Saturday, February 6, 2010

Newfoundland Capital Corp 2

I am today continuing my review Newfoundland Capital Corp (TSX-NNC.A), that I started Thursday. I have not invested in this stock. This stock is not on any dividend list that I follow. They stop paying dividends in dividends in 2009. However, they did report dividends for 2009, as they declared dividends in 2009 to be pay in early 2010. A lot of company decreased or stopped dividends in 2009.

The first thing to look at is the P/E Ratio. The 5 year low for this ratio is 15 and the 5 year high is 19.7. The current P/E Ratio I get is very high at 34. The sites that use the last 12 months earnings get a high one also, but it is even higher at over 37. This points the stock being over price. If you look below at what the analysts say, they also say the stock is over priced.

The dividend yield on this stock is 1.5% and the 5 year average is 1.6%. So the current yield is not far off the 5 year average, but unfortunately, a good price is when the current yield is higher than the 5 year average. The next thing is the Price/Book Value Ratio. Here the current one is higher than the long term average. This also points to the current price also being too high. The last thing is the Graham Price. I get a Graham price of just $3.65. The current stock price of $6.80 is more than 86% higher. This also points to a current high price. I must say the average price is about 35% above the Graham Price, but it would still appear that the current price is too high.

When I look at the analysts’ recommendations, I find that they range from Hold to Sell, with the consensus probably being a Sell. A lot of analysts feel that the stock price is just too high and better returns on a go forward basis could be made elsewhere. At the very least, many analysts feel that you should reduce your holding in this stock. (See my site for information on analyst ratings.)

A couple of problems were noted and one of these is the Liquidity Ratio. I find it at 0.37. This means that the current assets cannot cover the current liabilities. A long term debt is coming due and it is expected that the company will sell more shares to raise capital. The analysts I looked at mentioned this low Liquidity Ratio. Another problem mentioned is that the Steele family has some 96% of the vote, but has just over 50% of the shares. This is because NCC.A shares are subordinate to the NCC.B shares owned by this family. The Steele family ownership may or may not be a problem, and this depends on how you view such ownership set ups.

The stock price is probably too high. It would appear that this might not be a good time for an investment in this stock. I do not sell off shares in companies I own simply because the shares become overpriced. However, in this case, it would appear there are some more problems than the stock is overpriced. Selling off or reducing shares in a company is always a value judgment. For this stock, no one thinks it will tank, but people do have concerns. For this stock, I am not interesting in buying it at the current time, but I will continue to track it.

Newfoundland Capital Corporation Limited also owns and operates Newcap Radio. Newcap Radio is one of Canada's leading radio broadcasters with 79 licenses across Canada. The Company reaches millions of listeners each week through a variety of formats and is a recognized industry leader in radio programming, sales and networking. The Company has 58 FM and 21 AM licenses spanning the country employing over 800 radio professionals in Canada. Newfoundland Capital Corporation Limited also owns and operates the Glynmill Inn, Corner Brook, Newfoundland and Labrador. 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

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