Wednesday, March 26, 2014

Richelieu Hardware Ltd 2

On my other blog I am today writing about annuities and bonds continue...

I own this stock of Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF). I initially bought this stock in 2007 because it was recommend by the Investment Reporter. It is not on any of the dividend lists, probably because they only started to pay dividends in 2002and increases are not consistent. I would consider this stock to be a dividend paying growth stock. In 2009, I thought I would add to what I had in this stock.

When I look at insider trading for the past year I find $5.7M of insider selling and $5.7M of net insider selling. There is a minor amount of insider buying. In the past year the CEO sold shares worth around $4.7M. The CEO has shares currently worth around $69.5M. An officer has shares worth around $1.4M and a director has shares worth around $3.7M. So there is some insider ownership.

Insiders have stock options and directors also have option like vehicles called Deferred Stock Units and Subscription Rights Units. In 2013 outstanding shares were increased by under just 125,000 shares with a book value of $3M and this number of shares would have been worth around $5.6M at the end of 2013.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.53, 14.62 and 16.69. (The 10 year corresponding ratios are a bit higher.) The current P/E Ratio is 18.46 based on a stock price of $47.07and 2014 EPS estimates of $2.55. This stock test suggests that the current stock price is high.

I get a Graham Price of $28.75. The 10 year low, median and high median Price/Graham Price Ratios are 1.16, 1.29 and 1.43. The current P/GP Ratio is 1.64. This stock price tests suggests that the stock price is high.

The 10 year median Price/Book Value per Share Ratio is 2.45. The current P/B Ratio is 3.27 a value some 33% higher. The current P/B Ratio is based on a stock price of $$47.07 and a book Value of $4.27. This stock price test suggests that the stock price is high.

The 5 year median dividend yield is 1.53%. The current dividend yield is 1.19%, a value some 22% lower. This stock price test suggests that the stock price is high. However, the historical average is around 1.38% a lower yield, a value only 14% higher than the current dividend yield. This is the only stock price test that suggests that the current price could be reasonable, if a bit on the high side.

There is an interesting article in the Financial Post about Quebec not wanting their companies to be taken over, especially by foreigners. The article names some 8 companies that could possibly be taken over and this company called by its French name of Quincaillerie Richelieu was one of the companies mentioned. The Dividend Blogger mentions this company and its recent dividend increase. The web site of The Street gave this stock a positive view late last year.

When I look at the analysts' recommendations, I find only two. Both the recommendations are a Buy. The 12 month stock consensus is $50.00. This implies a total return of 7.41% with 6.22% from capital gains and $1.19% from dividends.

By most of my tests this stock is shown to be in the overbought category. See my spreadsheet at rch.htm.

This is the second of two parts. The first part was posted on Tuesday, March 25, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. This stock is widely held. Its web site is here Richelieu.

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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