TSX:ACO.X

Stock Analysis Report

Executive Summary

ATCO Ltd., together with its subsidiaries, engages in the electricity, pipeline and liquid, and retail energy businesses in Canada, Australia, and internationally.

Rewards

Trading at 48.6% below its fair value

Earnings grew by 151.1% over the past year

Pays a high and reliable dividend of 3.5%

Risk Analysis

Earnings are forecast to decline by an average of -18.9% per year for the next 3 years

Interest payments are not well covered by earnings

Large one-off items impacting financial results



Snowflake Analysis

Undervalued established dividend payer.


Similar Companies

Share Price & News

How has ATCO's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: ACO.X has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

3.5%

ACO.X

1.7%

CA Integrated Utilities

0.8%

CA Market


1 Year Return

29.1%

ACO.X

21.3%

CA Integrated Utilities

10.6%

CA Market

Return vs Industry: ACO.X exceeded the Canadian Integrated Utilities industry which returned 19.9% over the past year.

Return vs Market: ACO.X exceeded the Canadian Market which returned 10.4% over the past year.


Shareholder returns

ACO.XIndustryMarket
7 Day3.5%1.7%0.8%
30 Day4.3%3.8%2.1%
90 Day10.5%1.4%6.6%
1 Year33.6%29.1%25.6%21.3%14.1%10.6%
3 Year24.8%12.9%46.7%31.8%17.0%6.4%
5 Year23.3%6.0%61.3%29.6%38.5%18.2%

Price Volatility Vs. Market

How volatile is ATCO's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is ATCO undervalued compared to its fair value and its price relative to the market?

46.2%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: ACO.X (CA$49.76) is trading below our estimate of fair value (CA$96.87)

Significantly Below Fair Value: ACO.X is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: ACO.X is good value based on its PE Ratio (10.1x) compared to the Integrated Utilities industry average (20.7x).

PE vs Market: ACO.X is good value based on its PE Ratio (10.1x) compared to the Canadian market (15.8x).


Price to Earnings Growth Ratio

PEG Ratio: ACO.X's earnings are forecast to decline next year, so we can't calculate its PEG ratio.


Price to Book Ratio

PB vs Industry: ACO.X is good value based on its PB Ratio (1.4x) compared to the XN Integrated Utilities industry average (2.1x).


Next Steps

Future Growth

How is ATCO forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

-17.4%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ACO.X's earnings are forecast to decline over the next 3 years (-18.9% per year).

Earnings vs Market: ACO.X's earnings are forecast to decline over the next 3 years (-18.9% per year).

High Growth Earnings: ACO.X's earnings are forecast to decline over the next 3 years.

Revenue vs Market: ACO.X's revenue is expected to decline over the next 3 years (-3.3% per year).

High Growth Revenue: ACO.X's revenue is forecast to decline over the next 3 years (-3.3% per year).


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: ACO.X's Return on Equity is forecast to be low in 3 years time (8.2%).


Next Steps

Past Performance

How has ATCO performed over the past 5 years?

4.0%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: ACO.X has a large one-off gain of CA$275.0M impacting its September 30 2019 financial results.

Growing Profit Margin: ACO.X's current net profit margins (12%) are higher than last year (4.4%).


Past Earnings Growth Analysis

Earnings Trend: ACO.X's earnings have grown by 4% per year over the past 5 years.

Accelerating Growth: ACO.X's earnings growth over the past year (151.1%) exceeds its 5-year average (4% per year).

Earnings vs Industry: ACO.X earnings growth over the past year (151.1%) exceeded the Integrated Utilities industry 8.1%.


Return on Equity

High ROE: ACO.X's Return on Equity (14.2%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is ATCO's financial position?


Financial Position Analysis

Short Term Liabilities: ACO.X's short term assets (CA$3.7B) exceed its short term liabilities (CA$2.4B).

Long Term Liabilities: ACO.X's short term assets (CA$3.7B) do not cover its long term liabilities (CA$12.9B).


Debt to Equity History and Analysis

Debt Level: ACO.X's debt to equity ratio (121.9%) is considered high.

Reducing Debt: ACO.X's debt to equity ratio has increased from 119.4% to 121.9% over the past 5 years.

Debt Coverage: ACO.X's debt is not well covered by operating cash flow (15.5%).

Interest Coverage: ACO.X's interest payments on its debt are not well covered by EBIT (2.7x coverage).


Balance Sheet

Inventory Level: ACO.X has a high level of physical assets or inventory.

Debt Coverage by Assets: ACO.X's debt is not covered by short term assets (assets are 0.4x debt).


Next Steps

Dividend

What is ATCO's current dividend yield, its reliability and sustainability?

3.34%

Current Dividend Yield


Upcoming Dividend Payment

Purchase ATCO before the 'Buy Limit' to receive their next dividend payment.


