I am reviewing this stock (TSX-DCI.UN) today because I have not done so for a year. I picked up this stock from the Money Show I attended in 2009. It was an income trust company that was recommended as one that will do well when income trusts had to convert to corporations. This stock has done well over the past year. The question today, is it a good stock to buy at the present moment?
When you look at Insider Trading, I find that there was $6.6M in insider selling and $1.2M in insider buying. The majority of the selling seems to be by Jeffrey J. Smith, the CEO via Atlantis Financial Corp., a company wholly owned by Jeffrey J. Smith. I see no reason for this sale; so, it is not telling us anything. The hint that the company has confidence, at least in the short term is the special dividend of $.25 to be paid in early 2010.
The company had previously said that they would not decrease the dividends on conversion to a corporation. They are sticking to this. However, they seem to be inclined to give special dividends out rather than increase the dividend payments. This generally points to management having cash now for an extra dividend, but them also being unsure if the future will provide for an increase in dividend payments. Also, analysts are predicting that the earnings on this stock will decrease in 2011 from estimates given for 2010.
The 5 year median P/E ratios for this stock are so high (at 76 and 94) that it provides no guidance on a good relative P/E ratio. However, the current P/E ratio, based on the estimated earnings for 2010, at 11.7 is not a bad P/E ratio. Generally speaking, a P/E of 10 or less is good. The Graham price for 2011 is $16.93 and the current stock price of $20.98 is some24% above this. However, in the past the stock price and Graham Price have not even been close. In recent years, the Graham Price and the Stock Price has been getting closer.
When I look at the Price/Book Value ratio, I get a current one of 2.96 and a 5 year average of 2.17. This does not point to a good current price, as the current ratio is almost 40% above the 5 year average. The last measure to look at is the dividend year. The 5 year average is 10.34%, which is very high. The current yield at 6.7% is still a good yield, but it is lower than the 5 year average.
So, it is only on the basis of P/E that this stock price looks good. On sites that use the last 12 months earnings, the P/E is even lower at 10.3. This company’s 12 months earnings equal $2.03. Also, you should be aware that yields are expected to come down on Income Trust as they convert to corporations. So, a current yield of 6.7% is still good.
There are few analysts that follow this stock. What recommendations I can find are Strong Buy and Buy. The consensus is probably a Strong Buy. (See my site for information on analyst ratings.) A lot of analysts seem to like the management. It is felt that this company is well managed and it will continue to grow their share of ATM machines.
I will continue to track this stock.
DirectCash is the leading provider of ATMs, debit terminals, prepaid phone cards and prepaid cash cards in Canada. They have built a substantial technological, sales and service infrastructure that enables them to offer convenient and secure revenue streams for businesses across the country. Direct Cash operates in Canada, the United States and Mexico. Over 40% owned by Gallacher family. Its web site is here Direct Cash. See my spreadsheet at dci.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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