Wednesday, June 9, 2010

Shoppers Drug Mart 2

I bought this stock (TSX-SC) for my TFSA, so I did a purchase in January 2009 and in January 2010. To date, I have lost some 21% per year. This is not a stunning performance. After I had purchased this stock, analysts seem to have come up with all sort of negative things to say about this company.

When I look at the Insider Buying and Insider Selling information, I find that there has been, over the past year, Insider Selling to the tune of $1.8M. However, this selling all occurred last year. Lately, insiders have been keeping their stock options. As I find a problem in lots of company, I find that the insiders of this company have more stock options than shares in this company. There has been an extremely small amount of insider buying this year. I do not think all this tells us much. All the selling of last year occurred prior to the recent drop in share price.

The 5 year average low P/E ratio is 18.9 and the 5 year average high P/E is 22.8. These ratios are both rather high and rather close. The current P/E ratio that I get is 12. This is better than the average low and is not a bad ratio. For 2010, I get a Graham price of $34.18. The current stock price of $34.77 is less than 2% higher. I do not see a time since this stock went public 9 years ago when the stock price was so close to the Graham price. Prior to this the closes the stock price has been to the Graham Price was 25% above the Graham Price.

The current stock yield of 2.6% is quite a bit above the 5 year average of 1.4%. This is the highest the yield has been so far. The last thing to look at is the Price/Book Value Ratio. The 10 year average is 3.36 and the current P/B is just1.74. This P/B ratio is less than 60% of the 10 year average and also points to a good price.

So what are the consensus recommendations? When I look at the recommendations, I find lots of Strong Buys, Buys and Holds. I find no other recommendations, The consensus would be a Buy. (See my site for information on analyst ratings.) A lot of analysts feel this is a great company. However, it is the Ontario government’s generic drug policy that has put this stock under pressure. There is also the fear that other provinces may follow Ontario’s lead. No one feels that this stock will rise anytime soon.

I found a couple of reports by RBC dated March 26, 2010 and April 8, 2010 on this company. (I do not know how long this link will last.) Wikipedia has an item on this company, see Shoppers. Also, Wikinvest has an article at TSE:SCfor this company.

At the moment, I will be holding on to my stock, as this is a long term solid investment. However, I doubt if I will see the fruits of this investment anytime soon.

Shoppers Drug Mart Corp. is a licensor of Shoppers Drug Mart in Canada and Pharmaprix in Quebec. The company owns and operates Shoppers Home Health Care stores. It also owns MediSystem Technologies Inc. and the new Murale Stores. Its web site is here Shoppers. See my spreadsheet at sc.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.

1 comment:

  1. I was a long time associate. I have since left the company and ply my trade elsewhere. This is NOT the same company it was even 5 yrs ago.
    I would not invest, the best days are long gone.
    Finally, the present company manages by threats and is very very
    staff unfriendly. 3rd party intervention will occur and the associate body is very upset..see their 1B lawsuit.

    also check out