Thursday, March 14, 2013

Russel Metals Inc 2

I own this stock of Russel Metals Inc. (TSX-RUS, OTC- RUSMF). If first bought this stock in 2007 and it promptly went down by some 26%. I got the stock off of Mike Higgs' list of dividend paying growth stocks. It had a generally good track record, so I have kept it and bought more in 2009 and 2011. I have made a total return of 6.84% per year with 4.45% from dividends and 2.39% from capital gains.

When I look at insider trading, I find insider buying at $2M and insider selling at $3.1M with net insider selling at $1.1M. Some options were kept and some were sold. There is also buying under the company plan. Nothing of this tells us anything. There are options and options like vehicles call Rights Deferred Share Units and Rights Restricted Share Units.

The CEO has shares worth $2.9M and has options are worth $18M. The CFO has shares worth $2.5M and has options worth $9.3M. An officer has some shares and has options worth $0.6M. A director has shares worth $0.5M and has options worth $0.5M. This is just to give you an idea on insider share ownership and option values. A number of insiders also hold Convertible Debentures.

The 5 year low, median and high median Price/Earnings Ratios are 10.22, 12.30 and 14.38. The current P/E Ratio would be12.71 based on a stock price of $28.22 and 2013 earnings of $2.22. I get a Graham Price of $25.75. The 10 year low, median and high Price/Graham Price Ratios are 0.62, 0.82 and 1.07. The current P/GP Ratio would be 1.10.

I get a 10 year Price/Book Value per Share Ratio of 1.74. The current P/B Ratio is 2.13 a value some 22% higher. A potential problem with the PB Ratio is that the Book Value has been declining over the past 5 years. The current dividend yield is 4.96% and the 5 year median is 5.24%. The current yield is some 5% lower than the 5 year median yield.

Well, none of the tests says the stock is cheap. Mostly we see that the stock is a bit higher than the median, which would suggest it is reasonable. Other tests show the price is bit higher than the median high, relatively speaking. So the price is on the high side, but it is not unreasonable.

One analysts thought that the current EPS consensus was too high because most analysts are too optimistic about the companies Energy Products segment. They also thought the current stock price was too high. (The implications of a too high of EPS consensus is that, if the earnings are lower, then we would expect the P/E Ratio would go higher.)

When I look at the analysts' recommendations I find only Buy and Hold. The consensus recommendation would be a Buy (but it is getting close to a Hold). The consensus 12 months stock price is $31.20. This implies a total return of 15.52% with 4.96% from dividends and 10.56% from capital gains.

This company is well thought of. Everyone seems to feel that the current dividend is safe. One analyst suggested that investors should wait for a pull-back in stock price before buying. Most think that the price is a bit too high.

The blogger, the Happy Capitalism commented on this stock late last year. One interesting comment he made is that the stock price has been helped by the quarterly dividend increases in 2011 and 2012. I must admit that I have found that over time, the capital gain on dividend stocks is greatly affected by the dividend increases.

The Jags Report comments on several recent analysts rating modifications on this stock. Mostly analysts are raising the 12 months stock price.

I will continue to hold the stock I have. When I have more money to invest, I might buy more as I do not have that much of this stock. It would seem that the price is relatively high, but then the TSX is relatively high at the moment. I expect it to do well in the long term.

Russel Metals Inc. is one of the largest metals distribution and processing companies in North America. The Company primarily distributes steel products and conducts its distribution business in three principal business segments: metals service centers; energy tubular products and steel distributors. Its web site is here Russel Metals. See my spreadsheet at rus.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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