Monday, April 30, 2012

Leon's Furniture Ltd 2

I own this stock (TSX-LNF). I first bought this stock in 2006, and then some more in 2008 and 2009. I have made a total return of 4.5% per year. The Dividend portion of this return is 3.3% per year with a capital gain portion of 1.2% per year. Dividends make up 74% of my return.

There was a small amount of insider buying late last year when the stock price was below $12.00. There was no insider selling. Insiders do not have any stock options of any variety. Some 13% of the company is owned by institutions. Over the past 3 months they very marginally reduced their holdings. This company has two levels of shares of voting shares and non-voting shares. The Leon family controls about 68% of the votes.

The 5 year median low and high Price/Earnings Ratios are 11.99 and 17.13. The current P/E ratio of 14.58 is the median for the last 5 years and would suggest a reasonable stock price.

I get a Graham Price of $10.67. The 10 year median low and high difference between the Graham Price and stock price is the stock price being 6% and 42% higher than the Graham Price. Currently, the stock price is 13% higher than the Graham Price. This would suggest a reasonable stock price.

I get a 10 year median Price/Book Value Ratio of 2.49. The current P/B Ratio at 1.99 is only 80% of the 10 year median. This suggests a good stock price. The 5 year median dividend yield is 2.65% and the current yield at 3.31% is some 25% higher. This also suggests a good stock price.

My tests suggest that the stock price is from reasonable to good. The Problem with estimates on this stock is that few people follow it. Generally, estimates are from 1 analyst. This problem affects both the P/E Ratio and the Graham Price. These tests suggest a reasonable stock price. The other tests suggest a good stock price.

There is only one analyst giving a recommendation on this stock and that recommendation is a Hold. However, there are 3 separate analysts talking about this company. All three give it a Buy rating. Two mention the fact that the company has no debt. Two mention that it is fairly illiquid as far as stock trading goes. All three think that the management team is great.

Two analysts mention that this company gives out special dividends. One mentions that the company owns a lot of the real estate their stores are on and that this makes up almost all the market cap.

I happen to like this company and personally feel that it is selling at a good price. I do not have money to spend on stocks at the moment, but I am certainly holding on to what I have.

There is a recent article in the Financial Post about this company talking how great a stock it has. See article. An article on the Canadian News site talks about Leon opening 4 more superstores on their site.

This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Leon family owns 68% of this company. Its web site is here Leon. See my spreadsheet at lnf.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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