K-Bro Linen Inc 2

On my other blog I am today writing about Good times and bad times...continue...

I do not own this stock K-Bro Linen Inc. (TSX-KBL, OTC-KBRLF). People were talking about this stock at the 2009 Toronto Money Show. It was also recommended by Aaron Dunn who is the Senior Equity Analyst for Keystone Publishing Corp, a publisher of Canadian investment newsletters.

When I look at insider trading, I find $1.4M of insider selling and $1.4M net insider selling. There is a tiny amount of insider buying. The CEO has shares worth $3.5M of common shares and has no options. The CFO has shares worth $0.2M and has no options. An officer has shares worth $0.2M and has no options. A director has a few shares and has 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 12.12, 15.67, and 18.84. The current P/E is 24.11. This is based on a stock price of $33.27 and 2013 EPS estimate of $1.38. This stock test suggests that the stock price is relatively high. Also, for this company I find that the median P/E ratios are rather high. You would expect the 5 year median low to be below 10.00.

I get a Graham Price of $17.58. The 10 year low, median and high median Price/Graham Price Ratios are 0.90, 1.05 and 1.20. The current P/GP Ratio is 1.89 based on a stock price $33.27. This stock price test suggests that the stock price is relatively high.

I get a 10 year median Price/Book Value per Share of 1.52. The current P/B Ratio is 3.34. This is some 20% higher and this stock test suggests that the stock price is relatively high. When I look at the 5 year median Price/Cash Flow per Share Ratio, I get one of 6.68. The current one is 12.95 a value some 93% higher. This stock price test suggests that the stock price is relatively high.

When I look at analysts' recommendations, I find Buy and Hold recommendations. The consensus recommendation is hold. The 12 month consensus stock price is $36.80. This implies a 12 month total return of 14.07% with 10.61% from capital gain and 3.46% from dividends.

There is an article in iPolitics about the company getting a new contract. I think that this is a good company. However, I feel that stock price is far too high to buy this stock at the present time. See my spreadsheet at kbl.htm.

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

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts. K-Bro currently has seven processing plants in six Canadian cities: Quebec City, Toronto, Edmonton, Calgary, Vancouver and Victoria. Its web site is here K-Bro Linen.

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.