Tuesday, October 2, 2012

Organic Resource Management 2

I own this stock (TSXV-ORI). I made several purchases of the stock over a few months between July and December of 1997. My purchase prices ranged from $.86 to $2.00. My total return since then is a loss of 16.2 per year or a 93% capital loss.

Looking at the insider trading report, I find no insider buying and no insider selling over the past year. Insiders do have lots of shares in this company. The Chairman and CEO, when I looked at his holdings in my review in 2010 had 44.6% of the outstanding shares. When I looked at his holdings in 2011, he had 41.6% of the outstanding shares. When I look at his holdings today, he has 31.4% of the outstanding shares. The CFO and the officers have more options than shares; however, this is not true of the CEO or the directors.

I cannot do any Price/Earnings test because this company had too many years of negative earnings. The problem of negative earnings also hampers a Graham Price test.

The Price/Book Value per Share test can be done. The 10 years P/B Ratio is 0.91 and the current P/B Ratio is 1.58. This would suggest a relatively high current stock price. However, there are problems. First the 10 year P/B Ratio is quite low. When it is below 1.00 it implies that the stock price is lower than the book value. When the stock price is lower than the book value, it generally means that the stock price is very low. Also, the book value has been declining over the last over the last 5 and 10 years. Lastly, the P/B Ratio of 1.58 is a reasonable ratio on an absolute basis.

There are other tests that can be done besides my standard tests. One is the Price/Sales Ratio test. Using the last Revenue per Share value, I get a P/S Ratio of 0.61. The 10 year low, median and high median P/S Ratios are 0.20, 0.39, and 0.63. The 0.61 current ratio would suggest that the stock price is relatively high. However, a P/S Ratio is 0.61 on an absolute basis is a low one.

There is also the Price/Cash Flow per Share Ratio test. The 10 year low, median and high median P/CF Ratios are 2.70, 5.69, and 9.49. Using the latest Cash Flow per Share, I get a P/CF Ratio of 5.68. This P/CF Ratio suggests that the stock price is reasonable.

My stock price tests give rather mixed results. The price is probably reasonable.

I cannot find any analysts that follow this stock. Still, the most positive thing that I see is that more than 34% of the company is owned by insiders. (Although insider used to own more shares just a couple of years ago.) I did not sell this because of the low value. It is also interesting to track such a company and see how it ends up. You do have a tendency to keep track of companies you invest in. I will retain the shares I have for now and see what happens.

There is an interesting article on Stock Guru about this company possibly wanting to sell itself.

A number of sites list this stock as a great one to buy in 2012. They talk about what the company does, but none says why to buy. For an example of this see Kandy Daily. I think that saying a stock is a good one to buy without saying why is a rather useless report for investors.

I think you have to review both the good and the bad investments. The main reason I liked this company was because it was "green". It would seem I could invest in a "green" company and make money. It did not turn out that way.

So, I originally bought this company because I was impressed with what they we doing. It sounded great for the environment and look where it got me. The real question is "Can they make any money?" I do not think they have proven this.

The Company's core business is the regularly scheduled collection of non-hazardous liquid organic residuals. It collects, processes and recycles these wastes. Its web site is here Organic Resource. See my spreadsheet at ori.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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