Wednesday, November 23, 2011

Mullen Group Ltd 2

I do not own this stock (TSX-MTL). This is another Industrial type stock. It has recently converted from a Unit Trust stock (2009). Around the time of conversion, the company reduced the dividend by 83%. Since then it has increased dividends by 233%, but the dividends are still some 44% lower than they were at the peak.

For Price/Earnings Ratios, I have 10 year median low of 10.20 and 10 year median high of 17.11. The current P/E Ratio of 13.84 on a stock price of $19.52 is a median P/E Ratio and shows a reasonable stock price.

The Price/Book Value ratio is not much help as the Book Value has just been degraded by a goodwill write off. The 10 year median P/B Ratio is 1.65. For the third quarter of 2011, the Book Value dropped some 44% and we are left with a P/B Ratio of 2.35, one that is some 42% above the 10 year medina Ratio.

The Graham Price I get is $16.23 for this year. The current stock price of $19.52 is some 20% higher. The median difference and higher difference between the Graham Price and stock price is the stock price being 11% and 38% higher. This test show a higher than median stock price. However, the Graham Price is also very much influenced by the Book Value, so you have to currently wonder about this test also.

The last thing to look at is dividend yield. The 5 year median dividend yield is 6.6% and the current dividend yield is lower at 5.1%. The problem with this test is that the dividends were cut by83% when the company changed from a unit trust company to a corporation. However, looking at the 10 year high dividend yield, it is only 3.8%. This put the current dividend yield in better light.

The stock price tests that I use have some problems on this stock. However, the results are probably that the price is reasonable one. Even with problems, no test show that the stock is overbought (that is that the stock price is too high).

One thing to note is that the insider trading report shows no insider selling and no insider buying. 59 Institutions hold 38% of the stocks of this company. Over the past 3 months, there has been buying and selling, but on a net basis, these institutions have increased their holdings by 4%.

As far as analysts’ recommendations go, I find Strong Buy, Buy and Hold recommendations. However, there are few Strong Buy and Buy recommendations and lots of Hold recommendations. The consensus recommendation would be a Hold. Although this company is not directly in the oil and gas business, it is certainly dependent on the oil and gas business. Even analysts that think this company is a buy, rate it as a high risk.

One analysts with a Buy recommendations said that the company beat 3 quarterly EPS estimates. Although the analyst gives a 12 month stock price of $26.00, he also rates the company has a high risk investment. A hold recommendation comes with a 12 month stock price of $24.00.

There is an article on this company at the Calgary Herald, and another article in the Oil Week Magazine.

Mullen Group Ltd. is a corporation that owns a network of independently operated businesses. Mullen is recognized as the largest provider of specialized transportation and related services to the oil and natural gas industry in western Canada and is one of the leading suppliers of trucking and logistics services in Canada - two sectors of the economy in which Mullen has strong business relationships and industry leadership. Its web site is here Mullen Group. See my spreadsheet at mtl.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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