Wednesday, September 23, 2009

Home Capital Group 2

I am reviewing this stock (TSX-HCG) as it is a stock I follow. I have not written up this company before, but I have updated my spreadsheet with the 2008 annual report and the 2nd quarterly report of 2009. This company is in the financial services industry and it is good dividend paying growth stock.

When I look at the Insider Buying and Insider Selling I see that there has been some heavy Insider Selling lately, but it has been by one director and one officer. I also see that this company has been buying back shares in the company for cancellation. You have to wonder how important this insider selling is. The company has shown their faith in the company by increasing the dividends this year by 14%.

The current P/E, based on earnings estimates, is just 9.9. Anything below 10 is usually considered a low P/E. Also, this P/E is below the 5 year low average P/E of 12.8. This is a growth company and growth companies tend to have higher P/E than other types of companies. The 5 year average yield is just below 1% and the current yield is 1.5%. So, this is an improvement and points to a relatively good current price.

If you look at the Graham Price, it is just 6% higher than the current price. When looking at the stock price, a good price is at the Graham Price and this is not far off. On average, the Graham Price has been 50% lower than the stock price, so this shows a good relative price. And, let’s face it, when you are dealing with stocks, everything is relative.

If you look at the Price/Book Value, I find that current P/BV ratio is only 70% of the long term average P/BV. Anything below 80% of the long term P/BV ratio is good. What all these ratios lead me to believe is that the current stock price is a relatively good one for this company.

When I look at analysts’ recommendations, what I see is lots of Strong Buys and lots of Holds and a very few Buys. The only censuses rating would be a Buy. (See my site for information on analyst ratings.)

I do not know why various analysts are issuing Holds on this stock. The only problem I see is the high Accrual Ratio. I do not like this to be above 5% and it is currently at almost 11%. However, this company is into subprime mortgages, so this could be a reason, but this is only a guess. As I said yesterday, I will continue to track this company, but I already have too much invested in the Financial Sector currently to invest in this one.

Home Capital Group Inc. operates through one subsidiary, Home Trust Company, to provide mortgage lending, deposit, retail credit and credit card issuing services. They have subprime mortgages. The stock is widely held. Its web site is See my spreadsheet at

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 for a list of the stocks for which I have put up spreadsheets.

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