Tuesday, July 30, 2013

Newfoundland Capital Corp 2

I do not own this stock Newfoundland Capital Corp (TSX-NCC.A, TSX-NCC.B). I started to follow this stock as it was suggested as a decent dividend paying stock for investment purposes. It is not on any dividend lists that I follow. This is probably because dividends have been inconsistent.

When I look at insiders trading, I find a small amount of insider buying and no insider selling. There are two classes of shares, the subordinate voting shares of Class A and the multiple voting shares of Class B. One officer of the company has practically all the Class B shares. There are no only options under this company but other option like vehicles called Share Appreciation Rights.

The CEO has shares worth $7.5M and has options worth $4.3M. The CFO has shares worth $0.2M and has options worth $0.2M. An officer has shares worth $0.3M and has options worth $1.4M. Another officer has shares worth $132.4M of Class A Shares and almost all the Class B shares worth $32Mand has options worth $6.4M. A director has shares worth $4 M and has options worth $0.8M. 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 12.56, 15.81 and 19.07. The current P/E Ratio is 12.88 based on a stock price of $8.50 and 2013 earnings estimate of $0.66. By this measure the stock is relatively cheap.

I get a Graham Price of $7.86. The 10 year low, median and high median Price/Graham Price Ratios are 1.07, 1.24 and 1.41. The current P/GP Ratio is 1.08. This suggests also that the stock is relatively cheap.

The 10 year median Price/Book Value per Share Ratio is 2.08. The current ratio is 2.04 a value some 98% of the 10 year ratio. This ratio suggests that the stock price is relatively reasonable.

The current dividend yield is 2.12% and the 5 year median dividend yield is 1.66%. The current dividend yield is some 28% higher than the 5 year medina yield. This test suggests that the stock price is cheap. (Note that the 10 year median dividend yield is a bit lower at 1.61%.)

When I look at analysts' recommendations, I find only one analyst following this stock and the recommendation is a Hold. The 12 month stock price is given as $10.00 and this implies a total return of 19.76% with 2.12% from Dividends and $17.65% from capital gains. (To me the recommendation of a Hold and a 12 months total return of almost 20% do not match up. You would think that a Hold recommendation would have a much lower 12 month total return.)

If you look at the last 12 months which includes the most recent quarterly report of March 2013, compared the 12 month ending at the end of 2012, EPS are up by 14%. However, if you look at revenues and cash flow, the growth is marginal. The estimates for 2013 do show that growth in EPS would greatly outstrip growth in Revenues and Cash Flow (89% growth compared to 4.5% and 8.7% growth, respectively).

The stock price spiked over 25% in April 2013. However, I cannot find any reason for this. There is not much coverage for this stock. Above, I could only find one analysts giving this stock a rating. I find this an interesting company. You would buy it for diversifications purposes.

I cannot see why the one analyst gives this stock a Hold rating. Perhaps this is because EPS were down last year. However, EPS tend to fluctuate quite a bit for this stock. Also perhaps if you look at the P/E using last 12 month's earnings (to March 2013), the P/E would be 21.25, a relatively high P/E for this company. Also, the estimates given last year, only the Revenue estimates were close. The estimates for EPS and CFPS were quite a bit off.

However, I think that the test that is the best is the dividend yield one and this is signally a cheap price. The P/B Ratio is signaling a reasonable price and I think that these two tests are the best to use. The company has a reasonable dividend and does raise dividends, although not consistently, but dividend growth is good. The company has decent growth and the balance sheet is fine. The ROE is good. I do not see why it is not given a buy rating. See my spreadsheet at ncc.htm.

This is the second of two parts. The first part was posted on Monday, July 29th, 2013 and is available here.

Newfoundland Capital Corporation Limited also owns and operates Newcap Radio. Newcap Radio is one of Canada's leading radio broadcasters with 79 licenses across Canada. The Company reaches millions of listeners each week through a variety of formats and is a recognized industry leader in radio programming, sales and networking. The Company has 58 FM and 21 AM licenses spanning the country employing over 800 radio professionals in Canada. Newfoundland Capital Corporation Limited also owns and operates the Glynmill Inn, Corner Brook, Newfoundland and Labrador. Its web site is here Newfoundland Capital Corp.

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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