Monday, January 21, 2013

Bank of Nova Scotia 2

On my other blog I am today writing about the high pay of CEOs via stock options...continue...

I do not own this stock of Bank of Nova Scotia (TSX-BNS, NYSE-BNS). However, I have been following this bank for some time. I do not own this bank because I already own Bank of Montreal (TSX-BMO), Royal Bank (TSX-RY) and Toronto-Dominion Bank (TSX-TD).

When I look at insider trading I find no insider buying and insider sell at $40.5M. (This is the second highest net insider selling of the banks I have reviewed so far.) Problem is that insiders have lots of options and look at options as part of their pay.

The CEO has shares worth $15M and options worth $225M. The CFO has shares worth $2M and options worth $13M. An officer has shares worth $0.5M and options worth $3M. A director has shares worth $5M and has options worth 2.63M. This is just to give you an idea on insider share ownership and option values.

It would seem that this bank has some 50% of its outstanding shares owned by institutions. Over the past 3 months institutions have increased their shares by some 7%. This is a positive.

The 5 year low, median and high median Price/Earnings Ratios are 10.66, 11.93 and 14.20. The current P/E is 11.34. This is based on a stock price of $58.05 and 2013 earnings of $5.12. This relatively low P/E ratio suggests that the stock price is reasonable.

I get a current Graham Price $58.56 and the 10 year low, median and high median Price/Graham Price Ratios are 1.00, 1.14 and 1.29. The current P/GP Ratio is 0.99. This relatively low ratio suggests that the stock price is low. Since the P/GP ratio is below 1.00, this also suggests that the stock price is a good one.

The 10 year median Price/Book Value per Share Ratio is 2.40 and the current P/B Ratio is 1.95. The current ratio is 81% of the 10 year ratios and this relatively low ratio suggests that the stock price is low.

The 5 year median dividend yield is 3.96% and the current dividend yield is 3.93%. These yields are relatively close and that suggests that the stock price is reasonable.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. (See my site for information on analyst ratings.) The 12 month consensus stock price is $61.30. This suggests a total return of 9.06% with 3.93% from dividends and 5.13% from capital gains.

Analysts have stated that Scotia has Latin American exposure and that this is a good thing. However, ever since I started to invest in the 1970's people have been talking about Latin America coming into its own and doing well. However, it seemed to have its ups and downs, but I cannot say much for progress. A number of South American states seem to have, again, become basket cases. Venezuela currently comes to mind when you talk about countries doing poorly. I wish the people of South America well, but I really have a hard time believing things are going to ever change there.

A number of analysts liked the recent purchase of ING Bank of Canada. See articles in the Financial Post on this purchase. See one dated in August 2012 and one dated in September 2012.

A few analysts liked this bank for a long term buy and liked the current dividend which is around 3.9%. Citigroup Initiates Bank of Nova Scotia at Neutral says Benzinga. (By the way a neutral rating is a Hold rating.)

There is an article on Seeking Alpha about 6 good banks to buy and this bank is included in the list.

I have always liked this bank. It has international exposure (although as mentioned I do not see that exposure to South America gives it much advantage). It is a well-run bank. It has a decent dividend and the stock price is low to reasonable, relatively speaking.

The Bank of Nova Scotia is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. It is an international bank having banking in Canada and some 40 other countries around the world in the geographic regions of the Caribbean and Central America, Mexico, Latin America and Asia. Its web site is here Scotia Bank. See my spreadsheet at bns.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.

No comments:

Post a Comment