Tuesday, July 21, 2009

Leon's Furniture

I am reviewing this stock (TSX-LNF) today as I have not reviewed it since I received the annual report for the end of December 2008. I have held this stock since 2006 and have just about broken even on it. That is no loss, but no profit. I still have faith in this company for the long term and I will continue to hold this stock. I first bought it because I read a recommendation on this stock and I liked what they said.

Compared to the stock I reviewed yesterday, if you look at the growth figures for this stock, all are good. The only one that does not appear to be good is the growth in Cash Flow for the last 5 years. However, the Cash Flow 5 years ago was unusually good and therefore the calculations are thrown off. However, if the Cash Flow for that year were more normal, the 5 year growth in Cash Flow would be good also. The other thing to mention is dividends. Every few years, when it can afford too, this company throws in an extra dividend payment. Excluding the extra dividends, the growth in dividends is very good at about 15% on average a year. However, the dividend yield on this stock tends to be low at around or below 2%.

Moving on to look at is the Asset/Liability Ratios; I find these quite high. I like to see both ratios at 1.50 or above and for this company both the Liquidity Ratio and the Asset/Liability Ratio have been much higher.

A good thing to note is the Return on Equity (ROE). The 5 running average ROE to December 2008 was 18.4%. The ROE for the first quarter of 2009 was lower than usual at 9.6%. It was not a great quarter. The one thing that I do not like on this stock is the high Accrual Ratio. For the first quarter of 2009, it is very high at 11.09. However, this is probably not an accurate reading as the Cash Flow from Operations was negative. The lack of Cash Flow is in itself a negative.

The good things about this stock are that it is easy to understand what they do for a living, the good dividend growth and the extra dividend payments they have paid. The other thing is that ever though we are in a recession, if you had held this stock for 5 years, you would have made a profit. Tomorrow, I will look into what the analyst say about buying this stock.

This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Its web site is www.leon.ca. See my spreadsheet at www.spbrunner.com/stocks/lnf.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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