Pareto Corp 2

I am continuing my review of this dividend paying small cap stock (TSX-PTO). I just found it and did a spreadsheet on it to see how good it was. In this part of my review, I first look at Insider Buying and Selling. What I find is that there is insider buying and it appears that all this buying is under $.70 a share.

When looking at the spreadsheet ratios, I find that the current P/E is around 7.5 and this is much lower than the 5 year average of 15. The Graham price of $1.20 is some 37% higher than the current price of $.75. Also, the Price/Book Value at .70 at the end of 2008 is only 23% of the 10 year average of 3.06 and 30% of the 5 year average of 2.42. All these things point to $.75 being a good price to pay for this stock.

When you look at the yield, it has come down recently, but at the current 8%, it is still quite high. Also, since the company has increased the dividend by 50% for 2009, it would seem that it has faith that it can produce enough cash flow to pay the current good dividends.

In looking for analyst ratings, I can only find two. The ratings are a Strong Buy and a Buy. (See my site for information on analyst ratings.)

I looked at the charts and I compared this stock to the TSX Index. If you look at periods of 1 year and shorter, this stock has done better than the TSX. If you look at the charts for the last 3 and 5 years, this stock has done worse, but it has done as well as any other small cap stock. Small cap stocks have not done as well as the TSX for some time. It is only recently that small cap stock has been doing as well as the TSX and this has been only over the last 6 months.

All in all, this stock looks like a fine one. It is relatively cheap at the moment. It also has a very good dividend. However, this is also a small cap, so the risk level is high. You would only want to buy it if you can stand the risk.

Pareto is a Canadian marketing services and execution company committed to helping clients sell more. We service Canada’s most successful businesses through our network of services; Retail Merchandising, In-Retail Messaging, Direct Marketing, and Incentives. Its web site is www.pareto.ca. See my spreadsheet at www.spbrunner.com/stocks/pto.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.