Tuesday, June 10, 2008

AGF Management

This blog is meant for educational purposes only, and not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

For me, I feel there are far more negatives than positives with this stock. Revenue growth for last 5 years is under 4% per annum. If a stock is not growing its revenue, the stock itself cannot grow. The stock has too much debt. The liquidity ratio (assets divided by debt) has been coming down for a few years. In 2004 it was 1.73, 2005 it was 1.51, 2006 it was 1.33 and in 2007 it was 1.22. What I want is a ratio of 1.50 or higher. (High debt is a huge negative.) The accrual ratio is 23%. If it is over 5%, you have to wonder if they are trying to hide something. Maybe the cash flow is not exactly as it would appear on the cash flow statement?

What are internet sites saying about this stock? They say it is a hold. They worry that AGF is facing major headwinds. I do not mind keeping a stock that people rate as a hold, or sometimes even as a sell, if the reason for the rating is because the stock price has gotten too high. However, you have to be cautious with stocks rated as a hold if they are having problem. AGF Management is certainly having problems.

There is not much I like about this stock except that the dividend has been increasing nicely. The Earnings Per Share (EPS) seem to be ok too, but the cash flow does not seem to be increasing. I think it is time for me to replace it.

See my spreadsheet at http://www.spbrunner.com/stocks/agf.htm. See my website at http://www.spbrunner.com/stocks.html.

AGF is a Mutual Fund company. It owns AGF Trust Company. The company has a diversified group of products designed to meet a variety of investment objectives including mutual funds, GIC’s, term deposits, real estate secured loans, investment loans and home equity lines of credits. They sell their products in Canada.

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