Shaw Communications Inc. 2

On my other blog I am today writing about Capital Gains..continue...

I do not own this stock of Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR). It was a stock on Investment Reporter list (MPL Communications Publication).

Looking at the insider trading report, I find $14M of insider selling and net insider selling at $13.8M with a small amount of insider buying at $0.2M. Over the past month, directors seem to be retaining their Directors' Deferred Share Units. Besides options, insiders have Restricted Share Units and Directors' Deferred Share Units, which are option like vehicles.

The 5 year low, median and high median Price/Earnings per Share Ratios are 14.06, 16.52 and 17.90. The current P/E Ratio is 13.92 based on a stock price of $24.36 and 2014 earnings estimates of $1.75. This stock test says that the stock is cheap.

I get a Graham Price of $18.73. The 10 year low, median and high median Price/Graham price Ratios are 1.38, 1.61 and 1.87. On a relative basis this stock test says that the stock price is cheap. On an absolute basis, the P/GP Ratio would have to be 1.00 or lower for the stock price to be cheap.

The 10 year median Price/Book Value per Share Ratio is 3.20. The current P/B Ratio is 2.73 based on a stock price of $24.36 and a Book Value per Share of $8.91. The current P/B Ratio is 86% of the 10 year median P/B Ratio. This stock test says that the stock price is reasonable. For the stock price to be considered to be cheap, the current P/B Ratio would have to be just 80% of the 10 year median P/B Ratio.

The 5 year median Dividend Yield is 4.23% and the current dividend yield is some 6.7% higher at 4.52%. This stock test shows that the stock price is reasonable. For the stock price is to be cheap by this test, the current dividend yield would have to be 20% higher than the 5 year median dividend yield.

On a historical dividend yield basis, the average dividend yield is 2.43% a value some 86% lower than the current dividend yield and this suggests that the stock price is cheap. However, dividend yields were started off in a very low range and they were increased over time to take up a higher percentage of the earnings and cash flow. I would wonder how good this test is in light of this fact.

My stock tests show that the current stock price of $24.36 is relatively cheap to reasonable. Analysts expect that this company will do very well in 2014 as far as revenue, earnings and cash flow go. Certainly the first quarterly report for 2014 of November 2013 has these values going in the right direction, but not as strongly as expected yet.

For example, analysts expect that EPS will climb some 7.4% in 2014. If you look at year over year ending in August 2013 and November 2013, EPS is up but by only 0.8%. Cash Flow per Share is expected to climb by 150% in 2014, but if you look at year over year ending in August 2013 and November 2013 Cash Flow per Share is up by 28%. We can say that revenue, earnings and cash flow are heading in the right direction.

This stock was analyzed by the Dividend Growth Investing & Retirement blogger in May 2013 and he gives an overall positive take on this stock. He also did another review of this stock two days later and it is here. The blogger Canadian Miser named this stock as one of the op 10 Undervalued Dividend Paying Stocks on January 30, 2014. The blogger Insider Monkey says that hedge fund holdings of this stock dropped 17% in the first part of 2013.

When I look at analysts' recommendations, I find Buy, Hold, Underperform and Sell recommendations. The consensus recommendation would be a Hold. The 12 month stock price is $25.10. This implies a total return of 7.55% with 3.04% from capital gains and 4.52% from dividends.

My stock testing shows that the stock price is relatively cheap to reasonable. However, I do wonder about the future of the communications industry and the effects of future technological changes on this sector. To me the risks associated with communications stocks concerning future tech changes is high and I wonder if this stock is cheap enough to make the risk of buying it enough. See my spreadsheet at sjr.htm.

This is the second of two parts. The first part was posted on Tuesday, February 4, 2014 and is available here.

Shaw Communications Inc. is a diversified communications company whose core business is providing broadband cable television, Internet, digital phone and satellite direct-to-home services. Industry: Communications & Media (Cable). SJR.B shares are non-voting and the SJR.A shares are voting shares. Its web site is here Shaw Communications.

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.