Tuesday, May 26, 2009

Toromont Industries Ltd 2

I am continuing my review this stock (TSX-TIH) today because of its annual report for 2008. I have also updated my spreadsheet today as I noted that the quarterly report is in. Toromont has made progress as the Revenues, Earnings and Book Value are up from last year. Stock price is down marginally from yesterday.

This stock is on the Dividend Achievers list at www.dividendachievers.com, and the Dividend Aristocrats list at www.tmxmoney.com/en/individual.html (see indices) and was also on Mike Higgs’ list. (Note that Mike Higgs’ has discontinued his list.)

The first thing I look at is Insider Buying and Selling. There is some Insider Selling, but this seems to be connected with options. Insider ownership of shares have not changed much over the past year, in fact share holdings seemed to have increased slightly. This report does not seem to tell us anything at this time.

The next thing to look at is the ratios and the Graham Price to see if these indicators show if this stock is presently a good buy or not. The stock is selling near, but slightly above the Graham Price. This does point to a good buy price. Also, the current yield is 2.6% compared to a 5 year average 1.7%. The P/E ratios are, of course, dependent on the earnings estimates. The P/E at the end of 2008 was only 11. The current one is 12 to 13. This is a nice low P/E as the 5 year low P/E ratio is 13. The P/E 5 year average on the closing price is 16.

I also looked at the Price to Book Value and this ratio is at 1.9. This is substantially lower than the 10 year average of 2.5 or the 5 year average of 2.8. The currently P/BV is about 75% of the 10 year average and anything lower than 80% of the 10 year average is showing a good stock price for buying.

There are quite a few analysts following this stock. Their ratings seem to be either a Buy or a Hold. (See my site for information on analyst ratings.) No one says anything bad about the company, and most with the Hold rating feel that the current recession will still affect the company, at least in the short term. Even though this is a dividend paying company, it is still an industrial company and there are therefore risks in buying it, especially in the short term.

When I look at the charts, I see that this company has done better than the TSX and the Industrial Index over periods of 1 year and longer. It is only in a shorter time frame that the TSX index has done better, but this stock as done as well as the Industrial Index in these shorter time periods. I still expect to make money on this stock in the long term and I intend to hold the shares that I have.

There are two sections to this company. The Equipment Group is for Caterpillar dealerships. The Compression Group designs, engineers, fabricates and installs compression systems for natural gas, fuel gas and carbon dioxide. This last group also has industrial and recreational refrigeration systems. Its web site is www.toromont.com. See my spreadsheet at www.spbrunner.com/stocks/tih.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets.

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