Although they do not seem to be direct competitors, they both provide services for the oil and gas industry. The main reasons I liked Mullen better was the great Liquidity Ratio. So I decided to analysis the stocks further. The oil and gas industry is not doing well currently because of the relatively low price of oil.
Below is my chart and the items are explained below:
|Liquidity Ratio||Below 1.00||-1||Very good||1|
|Other Debt Ratios||Good||1||Good||1|
|Dividend Growth Company||Yes||1||Yes||1|
|5 Year Median Div Yield||2.55%||4.44%||1|
|Dividend Payout Ratios||Better||1|
|Dividend Growth 5 years||Better||1|
|Dividend Growth 10 years||Better||1|
|Dividend Increase 2014||Yes,||1||No, but scores for smart decision||1|
|Could Cut Dividend||Possible||-1|
|Revenue growth||Lately, Mullen Better||1|
|EPS to end of 2013||Better||1|
|EPS to end of 2014||Better, especial over past 5 years||1|
|CFPS to the end of 2013||Better||1|
|CFPS to the end of 2014||Better||1||But not by much||1|
|ROE 10 years above 10%||Better||1|
|ROE 5 years above 10%||Better||1|
|ROE 5 year median||8.2%||Better 15.8%||1|
|Comp Inc. ROE to Net Inc.,||Higher, confirms EPS||1||same||1|
|ROE Comp Inc. 5 yr. median||8.7%||15.8%|
|Survive low Liquidity Ratio||Possibly not|
|Survive Dividend Cut||Yes|
|Insider Ownership||Yes, Chairman 16.7%||1||Yes, Chairman 3.2%||1|
The first thing I like about Mullen is the Liquidity Ratio which is at 2.79. This is compared with Ensign's ratios at 0.89. Ensign's ratio rises to 1.47 with cash flow less dividends. This is still lower than the 1.50 I would prefer for this ratio. However, the fact remains that good Liquidity Ratios help companies survive in the bad times. In the business these companies are in, being able to survive the bad times is a great plus. Mullen scores here.
The Debt Ratios are good for both these companies with Ensign at 2.31 and Mullen at 2.38. Also the Leverage and Debt/Equity Ratios are good for both these stocks with Ensign at 1.76 and 0.76 respectively and Mullen at 1.73 and 0.73 respectively. I looked at Goodwill and Intangible assets and both companies are good here. Both companies do well here.
Ensign has moderate dividends with moderate growth over the past 5 years and good growth over the past 10 years. The current dividend yield is 4.50% but its 5 year median yield is 2.55%. The dividend growth on Ensign is 5.8% and 14.11% per year over the past 5 and 10 years. Mullen currently has a high dividend yield and very good increases. The current dividend yield is 5.64% with a 5 year median of 4.44%. There are a lot of studies that suggests that stocks with higher dividend yields to better over the long term. Mullen does well on higher dividend yield.
Mullen used to be an income trust and did increase and then decrease their dividends going into and out of an income trust. The dividends were increased by 305% to be an income trust and then decreased by 75% when going to a corporation. The 5 and 10 years growth is a negative 5.59% and a positive 26.05% over the past 5 and 10 years. However, if you look at the past 4 years, dividends have climbed by 24.5%. When all is said and done, Mullen probably has better dividend increases.
With Mullen's higher dividends come higher Dividend Payout Ratios. Their 5 year median DPR for EPS and CFPS was at 61% and 33%. The DPRs for 2013 was at 86% and 55%. For Ensign they have 5 year median DPRs for EPS and CFPS at 41% and 15%. The DPRs for 2013 was at 52% and 15%. Ensign certainly does better on DPRs.
For the year 2014, Ensign has increased the dividend by 6.8% but Mullen has done no increases. It is expected that Ensign will have Dividend Payout Ratios of 51% and 15% for EPS and CFPS in 2014. It is expected that Mullen will have Dividend Payout Ratios of 100% and 47% for EPS and CFPS in 2014. Mullen's DPR is expected to go down after 2014.
However, this brings up the possibility of the connection between high DPRs and cutting of dividends. Mullen could be at risk to cut dividends. However, Ensign's low Liquidity Ratio could get it into trouble. Neither company wins here.
Mullen is wise to have no dividend increase in 2014 because of the DPR. I like companies that do the right thing when it comes to dividends. They say they want to have sustainable dividends and they also need cash flow for investment purposes. Mullen certainly scores for making a tough decision and the right one.
The next thing to mention is that I bought Ensign in 2012 and some more in 2013. I have a total return of a negative 17.64% per year. If I had made the same purchases of Mullen, my total return would be a negative 3.10% per year. My total actual loss would have been 26.02% for Ensign. The potential loss for Mullen would have been 4.74%. The above values include dividends. Mullen would score here.
