Friday, December 31, 2010

Transcontinental Inc 2

Today, I will continue with my review of this stock (TSX-TCL.A). It is one that I follow, but I do not own it. I have not blogged about this stock before. It is fairly well followed company that is into print media. They have a financial year end of October 31st of each year. They have a fairly good record of increasing their dividends.

I looked at the insider trading report. What I find is a minor amount of insider buying and no insider selling. What we do know is that the company raised their dividend 12.5% in 2010. This was after no dividend increases occurring in 2009. This is a positive sign from management that they feel positive about the future.

For this stock, I get a 5 year median Low P/E of 11.5 and a 5 year median high P/E of 13.52. The current P/E I get is just 8.5. My any standard a P/E of 8.5 is low and here it is relatively low also. Sites that use the last 12 months earnings for current P/E get an even lower one of 7.9. I get a Graham Price of $26.75 and a current stock price of $16.07. The stock price is some 40% lower than the Graham price. This is points to a low stock price. The low average difference between the Graham Price and the stock price is -7.5%.

When I look at the Price/Book Value Ratio, I find that the current one of 1.04 is some 67% lower than the 10 year average of 1.56. The last thing to look at is the Dividend yield. At 2.3%, it is a bit higher than the 5 year average of 2.2%. This is the only measure that does not show a very low stock price.

When I look at analysts’ recommendations, I find that they are Strong Buy, Buy and Hold. I find no other, and most of the recommendations are either a Buy or a Hold. The consensus recommendation would be a Buy. (See my site for information on analyst ratings.) This company is in print media and a lot of analysts do not like this business.

Even some analysts with Buy recommendations remark on the lack of revenue growth. They remark that earnings have improved only because of cost containment. Analysts with the Hold recommendations feel that the print media business is being cannibalized by the internet. They feel that print media is a tough business and that investment in this area will not longer be a good long term investment.

I must admit, this is not the sort of business I am interested in for a long term investment. Sometimes companies are cheap for a good reason.

Transcontinental, one of Canada's top media groups, is the largest printer in Canada and Mexico and the fourth-largest in North America. In addition to commercial printing, it operates 150 websites and is a leading publisher of consumer magazines, French-language educational resources and community newspapers in Quebec and the Atlantic provinces. Its web site is here Transcontinental. See my spreadsheet at tcl.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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