Russel Metals 2

I am continuing my review of this stock (TSX-RUS) which I bought in April 2007 and I have lost 4% per year. However, the total return on this stock over the past 5 years is 11.5% and over the last 10 years is 25%. Past performance does not in anyway guarantee future performance, but I have had this stock for only 3 years and we are in a recession.

The first thing I like to look at is Insider Buying and Insider Selling. There is a very tiny bit of both with more buying. This tells us nothing. However, it would appeal that the stock options that have been granted this year seem to have been kept and this is positive. This is a widely held stock, so there is no big owner. The only negative I see is that generally, insiders have more stock options than actual shares.

When I look at the 5 year average P/E low it is quite low at just 7.2. The 5 year average P/E high is also quite a low figure at 11.4. I get earnings estimate of $1.30 for 2010 and this puts the current P/E ratio at 14. This is a rather high one for this stock, although the P/E has varied widely on this stock, it is above average. When I look at the Graham Price, the current price comes off a bit better. I get a Graham Price of $19.64 for 2010 and this is higher than the current stock price if $11.38, at just over 6%. This shows a good current stock price. There is one problem and that is the stock price on this stock is often below the Graham Price and at times, substantially.

When looking at the dividend yield, I get a current one of 5.4%. This is lower than the 5 year average of 6.6%. Also, past dividend yields have been much higher, often over 7%. This would tend to say, the current price is not a great one. The last thing to look at is the Price/Book Value. I get a 10 year average P/B of 1.33 and a current P/B of 1.39. What you want to see is a current one about 80% of the 10 year average. Part of this problem was the dropped in book value for this stock in 2009 (and another drop for the first quarter of 2010). So, this does not point to a current good price. The best thing I can say about the current price is that it is lower than it was in 2006 and 2007. So, on an absolute basis, the stock price is low, but it is not on a relative basis.

The next thing is what do the analysts say? When I look at the recommendations, I see Strong Buy, Buy, Hold and Underperform. It would seem that the consensus is a Buy with Buy and Hold being the most common recommendations. (See my site for information on analyst ratings.) Analysts seem to like this stock for the good dividend yield and feel it is reasonably safe. The main difference between the Buy and Hold recommendations is where the analysts’ feel this company will be in terms of price and earnings in 2011.

I will continue to hold the shares I have. I have no intentions of buying more at the present time.

This company does metal distribution and processing North America. It operates in three segments of metals service centers, energy tubular products and steel distributors. Its web site is here Russel. See my spreadsheet at rus.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.