Thursday, June 5, 2014

Ag Growth International 2

I own this stock of Ag Growth International (TSX-AFN, OTC-AGGZF). It was talked about at the Money Show of 2009. Its median yield in 2009 was 7.9%. It is on the Canadian Dividend Aristocrats. So I investigated this company. By 2011 when I bought this stock, I have been interested in AFN for some time. It has a high dividends but probably riskier than average.

When I look at insider trading, I find 1.8M of insider selling and $1.6M of net insider selling with a bit of insider buying. Insiders do not have stock options per se, but they have stock options type vehicles called Rights Long Term Incentive Plan, Rights Share Award Incentive Plan and Rights Deferred Compensation Plan.

In 2013 outstanding shares were increased by 65,000 shares for stock options. The book value of these shares was $2.5M and the value of this number of shares at the end of 2013 was $2.9M. The number of shares is less than 1% of the outstanding shares.

The 5 year low, median and high median Price/Earnings Ratios is 14.49, 21.29 and 25.65. The P/E Ratio is increasing as the 10 year values were 10.83, 16.00 and 21.17. The current P/E Ratio is 15.86 based on a stock price of $45.53 and 2014 EPS estimate of $2.87. This stock price test suggests that the stock price is relatively reasonable. On an absolute basis, 15.86 is a moderate P/E Ratio.

I get a Graham price of $32.83. The 10 year low, median and high median Price/Graham Price Ratios are 0.89, 1.43 and 1.87. The current P/GP Ratio is 1.39. This stock price test suggests that the stock price is relatively reasonable. On an absolute basis a P/GP Ratio of 1.39 is a moderate one. To be a good price, the P/GP Ratio would need to be 1.00 or lower.

The 10 year median Price/Book Value per Share Ratio is 2.23. The current P/B Ratio is 2.73 based on a current BVPS of $16.59 and a stock price of $45.53. This ratio is some 22% higher than the 10 year median P/B Ratio and suggests that the stock price is relatively expensive.

Since this is an old income trust stock and the dividend yield has probably become lower because it changed to a corporation. It was expected that the old income trusts would have dividend yields between 4 and 5% when they changed to corporations. The current dividend yield at 5.27% is a bit high, but the dividend yield for this stock has seldom been below 5%. I doubt I can make any proper judgments on this stock using dividend yield. But basically the higher the yield the better the stock price and 5.27% is a rather high yield.

If you look at Price/Cash Flow per Share Ratio, the 10 year median ratio is 11.02 (a high value). The current P/CF Ratio is 9.61 a value some 13% lower. The P/CF Ratio is based on a stock price of $54.53 and 2014 CFPS estimate of $4.74. This stock price test suggests that the stock price is relatively reasonable.

The 10 year Price/Sales per Share Ratio is 1.72 and the current P/S Ratio is 1.35 a value some 21% lower. This P/S Ratio is based on a stock price of $54.53 and 2014 Sales estimate of $424 (and Sales per Share of $33.62. This stock price test suggests that the stock price is relatively cheap.

My testing of the stock price is all over the place. The only one that is not based on estimates says the stock price is expensive. Most of the others say it is reasonable and in the bottom range of the reasonableness range.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The 12 month consensus stock price is $50.70. This assumes a total return of 16.63% with 5.27% from dividends and 11.36% from capital gains.

The site of WKRB news and analysis talks about recent analysts' comments including TD Securities raising the 12 month Target price or $48 and keeping their Hold rating on this stock. (See my blog for information on analyst ratings .) The site Macr Axis has some interesting valuations on this company. At the site 2% Realty it talks about Cantor Fitzgerald's 7 stocks to own in Canada in 2014. This stock was included.

I can see why some analysts are rating this stock as a Hold. The stock price could be relatively high. This company is into agriculture, which is rather risky and it does business worldwide, including in the Ukraine. This could give you pause. See my spreadsheet at afn.htm.

This is the second of two parts. The first part was posted on Wednesday, June 04, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Ag Growth is a leading North American manufacturer of portable grain handling equipment, consisting of augers, belt conveyors, grain drying, fencing, post-hole augers, and other ancillary grain handling accessories. This company has 1,400 dealers and distributors in Canada and the United States. Its web site is here Ag Growth.

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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