Opinions Greg Newman
Student Transport of America Ltd.STB.TOBUYNov 06, 2012
Greg NewmanStock price when the opinion was issued
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They are good at renewing their contracts. It won’t make him rich, but it pays a decent dividend. You are okay to hold this for income.
Fabrice Taylor
A cozy little company with a nice 8% dividend yield, which is covered pretty well with a 60% payout ratio. He is looking at 7% revenue growth on contract wins next year, combined with some cost cuts. The only problem is, it is trading a little above its 5-year average right now. He would wait for a bit of a pullback.
Greg NewmanThey have a cozy little business. He sees 7% revenue growth from new contract wins. They had decent cost cuts and so be models 20% EPS growth. It is not cheap and it is a small cap so it is good until it is not good. It looks good now, but don’t make it a huge part of your portfolio. You have to keep an eye on it.
An extremely well-managed company. A tough industry with very low growth and a lot of competition. Management is using technology to their advantage to increase efficiencies. They are winning a lot of contracts and reinvesting a lot in the fleet. Doesn’t expect a lot of organic growth, or winning contracts from competition. Attractive dividend yield. He owns the convertible debentures.
A higher risk, more liquid name. He sees a 60% payout ratio, so the dividend is safe for now. Trading within its 5-year range, and that is usually pretty good. Debt levels are not low, but are not terrible. He expects some sales growth over the next couple of years. Q1 is usually a weak quarter, but this time it was a beat.
The last quarter was better than he expected. ROC improved, but that is just not enough. Dividend yield of about 7.5% is very tempting, but almost too good to be true. Expects they are paying out too much. He would like them to reduce the dividend and pay down some of their debt, which would make it more interesting.
The dividend is just too high. That is the first clue to it being unsustainable. If it was sustainable then the market would bid up the price of the stock. The payout ratio is pretty high, paying out almost all their cash. There is no room for growth and there is also debt. It is a low return on capital.
He recently bought debentures. Very solid management team. This is a business that is a very good growth vehicle in the US. A lot of the contracts are funded at the state government level, so they are very solid. Dividend yield of 8.2%.
Andrew PinkHas never invested in this name, largely because he remembers the days of Laidlaw which had a lot of debt. This has debt of about 3X EV/EBITDA, which is concerning. It is one of the larger players. The ROE is very low at under 2%. The combination of high debt and low returns is not attractive.
Had some drama earlier this year. Payout ratio swelled to about 108%. They did this after an $84 million equity issuance which made sense when they had more shares that they had to distribute cash flow to. Thinks the equity raise was a good use of their capital which brought there debt to EBITDA down to 3.1 from 4.6. This gives them the fire power to grow by acquisition. Payout ratio of 8.6% is pretty safe. He is modeling 19% growth for 2013. Try to buy at around $6.40.