High Liner Foods 2

On my other blog I am today writing about retiring using 8%, 4% rule...continue...

I do not own this stock High Liner Foods (TSX-HLF, OTC-HLNFF). This is a stock liked by the Investment Reporter and is considered to be of average risk. I have been meaning to look at it for a while. Ryan Irvine of Keystone also likes this company. Just recently, in July 2013, a reader of my blog also asked me to take a look at this stock.

When I look at the insider trading report, I find a very small amount of insider buying and insider selling at $0.4M (and net insider selling at $0.4M). Activity is all by directors. Insiders not only have options, but other option like vehicles called Rights Performance Share Units and Rights Restricted Share Units.

The 5 year low, median and high median Price/Earnings per Share Ratios are 8.77, 10.88 and 13.32. The current P/E Ratio is 13.16 based on a stock price or $34.66 and earnings estimates for 2013 of $2.63 CND$ (or $2.54 US$). This test says that the stock price is still within the reasonable range, but on the high side. (Also, I have a hard time believing that this company will make $2.54US$ in 2013 and $3.49 US$ in 2014 (the other consensus earnings estimates.)

I get a current Graham Price of $26.50. (This is a big increase over past Graham Prices.) The 10 year low, median and high median Price/Graham Price Ratios are 0.72, 0.82 and 0.96. The current P/GP Ratio is 1.31. This test says that the stock price is too high (or that the stock is relatively expensive.)

The 10 year Price/Book Value per Share is 1.20 and the current P/B Ratio is 2.92 a value some 144% higher. This test says that the stock price is relatively expensive. However, the book value has not been growing is part of the reason. It is not a good sign when a stock that cannot grow its book value. However, the BVPS increased by 20% between the end of 2012 and the 2nd quarter of 2013. (This is connected to lower debt and higher dividends for 2013.)

The current dividend yield is 2.08% and the 5 year median dividend yield is 2.6%. The current dividend yield is some 20% lower than the 5 year median and this test says that the stock is relatively expensive. (Also, note that dividends have grown substantially lately. Between the start of 2012 and now they are up some 80%.)

There are few analysts' following this stock. The analysts' recommendations on Buy and Hold with the consensus being a Buy. The 12 month consensus stock price is $38.20. This implies a 12 month total return of 12.29% with 2.08 from dividends and 10.21% from capital gains.

Ryan Irvine of Keystone gave High Liner Foods a good review in June of 2013. He thinks it is a buy over the next 1 to 3 years for both income and capital gains. However, he also says it is only for portfolios of "aggressive-risk". The New Hampshire Union Leader has a Q&A with the Keith A. Decker, president and chief operating officer of High Liner Foods. In technical news, Forbes talks about this stock crossing its 200 day moving average line on July 30, 2013and that this is bullish. One analyst thought that this company should be trading at 13 to 15 times earnings (that is a P/E of 13 to 15). Another thought you should only buy in weakness when the stock goes into the low $30 range.

The company has recently paid down debt and raised the dividends and this is a very good sign. However, I do think it is overpriced. See my spreadsheet at hlf.htm.

This is the second of two parts. The first part was posted on August 7th, 2013 and is available here.

High Liner Foods is the leading North American processor and marketer of value-added frozen seafood. Their retail branded products are sold throughout the United States, Canada and Mexico and are available in most grocery and club stores. They also sell their branded products to restaurants and institutions and they are the major supplier of private label value-added frozen seafood products to North American food retailers and food service distributors. Its web site is here High Liner.

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.