Home Capital Group 2

I do not own this stock of Home Capital Group (TSX-HCG, OTC-HMCBF). I started reviewing this company in September 2009. It is a dividend growth company and was coming up on lists of good dividend paying stocks. It is on some dividend paying companies lists that I look at.

When I look at insider trading, I find insider selling of $8.8M and net insider selling at $8.7M. There is a very small amount of insider buying. Insiders not only have options, but have option like vehicles called Rights Performance Share Units, Rights Restricted Share Units and Rights Deferred Share Units. In 2013 outstanding shares were increased by 153,000 shares with a book value of $8.4M. This number of shares was worth $12.4M at the end of 2013.

The 5 year low, median and high median Price/Earnings Ratios are 6.79, 8.74 and 10.34. The current P/E Ratio is 10.14 based on a stock price of $85.05 and 2014 earnings estimate of $8.39. This stock price test suggests that the stock price is within the reasonable range, but towards the high end. Note there is some difference between the 5 year median and 10 year median P/E Ratios with the 10 year median high ratio at 12.37.

I get a Graham Price of $79.99. The 10 year low, median and high median Price/Graham price Ratios are 0.78, 0.95 and 1.26. The current P/GP Ratio is 1.06 based on a stock price of $85.05. This stock price test suggests that the stock price is in the reasonable range, but slightly above the median.

I get a 10 year median Price/Book Value per Share of 2.24 and a current P/B Ratio of 2.51 a value some 12% higher. The P/B Ratio is based on a stock price of $85.05 and a BVPS of $33.90. This stock price test suggests that the stock price is in the reasonable range and slightly above the median.

I get a 5 year median dividend yield of 1.59% and a current dividend yield of 1.50%, a value some 5.6% higher. This is based on a stock price of $85.05 and a current dividend of $1.28. This stock price test suggests that the stock price is reasonable, but above the median. I get an historical average dividend yield of 1.42%. The current dividend yield of 1.50 is some 6% lower and this stock price test suggests that the stock price is reasonable and below the median.

The analysts' recommendations are Strong Buy, Buy and Hold. The consensus recommendation is a Buy. The 12 month target stock price is $89.90. This suggests a total return of 7.2% with 1.5% from dividends and 5.7% from capital gains.

For a short talk from the president of the company on BNN, click here. The company had a good year in 2013 and raised the dividend 14% and plans a 2 for 1 stock split. The Motley Fool site gave quite a positive report on this stock in February of this year. In February of this year HCG forecasted a positive year ahead.

My stock price testing says that the stock price is reasonable to high reasonable. This is a financial and you might want to buy it for diversification and growing dividends. See my spreadsheet at hcg.htm.

This is the second of two parts. The first part was posted on Wednesday, February 26, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Home Capital Group Inc. operates through one subsidiary, Home Trust Company, to provide mortgage lending, deposit, retail credit and credit card issuing services. They have subprime mortgages. Its stock is widely held. Its web site is here Home Capital.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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