Stella-Jones Inc. 2

On my other blog yesterday, I had a bad link to my spreadsheet. This link has now been fixed. Blog entry was about Dividend Stocks that may be cheap...continue...

I do not own this stock of Stella-Jones Inc. (TSX-SJ, OTC-STLJF). I started a spreadsheet on this stock in mid-2009 because of a favorable report I read on this stock. It was considered to be a dividend growth stock and I am always on the lookout for dividend growth stocks.

When I look at insider trading, I see $1.9M in insider selling and $1.9M in net insider selling. There is a minor amount of insider buying. The CEO sold almost a $1M in stock in 2012. He got stock options worth between $13M and $14M in 2012.

Stella Jones International S.A. which is based in Luxembourg is a joint venture between James Jones & Sons Ltd. and Eurocanadian Investments SA. James Jones & Sons Limited (forest products, UK) and Stella SpA, through the Stella Jones International S.A. joint venture, control a majority of Stella-Jones Inc.

The 5 year low, median and high median Price/Earnings Ratios are 9.05, 12.00 and 14.73. The current P/E is 13.94. The P/E for 2014 is higher at 15.20 because analysts expect the company to earn less in 2014 than it will earn in 2013. By this measure, the current stock price is on the high side but still reasonable using the P/E for 2013. However, using the P/E for 2014, the stock price becomes high.

I get a current Graham Price of $15.58. The 10 year low, median and high median Price/Graham Price Ratios are 0.67, 0.94 and 1.14. The current P/GP Ratios is 1.45. I get a Graham Price of $17.79 for 2014 and this gives a P/GP Ratio of 1.51. By this measure the stock price is rather high.

The 10 year median Price/Book Value Ratio is 1.92 and the current P/B Ratio is 3.39. This stock price tests says that the stock is rather high as the current P/B Ratio is some 78% higher than the 10 year P/B Ratio.

The 5 year median dividend yield is 1.31% and the current dividend yield is 0.74% a values some 43% lower than the 5 year median. This stock price test suggests that the stock price is rather high.

When I look at analysts' recommendations, I find Buy and Hold recommendations. There is more Buy than Hold recommendations and the consensus recommendation is a Buy. The 12 months consensus stock price is $38.80 and this implies a total return of 44.98% with 44.24% from capital gain and 0.74% from dividends.

There is an interesting article in Financial Post entitled how Stella Jones got its groove back. This article also talks about the stock price being too high and a stock split is necessary. By the way, the company has just done a 4 to 1 stock split.

By historical standards this stock is overpriced. On the other hand, historical data can only tell you about the past and it offers nothing about the future. As regards to P/E ratios, a P/E Ratio of 13.94 or 15.20 is not particularly high in absolute terms. However, a P/GP Ratio of 1.45 and a P/B Ratio of 3.39 are rather high in absolute terms.

As regards to dividend yield, 0.74% is not the lowest it has been as it high 0.5% in 2007. That was on a stock price of $12.00 and the stock is up some 124% since then. But I am talking about today. After the high of $12.00 in 2007, the stock price dropped and only got back there in 2012. See my spreadsheet at sj.htm.

This is the second of two parts. The first part was posted on Monday, December 30, 2013 and is available here.

Stella-Jones Inc. is a leading North American producer and marketer of industrial pressure treated wood products, specializing in the production of railway ties and timbers as well as wood poles supplied to electrical utilities and telecommunications companies. The Company also provides treated consumer lumber products and customized services to lumber retailers and wholesalers for outdoor applications. Other products include marine and foundation pilings, construction timbers, highway guardrail posts and treated wood for bridges. It has sales in Canada and US. Its web site is here Stella Jones.

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.