Stella-Jones Inc. 2

On my other blog I am today writing about selling Ensign Energy Services (TSX-ESI) and buying Mullen Group Ltd. (TSX-MTL) continue...

I do not own this stock of Stella-Jones Inc. (TSX-SJ, OTC-STLJF). I started a spreadsheet on this stock in mid-2009 because of a favorable report I read on this stock. It was considered to be a dividend growth stock and I am always on the lookout for dividend growth stocks.

Over the past year in insider trading there has been $5.2M of insider selling and $5.2M of net insider selling. There was a bit of insider buying. Insider Marla Eichenbaum, an officer of the company has been selling recently. No one is giving a reason as far as I can see. The problem with selling is that it can be for a lot of reasons which have nothing to do with how a company is doing.

Since I looked at this stock on December 19, 2014 there has been reported $2.9M more of insider selling and this is almost 5% of the outstanding shares. It is a high amount. Selling occurred between $34 and $37 per share. The total net insider selling for the year is almost 9% of outstanding shares. This has got to be a negative.

There is some insider ownership with a Director owning shares worth around $2.1M and the chairman owning shares worth around $0.9M. This insider ownership is a very small percentage of the outstanding shares.

The 5 year low, median and high median Price/Earnings per Share Ratios are 9.24, 12.87 and 14.73. These are little higher than the corresponding 10 year P/E Ratios of 8.42, 11.30 and 14.04. The current P/E Ratio is 21.72 based on a stock price of $33.45 and 2014 EPS estimate of $1.54. The P/E Ratio for 2015 is a little lower at 17.33 based on a stock price of $33.45 and 2015 EPS estimate of $1.93. These testing suggest that the stock price is expensive.

I get a Graham Price of $18.23. The 10 year low, median and high median Price/Graham Price Ratios are 0.76, 0.99 and 1.22. The current P/GP Ratio is 1.83 based on a stock price of $33.45. For 2015, I get a Graham price of $20.41. The 2015 P/GP Ratio is 1.64 based on a stock price of $33.45. This testing suggests that the stock is expensive.

I get a 10 year Price/Book Value per Share Ratio of 1.94. The current P/B Ratio is 3.49 based on a BVPS of $9.59 and a stock price of $33.45. The current P/B Ratio is 80% higher than the 10 year median ratio. This testing suggests that the stock is expensive.

The current dividend yield is 0.84%. The 5 year median dividend yield is 1.31%. The historical average dividend yield is 1.95% and the historical median dividend yield is 1.31%. These yields are 36%, 57% and 36% higher than the current dividend yield. This testing suggests that the stock is expensive.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold recommendations. Consensus is a Buy. The 12 month consensus stock price is $36.30. This implies a total return of 9.36% with 0.84% from dividends and 8.52% from capital gains.

According to The Legacy an insider just sold some shares and TD Securities upgraded their rating from a Buy to an Action Buy recommendation. Peter Hodson, Head of Research at 5i Research says in May of 2014 that this company is one of three top picks.

Sound bit for Twitter and StockTwits is: Stock is expensive. On a relative basis this stock is rather expensive. I still think that it is a good stock, but now may not be the time to buy it if you are buying for the longer term. See my spreadsheet at sj.htm.

This is the second of two parts. The first part was posted on Friday, December 19, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Stella-Jones Inc. is a leading North American producer and marketer of industrial pressure treated wood products, specializing in the production of railway ties and timbers as well as wood poles supplied to electrical utilities and telecommunications companies. The Company also provides treated consumer lumber products and customized services to lumber retailers and wholesalers for outdoor applications. Other products include marine and foundation pilings, construction timbers, highway guardrail posts and treated wood for bridges. It has sales in Canada and US. Its web site is here Stella-Jones.

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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