Rogers Sugar Stock Profile
I am three weeks into the Whole 30 eating plan and, with one week left to go, I am seriously craving some sugary treats! It is all I can do not to dive into some chocolates and cookies. So, in honour of my last week on the program, I thought I would profile a sugar company this week. Lantic Inc. is a Canadian company resulting from an amalgamation in 2008 of Lantic Sugar Limited and Rogers Sugar Ltd. The brand Lantic Sugar Ltd. is used in Eastern Canada and Rogers Sugar Ltd. is sold iin Western Canada. Lactic Inc. operates cane sugar refineries in Montreal, Quebec and Vancouver as well as a sugar beet factory in Taber, Alberta. Its product line includes natural, high quality sugar and sweeteners along with authentic maple syrup products as a result of a recent acquisition. Interestingly, it was difficult to find a publicly traded sugar company. Rogers Sugar was one of the only ones I could find in North America. Imperial Sugar in the United States is now privately owned.
Most of us have a love/hate relationship with sugar. We love the taste of it but hate the unhealthy consequences of consuming too much - which most of us do on a regular basis. The ill effects of sugar on our bodies are becoming increasingly clear so it is interesting to consider where the sugar industry will go in the next few decades. For example, Rogers Sugar experienced lower sugar deliveries this year which may be due in large part to diet changes. It is hard to believe that we will kick our love of sugar but no question, consumers are much more conscious of how much sugar is going into the packaged foods they previously purchased without much thought. I have become a diligent food label reader in the last three weeks and it is shocking to find sugar added to nearly everything I picked up in the interior grocery aisles.
· As stated many times on this site, I, nor ZSM Creative Inc. operating as The Capital Pink, are financial advisors and have no financial accreditations. I am applying some basic evaluation tools to this stock along with some commentary, but this should only serve as a starter for your further research. The information below is only current to the day this post was written which may or may not be the same day as this post was published so please update the ratios and numbers to the current day before relying on them as they may have significantly changed (see How Do I Evaluate a Stock? (Part One) for information on where to find the ratios and numbers online). Please read my Legal Disclaimer. Also, I do not own Rogers Sugar Ltd. stock and am not affiliated with them in any manner.
What is Rogers Sugar?
Rogers makes the sugar we purchase in the grocery store in two ways: 1. By refining sugar cane that comes into Canada for processing. The sugar cane has to be partially refined directly at the mill near the sugar field and then must be processed rapidly after being cut. 2. By refining sugar beets which are grown in southern Alberta. Interestingly, there is no difference between beet or cane sugar in terms of end product. Both are pure sucrose; cane sugar comes from the stalks of the cane sugar plant while beet sugar comes from the roots of the sugar beet plant. In terms of sugar beets, Rogers has contracts with about 400 sugar beet producers which grow a certain number of acres of sugar beets depending on market demand. Rogers is continuing to grow by expanding into more choices with sugar and sweeteners. It has recently brought new products to market including hot chocolate, iced tea, agave and stevia. In 2016 it launched organic coconut sugar and a smart sweetener blend.
Other relevant investor information regarding Rogers Sugar (as taken from the 2017 Annual Report):
· Fiscal 2017 saw increased growth and earnings;
· Acquired L.B. Maple Treat Corporation in August 2017 which will place Rogers as a global leader in the natural sweetener category (L.B. Maple Treat has syrups and spreads, candies and cookies, gourmet line and coffees/teas);
· Added another maple syrup business, Decacer, in November 2017;
· Dividend was $0.36 per share and “The Board of Directors will continue to assess the appropriateness of the level of the dividend based on performance and on the outlook for the business”;
· Its liquid sugar business volume increased due to the start of a three-year contract;
· Three prong strategy: Operational Excellence (lowering costs and improving system reliability), Market Access (build new business in markets where trade agreements exist) and Acquisitions (diversify the portfolio);
· Lantic is the only sugar producer with operating facilities across Canada;
· Sales are focused on three specific markets: industrial (largest – broad range of North American food processing companies), consumer (remained stable) and liquid (liquid sucrose – used by some manufacturers in place of high fructose corn syrup);
· Canada remains the largest producer of maple syrup with over 77% of the world’s production, US is the only other major producing country. Maple syrup is being increasingly viewed as a healthy alternative to traditional sugar; and
· Lantic uses a variety of hedging financial tools to protect from volatility in sugar markets and its input costs.
Rogers Sugar is a relatively uncomplicated operation. It processes sugar and sells it to industrial and consumer customers as well as selling liquid sugar. Its acquisition of the L.B. Maple Treat appears to be a big move for it as it will it allow growth into an entirely new segment – natural sweeteners. The main threats to it business would seem to be global demand for sugar as well as the volatility in sugar prices worldwide. Let’s examine its stock to see what is tells us about this steady and stable business.
What is Rogers Sugar stock doing?
As at May 8, 2018, the numbers from our basic stock evaluation tools are as follows:
Share price: $5.28 CAD
One share of Rogers Sugar costs $5.28 CAD. The price over the past 52 weeks has ranged from $5.18 to 6.94 CAD. This is a fairly narrow range; the stock has not jumped up and down relatively speaking over the past year.
