Canam Group Inc

I do not own this of Canam Group Inc. (TSX-CAM, OTC-CNMGA), but I did for a short while between 2011 and 2013. I bought this at the end part of 2011 because I thought that the market had gone overboard in punishing the stock because of a dividend cut and the company was having a tough time. I thought I could make a few thousand dollars for my RRIF account and that is what I did. I sold my stock in March of this year.

Companies that pay dividends get hit especially hard when they cut or delete dividends. However, I think that the company acted appropriately. It will probably start paying dividends again, but it is hard to say when this will happen. When they cut dividends they were not earning any money. However, they started to earn money again last year and are expected to earn money both this year and next.

The other problem with 2011 was not only did they not earning any money, but they also had a negative cash flow. Cash Flow was again positive in 2012 and is expected to be positive over the next couple of year also.

The outstanding shares have increased by 0.63% over the past 10 years and decreased by 3.16% over the past 5 years. Shares have increased when the company has bought shares for employees and have decreased when the company has bought shares on the open market.

Revenue has not grown over the past 5 and 10 years, but it has not declined much either. The company really has not recovered fully from 2008 and the stock is down some 14.81% per year over the past 5 years. However, the total return over the past 10 years is 3.69% per year with 1.57% from dividends and 1.12% from capital gains.

ROE has not been very good over the past few years. However, the debt ratios are quite good, with Liquidity Ratio currently at 2.28 and the Debt Ratio at 1.82. The Leverage and Debt/Equity Ratio are also fine at 2.22 and 1.22, respectively.

When I look at insider trading I find a minimal amount of insider selling and no insider buying. There does not seem to be much in the way of stock options, but there is insider ownership. The CEO has shares worth $1M and has no options. The CFO has a few shares and no stock options. An officer owns shares worth $59M which is some 16% of the outstanding shares. I.A. Michael Investment Counsel Ltd owns shares worth some $47M and this is some 13% of the outstanding shares.

There are a few analysts following this stock and analysts' recommendations are Buy and Hold with most recommendations being a Buy and the consensus recommendation being a Buy. The 12 months stock price consensus is $9.10. This implies a total return and capital gains of 13.75%.

The 5 year low, median and high median Price/Earnings Ratios are 9.90, 12.43 and 14.95. The current P/E ratio is 14.81 based on 2013 earnings of $0.54 and a current stock price of $8.00. The current Graham price is $10.26. The 10 year low, median and high median Price/Graham Price Ratios are 0.48, 0.66 and 0.90. The current P/GP Ratio is 0.78. Both these tests show the stock price to be reasonable, but a little high.

The 10 year median Price/Book Value per Share Ratio is 0.98. The current P/B Ratio is 0.92. The current P/B Ratio is 93% of the 10 year median Ratio. This test shows that the stock price is reasonable. (To be cheap, the current ratio would have to be only 80% of the 10 year median Ratio.) However, since the P/B Ratio is less than 1.00, this implies that on an absolute basis the stock price is cheap. (The P/GP Ratio being less than 1.00 also implies the same thing.)

I think that this stock is reasonably priced. However, the easy money from its recent problems has already been made. See my spreadsheet at cam.htm.

Canam Group specializes in the design and fabrication of construction products and solutions for the commercial, industrial, institutional, multi-unit residential, and bridge and highway infrastructure markets. This company has offices in Canada, US, Saudi Arabia, United Arab Emirates, India, Romania France and China. Its web site is here Canam.

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.