Tuesday, November 3, 2009

PFB Corp

I am reviewing this stock (TSX- PFB) today as I just read an article on this stock and thought I would do a spreadsheet on it. This stock is a dividend paying small cap stock. The article said that this stock would be good for long-term gains and rising dividends. This is the thing with small cap stock; you can get a blend of capital gains and rising dividends in the long term if the company is successful. However, such stock is not for everyone. Small cap stock can be risky and this stock is no exception. You should not invest in this stock unless you are willing to accept the risk.

The good growth figures are in Revenue and dividends. The regular dividends have grown over 9% per year for the last 5 and 10 years. They have also given out a number of special dividend payments over the years since starting dividend payments in 1997. If you look at earnings, they were negative 22% per year growth to 2008. However, 2008 was a particularly bad for this company. The expected earnings for 2009 are $.55. If this comes true then the 5 year earnings growth will be 11% per year. This is a good figure. However, this would also give a 10 year earnings growth of only 2.2% per year. The problem is that recessions hit this company’s earnings very hard.

If you look at cash flow, you will see about the same results as for earnings, so these figures are currently very negative. Here it also, the company is expected to do much better this year. The last growth figures to look at is the book value. Here the growth has been mediocre with 5 and 10 year growth at 6% per year and 4% per year. The other negative is the Return on Equity. Although the 5 year average was over 9%, in 2008 the ROE was under 2%. For the first half of this year, the ROE has improved, but only slightly to just over 4%.

The place where this stock shines is the Liquidity Ratio and the Asset/Liability Ratio. The Liquidity ratio is generally about 2.00 and the Asset/Liability Ratio is generally above 3.00. With either of these ratios, a good one is anyone at 1.50 and above. This stock has a strong balance sheet. This is a good situation to be in if you are a small cap company.

I do not own this stock, but I would be interested in tracking it at the present time, as it maybe something I might be interested in, in the future. They have not raised their dividend since 2005. However, they do have a tendency of keeping the dividend level for a number of years and then do a very large increase.

PFB Corporation, through its wholly-owned subsidiaries, is a vertically-integrated manufacturer of proprietary insulating building products that are based on expanded polystyrene (EPS) technology. This expanded polystyrene (EPS) rigid insulation is used in a wide variety of residential and commercial construction projects across North America. It was founded in 1968 as Plasti-Fab Ltd, now a subsidiary of PFB. Directors and officers own 57% of the issued and outstanding common shares as of December 31, 2008. Its web site is www.pfbcorp.com. See my spreadsheet at www.spbrunner.com/stocks/pfb.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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