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Student Transportation, Inc. Message Board

  • billmann40 billmann40 May 14, 2013 7:47 PM Flag

    P/E ratio

    Why is the P/E so high? Was interested in investing until I saw that.

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    • I think that the pe ratio is high because of the low margin, which is why the street advises this as a sell. Having said that, it's hard to group this one into any category for several reasons. First it's a Canadian, which scares some people off right there. Secondly, it's only business is transporting students, which by the nature of public school expenditure, is where the low margin comes in. I'm not very well versed in the in's and outs of Canadian regulations, but since it's not a reit it would likely have to pay some Canadian income tax, as do we on any dividends. However it's a straight deduction from your tax owed to the U.S. at the end of the year, so no big deal. I think the more important considerations here are the working life of the fleet, cap x for the change over to lpg, and perhaps some liability insurance issues on being responsible for school kids for a couple of hours each day. Also the CEO has just announced his plan to reduce the payout ratio for dividends, which makes any dividend increase less likely, even if or as revenues and profits go up. I guess he will use any additional revenues to renew the fleet etc. I don't think it's very likely that the dividends will go down though, and as retained earnings are put back into the business in the form of reduced leverage and newer vehicles going forward, it could make the stock price go up.........but probably not by much.
      Other thoughts?
      Arf

 
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