Thursday, February 10, 2011

The North West Company 2

I first heard about this company (TSX-NWF) at the 2009 Money Show in Toronto. This is one of the income trust companies (TSX-NWF.UN) that has recently changed into a corporation. It was one that many thought was worth while watching and that it would be one of the income trust companies to do well. And, it has done well. It also has not missed a beat in the change to a corporation with the dividends remaining the same in the change over.

When I looked into Insider Trading, I can only find information for this year. This is because the company has changed to a corporation and has changed it TSX symbol. There was a very small amount of insider selling by some directors in 2011. What would be of more interest is to see what the company does in regards to dividends.

The 5 year median low Price/Earnings Ratio is 9.5 and the 5 year median high P/E Ratio is 13.6. That makes the current ratio of 15.7 rather high. However, a P/E ratio of 15.7 is a moderate rather than a high P/E Ratio on an absolute basis. Part of the reason for the current high P/E ratio is that this company is not expected to earning as much in 2011 as it will in 2010. Earnings are expected to again pick up in 2012. However, even if they made the same in 2011 as 2010, the P/E ratio would still be around 13 and this is high for this stock.

Because of the drop in earnings for 2011, the current Graham Price I get is $13.92. This is lower than the Graham Price I estimate for 2010, which is $15.33. However, using either Graham Price, the Graham Price is still 40% to 50% below the stock price. The average difference between the Graham Price and the stock price is close to 0%. The average high difference between the Graham Price and the stock price is 16%. So, no matter how you look at this stock price, it is way off the Graham Price and way off the usual difference.

I get a 10 year average Price/Book Value Ratio of 2.25 for this stock. The current P/B Ratio is 3.37 and this is some 50% higher than the 10 year average. By this measure, the stock price is high. The last thing to look at is the Dividend Yield and 6.4% and this is low than the 5 year average of 7%. This is another indicator to say the stock price is high.

When I look at analysts recommendations, all I find are Hold recommendations. So, the consensus recommendation would be a Hold. (See my site for information on analyst ratings.) Mind you, no one says anything negative about this stock or the company. The analysts that I read say that they like this company. The analysts that follow this stock just think that this price is too high. Some analysts recommend that you buy the stock on any dip in price.

The North West Company is a leading retailer of food and everyday products and services to rural communities and urban neighborhoods in Canada, Alaska, the South Pacific and the Caribbean. North West operates 225 stores under the trading names Northern, NorthMart, Giant Tiger, AC Value Center, and Cost-U-Less. Its web site is here North West. See my spreadsheet at nwf.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. NWF just made this screening list: