Thursday, December 20, 2012

Methanex Corp 2

I do not own this stock of Methanex Corp (TSX-MX, NASDAQ:-MEOH). I started reviewing this stock in 2010 because I had read some good reports on it. It also got a solid "C" grade in a money sense review of stocks in November 2010. Money Sense rated the top 100 Canadian Dividend Paying stocks. Money Sense was looking for stocks that provided generous income at reasonable prices.

When I look at insider trading report I find $19.9M in insider selling and a net of insider sell at $16.8M. There is minimal insider buying. The selling is by all types of insiders and seems to be insiders are cashing in their options. There are lots of outstanding options and not only options but Rights Deferred Share Units, Rights Performance Share Units, Rights Share Appreciation Rights and Rights Restricted Share Units.

For example, the CEO has shares worth some $4M, but options worth almost $50M, the CFO has shares worth $0.5M and options worth almost $20M, and officer has shares worth $0.2M and options worth $1.3M and a director has minimal shares and options worth $1.1M.

According to NASDAQ site, 73% of the outstanding shares are owned by institutions. They have marginally reduced their shares in the 3 months prior to September 30, 2012.

The 5 year low, median and high median Price/Earnings Ratios are 10.23, 12.76 and 15.29. Using a stock price of $30.89 and a 2012 EPS of 1.98, I get a P/E of 15.59. This test suggests that the stock price is relatively high. However, the company has cash of $4.26 per share. If you subtract this cash per share from the current share price you get a P/E of 13.44. This P/E is still a bit high but better.

I get a Graham Price of $26.06. The 10 year low, median and high median Price/Graham price Ratios are 0.84, 1.03 and 1.23. The current P/GP Ratio is 1.19. This test shows that the stock price is on the high side, but it is reasonable.

The 10 year Price/Book Value per Share Ratio is 1.89. The current one is 2.03, a value 7% higher. This ratio shows that the stock price is not cheap, but it is reasonable.

The 5 year median dividend yield is 2.53%. The current dividend yield is 2.36%, a value 7% lower and shows that the stock price is above the relatively median stock price, but it is still reasonable. (Note the 10 year median dividend yield is 2.24%, a yield a bit below the current dividend yield.)

So all my stock prices show that the stock price is relatively on the high side, but it could still be considered a reasonable price.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month consensus stock price is $33.14. This would imply a 9.64% total return with 7.28% from capital gains and 2.36% from dividends.

One analysts with a buy rating thought that the strong cash flow would provide support for future dividend increase and/or share buybacks. One analyst would buy when there is a pull back to a stock price in the mid-$20s. A couple of analysts said that the company is very shareholder friendly. A couple analysts also remarked that this is a cyclical company.

Zacks said they were downgrading this stock to a underperform rating in August 2012. However, no site I saw recently said that any analyst had this stock in this recommendation category. According to Zolmak news, Zacks upgraded Methanex to a Hold in November 2012. A couple of other analysts recommended it as buy in this Zolmak news blog.

Methanex is the world's largest supplier of methanol to major international markets in North America, Asia Pacific, Europe and Latin America. Methanol is an important ingredient in many of the essential industrial and consumer products. Head Office is in Vancouver, B. C. Canada. Its web site is here Methanex. See my spreadsheet at mx.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 or StockTwits.

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