Dividend Yield vs Market

company3.3%marketbottom25%1.9%markettop25%5.5%industryaverage3.3%forecastin3Years3.4%

Current dividend yield vs market & industry

Notable Dividend: ACO.X's dividend (3.5%) is higher than the bottom 25% of dividend payers in the Canadian market (1.88%).

High Dividend: ACO.X's dividend (3.5%) is low compared to the top 25% of dividend payers in the Canadian market (5.48%).


Stability and Growth of Payments

Stable Dividend: ACO.X's dividends per share have been stable in the past 10 years.

Growing Dividend: ACO.X's dividend payments have increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its reasonably low payout ratio (32.2%), ACO.X's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: ACO.X's dividends in 3 years are forecast to be covered by earnings (57.9% payout ratio).


Next Steps

Management

What is the CEO of ATCO's salary, the management and board of directors tenure and is there insider trading?

3.3yrs

Average management tenure


CEO

Nancy Southern (62yo)

20yrs

Tenure

CA$4,842,756

Compensation

Ms. Nancy C. Southern has been the Chief Executive Officer of ATCO Ltd. since January 2000. Ms. Southern served as the Chief Executive Officer at Canadian Utilities Ltd. from January 01, 2003 to May 8, 201 ...


CEO Compensation Analysis

Compensation vs Market: Nancy's total compensation ($USD3.69M) is about average for companies of similar size in the Canadian market ($USD2.85M).

Compensation vs Earnings: Nancy's compensation has been consistent with company performance over the past year.


Management Age and Tenure

3.3yrs

Average Tenure

58.5yo

Average Age

Experienced Management: ACO.X's management team is considered experienced (3.3 years average tenure).


Board Age and Tenure

7.1yrs

Average Tenure

72yo

Average Age

Experienced Board: ACO.X's board of directors are considered experienced (7.1 years average tenure).


Insider Trading

Insider Buying: ACO.X insiders have only sold shares in the past 3 months.


Recent Insider Transactions

SellCA$5,34311 Dec 19
Colin Jackson
EntityIndividual
Shares105
Max PriceCA$50.89
SellCA$31,45405 Dec 19
Steven Piepgrass
EntityIndividual
Shares625
Max PriceCA$50.34
SellCA$29,87519 Nov 19
George Lidgett
EntityIndividual
Role
Senior Key Executive
Executive VP & GM of Utilities
Shares600
Max PriceCA$49.79
SellCA$62,97430 Sep 19
Dennis DeChamplain
EntityIndividual
Role
Chief Financial Officer
Senior VP & CFO
Shares1,300
Max PriceCA$48.48
BuyCA$1,872,33112 Sep 19
Linda Southern-Heathcott
EntityIndividual
Role
Vice Chairman
Vice Chairman of the Board
Shares41,100
Max PriceCA$45.56
SellCA$14,12712 Sep 19
Colin Jackson
EntityIndividual
Shares300
Max PriceCA$47.09
BuyCA$214,53631 Aug 19
Sentgraf Enterprises Ltd.
EntityCompany
Shares4,500
Max PriceCA$47.67
SellCA$2,37228 Aug 19
Colin Jackson
EntityIndividual
Shares50
Max PriceCA$47.45
SellCA$20,05526 Aug 19
D. Sharpe
EntityIndividual
Shares430
Max PriceCA$46.64
BuyCA$1,872,33118 Aug 19
Sentgraf Enterprises Ltd.
EntityCompany
Shares41,100
Max PriceCA$45.56
BuyCA$1,574,41413 Aug 19
Sentgraf Enterprises Ltd.
EntityCompany
Shares35,000
Max PriceCA$45.15
SellCA$27,41428 May 19
Adam Beattie
EntityIndividual
Role
Senior Key Executive
President of Structures
Shares600
Max PriceCA$45.69
SellCA$72,64803 May 19
P. Cook
EntityIndividual
Shares1,606
Max PriceCA$45.24
SellCA$64,67602 May 19
P. Cook
EntityIndividual
Shares1,506
Max PriceCA$43.26
SellCA$96,82710 Apr 19
Settimio Policicchio
EntityIndividual
Shares2,129
Max PriceCA$45.48
BuyCA$77203 Apr 19
Loraine Charlton
EntityIndividual
Shares17
Max PriceCA$45.44
SellCA$35,09929 Mar 19
Wayne Stensby
EntityIndividual
Role
Senior Key Executive
Managing Director of Electricity Global Business Unit
Shares959
Max PriceCA$36.60
SellCA$43,50029 Mar 19
Clinton Warkentin
EntityIndividual
Shares959
Max PriceCA$45.36
SellCA$43,50029 Mar 19
P. Cook
EntityIndividual
Shares959
Max PriceCA$45.36
SellCA$122,93929 Mar 19
Siegfried Kiefer
EntityIndividual
Role
President
President
Shares3,359
Max PriceCA$36.60
SellCA$21,72729 Mar 19
George Lidgett
EntityIndividual
Role
Senior Key Executive
Executive VP & GM of Utilities
Shares479
Max PriceCA$45.36
SellCA$51,92207 Mar 19
Brian Shkrobot
EntityIndividual
Shares1,150
Max PriceCA$45.15

