Finning is a Canada-based Caterpillar dealer that sells, rents and services Caterpillar equipment. It is goegraphically diversified through operations in Western Canada, the UK, and South America.
Due to it’s focus on Western Canada and South America, Finning has a strong concentration in mining and oil sands operations, which means that it is somewhat correlated to commodity prices (copper, gold, coal, oil and so on). This is a consideration when looking at the diversification of my overall portfolio. I already own Teck Resources, which is similarly correlated to commodity prices. I probably don’t want to buy another miner right now.
- The P/E Ratio is 12.05, which is much lower than the average historical P/E of 18.50 (excluding 2007 and 2008, which were extraordinary) and the Graham Number is $19.73
- The Dividend Yield is 2.66%, and the coverage is 311%. I’d prefer a bigger yield, but Finning is a serial dividend increaser so I will be patient.
- Forecast Growth Rate is healthy at 13.94%
- The Gordon Return (Dividend + Growth) is 16.61%
The Margin of Safety at current prices is -1%. I would have preferred to pay $21 for this stock, but I think the stock is well priced here as it has pulled back.
- Buy FTT.TO @ $22.89