Monday, June 17, 2013

Saputo Inc 2

On my other blog I am today writing about surviving the current Secular Bear Market...continue...

I own this stock of Saputo Inc. (TSX-SAP, OTC- SAPIF). I first bought this stock in 2006 and then some more in 2007. However, it was in an RRSP account and since I am taking money out of my RRSPs each year I sold some of this stock in 2012 and 2013. The reason I sold this stock was that it had the lowest dividend yield of stocks in my RRSP Accounts. However, I do like this company and hope to buy some for the trading account at some point.

When I look at insider trading, I find $15.4M of insider selling and $14.7M of net insider selling. There is some insider buying of $0.7M. Insiders have options and other options type vehicles called Performance Share Units and Deferred Share Units.

There is lots of insider ownership, with directors of Emanuele Saputo owning shares worth approximately $3.4B and 34% of outstanding shares and Pierre Bourgie owning approximately $44.7M and owning 0.48% of the outstanding shares. This company is worth over $9B. The notable stock options holdings are for the CFO with options worth $11.5M and an officer with options worth $18.M.

The 5 year low, median and high median Price/Earnings Ratios are 14.44, 18.01 and 21.43. These are moderate to a bit on the high side because this is a growth company. The current P/E Ratio at 15 does show that the stock price is relatively reasonable. This P/E is based on a stock price of $47.10 and 2013 earnings estimates of $3.14.

I get a current Graham Price of $28.78. The 10 year low, median and high Price/Graham Price Ratios are 1.20, 1.50 and 1.70. The current P/GP Ratio is 1.64 and this makes the stock price a relatively reasonable one. This is a growth company, so you are unlikely to see a P/GP Ratio near 1.00.

The 10 year Price/Book Value per Share Ratio is 3.07. The current P/B Ratio is 4.02 a value some 30% higher and this would suggest a relatively high stock price. (However, the current P/B Ratio is almost the same and the 5 year median ratio of 3.99.)

The current dividend yield is 1.78% and the 5 year dividend yield is 2.2% higher at 1.82%. What you want is the current dividend yield to be less than the 5 year dividend yield. However, they are close and this suggests a relatively reasonable stock price.

The stock price is relatively reasonable and this is generally all you can hope for in buying stocks. This stock has been rated down with the Annual Report dated March 31, 2013 because the company did not have earnings meeting the earnings estimates for the March 31, 2013 financial year nor for the 4th quarter.

When I look at analysts' recommendations I find Buy and Hold recommendations. There are more Buy recommendations than Hold recommendations and the consensus recommendation would be a Buy. The 12 month consensus stock price would be $52.20. This would imply a 12.61% total return with 10.83% from capital gains and 1.78% from dividends.

The Proactive Investor's site talks about Saputo missing earnings estimate for the financial year ending in March 31, 2013. The site of Ticker Reporter talks about some recent stock downgrades for Saputo. The site Celebrity Networth talks about Lino Saputo, the man who started and still runs Saputo. And, iPolitics talks about Saputo missing fourth quarter estimates.

This is a growth company and the P/E of 15 is reasonable. However, this company is growing by acquisitions (or consolidation in the dairy business). At some point all growth companies stop being growth companies and become mature companies and ratios, like P/E Ratios go lower. However, the current P/E ratio is not that high and it would probably be a while before this company transitions to a mature company. See my spreadsheet at sap.htm.

This is the second of two parts. The first part was posted on Friday, June 14th and is available here.

Saputo produces, markets, and distributes a wide array of products of the utmost quality, including cheese, fluid milk, yogurt, dairy ingredients and snack-cakes. Saputo is the twelfth largest dairy processor in the world, the largest in Canada, the third largest in Argentina and among the top three cheese producers in the United States. Our products are sold in more than 50 countries under well-known brand names. Its web site is here Saputo.

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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