Wednesday, February 2, 2011

Nordion Inc 2

In October 2010, MDS Inc (TSX-MDS) changed its name and stock symbol to Nordion Inc and TSX-NDN. Also, the NYSE changed the symbol for this company from MDZ to NDZ. I bought stock in the old MDS company in 1996, 1997 and 1998. I sold all my shares in 2006. On this stock, I made a total return per year of 5%.

When I look at the Insider Trading report, I find that there has been some insider buying over the past year, with a little bit of insider selling. Considering that this is a $755M insider buying at $.7M is rather small. However, it is a positive note. All the insiders, except for directors, have more stock options than shares. Although another positive note is that insiders seems, for the most part, to be keeping their stock options.

The other positive note from this company is that they are reintroducing a dividend. The new dividend is $.10 a quarter or $.40 a share per year. The old rate in 2006 was $.13 a share, so this is a nice increase. It certainly shows that the company is confident in producing positive earnings and positive cash flow for the financial year ending in October 2011.

Since this company has had several years of negative earnings and before that, it took awhile for the stock price to fall when earnings fell; it is hard to pin down median Price/Earnings Ratios. However, it would seem that low P/E Ratios were around 15 and high P/E Ratios around 25. The current P/E Ratio I get is 19.6 and this is rather high, whether you look at this in relative or absolute terms. Sites that use the last 12 months earnings for the current P/E ratio haven’t got one as the financial year ended in October 2010 and there was no positive earnings.

In looking at the Graham Price, I get one for 2011 of $8.10. The current stock price of $11.17 is some 38% higher than this Graham Price. When I look at the Price/Book Value Ratio, I get a 10 year average of 1.73. The current one, at 2.18, is about 25% higher than the 10 year average. A P/B Ratio of 2.18 is neither particularly low nor high.

When I look at the dividend yield, I get a current one of 3.6%. Dividends paid under this stock were always very low, with the 5 year average from 2002 to 2006 at around .5%. That is ½ of 1%. The company paid out a very small portion or their earnings and cash flow. Under the new dividends, it is expected that the cash flow payout ratio will be around 31% for 2011. It will be 27% for 2012 if the dividends are not increased. A 30% payout is not a bad ratio, but I would not like to see it much higher.

Looking at analysts’ recommendations, I find they cover all the possible ones of Strong Buy, Buy, Hold, Underperform and Sell. It might be a toss up, but the recommendations are probably just into the Buy territory. (See my site for information on analyst ratings.) On this stock, analysts seem to like the short term prospects of the company better than the long term. Some think that long term prospects may be iffy.

I found one blog entry on this company at Nuclear N Former. There is also an article in the Ottawa Citizen on this company.

This company restated the dividend and at good rate to try to attract dividend investors. However, it is not clear wither or not this is a good investment for dividend investors or for long term investors.

Nordion Inc. is a global life sciences company that provides products and services for the development of drugs and diagnosis and treatment of disease. The company is a provider of pharmaceutical contract research, medical isotopes for molecular imaging, radio therapeutics, and analytical instruments. Its web site is here Nordion. See my spreadsheet at ndn.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.

1 comment:

  1. "Reintroducing dividend" never sounds good to me Susan. I'm sure you feel the same :)

    If one of my companies stops paying me, I'm out.