Thursday, June 14, 2012

McCoy Corp 2

I own this stock (TSX-MCB). I bought this stock in February 2011 and then in May 2011 to soak up small amounts of extra money in my TFSA. This is a dividend paying small cap. I have lost 3% per year on this stock. Of this negative total return, I got 2.22% in dividends per year. My capital loss would be 5.23% per year.

Insider trading report shows small amount of Insider buying and small amount of insider selling with a net of insider buying over the past year. There are a lot of options outstanding. Options outstanding over the next 3 years represent 4.3% of the shares of this company. The company also has a deferred share unit plan for Directors.

When I first looked at this on June 3, Reuters said there are 4 institutions that held 4% of the shares of this company. It also showed that institutions have reduced their investment in this company by 44% over the past 3 months. Now, Reuters say that there are 5 institutions holding 7.3% of the shares and that they have reduced their shares by 30.6% over the past 3 months. It is hard to determine how accurate their information is.

The 5 year median low, median and high Price/Earnings Ratios are 6.02, 8.11and 10.20. The current P/E ratio on a stock price of $3.65 is 7.93. This is between the low and median values and therefore shows a reasonable price. On an absolute basis, a P/E Ratio of 7.93 is a low ratio.

I get a Graham price of $5.07. The 10 year low, median and high Price/Graham Price Ratios are 0.47, 0.93 and 1.37. The current P/GP Ratio of 0.69 on a stock price of $3.65 is between the low and median values and therefore shows a current reasonable stock price. On an absolute basis, a stock price at or below the Graham price is a very good stock price.

I get a 10 year median Price/Book Value of 1.14 and a current P/B Ratio of 1.36, which is 19% above the median. This show a higher than median current ratio and a current stock price that, although not unreasonable, is a bit high.

The 5 year median dividend yield is showing up as 1.93%. However, the dividend yield has often been 0% because of cancelled dividends. However, the current dividend yield of 5.48% has only been surpassed once in 2008 when it was 11%. The next highest was 3.7%. This stock’s dividend yield has mostly been in the 2 to 3% range. So, it would seem that the current yield is relatively good.

Most of my tests show a rather reasonable current stock price. I can see why some analysts think the stock is cheap, as the dividend yield is very good and the P/E ratio is low. The other thing to consider is that the current cash under this company is $0.88 per share. At the end of 2011 this cash value was $1.11 per share and for the end of 2010 it was $0.64 per share. Because of the cash held by the company, you might be paying a lower value that you realize for this stock when you just consider the stock price.

There are 4 analysts following this stock and they all give it a Buy recommendation. The consensus, of course, would be a buy. This is a surprising number of analysts following this rather small stock. Analysts complain about this stock being illiquid. However, they seem to like the management and feel that the stock is rather cheap. I feel that my tests show that this stock is more in the relatively reasonable range. However, as I said above, the dividend yield is quite good and the P/E Ratio, on an absolute basis is low.

The mean 12 month stock price is $5.73. That would suggest a rather large total return of around 65% over the next 12 months.

The press release for the first quarter talks about the 38% increase in Revenue and 18% increase in net earnings. However, what they fail to mean is the decrease in cash flow, which I calculate to be around 65%. See press release. On the other hand, McCoy Corp. thinks the outlook for cash flow for 2012 will be good.

There is an interesting write-upon this company at Alberta Adventure by Fabrice Taylor . He thinks that the company is great and currently cheap. He has shares in the company. Mackenzie Institutional has a Canadian Microcap Value fund has McCoy as one of their top 10 investments. See their PDF document.

McCoy provides innovative products and services to the global energy industry. McCoy's two segments, Energy Products & Services and Mobile Solutions, operate internationally through direct sales and distributors with its operations based out of the Western Canadian Sedimentary Basin and the US Gulf Coast. McCoy's corporate office is located in Edmonton, Alberta, Canada with offices in Alberta, British Columbia, Louisiana, and Texas. They are growing internationally. Its web site is here McCoy. See my spreadsheet at mcb.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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