Just looking at the stock prices without the dividends, my loss on Ensign is 20.61% per year or a total capital loss of 30.97%. My loss on Mullen would have been 7.65% per year or a total capital loss of 12.06%.
The Mullen Group has issued stock so their outstanding shares have increased by 7.3% and 2.4% per year over the past 5 and 10 years. This makes their per share values more important. Ensign has not changed their outstanding shares. They both have done Buy Backs of shares.
Revenues growth is important as it is revenue growth that will ultimately drive earnings and cash flow growth. For Ensign, the Revenue per Share is moderate to good with growth at 1.3% and 8.3% per year over the past 5 and 10 years. For Mullen, the Revenue per Share growth is non-existent to moderate with growth a decline of 0.6% and growth at 5.3% per year over the past 5 and 10 years.
Because using an exact number of years does not tell the whole story. In some industries growth can be volatile so looking at the 5 and 10 year growth using 5 year running averages can tell a more complete story. Here Ensign still does better with growth at 2.4% and 9.5% per year over the past 5 and 10 years. However, Mullen shows rather similar results with growth at 3.45 and 6.8% per year. Both companies are growing revenue with Ensign doing better over the past 10 years and Mullen doing better over the past 5 years. If it comes down to what have you done for me lately, then Mullen is ahead here.
The next question is can they translate revenue growth into earnings growth. Ensign had a big EPS decline in 2013 but things are expected to improve somewhat in 2014. EPS growth is down by 12.9% and up by 2.7% per year over the past 5 and 10 years. If you use 5 year running averages, this improves somewhat to a decline of 6.5% and growth of 7.9% per year over the past 5 and 10 years.
For Mullen, EPS grew a bit in 2013 but are expected to decline by 24% in 2014. To the end of 2013, EPS are up by 2.3% and 7.8% per year over the past 5 and 10 years. If you look at 5 year running averages, this improves greatly to growth of 8.7% and 8.4% per year over the past 5 and 10 years. Mullen is better when it comes to EPS growth.
Analysts' estimates tend to improve as we get closer to reporting dates. If we use 2014 estimates for these stocks we find that Ensign's EPS is up by 2.3% and 1.8% per year over the past 5 and 10 years. Using 5 year running averages EPS is down by 6.2% and up by 5.9% per year over the past 5 and 10 years. Here Mullen's EPS has increased by 1.8% and 1.6% per year over the past 5 and 10 years but using 5 year running averages, growth is at 8.7% and 6.4% per year over the past 5 and 10 years. It would seem that Mullen is growing its EPS better.
Can they translate revenue growth into cash flow growth is my next questions. For Ensign, the 5 and 10 year growth in CFPS is at 1.4% and 9.5% per year. If I use 5 year running averages the growth is better at 3.5% and 12.4% per year over the past 5 and 10 years. For Mullen growth is not as good especially over the past 5 years. For Mullen, the 5 and 10 year growth in CFPS is at a negative 4.1% and a positive 10.14% per year. If I use 5 year running averages the growth is better at 0.73% and 10.1% per year over the past 5 and 10 years. Ensign is better here.
If we use analysts' estimates for CFPS, I find that Ensign's growth is at 13.3% and 9.6% per year over the past 5 and 10 years and using 5 year running averages, growth is 4.9% and 11.5% per year. I find that Mullen's growth is at 11.2% and 5.12% per year over the past 5 and 10 years and using 5 year running averages, growth is 2.5% and 9.2% per year. Ensign does better here, but not by much.
When I look at Return of Equity, I find that for Ensign the ROE was below 10% 3 times in the past 10 years, and 3 times in the past 5 years. For Mullen the ROE was below 10% 4 times in the past 10 years and 2 times in the past 5 years. The ROE for Ensign in 2013 is 6.6% and it has a 5 year median value of 8.2%. For Mullen the 2013 ROE is 15.9% and it has a 5 year median of 15.8%. Mullen does better here.
If you compare the ROE on Comprehensive Income, I find that for Ensign the 5 year median ROE is at 8.7% and the 2013 ROE on comprehensive income is 7.8% which is 31.8% higher than the ROE on net income. For Mullen the 5 year median ROE is at 15.8% and the 2013 ROE on comprehensive income is the same as the ROE on net income. They both score here as the ROE on comprehensive income confirms that the net income could be of good quality.
But the ROE on Comprehensive Income for Ensign is just 8.7% with a 5 year median of 8.7%. The one for Mullen is at 15.9% with a 5 year median at 15.8%. Mullen scores here for the higher ROE on comprehensive income.
They both have insider ownership. With both stocks the chairman owns the most. For Ensign the chairman owns shares worth around $423M or 16.7% of the outstanding shares. For Mullen the chairman owns shares worth around $82M and 3.2% of the outstanding shares. They both do well here.
On my other blog I am today writing about Stella-Jones Inc. (TSX-SJ, OTC-STLJF) ... continue...
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