Wednesday, July 13, 2011

Saputo Inc 2

I own this stock (TSX-SAP, OTC- SAPIF). I first bought this stock in September 2006 and I bought more in May and June of 2007. To date, I have made a return of 23% per year. Around 2% per year of this total return is attributable to dividends.

There is an awful lot of insider selling to the tune of $25M. $8M of the insider selling is by the CFO and $17M of this insider selling by officers. There was a bit of insider selling by directors. The selling by CFO and officer seem to be all stock options. There was also $1M of insider buying by directors. Net Selling was $24M. This is not the worse I have seen by insiders, but it is high.

Emanuele (or Lino) Saputo owns around 34% of this company. Also, there are 123 institutional stock holders, holding around 12% of this company. Over the past 3 months, institutions have bought and sold this stock and present have slightly more shares than they did 3 months ago. (See my site for information on Insider Trading.)

When I look at the 5 year median Price/Earnings Ratio, I get a low of 14.11 and a high of 20.26. The current P/E Ratio of 18.02 is just above the median P/E of 17.18. So, the stock price is not unreasonable. I get a Graham Price of $24.36 and the current stock price at $46.32 is some 90% above this. The median difference between the Graham Price and the high stock price over the past 10 years is 60%, so by this measure, the stock price looks a little high.

I get a 10 Year Price/Book Value Ratio of 2.96. The current P/B Ratio at 4.51 is some 53% higher. This high P/B Ratio points to a rather high stock price. The 5 year median dividend yield is 1.99%. The current yield is lower at 1.38. This also points to a higher than usual stock price. Also, do not forget that P/E Ratio and the Graham Price are basis in estimates, while the P/B Ratio and dividend yield are not.

When I look at the analysts’ recommendations, I find a few Buy, but a lot of Hold recommendations. The consensus recommendation would be a Hold. This company has had a good run up in stock price lately and lots of analysts say stock is fully valued or over bought. It basically means that the stock price is too high.

Analysts do like this stock. They think Saputo is a high quality stock. They like the management of this company and feel it has a clean balance sheet. They just do not see much in the way of stock appreciation over the near term. Some feel that it is trading at the top end of its P/E range. It is a Consumer Staple stock, and therefore is a defensive stock and something worth holding.

This stock is mentioned in a Globe and Mail article about “A decade of dividend growth: more upside, less downside”. See Globe and Mail article on dividend investing and how it contributes to stock price growth. I follow almost all of the stocks mentioned on my site.

This company is a dairy processor and cheese producer in Canada, USA, Argentina, UK and Europe. It is also the largest snack-cake manufacturer in Canada that accounts for about 3% of its business. Its web site is here Saputo. See my spreadsheet at sap.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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