Manitoba Telecom Services Inc 2

I own this stock of Manitoba Telecom Services Inc. (TSX:-MBT, OTC-MOBAF). I first bought this stock in 2006. I sold some in 2010 and on these shares I made a return of 0.8% per year. The capital gain loss was 6% per year and the dividends were 6.8% per year. The remaining stock that I bought in 2006 and still have, I have made a return of 3.4% per year, with a capital loss of 3% per year and dividends at 6.4% per year. It could be worse.

When I look at the insider trading report, I find no insider selling and no insider buying. It would appear that insiders are holding on to the shares they are getting via their stock options. This is a positive. Not only do insiders have stock options, they also have stock option like vehicles called Rights Performance Share Units, Rights Restricted Share Units and Rights Director Compensation Units.

The CEO has shares worth $4.5M and has options are worth $49.7M. The CFO has shares worth $0.4M and has options worth $9.7M. An officer has some shares and has options worth $1M. A director has some shares and has options worth $0.2. This is just to give you an idea on insider share ownership and option values.

I get low, median and high median Price/Earnings Ratios of 14.33, 16.91 and 19.48. The current P/E is 15.24 based on 2013 earnings of 2.13 and a stock price of $32.46. This test shows that this stock is at a very reasonable price.

I get a Graham Price of $24.06. The 10 year low, median and high median Price/Graham Price Ratios are 1.04, 1.17 and 1.32. The current P/GP Ratio is 1.35. I get a 10 year Price/Book Value per Share Ratio of 2.09. The current P/B Ratio is 2.69, a value some 29% higher. Both these tests show that the stock is rather high. The BV has been falling lately and this would affect both these tests.

Since the dividend was cut within the last few years, a dividend yield test is probably not so helpful. However, there are other things to look at. One is the Price/Cash Flow per Share Ratio. The 5 year median P/CF Ratio is 4.96. We can also look at the Price/Sales per Share Ratio. For the P/S Ratio the 5 year median is 1.22 and the 5 year high median is 1.34. The current P/S Ratio is 1.30.

As with most ratios, for the P/CF Ratio and the P/S Ratio, lower is better. The P/CF shows that the stock price is reasonable. The P/S Ratio shows also a reasonable, but a bit high. After all this, the current price is probably reasonable, but there are some tests that show that the price is a bit too high.

When I look at the analysts' recommendations, I find that they are all over the place. I find Buy, Hold, Underperform and Sell recommendations. However, most of the recommendations are in the Hold category and this give a consensus recommendation of Hold. The consensus 12 month stock price is $33.10. This is a price very close to the current only, so not much in capital appreciation is expected this year.

In Canada, I understand that we have some of the highest prices for telecom services in the world and this company cannot do well. Is this complacency? Is it poor business planning? I must say that I am rather underwhelmed. I am only holding on to it because the dividend seems safe and yield is good. I will get rid of it once I find a good replacement stock.

I do not see this stock as a good long term investment and my preference is for stocks that make a good long term investment. However, it is interesting that the over the past year insiders are holding on to stock acquired through options.

This company is a full-service communications company. It serves residential and business customers in Manitoba. Their Allstream division serves national business consumers. Its web site is here Manitoba Telecom. See my spreadsheet at mbt.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.