FGP recommended

General Business
1

FGP has been recommended to me by my financial institution’s stock screener.

Do any of you hot shots have opinions about this one? I’m looking at 18 months out, not a quick in-out (unless it’s profitable).

2

I know nothing about this company, but here is why I would NOT buy it:

  1. Stock price is at an all time high! This company has shown no explosive growth in the past 10 years and historically, if you paid this much for the stock, you may have received dividends, but had depreciation in the share price (i.e. lost money)
  2. No history of raising dividends (seems like it’s always been 50 cents).
  3. Very low profit margins (< 2%)
  4. Incredibly high PE for a gas company
  5. Total equity seems to be SHRINKING in the past 5 years! Does this mean that they are borrowing money to pay these high dividends? What happens when equity is ZERO or negative?

I would think that if you wanted to own this stock, that you would want to buy in at the $12-$16 range. If you get it there, you are looking at 20% yield in dividends which probably explains why there was a lot of insider buying at that range!

Also, why does it rank so high in the screener? Knowing what I have pointed out, is this a company that you would buy in real life if you were a billionaire?

3

Thanks for the info. One of the filters was high 3 year growth expectation, perhaps that’s what put it on the list. Maybe they’ve got some deal pending, or they are a potential buyout, or some such.

Either way, thanks for your brief analysis. I won’t buy this.

Hold the tomato, fool!

4

I think that is a good decision, TandS, at least for now. Skinneej is right.

Lp and natural gas, tend to have at least two dips a year, March being one, and July/August being another. I would expect to see some backtracking from this point, especially since it is at an all-time high. Coming out of this exceptional winter may be partially to blame for this run up.

It could be a potential buyout, since it is family run, but sometimes you wait forever for those buyouts to take place. That may also account for how poorly it seems to be managed.

Skinneej’s points are well taken, and accurate. Good question, and another stock for my watchlist.