Tuesday, November 9, 2010

Forzani Group Ltd

I have been following this stock (TSX-FGL) since 2008, because it has been recommended as a good dividend paying stock. They started to pay dividends in 2008. It was recommended along with Reitmans. However, I like Reitmans better because it has a much stronger balance sheet (little debt) and it increases it dividends on a regular basis. Please note that I do not own Reitmans either, but I am considering it. I think that this would be a more interesting stock when (and if) it starts to increase their dividends.

In regards to dividends, I understand that we are just coming out of a recession where consumer stocks have been hit hard and that a lot of companies did not increase their dividends in 2009 and this year. So, what I am saying is that it would be a good idea to be patient with this stock and give it a chance. I will continue to follow it.

With this stock, the Liquidity ratio is a bit low at 1.15. However, the Asset/Liability Ratio is good at 1.83. Another difference with this stock compared to Reitmans is that it is widely held, whereas Reitmans is 50% owned by the Reitmans family. This stock has made no earnings in the first two quarters of the 2011 reporting year. However, this is normal for this stock and it is expected to do well in the last two quarters of the 2011 reporting year. The financial year for this company ends at January 31 of each year.

For this stock, the growth figures for the last 10 years are better than for the last 5 years. (We are in a recession.) If you had invested in this company for the last 5 years, you would have earned a return of about 5% with just under 1.5% of the return in dividends. Over the past 10 years, the return is better at around 12%. Dividends would not have amounted to much as they just started them in 2008.

A much better growth story is in revenue, and the growth in revenue per share for the last 5 and 10 years is 8.3% and 10.2% per year respectively. Growth in cash flow is not as good, but it is respectable. The growth in cash flow for the last 5 and 10 years is 7.3% and 9.3% per year, respectively.

The return on equity for this company is also respectable, with the 5 year average of 9.4%. As I had mentioned previously there has been a lost in earnings for the first 2 quarters of the current reporting year. However, this will change over the next to quarters. In fact, earnings for this year are expected to grow some 30%, year over year.

There are a number of analysts who follow this stock and tomorrow, I will talk about what they are saying about this stock.

The Forzani Group is a Canadian retailer of sporting goods, offering an assortment of brand-name and private-brand products through stores under corporate and franchise banners. Their corporate banners include Sport Chek, Sport Mart, Coast Mountain Sports, National Sports, Athletes World and Hockey Experts. The franchise banners include Sports Experts, Intersport, Atmosphere, Nevada Bob’s Golf, Hockey Experts, Fitness Source, Pegasus, RnR, S3, Tech Shop and Econosports. Its web site is here Forzani. See my spreadsheet at fgl.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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