Saputo Inc

I am reviewing this stock (TSX-SAP) today as I have received its annual report. I first bought this stock in 2006. I bought more of this stock it in 2007. To date, including dividends, I have a return of 10% per year. This stock has done fairly well considering we are in a recession. Just over 2% of my return is dividend income. The great thing about this stock is the growth in dividends. The 10 year growth at 38% is much better than the 5 year growth of 18%. Often in a recession, dividend growth slows down.

This first thing I want to look at is the growth figures. For things like Revenue, Dividends, Earnings, Stock Price, Book Value and Cash Flow, the 5 year and 10 year figures for this stock are all good. The thing that I noticed was that the 10 year growth figures are better than the 5 year growth figures. The other thing is that the earnings growth for 5 years is ok, but not great.

The next thing to look at is the Asset/Liability Ratios. For the Liquidity Ratio is only 1.17. That means that the current assets can cover the current liabilities, but I would prefer a ratio of 1.50 or higher. Both the 5 year and 10 year averages are higher and this is the first time that I can see that this ratio has fall below 1.50. Asset/Liability Ratio is much better at 2.29. The thing to say is that both this ratios are below the 5 year averages.

To March 2009, the last annual report date, the Return on Equity (ROE) ratio looked good with a 5 year running average of 15.7%. The ROE for March 2009 was 14.1%. Both these ratios are very good.

There are some great things about this stock. Most of the growth figures and ratios are great, but there is one thing that concerns me and that is the Accrual Ratio, which is very high at 16.2%. The good thing about this ratio is that the Cash from Operations is higher than the net income, but there is not enough difference to cover investments. Sometimes, a high Accrual Ratio could call into question the earnings. A high Accrual Ratio can also signal that the stock price is about to fall.

Tomorrow, I will look into what the analyst say about buying this stock.

This company is a dairy processor and cheese producer in Canada and USA. Its web site is www.saputo.com. See my spreadsheet at www.spbrunner.com/stocks/sap.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.