Wednesday, February 16, 2011

Linamar Corporation 2

This is a stock (TSX-LNR) that I track, but I do not own. This is a manufacturing company, so they tend to have a low payout ratio on both earnings and cash flow. Over the longer term, the dividend growth is 4.1%, but the dividends have not grown over the past 5 years. This stock may be an interesting industrial stock, but it is not one I am currently interested in investing in.

When I look at the Insider Trading information, I find that that there was a small amount of buying in December of 2010. There was no insider selling over the past year. What I like about this company is that insiders seem to have more shares than options. It would also seem that recent options granted to the CEO were retained. The company has also shown faith in the near future of the company by reinstating the full dividends for 2010. The dividends were cut in half for 2009.

For the Price/Earnings Ratio, I get a 5 year median low of 8.4 and a 5 year median high of 16.4. The current P/E of 12.8 is between these values and a little higher than the average of 10. I get a current Graham Price of $23.15. The current stock price of $23.09 is slightly below this. This is good in itself, but on average, the Graham Price has been some 18% higher than the stock price. So, on a relative basis, the stock price is high.

The 10 year average Price/Book Value Ratio is 1.22. The currently one at 1.75 is almost 45% above this. This tends to point to a rather high stock price. The current dividend yield at 1% is lower than the 5 year average of 1.6%. The growth potential of this dividend is not great either. If we assume a growth of 4% per year over the next 10 years, the dividend would only be 1.5% in 10 years time. You would not buy this stock for its dividends.

When I look at analysts’ recommendations, I find lots of Strong Buy and Buy recommendations. There are also Hold and Underperform recommendations. The consensus is probably a Buy (but close to a Strong Buy). (See my site for information on analyst ratings.) Analysts remark that this stock is recovering. It is in auto parts industry, but it tends to do more in the precision type of auto parts, which has little competition, so it is well placed to recover as auto industry recovers.

Linamar Corporation is a diversified global manufacturing company of highly engineered products. It is a world-class designer and diversified manufacturer of precision metallic components and systems for the automotive industry, and mobile industrial markets. Its web site is here Linamar. See my spreadsheet at lnr.htm.

My stock Pareto Corp (TSX-PTO) is being bought out at the end of March this year. I see no sense in waiting until its buyout in connection with my TFSA. I got a price of $2.69 (plus commission of $9.99) compared to the buy out price of $2.72. I have replaced this stock with Davis and Henderson (TSX-HD), a stock I already own. I also bought a filler stock called McCoy (TSX-MCB) which I will be reviewing shortly. I have some Pareto also in my Canadian Trading account and I will replace it now, but hold Pareto until after the forced buyout and get the $2.72 for my shares.

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.

No comments:

Post a Comment