Monday, March 15, 2010

Richelieu Hardware Ltd 2

I am continuing my review this stock (TSX-RCH) today as I received the annual reported dated November 30, 2009 and I own this stock. I bought it because this stock is well liked by some investor newsletters I like and follow sometimes. I first bought this stock in 2007 and my return on this stock is, including dividends, 16.7% per year. The reason for the good return is the follow up purchases I did at very good prices.

The first thing I like to look at is Insider Buying and Insider Selling. There was some very minor selling at the end of 2009. Other than that, there has been no activity in this area. The other thing to mention is the increase in dividends because this show confidence in the company by the management.

When I look at P/E ratios, I find the 5 year average low is 13 and the 5 year average high is 17.9. I get a current P/E of 14.3 based on estimate of earnings for 2010. The sites that show a P/E based on last 12 months earnings get a P/E of 16. The P/E is not bad, but it is not particularly low. The next thing is the Price/Book Value. Here the ratio is favorable to a low price as the current P/BV of 2.01 is about 73% of the 10 year average of 2.74. This ratio shows a good price if the current P/BV is 80% or less of the 10 year average.

The next thing to look at is the Graham Price. I get a current Graham Price of $19.62. This is 12% less than the current price of $22. However, the stock price of this company is seldom near the Graham Price, so on a relative basis the current price is good. This is a growth company and that is why the stock price is usually always higher than the Graham Price. The last thing I want to look at is the dividend yield. The current yield is 1.6% and the 5 year average is 1.3%. On this basis, the current price is relatively good.

When I look at analysts recommendations, I find a few Buys and lots of Holds. The consensus recommendation would be a Hold. (See my site for information on analyst ratings.) The Holds seem to be because no one expects the price of this stock to go up anytime soon. The analysts that say this stock is a buy mention the recent dividend increase and the very strong balance sheet this company has. They feel it should be bought for long term gains and rising dividends.

I plan to hold on to the shares I have and continue to earn their rising dividends.

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. This stock is widely held, but QV Investors hold about 10% of outstanding shares. They are Institutional Investors looking after Mutual Funds, Pension Funds and Foundation Funds. 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 Follow me on twitter.

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