Tuesday, August 20, 2013

MacDonald, Dettwiler & Associates 2

I do not own this stock MacDonald, Dettwiler & Associates (TSX-MDA, OTC-MDDWF). I read about this stock in MPL Communication's Advice Hotline dated October 10, 2012. CanTech likes it also and it is a Tech stock with dividends.

When I look at insider trading, I find insider selling at $1.2M and no insider buying. The insiders do have options per se, but have option like vehicles called Deferred Share Unit (DSU), Share Appreciation Rights (SAR) and Deferred Restricted Share Units (DRSU). There is some insider ownership, but not that much. For example, the CEO has shares worth $3.3M and the CFO has shares worth $2.2M. Both these add up to only 0.2% of the company.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.45, 18.62 and 22.51. The current P/E Ratios is 15.00 based on 2013 earnings estimates of $5.28 and a current stock price of $79.20. Since earnings for the first 6 months are down by 1.5%, you have to wonder about the estimates. Based on earnings for the year to June 2013, the P/E ratio would be 29.66 based on earnings of $2.67 and stock price of $79.20.

The current Graham Price has some of the same problems as the P/E Ratio with the Graham Price of $47.20 partly based on high expected earnings by analysts. The current Price/Graham Price Ratio is 1.68. The 10 year low, median and high median P/GP Ratios of 1.61, 1.89 and 2.25 this tests shows the price is reasonable.

A test based on the Price/Book Value per Share Ratio however, shows the same thing, that the stock price is relatively reasonable. The 10 year P/B Ratio is 3.94 and the current P/B Ratio of 4.22 is just some 7% higher and points to a reasonable stock price. However, a P/B Ratio of 4.22 is rather high.

The dividend yield test is the only one to show something different. Since dividends have only been paid for two years, this is not a great test. The 2 year median dividend yield is 2.29% and the current one is 1.64%, showing that the current dividend yield is some 28% lower than the 2 year dividend yield and suggests a rather high price.

Looking at other stock price tests, like Price/Cash Flow per Share Ratio shows a relatively reasonable stock price, but here again, the P/CF ratio is rather high. The 10 year median P/CF Ratio is 11.25 and the current one is 11.73 which is only some 4% higher and points to a relatively reasonable stock price.

If you look at the Price/Sales per Share Ratio, this shows that the price is good. The 10 year median P/S Ratio is 1.54 and the current one is 1.35 based on sales estimates. Even if you use the sales for the last year to June 2013, the current P/S Ratio is 1.79 and only 17% higher.

The thing also to consider is that Ratios tend to be higher on tech stocks than some other types of stocks. For this stock most of the stock tests point to a relatively reasonable current stock price.

When you look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The vast majority of the recommendations are a Buy. The consensus recommendation would be a Buy. However, the 12 month stock price consensus is just $83.00. This consensus price gives a 12 month total return of just 6.44% with 4.8% from Capital Gains and 1.64% from Dividends. This is rather a low total return on a Tech stock.

CanTech has a positive review of this stock in August 2013. Donville Kent Asset Management covers this stock in their July 2013 issue.

The stock price may be relatively reasonable, but the easy money on this tech stock has already been made. Since the end of last year this stock has rallied around 60%. I would like to see another dividend increase before looking at this stock again. See my spreadsheet at mda.htm.

This is the second of two parts. The first part was posted on Monday, August 19th, 2013 and is available here.

MacDonald, Dettwiler & Associates Ltd. provides solutions that capture and process large amounts of data, produce essential information and improve the decision making and operational performance of business and government organizations worldwide. Its web site is here MacDonald, Dettwiler and Associates.

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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