Russel Metals Inc. 2

On my other blog I am today talking about the Oil Sands and Coal continue...

I own this stock of Russel Metals Inc. (TSX-RUS, OTC-RUSMF). This was a stock on Mike Higgs' Canadian Dividend Growth List. In 2007 I needed to reduce my holdings of Loblaws and buy something to help replace the dividends I had been earning. With Russel Metals, both Mike and TD recommend buying at this time.

When I look at insider trading, I find $2.3M of insider selling and $1.1M of insider buying with net selling at $1.2M. There are not only stock options, but other option type vehicles called Rights Restricted Share and Rights Deferred Share Units. Insiders also have Convertible Debentures with good interest rates (i.e. 7.75%).

Outstanding shares were increased by 737,000 for stock options in 2013 with a book value of $21.5M. This number of shares was worth some $23.1M at the end of 2013 and is some 1.2% of the outstanding shares. This is rather a high number of shares for stock options as most companies increase shares for stock options at a rate less 1% and generally at one half of 1%.

There is some insider ownership with the CEO having shares worth around $3.5M, the CFO having shares worth around $2.3M and the Chairman having shares worth around $1.3M. There also seems to be a lot of stock options outstanding.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.80, 15.70 and 17.61. The current P/E Ratio is 15.89 based on a stock price of $30.66 and 2014 earnings estimates of $1.93. This stock price test suggests that the stock price is reasonable. Note that P/E Ratios are currently moving up on this stock as the 10 year low, median and high median P/E Ratios are 9.22, 11.00 and 12.77.

I get a Graham Price of $24.64. The 10 year low, median and high median Price/Graham Price Ratios are 0.78, 0.93 and 1.08. The current P/GP ratio is 1.24. This stock price test suggests that the stock price is relatively high.

The 10 year median Price/Book Value per Share ratio is 1.74. The current P/B Ratio is 2.19 which is a value some 26% higher. This stock price tests suggests that the stock price is relatively high. The current P/B Ratio of 2.19 is based on a stock price of $30.66 and 2013 BVPS of $13.98.

I get a 5 year median Dividend Yield of 5.11. The current dividend yield at 4.57% is some 10% lower. The historical average dividend yield is 5.35% which is some 15% higher than the current dividend yield. The historical median dividend yield is 5.12% a value some 11% higher than the current dividend yield. This stock price testing says that the stock price is still reasonable, although it is in the high portion of the reasonable range.

The analysts' recommendations are Buy and Hold. There are equal numbers of Buy and Hold recommendations so the consensus recommendations would be a Buy. The 12 month price consensus is $31.30 which implies a total return of 7.31% with 2.74% from capital gains and 4.57% from dividends.

There some recent technical analysis on this stock at the site BannRonn. The newspaper the Western Star talks about the company's fourth quarter which had a profit drop.

My stock price testing says that the stock price is reasonable to high. I still think that I can make good money in this stock over the longer term, so I will continue to hold on to my shares. Although I must admit this stock is only a minor stock holding in my portfolio. See my spreadsheet at rus.htm.

This is the second of two parts. The first part was posted on Thursday, April 24, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Russel Metals Inc. is one of the largest metals distribution and processing companies in North America. The Company primarily distributes steel products and conducts its distribution business in three principal business segments: metals service centers; energy tubular products and steel distributors. Its web site is here Russel Metals.

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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