Wednesday, May 23, 2012

Richelieu Hardware Ltd 2

I have updated yesterday’s blog entry. Whether you are currently making any money may depend on your point of view at comments blog.

I own this stock of Richelieu Hardware Ltd. (TSX-RCH). I first bought this stock in 2007 and then some more in 2009. Since this stock is in two separate accounts, I can see how each purchase has done. For the stock purchased in 2007, I have made a return of 7.6% per year. For the stock I purchased in 2009, I have made a return of 24.9% per year. I realized that the stock was quite low in 2009 when I bought it and that is just why I bought it then.

When I look at insider trading, I find some $1.7M of net insider selling and very little insider buying. However, $1.7M is a very small portion of the market cap of this stock (that is less than 1%). Over the past month a number of officers have purchased small number of shares via the company’s plan at $32.55 and one officer has cash in his options. Insiders have options and also Action Deferred Units and Subscription Rights Actions Deferred Units.

The CFO and officers have more options than shares. The directors may not have more options than shares, but they have lots of Deferred Units, which are a sort of option. The CEO has around 1.4M shares in this company worth around $49M.

QV Investors still seem to have shares in this company and they talk about their investment in a recent report dated January 2012. Some 22 institutions own 45% of this company. In the last 3 months they have increased their investment in this company by 15%. This is a positive.

I get 5 year median low and high Price/Earnings Ratios of 12.05 and 16.65. With the current stock price of $31.84, the current P/E ratio is 15.38 and this is between the median P/E of 14.37 and high P/E of 16.65. It shows the price is reasonable, if a bit on the high side.

I get a Graham price of $23.96 and the current stock price of $31.84 is 33% above it. The 10 year low, median and high difference between the Graham price and the stock price is the stock price being some 12.5%, 41% and 52% above the Graham price. This put the stock price between the low and median values and shows a reasonable stock price.

I get a 10 year median Price/Book Value Ratio of 2.74. The current P/B Ratio is 2.58, which is 94% of the 10 year ratio and shows a reasonable stock price. (If you are looking at this report more than a few weeks after I have published it, you can get the current P/B Ratio if you go to the Reuters stock site and use symbol of RCH.TO where it says to search for a stock. Click on the “Financials” tab to get the current P/B Ratio.)

The 5 year median dividend yield is 1.58% and the current yield at 1.51% is some 5% lower. This put stock price still in a reasonable category, but a bit on the high side.

There seems to be only a couple of analysts following this stock and the recommendations seem to be Buy and Hold, with a consensus recommendation of Buy. The Buy recommendation comes with a 12 month stock price of 35.00. The consensus 12 months stock price of $34.30 implies a total return over the next 12 months of 9.2%.

A globe and mail article calls this stock a buy-and-forget stock for conservative investors.

I will retain what I have in this company. I am not looking for a stock which has the characteristics of this stock currently, but if I was this would be a stock I would consider. It is only just over 1% of my portfolio so I do have room to buy more of it. (Stock characteristics are low dividend, good dividend increases.)

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. Its web site is here Richelieu. See my spreadsheet at rch.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.

1 comment:

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