FIRSTSERVICE CORP. $50.53 - Toronto symbol FSV

FIRSTSERVICE CORP. $50.53 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 34.7 million; Market cap: $1.8 billion; Dividend yield: 1.1%) spun off its Colliers International subsidiary (see below) on June 2, 2015, when it handed out Colliers shares to its investors. Shareholders are only liable for capital gains taxes on the transaction when they sell their FirstService or Colliers shares. Now that the spinoff is complete, FirstService is carrying on with its residential property management and property-improvement businesses. In the three months ended September 30, 2015, the company’s revenue gained 12.0%, to $349.5 million from $312.0 million a year earlier (all figures except share price and market cap in U.S. dollars). If you set aside one-time items, earnings per share jumped 28.2%, to $0.50 from $0.39. The second and third quarters are FirstService’s busiest. The spinoff adds to FirstService’s appeal. In our experience, and in most academic studies of the subject, both the parent and the newly created firm generally do better than similar companies for at least several years after they split. The company’s outlook remains strong. However, the stock trades at a high 25.0 times the $1.39 U.S. a share that FirstService will likely earn in 2016. FirstService is a hold.

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