Friday, November 26, 2010

Goodfellow Inc. 2

I am reviewing this stock (TSX-GDL) today because I have not done so for a year. I started to look at this stock when I was searching for small cap stocks that paid dividends. It looked like an interesting stock, although it was not the one I decided to buy. Their financial year end is 31st of August of each year.

When I look at the insider trading report, over the past year there have been a bit of insider buying and a bit of insider selling. There is net selling of $.4M and it has all been done by directors of the company. This tells us little. What might be more telling is the handling of dividends. They issued a special dividend of $.30 in April of 2010. This is the same rate as the semi-annual dividend payment. They have not increased the dividend for this year yet and the first one has been declared at $.30. Are they being cautious or do they not think that the financial year ending in August 2011 will be more profitable than the prior year?

When I look at the P/E Ratio, I find the 5 year median low to be 5.4 and the 5 year median high to be 9.2. These are both quite low, where any P/E ratio below 10 is low. I get a current P/E ratio, based on earnings estimates for 2011 at 6.5. Sites that use a P/E ratio based on last 12 months of earnings get a P/E Ratio of 7.7. These ratios are all low; however, this is a small cap with a heavy insider ownership. The best way of getting an idea on what the P/E Ratios are like for this stock (or any stock) is just eye balling the section of my spreadsheet on stock prices and P/E Ratios. See my spreadsheet at gdl.htm.

For this year, I get a Graham Price of $23.02. The current stock price of $11.37 is some 51% lower. However, the Graham Price has on average, been some 44% lower than the stock price. So, on a relative basis the stock price is low. Next, I shall move on to the Price/Book Value Ratio. I get a current P/B Ratio of .0.84. This is some 90% below the 10 year average of 0.93. However, it also means that the stock price is below the theoretical breakup value of this stock. The current yield is 5.3%. The 5 year average yield is 5.1%. The current yield is good, but the high yield for this stock has often been around 5.3%. So, this shows a good, but not great, current price.

Another blogger follows this stock, see Canadian Ben Graham blog. A blogger posted a list of what he thinks is the current best dividend paying stocks and in this list was Goodfellow Inc. See The Dividend Guy Blog. It was also listed as one of the 50 best Canadian Dividend paying stock under The Financial Blogger.

I cannot find any analysts following this stock, but I did find a recent investment letter report that said that the stock was a good buy at $11.40. It also said that it expects Goodfellow to have near-term challenges because of the current weak economic environment. Nevertheless, they thought that the stock was a good buy for long term capital gains and dividend income.

Goodfellow is a wholesaler and distributor of wood and wood by-products with headquarters located in Delson, Qu├ębec. We have wood treating facilities and offer a full inventory of exterior siding, flooring, plywood, treated wood and prefabricated products as well as a broad range of hardwood, softwood and exotic woods. It has distributions centers in Canada and US. It is about 60% owned by insiders. Its web site is here Goodfellow. See my spreadsheet at gdl.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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