Tuesday, October 12, 2010

Finning International Inc. 2

As I said on Thursday, I do not own this stock (TSX-FTT). When I was in the market to buy an industrial stock in this area, at the time I liked Toromont Industries (TSX-TIH) better, so that is what I bought. See my latest reports on Toromont at report 1 and report 2. See my spreadsheet on Toromont at tih.htm.

When looking at Insider Trading, I find about $.5M of Insider Buying and about 1.5M of Insider Selling. This nets to about $1M in net Insider Selling. This is not much action on a $2B company. However, the CEO, CFO and officers have more stock options than shares in this company. This I not what I like to see, however, there are an awful lot of companies giving out an awful amount of stock options. So, we do not learn much here.

When I look at the 5 year P/E low median ratio, I get a low P/E ratio of 16 and a 5 year P/E high median ratio of 19. I get a current P/E of 25 based on earning estimate for 2010. Except for 2008 where the P/E high was 39.5 and for 2004 when it was 22.5, the high P/E ratios have been below 20, the current one of 25 does seem a bit high. However, the forward P/E is 17. Forward P/E ratio is based on earnings expected in 2011. The earnings for this company are not expected to recover from this recession until 2011.

When I look at the Graham Price, I get one of $13.07. The current stock price of $23.85 is some 45% above this. Although the stock price has seldom been below the Graham Price, the median low difference is 12% and the high median difference is 56%. This makes the current price relatively closer to the high median difference. When I look at the Price/Book Value Ratio, I get a current one of 2.98 and a 10 year average of 2.13. The current one is 40% higher than the 10 year average. So this also does not point to a good current stock price.

The one comparison that points to a good stock price is the dividend yield. The current yield of 2% is higher than the 5 year average of 1.8%. However, the yield has been better over the past 2 years and the 10 year high yield is 2% with the 5 year average high at 2.5%. So, while none of this shows the current price is be excessively high, they also do show the current price is be any sort of bargain either. The thing is that this stock price is up over 40% since the end of 2009.

So, what do the analysts say about this stock? When I look at the recommendations, there are lots of Strong Buy and Buy recommendations and a number of Hold recommendations. The consensus is close, but it is probably a Buy rather than a Strong Buy consensus. (See my site for information on analyst ratings.) The curious thing is that no one expects the stock price on this stock to raise much over the next 12 months, although a number of people have said that this stock is a good long term investment. Analysts also point to the company’s strong 2nd quarter and that it has long term growth potential.

There is a Wikipedia entry for this company at Finning. This company is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices).

I will continue to track this company, but will probably not be interested in buying it while I hold Toromont Industries.

This company sells, rents and provides customer support services for Caterpillar equipment and engines. They cover Canada, UK, Argentina, Bolivia, Chile and Uruguay. Its web site is here Finning. See my spreadsheet at ftt.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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