Tuesday, September 17, 2013

Reitmans (Canada) Ltd 2

On my other blog I am today writing about my friend's art show called Transformations 2013 ...continue...

I do not own this stock Reitmans (Canada) Ltd. (TSX-RET.A, OTC-RTMAF), but I just bought some. See my comments below. I am following this stock as it was a stock on Mike Higgs' dividend growth stocks list.

When I look at insider trading, I find a very small amount of insider buying and no insider selling. The bit of insider buying seems to be insiders retaining stock options. There are two kinds of shares, common shares that are voting shares and Class A shares that are non-voting shares. Insiders own 83% of the common shares.

The CEO has shares worth $17.9M of common shares and $11.5M of Class A shares and has options worth $0.8M. The CFO has shares worth $0.3M and has options worth $0.6M. An officer has no shares and has options worth $06M. Another officer has shares worth $17.9M of common shares and $8.3M of Class A shares and has options worth $08M.A director has no shares and has options worth $0.4M. This is just to give you an idea on insider share ownership and option values.

The common shares are owned by the Reitman family under Reitmans and by Sherlex Investments Inc., which is also run by the Reitman family.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.33, 12.97 and 15.67. The current P/E Ratio is 17.78 based on a stock price of $8.00 and 2013 earnings of $0.45. It would seem that the ratio is saying that the stock is expensive. However, earnings have been dropping.

I get a Graham Price of $8.27. The current stock price of $8.00 has a Price/Graham Price Ratio of 0.97. The 10 year low, median and high median P/GP Ratios are 0.98, 1.20 and 1.46. This test says that the stock price is relatively cheap. A P/GP Ratio below 1.00 says the same thing.

The 10 year Price/Book Value per Share Ratio is 2.33. The current P/B Ratio is 1.18 on an $8.00 stock price. The current P/B Ratio is just 51% of the 10 year P/B Ratio. This test says the stock is relatively cheap.

The 5 year median dividend yield is 5.24% and the current dividend yield is 10%. The 10 year median dividend yield is even lower than the 5 at 3.9%. This test says that the stock is relatively cheap.

Unlike Le Chateau, there are still analysts that are following this stock. There are 3 analysts with recommendations and all the recommendations are a Hold. The consensus recommendation would be a Hold. The 12 month consensus stock price is $12.00. This implies a 12 month total return of 60%, with 50% from capital gains and 10% from dividends. Frankly, I do not believe this.

On the other hand you should buy stocks when they are cheap. So, I have just bought some 500 shares of this company today at $7.97. Personally, I think that if they do not make any money soon, they will cut the dividends.

You can find a review of the second quarter 2013 in Montreal Gazette. The blog Ticker Reporter mentions some recent downgrades of this stock by some analysts.

See my spreadsheet at ret.htm.

This is the second of two parts. The first part was posted on Monday, September 17, 2013 and is available here.

Reitmans (Canada) Limited operates a network of clothing stores specializing in women's & men's fashions and accessories. The company operates stores under the names Reitmans, Smart Set, Pennington Superstores, RW & Co., Thyme Maternity, Addition-Elle, and Cassis. Its web site is here Reitmans.

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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