Tuesday, September 6, 2011

Ag Growth International 2

I do not own this stock (TSX-AFN). Ag Growth was founded in 1996, and went public in May 2004. I cannot find financials beyond 2004. In June 2009, company was converted into a corporation. This company used to be a Unit Trust (TSX-AFN.UN).

When I look at insider trading report, I find some $5.9M of insider selling, mainly by officers and most of the selling seems to be an estate of Robert Stenson. He passed away in October 2010. He was the CEO of this company. Almost 70% of the company is owned by institutions. Over the past 3 months they have marginally reduced their share of this company (by less than 1% of their holdings).

The 5 year median low Price/Earnings Ratio is 9.95 and the 5 year median high P/E Ratio is 19.44. The current P/E ratio on a stock price of $39.34 is about average at 15.37. I get a Graham Price of $31.08. This is some 27% below the stock price of $39.34. For most of this stock’s lifetime, the stock’s price has been below the Graham Price and the median high difference is Graham Price being just 7% below the stock price.

I get a 7 year median Price/Book Value Ratio of 1.77. The current P/B Ratio is 2.35 and this is some 32% above the P/B Ratio median. To show a good price, you would want to the current P/B Ratio to be below the median ratio. Although, this stock used to be a unit trust company and these sorts of companies are not good at growing their book values.

I get a current dividend yield of 6.1%, which in of itself is a good yield, but it is below the 5 year median yield of 7%. From looking at my spreadsheet, the only test that shows a current reasonable stock price is the Price/Earnings Ratio.

The best that can be said is that the current price is better than it was for most of last year when the stock price was generally higher. It should be expected that the dividend yields on former income trust companies will come down over the next few years. This stock has better Dividend Payout Ratios than a lot of former income trust companies.

So, what do the analysts’ say? I find Strong Buy, Buy and Hold recommendations with the consensus being a Buy recommendations. The Buy recommendation comes with a consensus 12 months stock price of $47.50. One analyst mentioned that only 25% of grain is professionally stored globally so the market for this company is enormous. Analysts like the Dividend Payout Ratios and feel that the dividend is safe.

If I was in the market to buy stocks, I would certainly take a good look at this one.

I am going to pause on Thursday because I am going to the Money Show. I will be reporting what I hear there, the same as I did last year.

Ag Growth is a leading North American manufacturer of portable grain handling equipment, consisting of augers, belt conveyors, grain drying, fencing, post hole augers, and other ancillary grain handling accessories. This company has 1,400 dealers and distributors in Canada and the United States. Its web site is here AG Growth. See my spreadsheet at afn.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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