Price to Earnings (P/E): 20.50
Recall this is the stock price divided by the earnings per share. If the P/E is high, you should expect to get some growth for having paid a bit more for the stock however, it could indicate the stock is overvalued. Rogers Sugar P/E has gone up significantly in the last few years. In 2017 it was 28.73 up from 10.64 in 2016. It is also higher than the index P/E at 15.56. This would seem to indicate that investors are expecting some further growth from Rogers Sugar, perhaps due to its recent expansion into natural sweeteners with the maple syrup acquisition.
Dividend Yield: 6.82%
Dividend paying stocks are something many investors look to buy as they are like an interest rate on your shares. Dividend payouts are discretionary. Dividend yield represents the amount the company pays out in dividends relative to its share price. While a higher dividend yield is usually more desirable, you still need to consider the health of the underlying company before making a generalization either way. Rogers Sugar has kept a fairly steady dividend yield over the last five years and 6.82% is a high yield which is promising. This high yield would make it a very attractive stock for dividend investors.
Earnings per Share (EPS): 0.26
This figure will tell you a great deal about the growth of the company. It takes what the company earns and divides it by the number of shares outstanding. It is essentially the profit allocated to each share of the company. The bigger the number the better because the more the company earns, the more attractive it is to investors. EPS that is increasing every quarter shows earnings momentum and shows growth potential. The EPS of Rogers Sugar has moved around up and down. It is down from a high of 0.64 last year in 2016.
Revenue: $753.69 TTM
Increasing revenue is a good sign that the company is growing. Rogers Sugar has had increasing revenue. Its five-year average is $582.85 million so the trailing twelve months at this point is significantly higher. Its five-year growth is positive at 2%.
Return on Equity (ROE): 10.23 TTM
ROE tells you what sort of return the company is getting on the shareholders money. An increasing ROE is a good sign. Rogers Sugar’s ROE has jumped around considerably in the last five years from a high of 25.94 in 2016 to the current 10.23.
Market Capitalization: $558.3334 Million
Recall that small cap stocks usually have the most room for growth as opposed to large, established, stable large cap companies and medium fall somewhere in the middle. Rogers Sugar is a small cap stock with perhaps some room for growth, but it certainly would not be equated with a fast-moving company like one perhaps in the tech space.
Net Profit Margin: 5.35 (TTM)
This ratio tells us what profit is left over after the company pays its expenses for the year. The more money it keeps, the better. High net profit margins mean that a company is good at keeping profit after expenses are paid, which may mean they are adept at keeping their expenses down. It is a good idea to compare these over an industry to see what companies are good at operating and maintaining a high net profit margin.
Free Cash Flow per Share: -0.09
Recall that this number is the cash flow through the business divided by the number of shares outstanding. It represents the net cash a company can produce per share and many investors consider this a better indicator of a company’s health than the more popular, earnings per share ratio because it is more difficult to manipulate cash flow numbers than it is earnings numbers. A higher value usually indicates the company is in a healthier position. It shows the cash that the company actually holds that could be distributed out to shareholders without impacting the continued development of the company.
This ratio should be considered along with the EPS figure for a better picture of the company’s health as there should not be a wide discrepancy between the two figures. If there are large variances between those numbers, you may want to consider if there were large, non-recurring one-time items that account for the large variance. It is also wise to look at a company’s cash flow picture in the long term as that should take into account one-time, large capital expenditures (money spent by a company to buy or maintain an asset like land, buildings or equipment, i.e. “fixed assets”) that required large amounts of cash. A low free cash flow per share could also mean the company is earning less profit.
The negative figure for Rogers Sugar on this metric indicates negative cash flow but further research is required to determine the cause of that negative amount.
Price to Sales (P/S): 0.80
This ratio compares the total market value of the company with its sales revenues. There is not a great deal of manipulation a company can do with its sales data, so this can be a good indicator of how well the company is doing. Recall that a lower ratio relative to its peers in the industry can indicate a potentially good investment opportunity. Morningstar indicates the index is 1.72 so Rogers Sugar is lower on this metric.
Price to Book (P/B): 1.63
This compares the stock price with how much the stock would be worth if the company was liquidated or sold off. It is the value of the stock in comparison to the underlying assets of the company. Thus, a low P/B relative to the stock price suggests you are not paying too much for what would be left over after such a sell off. Morningstar states that the index for P/B is 1.82.
Price to Cash Flow (P/CF): 10.71
Having cash left over after expenses are paid off is crucial to remaining in business so this is a good indicator about the health of a company. Generally lower is better as it could indicate the company is obtaining large cash flows not yet reflected in the stock price. Morningstar indicates the index is 9.19 so Rogers Sugar is slightly higher on this metric.
Rogers Sugar appears to be poised from some new growth into the maple syrup, natural sweetener market. It definitely warrants some further research and watching to see how it integrates this new segment into its existing sugar business.
*** Top photo courtesy of Joanna Kosinska on Unsplash