Jean Coutu Group Inc. 2

I do not own this stock of Jean Coutu Group Inc. (TSX-PJC.A, OTC-JCOUF), but I used to. I made money on this stock, but sold in 2007 when I thought that the stock was not doing so well.

When I look at insider trading, I find $9.5M of insider selling and $0.2M of insider buying. The net insider selling is at $9.3M and at 0.23% of market cap. Although 9M sounds like a lot it is a small percentage of the market cap. This company is mostly owned by Jean Coutu who owns all the Class B shares worth around $2.2B and some Class A shares worth around 61M.

The outstanding shares were increased by 1M in the 2014 financial year for stock options. These shares have a book value of $14.4M and this number of shares was worth $20.9M at the end of March 2014. The increase in shares is at 0.53% of the outstanding shares and this is rather normal for most companies with stock options.

The 5 year low, median and high median Price/Earnings per Share Ratios are 9.80, 11.42 and 13.05. The 10 year values are similar. The current P/E Ratio is 17.68 based on a stock price of $21.57 and financial year 2015 EPS estimate of $1.22. This stock price test suggests that the stock price is relatively expensive.

I get a Graham Price of $11.63. The 10 year low, median and high median Price/Graham Price Ratios are 1.23, 1.46 and 1.74. The current P/GP Ratio is 1.85 based on a stock price of $21.57. This stock price test suggests that the stock price is relatively expensive.

I get a 10 year Price/Book Value per Share Ratio of 3.20. The current P/B Ratio is 4.38 based on a stock price of $21.57 and current BVPS of $4.93. The current P/B Ratio is some 40% higher than the 10 year median ratio. This stock price test suggests that the stock price is relatively expensive.

The 5 year dividend yield is 2.29% and the current dividend yield at 1.85% is 19% lower and this suggests that the stock price maybe reasonable, but it is at the top of the reasonableness scale.

There is one place that suggests that the stock price is reasonable. The historical average dividend yield is 1.52% and the current dividend yield at 1.85% is 22% higher and this suggests that on an historical basis the stock price is reasonable. The historical median dividend yield is even lower at 0.73% and 154% lower than the current dividend yield and is this test says that this stock is cheap.

The historical dividend yield is much lower than the more recent dividend yields. This is because the dividend yield has been climbing since 2008. The thing is dividends have been increasing at the expense of the Dividend Payout Ratios. However, the DPRs are still not particularly high with 5 year median values of 30.5% for EPS and 25.9% for CFPS.

However, they are higher than generally than comparable stocks. For a comparison of DPRs, Metro (TSX.MRU) has 5 year median values of 16.9% for EPS and 13% for CFPS and Loblaws (TSX-L) 5 year median values of 35% for EPS and 15% for CFPS.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations with the consensus recommendation being a Hold. The 12 month stock price consensus is $21.7 0. This implies a total return of just 2.46% with 0.60% from capital gains and 2.85% from dividends.

There is an interesting remark in this G&M item saying that this company will have to uncover more acquisition opportunities if it is to maintain a high rate of growth. This news item fromNational talks about Andrew Molson joining the Jean Coutu Group's Board of Directors. The article in the Canadian Grocer talks about this company's higher profits in the fourth quarter. This article in the Winnipeg Free Press talks about Jean Coutu eagerly waiting a deal expanding the role of Quebec pharmacists.

Sound bit for Twitter and StockTwits is: Stock could be expensive. See my spreadsheet at pjc.htm.

This is the second of two parts. The first part was posted on Wednesday, August 13, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

The Jean Coutu Group is one of the most trusted names in Canadian pharmacy retailing. The Corporation operates a network of 413 franchised stores located in the provinces of Québec, New Brunswick and Ontario under the banners of PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté. Furthermore, the Jean Coutu Group owns Pro Doc Ltd ("Pro Doc"), a Québec-based subsidiary and manufacturer of generic drugs. Controlling shareholder is Jean Coutu. Its web site is here Jean Coutu.

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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