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Nancy Southern (62yo)

    Chair & CEO

    • Tenure: 20yrs
    • Compensation: CA$4.84m
  • Siegfried Kiefer (60yo)

    President

    • Tenure: 1yrs
    • Compensation: CA$3.02m
  • Brian Bale (64yo)

    Senior VP of IT & Real Estate and Special Advisor to the CEO

    • Compensation: CA$573.52k
  • Donna Pincott

    Director of Corporate Communications

    • Dennis DeChamplain (55yo)

      Senior VP & CFO

      • Tenure: 2.6yrs
      • Compensation: CA$1.29m
    • George Lidgett (57yo)

      Executive VP & GM of Utilities

      • Tenure: 4.1yrs
      • Compensation: CA$1.55m
    • Pat Creaghan

      Managing Director of Australian Operations & Chief Operating Officer of Australian Operations

      • Tenure: 2.6yrs
    • Myles Dougan

      Director of Investor Relations

      • Wayne Stensby (52yo)

        Managing Director of Electricity Global Business Unit

        • Tenure: 4.1yrs
        • Compensation: CA$1.40m
      • Adam Beattie

        President of Structures


        Board Members

        • Nancy Southern (62yo)

          Chair & CEO

          • Tenure: 20yrs
          • Compensation: CA$4.84m
        • Roger Urwin (73yo)

          Independent Director

          • Tenure: 5.7yrs
          • Compensation: CA$412.46k
        • Charles Wilson (79yo)

          Lead Director

          • Tenure: 16.8yrs
          • Compensation: CA$630.41k
        • Rob Routs (73yo)

          Independent Director

          • Tenure: 7.7yrs
          • Compensation: CA$291.61k
        • Robert Booth (66yo)

          Director

          • Tenure: 12yrs
          • Compensation: CA$246.90k
        • Michael R. Rayfield (76yo)

          Independent Director

          • Tenure: 10.7yrs
          • Compensation: CA$233.10k
        • Denis Ellard (72yo)

          Independent Director

          • Tenure: 5.7yrs
          • Compensation: CA$225.60k
        • Susan Werth (62yo)

          Independent Director

          • Tenure: 5.5yrs
          • Compensation: CA$254.30k
        • Linda Southern-Heathcott (56yo)

          Vice Chairman of the Board

          • Tenure: 3.2yrs
          • Compensation: CA$436.80k

        Company Information

        ATCO Ltd.'s company bio, employee growth, exchange listings and data sources


        Key Information

        • Name: ATCO Ltd.
        • Ticker: ACO.X
        • Exchange: TSX
        • Founded: 1947
        • Industry: Multi-Utilities
        • Sector: Utilities
        • Market Cap: CA$5.903b
        • Shares outstanding: 114.32m
        • Website: https://www.atco.com

        Number of Employees


        Location

        • ATCO Ltd.
        • 3rd floor
        • West Building
        • Calgary
        • Alberta
        • T3E 8B4
        • Canada

        Listings

        TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
        ACO.XTSX (The Toronto Stock Exchange)YesClass I Non-Voting SharesCACADJan 1981
        8A6DB (Deutsche Boerse AG)YesClass I Non-Voting SharesDEEURJan 1981
        ACLL.FOTCPK (Pink Sheets LLC)YesClass I Non-Voting SharesUSUSDJan 1981
        ACO.YTSX (The Toronto Stock Exchange)Class II Voting SharesCACADJan 1981
        ACLT.FOTCPK (Pink Sheets LLC)Class II Voting SharesUSUSDJan 1981

        Biography

        ATCO Ltd., together with its subsidiaries, engages in the electricity, pipeline and liquid, and retail energy businesses in Canada, Australia, and internationally. The company operates through Canadian Utilities Limited, Structures & Logistics, Neltume Ports, and Corporate & Other segments. The Canadian Utilities Limited segment provides electricity services, such as electricity generation, transmission, distribution, and other related infrastructure solutions; and pipelines and liquid services that include integrated natural gas transmission, distribution and storage, industrial water solutions, and related infrastructure development, as well as retails natural gas and electricity. The Structures & Logistics segment provides modular facilities, site support services, and logistics and operations management services. The Neltume Ports segment operates port facilities. The Corporate & Other segment provides commercial real estate services. As of December 31, 2018, the company had natural gas, coal, and hydroelectric generating plants with a total capacity of 3,656 megawatts. ATCO Ltd. was founded in 1947 and is headquartered in Calgary, Canada. 


        Company Analysis and Financial Data Status

        All financial data provided by Standard & Poor's Capital IQ.
        DataLast Updated (UTC time)
        Company Analysis2020/01/22 23:32
        End of Day Share Price2020/01/22 00:00
        Earnings2019/09/30
        Annual Earnings2018/12/31


        Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.