Friday, November 25, 2011

Gennum Corp 2

First of all I like to mention that Dividend Ninja has an current blog about Balance Sheets at his site. If you are going to invest, you should have familiarity with company statements like the Balance Sheet and also with how ratios are calculated. The Dividend Ninja has also reviewed the Income Statement previously on his site.

Now, on to the stock I want to review today. It is Gennum (TSX-GND), a stock I do not own this stock. This is another industrial stock that I follow. I did own this stock at one time. I held it between 1998 and 2006 and I made 5.5% per year total return. Of this total return 0.75% would be attributable to dividends. I sold because I did not see this company going anywhere anytime soon.

When I look at insider trading, I find $.3M of insider buying and no insider selling. It also looks like insiders are retaining the recent stock options that they have received. There are 9 institutions that hold 41% of this stock of this company. There has been a bit of buying and selling in the last 3 months with institutions increasing their shares by 1.7%.

There is a huge difference between the 5 and 10 year median Price/Earnings Ratios. The 5 year median P/E Ratio is 8.75 and the 10 year median is 27.02. The same is true for the 5 and 10 year median high and low P/E Ratios with the high being 13.13 and 33.8 and the low being 4.36 and 20.24 over the past 5 and 10 years.

This stock hit it’s a high in 2006 before the recent bear market of 2008. The change in P/E ratios shows the company moving from growth stock status that it had. It was also just after the time it did a restructuring from doing, mostly, digital pieces for hearing aids. The fact is that this company hasn’t done much since hitting a peak at the end of 1999. It traded in a band between $10 and $20 between 1999 and 2008, and then it dropped to lows it hadn’t seen since 1996.

The current P/E Ratio of 10.97 is on the low side for P/E Ratios, generally. I get a Graham Price of $7.77 and a current price of $5.70, which is 27% lower. This is a stock that spend most of it life way above the Graham Price. But the Graham Price is increasing and the stock price is not.

As far as the Price/Book Value Ratio goes, the current one is 1.10 compared to the 10 year median P/B Ratio of 3.75. That means that the current one is only 30% of the 10 year median ratio. The current dividend yield is 2.46 and the 5 year median dividend yield is much lower at 1.7%. All of this, of course, points to a rather low current stock price. The questions may be, however, is the stock cheap for what you are getting?

When I look at analysts’ recommendations, I find that they are all over the place. There are Strong Buy, Buy, Hold, Underperform and Sell recommendations. The consensus recommendation would be a Buy. (See my site for information on analyst ratings.) The consensus 12 months stock price is $7.71

One commentator says that “In the old days it was a hearing aid company that did very well. Now they have semiconductor products for video and data com markets. This company has been hard hit as a mini semiconductor company and earnings are way down. It has a good balance sheet and the business is stabilizing.”

Also, the company is restructuring again. It has done this several times. However, it does not seem capable, to me, of raising its earnings. I still think that this stock is going nowhere still.

Gennum Corporation designs innovative semiconductor solutions and intellectual property (IP) cores to serve the rising global demand for high-speed data transmission products in the broadcast, networking, storage and telecommunications markets. They sell in North America, Europe and Asia Pacific. Its web site is here Gennum Group. See my spreadsheet at gnd.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.

No comments:

Post a Comment