Monday, November 4, 2013

PFB Corp

I am putting up on my other blog my notes from the World Money Show 2013 in Toronto. I will put up these notes as I transcribe them here.

I do not own this stock PFB Corp (TSX-PFB, OTC-PFBOF). I am following this stock as I read a positive article on this stock in November 2009 and thought I would do a spreadsheet on it. This stock is a dividend paying small cap stock. The article said that this stock would be good for long-term gains and rising dividends. This is the thing with small cap stock; you can get a blend of capital gains and rising dividends in the long term if the company is successful.

First I will talk about dividends. The company does not raise the dividend much. Since they started to pay dividends in 1997, there has been two dividend rises. One was for 50% in 2001 and one was for 60% in 2005. The dividend increase for the last 5 and 10 years is at 0% and 4.8% per year.

However, occasionally the company will give out special dividends. They did a number of times between 2000 and 2009. In this year they gave out a special dividend of $1.00 per share. The dividend portion of the return on this stock is 3.28% and 4.8% per year over the past 5 and 10 years. The current dividend is 4.75%. However, the historical high and low dividends are at 5.6% and 1.8%.

The dividend Payout Ratios are 86% for earnings and 30% for cash flow. The too high DPR for earnings is because the DPR for 2008 and 2012 were quite high. The DPR for 2013 that includes the special dividend may be over 100% again this year. These ratios need to be lower.

A good thing about this stock is the large amount of insider ownership. Most people quote insider ownership at 70%. Another good thing is the good debt ratios. The current Liquidity Ratio is at 2.27. This fell to a low of 1.48 last year, but the 5 year median Liquidity Ratio is at 2.22. The Debt Ratio is currently at 3.25 and the Leverage and Debt/Equity Ratios are good at 1.69 and 0.69.

What is disappointing is that the Return on Equity has seldom broke 10%. The last time this occurred was 2006. However, it is probably set to do that this year as the ROE on last 12 months earnings is 13.4%. Another thing is declining revenue for 2012 and 2013. A company needs increasing revenue to grow. Also Operational Profit Margin Ratio (CF/Revenue) has fallen in 2012 and 2013. This ratio needs to start to go up.

For the first two quarters of 2013, revenue is down slightly, but earnings have increased very well. It looks like cash flow might be up also. It is a good sign that they gave out a special dividend. However, what would be a much better sign of management confidence is if they raised the basic dividend.

Investors might like this stock because it is a green investment. I just wonder if the company has proven that they can make a profit. See my spreadsheet at pfb.htm.

This is the first of two parts. Second part will be posted on November 5, 2013 and will be available here.

PFB Corporation, through its wholly-owned subsidiaries, is a vertically-integrated manufacturer of proprietary insulating building products that are based on expanded polystyrene (EPS) technology. This expanded polystyrene (EPS) rigid insulation is used in a wide variety of residential and commercial construction projects across North America. Its web site is here PFB 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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