Friday, May 7, 2010

Pareto Corp 2

I bought this company (TSX-PTO) in June 2009. It is a small cap dividend paying company. I do not have a lot invested in this company, as that is hard to do when the stock price is just around $1. Since I bought this stock, I have earned a Total Return of 125%. The stock has done quite well.

When I look at Insider Buying and Insider Selling, I only find some Insider Buying. This year some officers of the company have brought some $40,000 of this stock. This is not a lot, but it does show confidence in the company. Also, Insiders have been retaining their stock options. The other good thing is that the company has raised their dividends for 2010 and has also given out a special dividend. This shows that the management of this company has confidence in future earnings.

I get a P/E ratio of just 8.8 using the current stock price and estimated earnings for 2010. The 5 year average low P/E ratio is 11.7 and the 5 year average high is 20.5. For the Graham Price, I get $1.57. The stock price at $1.68 is some 7% above the Graham Price. This is not a bad stock price relative to the Graham Price. When you look at averages, the average low is 9% below the Graham Price and the average high is 68% above the Graham Price.

When I look at the dividend yield, I see that the current one of 4.8% is below the average of the last two years. However, the stock price on this company has been quite low over the last two years due to the recession. I should point out that a dividend yield of 4.8% is quite good. The last thing to look at is the Price/Book Value Ratio. The P/BV Ratio at 2.90 is about the same as the 9 year average of 2.93. So, it would seem that the current price is reasonable, but not a low as it has been over the past 2 years.

When I look for analyst recommendations, I seem to be only able to find one and that recommendation is a buy. (See my site for information on analyst ratings.) The only comments I can only find comments about this company is that the dividends are great and the fact that the company has been busy buying back shares. The shares outstanding were reduced by 25% in 2009.

I am pleased with my investment in this company. I will probably buy more in the future. However, I should point out that this is a small cap company, so these shares are not for everyone. The risk level, because it is a small cap is quite high.

Pareto is a Canadian marketing services and execution company committed to helping clients sell more. They service Canada’s most successful businesses through our network of services; Retail Merchandising,
In-Retail Messaging, Direct Marketing, and Incentives. Its web site is here Pareto. See my spreadsheet at pto.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 for stocks followed and investment notes. Follow me on twitter.

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