Wednesday, May 18, 2011

Davis & Henderson Corp 2

I first bought this stock (TSX-DH) in 2009 and I have since bought more in 2010 and 2011. I have made a total return of 31% per year on this stock. Dividend payments probably are around 11% per year of this total return. The reason I have done so well is because I bought this stock at a very good price in 2009.

The Insider Trading report will only cover this stock from the beginning of the year when it because a corporation. Since the beginning of the year, there has been $1.2M insider buying by CFO, officers and directors. There has been no insider selling. This is positive. Also, insiders do not hold any stock options. It would appear that 53% of this company is owned by 38 institutions. Over the past 3 months, there have been 8 institutional buyers and 7 institutional sellers for a small net gain in shares owned by institutions.

When I look at the 5 year median Price/Earnings Ratios, I have a low P/E ratio of 8 and a high of 11.9. I get a current P/E ratio of 10, which is just higher than the 5 year median. Also, a P/E of 10 is rather low. I get a Graham Price of $22.37 and this is about 9% above the current stock price of $20.30. The current range of differences between the Graham Price and Stock price, is from -24% to 6%. So a difference of -9% is just below the median range. These both point to a rather average current price.

I get a 10 year median Price/Book Value Ratio of 1.90 and a current one of 1.89. Here there is not much difference between the 10 year P/B Ratio and the current one. The current dividend yield of 5.9% is lower than the 5 year median of 10.2%. The company just lowered the dividends by 35%, but there is more than a 35% difference between the 5 year median and current dividend yield. So, on a dividend basis, the stock price is not a great one. However, none of this shows a particularly high stock price. In investing, all you can hope for is getting the stock at a relatively decent price and this stock seems to be there.

When I look at analysts recommendations, I find Buy, Hold and Underperform recommendations. The consensus would be a Hold recommendation. (See my site for information on analyst ratings.) Analysts seem upset because the company did not meet the earning estimates for the 4th quarter of 2010. However, the earnings were higher than expected in the 1st quarter of 2011.

Most analysts give a 12 month stock price at or slightly below the current stock price. However, the one buy recommendation give a 12 month stock price at $30. A number of analysts comment on the current good yield of almost 6%. No one thinks that this is a growth stock.

A number of people have mentioned the recent purchase of MortgageBot by Davis and Henderson. While it is felt the price was high for this company, it is also felt to be good buy. It was purchased by a combination of shares and debt.

In the Globe and Mail’s Money Cruncher column, on March 8th, 2011, this is a stock that came up in the screen called “In Search of Wealth Creators”. However, I should point out that stock screening can only point out certain aspects of a stock. You really need to investigate a stock further after the screening to see if the company is really what you are looking for.

As I said yesterday, I think that this was a good investment for me and I intend to hold this stock in my portfolio.

Davis & Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Its web site is here Davis & Henderson. See my spreadsheet at dh.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. D&H seems to bee focusing more an more on expanding their NON cheques products and focusing on acquisitions. They arent all that aggressive on cheque pricing and seem to get all their orders by being the primary cheque supplier for virtually all canadian banks. There are other smaller print companies offering better pricing and faster service but it looks like d&H's foothold will remain.
    Some other competitors ive seen out there include, and

    Nebs is very large much like D&H and is owned by a US company called Deluxe.