Thursday, April 22, 2010

Leon's Furniture Ltd 2

I would like to continue my talk about this stock (TSX-LNF) today, look at the pricing of the stock and see what the analysts say. The 2009 annual report is in and I own this stock. This stock is a currently favorite and my intentions are to buy more in the future. I first bought this stock in 2006 and I bought more in 2008 and 2009. I have a return of 8.7% per year on this stock.

The Insider Buying and Insider Selling report shows very little action. There is a small amount of buying and a very tiny amount of selling. We learn nothing from this. The best gage of what the company thinks how they are doing is the dividends. We are in uncertain times and the company issued a special dividend at the end of 2009 of $.20 a share rather than raise the regular dividend of $.28 a share. This seems to give out special dividends on a rather regular basis. They do not commit to a raise in the regular dividend unless they are sure they can maintain it. The company acts in a conservative manner and has done well by the shareholders in the past. I can only see this continuing.

Now, I shall go on to talk about the current price. The 5 year average low P/E ratio is 12 and the 5 year average high is 16.5. The current P/E that I calculate is 14.9. This seems like a reasonable P/E. I get a Graham Price of $10.03. The current stock price of $12.50 is about 25% above this. This is not as far off the Graham Price that this stock has been in the past, but the stock price is a fair bit above the Graham Price.

When I look at the Price/Book Value Ratio, I find that the current ratio of 2.35 to be above the same as the long term average of 2.36. The last thing to look at is the dividend yield. The current yield at 2.2% is not a bad yield for this stock, but it has been better in the past. The 5 year average is higher at 2.4%. The 10 year average yield on the low stock price is 2.5%. So, the stock price is reasonable. It reached a high of $15.70 in 2007, which is still some 20% higher than the current price.

When I look at analyst recommendations, I find a Strong Buy, a Buy and a Hold. There are not many analysts following this stock. This is probably because it is mostly owned by one family. The consensus recommendation would be a buy. (See my site for information on analyst ratings.) I cannot find any negative remarks on this stock. Analysts talk about the fact the company has no debt. The company stock is not thought to go up much in the near term, but stock is thought a good buy for long term gain and a good dividend.

As I said before, I already have some of this stock and I plan, at some point, to buy some more.

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. Cannot find financial statements on site, but they are published in news item. 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 for stocks followed and investment notes. Follow me on twitter.

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