Linamar Corporation 2

I do not own this stock of Linamar Corporation (TSX-LNR, OTC-LIMAF). I looked at this stock back in 2000 and it was not a stock I thought fit my investment philosophy. In 2008 I read an article that recommended this company as a dividend stock with good value and so I started to follow this stock.

When I look at insider trading for the past year, I find $1.5M of insider buying and $0.8M of insider selling with $0.7M of net insider buying. These are very small amounts. There is some insider ownership with the CEO having shares worth around $169M and 5.9% of outstanding shares and the Chairman owning shares worth around $675.6M and 23.6% of outstanding shares.

In 2013 outstanding shares were increased by 56,000 or 0.09% for stock options. The book value of these options was at $1.2M and this number of shares was worth around 2.5M at the end of 2013. These are a very low numbers for stock options.

The 5 year low, median and high median Price/Earnings per Share Ratios were 6.45, 9.50 and 12.55. These are close to the 10 year corresponding values of 7.99, 9.95 and 12.31. The current P/E Ratio is 12.10 based on a stock price of $53.50 and 2014 EPS estimate of $4.42. This stock price test suggests that the stock price is relatively reasonable, but towards to high end of that range.

I get a Graham Price of $48.06. The 10 year low, median and high median Price/Graham Price Ratios are 0.59, 0.76 and 0.95. The current P/GP Ratio is 1.11. This stock price test suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 1.29 and the current P/B Ratio at 2.30 is some 79% higher. This is based on a BVPS of $23.22 and a stock price of $53.50. This stock price test suggests that the stock price is relatively expensive.

I get 5 year median dividend yield of 1.42% and this is some 47% higher than the current dividend yield of 0.75%. Also, the historical average and median dividend yields are 1.47% and 1.25% which are 49% and 40% higher than the current dividend yield of 0.75%. All this suggests that the stock price is relatively expensive.

When I look at analysts' recommendations, I get Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendation is a buy. The 12 month consensus stock price is $71.30. This implies a total return of 34.02% with 33.27% from capital gains and 0.75% from dividends.

Sound bit for Twitter and StockTwits is: Buy when it crashes, relatively expensive now. This is an industrial stock and it has its ups and downs. If you want to make a decent dividend yield on your purchase price, buy this stock when it is at a low. Also, I would not buy any dividend growth stock with a dividend yield less than 1% as it would take too long to get to a decent dividend yield on your original purchase. See my spreadsheet at lnr.htm.

This is the second of two parts. The first part was posted on Thursday, October 09, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Linamar Corporation is a diversified global manufacturing company of highly engineered products. It is a world-class designer and diversified manufacturer of precision metallic components and systems for the automotive industry, and mobile industrial markets. Its web site is here Linamar.

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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