Friday, January 22, 2010

TMX Group 2

I am continuing my review of TMS Group (TSX-X) today. I do not personally own this stock, but I do follow it. One of my main complains about this stock has changed, and that is the lack of growth in Book Value. After this stock because public, the book value dropped significantly. It is now recovering very nicely.

When I look at insider buying and insider selling, I find that over the past year there has been some $8.2M of insider selling and very little insider buying. Most of the selling appears to be by one director, who still has a substantial investment in this company. The other thing is that most insiders seem to have more options than stock. Selling by a limited number of people in a recession does not mean much as this is a time that people need money. The problem with looking at insider selling is that people sell for all sorts of reasons unconnected with a stock future prospects. It is only strong insider buying that really tells you something.

The first thing to look when considering a stock purchase is the P/E ratio. The 5 year average low is 18 and the 5 year average high is 26.5. The P/E low is not particularly low. A low P/E would be closer to 10. However, the current P/E, based on expected earnings for 2009 is 13.5. This is not bad. I get a forward P/E of 12 and this is even better. For sites that use the last 12 months earnings, they also get a P/E around 13.

Now, I shall go on to talk about the Price/Book Value Ratio. I touched on the Book Value in my open remarks. The current ratio of 2.87 is less than 30% of the Price/Book Ratio of the last 8 years. Usually, you look for one that is 80% or less of the long term Price/Book Value ratio. However, the Book Value has grown rapidly over the last few years after it dropped initially after this stock went public. The P/BV rating is ok at 2.87, but it is not that low.

The next thing to talk about is the Graham Price. This Graham Price at $25.35 is some 24% below the current stock price of $31.90. The only good thing to say is that, on average the Graham Price has been at 50% less than the stock price. The only time I can see that the stock price came near to the Graham Price was in later part of 2008.

The last thing I want to look at is the dividend yield. The current dividend yield at 4.8% is higher than the 5 year average of 3%. This is pointing at the relatively good currently stock price. The other things that I looked at, only point to a current reasonable price.

When I look at analysts recommendations, I find they range from Buy to Underperform. The consensus rating would be Hold. (See my site for information on analyst ratings.) The volume of trading on the TSX is down due to the recession. The other thing is that there are other trading platforms and this could very well affect the long term earnings for this stock.

I can see why the consensus recommendation is a Hold. For me to consider this stock, it would have to start raising their dividends again, and I do not see this happening soon. The other thing is it is hard to know how stock trading will change in the future. We do not know what will happen because of other stock trading platforms besides those owned my TMX group.

TMX Group operates Canada's two national stock exchanges, Toronto Stock Exchange serving the senior equity market and TSX Venture Exchange serving the public venture equity market, Natural Gas Exchange (NGX), a leading North American exchange for the trading and clearing of natural gas and electricity contracts and Shorcan Brokers Limited, the country's first fixed income interdealer broker. TMX Group also owns The Equicom Group Inc., a leading provider of investor relations and related corporate communication services in Canada. TMX Group has its headquarters in Toronto and maintains offices in Montreal, Calgary and Vancouver. 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. Also, look at other investing notes on my website at

1 comment:

  1. As usual, a fantastic post - keep going! I’m saying thanks for the thousands who enjoy your blog and don’t say anything!