurring and unusual items. In this way, earnings trend and valuation
measurements are not affected by one-time and non-operational items that can skew
earnings results.
Peer Group: Ford classifies each company in our coverage universe into one of 232
peer group categories based on industry group, products or services offered, annual sales
level and market capitalization. Peer groups, which are made up of between 3 and 8
companies, are a useful point of industry reference and a source for alternative ideas
within an industry.
Quality Rating: Quality Rating is based on factors that indicate a company’s overall
financial strength and earnings predictability. Each company in the Ford database is
assigned a quality rating ranging from A+ to C- based on size, debt level, earnings history
and industry stability. High quality stocks tend to have higher average market
capitalizations and annual sales, as well as lower average levels of debt as a percent of
equity and lower earnings variability. High quality stocks also tend to have lower
standard deviations of annual returns. Accordingly, a firm’s quality rating may be used to
gauge the risk associated with a particular stock. The Quality Rating letter grades are
translated into the following categories: A- and higher are High Quality; B and B+ are
Good Quality; B- is Average Quality; C+ is Low Quality; C and lower are Very Poor Quality.
Valuation Band: The Ford Valuation Band chart shows the price performance of the
stock over the past 5 year period in relation to its historical price/earnings valuation
range. The red and green lines indicate the highest and lowest P/E, respectively, in the
past 5 years multiplied by trailing 12-month operating earnings per share at the plotted
point. The end point prices shows the current share price (in black) along with the
potential high price based on the highest realized P/E in the past 5 years (in red),
potential low price based on lowest realized P/E in the past 5 years (in green), and
trailing 10-month average price (in yellow).
Disclaimer
The reports and the ratings contained herein were prepared by Ford Equity Research solely for the use of its clients and authorized subscribers. Reproduction or
distribution of such reports or ratings in any form is prohibited without the express prior written permission of Ford Equity Research. The reports and ratings are based
on publicly available information believed to be reliable. Ford Equity Research endeavors to present the timeliest and most accurate data possible, but accuracy in not
guaranteed. Additional information, such as corporate actions, industry and economic factors, and other events and circumstances that may affect a stock’s price may
not be reflected in the Ford Equity Research rating or in the data presented. This report is for information purposes only and should not be construed as an offer to buy
or sell any security. Recommendations made in this report may not be suitable for all investors. Recommendations do not take into account the individual user’s
investment risk or return objectives or constraints. Ford is not responsible for the results of actions taken based on the information presented. Opinions expressed
herein are subject to change without notice. The research process used is derived solely from a quantitative approach that uses historical data to produce a stock
ranking system. Each covered stock is assigned one of five ratings based on relative scores, Strong Buy, Buy, Hold, Sell, and Strong Sell. While stocks rated Strong
Buy are expected to be the best performers and those rated Strong Sell are expected to be the worst performers, there is no guarantee that such will be the case on
an individual stock basis or on average. Past results are no guarantee of future results.
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Research, its clients and/or its employees may at times own positions in the companies described in these reports. Ford Equity Research has an affiliated investment
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and sell recommendations until 24 hours after Ford’s recommendations are disseminated to all clients.
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