Wednesday, May 29, 2013

Ag Growth International 2

On my other blog I am today writing about Income and Portfolio Building...continue...

I own this stock of Ag Growth International (TSX-AFN, OTC-AGGZF). I bought this stock in October and December of 2011. Since then the stock has gone down and my total return is some 0.68%, with a capital loss of 6.18% and dividends of 6.86%. This is quite different from last May when I reported on this stock. At that time the stock was up considerably. This stock is connected with agriculture, so I would expect the earnings and cash flows to be volatile. This is another stock that was an income trust and has converted to a corporation.

When I look at insider trading, I find $0.8M of insider buying and $0.8M of insider selling, with a slight more insider selling than insider buying. Under this company option like vehicles are called Rights Long Term Incentive Plan, Rights Share Award Incentive Plan and Rights Deferred Compensation Plan.

The CEO has shares worth $3.9M and has options are worth $1.2M. The CFO has shares worth $1.5M and has options worth $1.7M. An officer has shares worth $0.4M and has options worth $0.6M. A lot of officers and Subsidiary Executives of this company have options. A director has shares worth $0.1M and has options worth $0.2M. 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 per Share Ratios are 11.69, 16.43 and 22.90. The current P/E Ratio is 17.16 based on a stock price of 34.83 and 2013 EPS of 2.03. This ratio implies that the stock price is reasonable, if a bit on the high side.

I get a Graham price of $25.82. The 10 year low, median and high median Price/Graham Price Ratios are 0.85, 1.40 and 1.90. The current P/GP Ratio is 1.35 and this implies a relatively reasonable stock price.

The 10 year Price/Book Value per Share Ratio is 2.12 and the current Ratio is 2.39. The current Ratio is 13% higher than the 10 year P/B Ratio and this implies a reasonable stock price. The current ratio is not much higher than the 10 year median Ratio.

The current dividend yield is 6.89% and the 5 year median dividend yield is 6.79%. The current dividend yield is just 1.4% higher than the 5 year median and this implies a reasonable current stock price.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would be a Hold recommendation as there are lots of them. The 12 month consensus stock price is $35.00. This implies and 12 months total return of 7.38%, with 6.89% from dividends and 0.49% from capital gains.

A couple of analysts have moved up their 12 months stock price and moved up ratings to buy and strong buy. Others feel analysts feel that since this business is the agricultural business, it will face challenges. Mideast times talks about some upgrades and downgrades by analysts for this stock. A site called talks about this stock braking about its 200 day moving average and this being bullish from a technical analysis point of view.

As I see this stock, its price is currently rather reasonable. It is a high risk dividend paying stock because it is in the agricultural business. I still think that over the longer term it will make money for its shareholders. See my spreadsheet at afn.htm.

This is the second of two parts. The first part was posted on Tuesday and is available here.

Ag Growth is a leading North American manufacturer of portable grain handling equipment, consisting of augers, belt conveyors, grain drying, fencing, post-hole augers, and other ancillary grain handling accessories. This company has 1,400 dealers and distributors in Canada and the United States. Its web site is here Ag Growth.

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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