Wednesday, May 8, 2013

Davis & Henderson Corp 2

On my other blog I am today writing about the Online Advertising...continue...

I own this stock of Davis and Henderson Corp. (TSX-DH, OTC- DHIFF). I first bought this stock as an income trust in 2009. I bought more in 2010, 2011 and 2013. I have made a return of 21.78% per year with 12.98% from capital gains and 8.8% from dividends.

When I look at insider trading, I find insider buying of $2.5M and very little insider selling. Buying is by CEO, officers and directors. Unfortunately for people currently looking at buying this stock the insider buying all happen a year ago when the stock price was mostly below $18.00 and purchases were at 20 to 30% lower than prices today.

The CEO has shares worth $1M and has options are worth $7.8M. The CFO has shares worth $0.5M and has options worth $3M. An officer has some shares and has options worth $1.5M. A director has shares worth $3.9M and no options. 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 9.28, 11.71 and 13.23. The current P/E Ratio is 12.31 based on 2013 EPS of $1.89 and stock price of $23.27. This P/E is based on an EPS for 2013 that is substantially higher than the ones earned in 2011 and 2012, especially the EPS of 2012. The current P/E of 12.31 shows a reasonable stock price on an absolute basis.

I get a Graham Price of $22.45. The 10 year low, median and high median Price/Graham Price Ratios are 0.76, 0.93 and 1.07. The current P/GP Ratio of 1.04 is closes to the high median P/GP ratios, but signals that the stock price is still in the reasonable range.

I get a 10 year Price/Book Value per Share Ratio of 1.83. The current P/B Ratio is 2.18, a value some 19% higher. This signals that the stock price is still in the reasonable range, but towards the higher end of the reasonable range.

There is not much point is doing a test on the dividend yield as the dividends were decreased with this company became a corporation. It was suggested at that time that the old income trusts would end up with dividends in the 4 to 5% range. This dividend is a bit better at 5.5%.

I will do a fourth stock test using the Price/Sales per Share Ratios. I get a current P/S Ratio of 1.88 based on 2013 revenue of 7.5.11M, Revenue (or Sales) per Share value of $12.41 and a stock price of $23.27. The 10 year median P/S Ratio is 2.20, so the current P/S Ratio is 15% lower and would suggest a current reasonable stock price.

When I look at analysts' recommendations, I get a Strong Buy, Buy and Hold recommendations. Most of the recommendations are a Hold and the consensus recommendation would be a Hold. The 12 months consensus stock price is $23.40 a value slightly above the current stock price. This would imply a 6.06% total return with 0.56% from capital gains and 5.5% from dividends.

Some people see their substantial income from printing cheques a positive and others a negative. It is a dying form of payment, but they are into other financial technologies which in the end will replace cheques. However, cheques have not died yet and it may be quite a while before they do. Sometimes these sorts of changes take a lot longer than you ever think possible.

Some analysts mention the sale of non-core assets. Most think that this was a good move. Others like the good dividend yield and everyone feels that it is safe. Some analysts feel that they have room for a dividend increase. CanTech magazine recently names this company in a list of the 10 most profitable tech companies in Canada.

I will certainly hold on to the shares I have. It would seem that the current share price is reasonable, although it might be to the higher end of the reasonable price range. Dividends are very good. See my spreadsheet at dh.htm.

Davis & Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Its web site is here Davis & Henderson.

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.

3 comments:

  1. Hi Susan,

    If you were interested in buying DH, would you consider today's price a good entry point or would you wait for a pullback and then buy in? I am interested in your opinion.

    Regards,
    Marypat

    ReplyDelete
  2. The relative price you pay for a stock greatly affects your long term returns. It is hard to get one that is cheap, but easier to get one at a reasonable price. This stock seems to still be in the reasonable range, but towards the higher end of the range. I prefer to get one that is in the mid to lower end of a range.

    For example, the 5 year low, median and high median Price/Earnings per Share Ratios are 9.28, 11.71 and 13.23. I would prefer to buy at a P/E of 11.71 or below. It is usually not difficult to get a stock in this spot in the reasonable stock price range if you keep an eye on a stock. So, yes I would wait a bit to get DH at a lower price

    I cannot give out investing advice because I am not licensed to so do so. So, the above remarks are just my personal opinion and the above and my 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.

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  3. I think you are right Susan.

    The problem with quality stocks is that they most of the time always trade at their highest value. Good luck to catch a value failure at a point or another. There's no other way: the entry point is now because tomorrow, it will trade at a higher value. So better not too be too much patient. Impatience is sometime a good quality.

    You shouldn't be too hard on yourself with the blabla about the fact you cannot provide advices and you are not a professional etc. You should know by now that I made nice money on some of your stocks that I had selected among your review.

    I lost on ATP, but you never liked that one so I cannot openly do something about it like you are responsible for it. I guess you have to do what you need to do in order to protect yourself.

    Have you teach your son how to read financial statement and other crap? I envy your son SO MUCH.

    Happy Mother Day too for tomorrow lucky rich mommy.

    ReplyDelete