Friday, July 11, 2014

Saputo Inc. 2

I own this stock of Saputo Inc. (TSX-SAP, OTC-SAPIF). This was a stock on Mike Higgs' Canadian Dividend Growth Stock list and on the dividend lists that I followed. When I sold RIM in 2006 I bought some Saputo. I had been following this stock and thought it was a strong Canadian Dividend paying stock.

When I look at the insider trading report, I find $12.1M of insider selling and $.8M of insider buying with net insider selling at $11.3M. This is just 0.11% of market cap. Insiders have stock options and also other option like vehicles called Performance Share Units and Deferred Share Units. There are some insiders with lots of options.

Last year the outstanding shares were increased by 1.7M shares with a book value of $41.9M. This number of shares would be worth some $94.8M at the end of 2014. There is also lots of insider ownership with the CEO having shares worth around $3.8M, a director having shares worth around $13.3M and the chairman having shares worth around $3.7B.

The 5 year low, median and high median Price/Earnings per Share Ratios were 16.8, 19.11 and 21.12. These are a bit higher than the corresponding 10 year P/E Ratios. The current P/E Ratio is 20.03 based on a stock price of $65.11 and 2014 EPS estimates of $3.25. This stock price test says that the stock price is within the relatively reasonable range, but it is close to the high end of this range.

I get a Graham Price of $32.26. The 10 year low, median and high median Price/Graham Price Ratios are 1.26, 1.58 and 1.83. The current P/GP Ratio is 2.02 based on a stock price of $65.11. This stock test says that the stock price is relatively expensive.

The 10 year median Price/Book Value per Share Ratio is 3.00. The current P/B Ratio is 4.57 a value some 53% higher. This P/B Ratio is based on a BVPS of $14.23 and a stock price of $65.11. This stock test says that the stock price is relatively expensive.

The 5 year dividend yield is 1.76% and the current dividend yield is 1.41% a value some 19.5% lower. This historical median dividend yield is 1.74% a value some 19% higher than the current dividend yield. Both theses stock test says that the stock price is relatively expensive. The historical average dividend yield is lower at 1.51% and this is only 6% higher than the current dividend yield of 1.41%. This last test says that the stock price is relatively reasonable.

There is an interesting article on the CTV site which talks about Saputo refusing to buy milk from a B. C. farm after a video of workers abusing the cows was released. Good for them. This is the proper way to do business. Desjardins downgrades Saputo from a buy to a hold according to the InterCooler site. A Wall Street Journal article talks about Saputo launching seven new specialty cheese items this June.

When I look at analysts' recommendations, I find Buy and Hold recommendations. The consensus recommendations would be a Hold. The 12 month stock price is $62.20. This is a value below the current stock price so the total return would be a 3.06% loss with dividends at 1.41% and a capital loss of 4.47%.

This is a good company and I have done well with it and although the dividend yield is low, it does healthy dividend increases. However, I think that now would not be a good time to buy as it is rather expensive at present. See my spreadsheet at sap.htm.

This is the second of two parts. The first part was posted on Thursday, July 10, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Saputo produces, markets, and distributes a wide array of products of the utmost quality, including cheese, fluid milk, yogurt, dairy ingredients and snack-cakes. Saputo is the twelfth largest dairy processor in the world; the largest in Canada; the third largest in Argentina and among the top three cheese producers in the United States. Our products are sold in more than 50 countries under well-known brand names. Its web site is here Saputo.

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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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