Tuesday, November 10, 2009

Leon’s Furniture

I am reviewing this stock (TSX- LNF) today as I am looking at purchasing some more of this stock. This is the fall, and I like to buy stock in the fall. Usually, you can get some of the best deals on stock in the fall, as often there is a drop in the market at this time of the year. This will be a short entry as I just reviewed this stock in July of this year. I have updated my spreadsheet with the data from the June 2009 financial statements.

Looking at the growth figures on this stock and they are all good. What I want to talk about is the Graham Price. This is a price developed by Benjamin Graham. He is the author of one of the most famous investment books called “The Intelligent Investor”. Graham wrote the book in 1973 and it is considered to be a classic. The Graham Price is a formula that uses the earnings per share and the book value per share to determine a proper price to pay for a stock.
If you look at the spreadsheet, this stock’s price has seldom got near to the Graham Price. On average, over the last 10 years, this stock’s price has been over 20% higher than the Graham Price. Currently, it is under 2% over the Graham Price.

The other ratios of P/E and Price/Book Value are also good. The current P/E at around 12 is the same as the 5 year low P/E ratio. The Price/Book Value ratio is less than 80% of the 10 year average for this ratio. The yield at 2.9 is also above the 5 year average of 2.4%. The only think that I do not like is the Accrual Ratio is rather high at 5.6%.

Globe investor gives this stock a 3 star rating. It is a small cap stock and it is a consumer’s stock, so it is not a safe, but they often reward their shareholders with extra dividends when they can afford to. When I look at analysts recommendations, I find only a Hold recommendation. (See my site for information on analyst ratings.) However, I think this is a mistake. I know that earnings are down, but we are in a recession. I am a long term investor, so I am willing to buy and wait for this stock to recover.

When you look at Insider Buying and Insider Selling on this stock, I only find Insider Buying. There is not a lot of Insider Buying, but there has been some by the CEO and also by Directors. Leon’s is also buying back company shares to reduce the share outstanding.

This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Leon family owns 68% of this company. Its web site is www.leons.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html.

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