Goodfellow Inc. 2

I own this stock of Goodfellow Inc. (TSX-GDL, OTC-GFELF). I started to look at this stock when I was searching for small cap stocks that paid dividends. It looked like an interesting stock. Goodfellow is a small cap stock that the Investor Reporter has written about a number of times.

When I look at insider trading, I find some insider buying and some insider selling, with a net of insider selling. However, all this trading is for very small amounts and tells us nothing. There also has been no insider buying or selling since May 2013. There is 60% insider ownership.

The 5 year low, median and high median Price/Earnings Ratios are 14.03, 14.68 and 15.32. The current P/E Ratio is 13.58 based on a stock price of $9.10 and previous 12 months earnings of $0.67. (There are no estimates for this stock.) This stock test suggests that the stock price is relatively cheap.

However, P/E Ratios have been rising lately. The 10 year low, median and high median P/E Ratios are much lower at 7.47, 10.31 and 13.00. This suggests that perhaps the stock price may not be relatively reasonable. (You do not often get such variances in the 5 and 10 year median P/E Ratios.) However, a P/E of 13.58 is also not a particularly high P/E Ratio in absolute terms.

I get a Graham Price of $14.53. The 10 year Price/Graham Price Ratios are 0.58, 0.65 and 0.75. These are all quite low P/GP Ratios. The current P/GP Ratio is 0.63 based on a stock price of $9.10. This stock test says the stock price is reasonable. Also, in absolute terms a P/GP Ratio of 1.00 or less says a stock is cheap.

The Price/Book Value per Share is 0.91 and the current P/B Ratio is 0.65 a value 28% lower or 71% of the 10 year median ratio. This stock test says that the stock price is relatively cheap. Also, a stock is considered cheap in absolute terms when the P/B Ratio is less and 1.00.

The 5 year median dividend yield is 4.4% and the 5 year median dividend yield is 3.85% a value some 14% lower. This stock test suggests that the stock price is relatively reasonable to cheap. If you look at historical dividend yields, the average is 4.77% a value some 7.8% above the current dividend yield. This test says that the stock is not cheap, but more in the relatively reasonable category.

There are no analysts recommendations on this stock; however in February 2013 Investment Reported rated this company a Hold. This was because, although sales climbed, the earnings were down. This was due to rising operating expenses. I track the OPM Ratio (Operational Profit Margin that is CF/Revenue). This has been declining over the past few years. This company sells products for the Real Estate market and this is not a good market at the moment, especially in the US.

The stock price is cheap to reasonable by any measure. You lose on investments when a company goes bankrupt or is so damaged by economic circumstances that it cannot recover. I see neither with this company. It also has a very strong balance sheet that will help see it through bad economic times. The time to buy stocks is when a stock is out of favour and this is perhaps what is with this stock at this time. See my spreadsheet at gdl.htm.

This is the second of two parts. The first part was posted on Wednesday, January 8, 2014 and is available here.

Goodfellow Inc. is one of eastern Canada's largest independent re-manufacturers and distributors of lumber and hardwood flooring products. The company serves customers throughout Canada, the United States and abroad including the UK and China and the Middle East. H.Q is Delson, Quebec, just outside Montreal. It is about 60% owned by insiders. Its web site is here Goodfellow.

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.