Thursday, April 25, 2013

Toromont Industries Ltd 2

I own this stock of Toromont Industries Ltd. (TSX-TIH, OTC-TMTNF). This stock is complicated by the spin-off of Enerflex (TSX-EFX), which I sold, but for less than the spin off price. If I look at this company with Enerflex, I have a total return of 6.72% with 1.89% from dividends and 4.83% from capital gains. If I look just at this company I get a total return of 8.13% with 1.97% from dividends and 6.16% from capital gains.

When I look at insider trading I find $1.4M of insider selling and $1.3M of net insider selling with a little insider buying. Insiders not only have options, but options like vehicles like Rights Deferred Share Units (cash settled). Leith Wheeler Investment Counsel Ltd, a Vancouver based investment firm, owns some 9.6% of the outstanding shares worth some $162M.

The CEO has shares worth $1.4M and has options are worth $5M. The CFO has shares worth $0.6M and has options worth $4.3M. An officer has shares worth $4.9M and has options worth $1.4M. A director has shares worth $0.3M and has options worth $0.5M. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings Ratios are 11.97, 14.06 and 15.99. The current P/E Ratio is 13.90 based on 2013 earnings of $1.59 and stock price of $22.10. This shows that the stock price is reasonable.

I get a Graham Price of $15.09 and 10 year low, median and high median Price/Graham Price Ratios of 1.12, 1.32 and 1.54. The current P/GP Ratio is 1.46. This shows that the stock price, although a bit high is still reasonable.

The Price/Book Value per Share test shows that the current P/B Ratio of 3.47 is some 24% higher than the 10 year P/B Ratio of 2.80. This shows a stock price that is high. The problem, of course, is that with the Enerflex spin off, the Book Value took a big hit. However, they only bought Enerflex in 2010. I think this is a cautionary note. They did not do well by shareholders in their buy and spin-off of Enerflex.

The last test is the dividend yield test. The current dividend yield is 2.35% and this is 5.5% higher than the 5 year median dividend yield of 2.23%. This shows that the stock price is relatively reasonable. You want a current yield higher than the 5 year median, but 5.5% is not that much higher, so stock price is reasonable.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus is a Buy. The 12 months consensus stock price is $24.70. This implies a total return of 14.11% with 2.35% from dividends and 11.76% from capital gains.

Pat McKeough thinks that both Toromont and Enerflex have done well since the Enerflex spin-off. (Does he realize that they only bought Enerflex in 2010 and spin it off in 2011?) John Sartz gives us a much more complete picture of the Toromont and Enerflex story. After reading his story, you may not think that Toromont's involvement with Enerflex was in the best interest of shareholders.

This has not been as good as investment as I had hoped. They did not create any shareholder value (in fact it negatively affected shareholder value) with their purchase and then spin-off of Enerflex. If you want to buy Toromont, my spreadsheet basically shows that the price is reasonable. See my spreadsheet at tih.htm.

There are two sections to this company. The Equipment Group is for Caterpillar dealerships. CIMCO is a market leader in the design, engineering, fabrication and installation of industrial and recreational refrigeration systems. Its web site is here Toromont.

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.

1 comment:

  1. The information that you provided was thorough and helpful. I will have to share your article with others.
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