Bank of Nova Scotia 2

I do not own this stock of Bank of Nova Scotia (TSX-BNS, NYSE-BNS). This is one of the big banks of Canada. All our big banks are dividend growth companies.

The insider trading report shows $28.3M of insider selling and $28.3M of net insider selling. There is a very minor amount of insider buying. Since net insider selling is 0.03% of the market cap of this stock, it is a relatively small amount.

Last year the outstanding shares were increased by 3.493M shares for stock options. This number of shares is only 0.29% of the outstanding shares and is therefore a relatively small amount. These stock options had a book value of $187M and this number of shares was worth $241M at the end of the October 2014 financial year.

There is some insider ownership with the CEO owning shares worth some $6.6M and the CFO owning shares worth some $2.6M. However, insider ownership is extremely small compared to the market cap of this bank. For example, the CEO owns 0.01% of the outstanding shares in this bank.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.64, 11.88 and 13.11. The 10 year corresponding P/E Ratios are similar at 11.03, 12.32 and 13.72. The current P/E Ratio is 10.72 based on a stock price of $61.56 and 2015 EPS estimate of $5.74. This stock price test suggests that the stock price is relatively reasonable.

I get a Graham Price of $61.17. The 10 year low, median and high median Price/Graham Price Ratios are 0.97, 1.09 and 1.24. The current P/GP Ratio is 1.01 based on a stock price of $61.56. This stock price test suggests that the stock price is relatively reasonable.

I get a 10 year median Price/Book Value per Share of $2.16. The current P/B Ratio is 2.12 based on a stock price of $61.56 and current Book Value per Share of $28.98. The current P/B Rati is some 1.8% lower than the 10 year P/B Ratio. This stock price test suggests that the stock price is relatively reasonable.

The current Dividend Yield is 4.29%. The 5 year median, historical median and historical average Dividend Yields are all lower at 3.92%, 4.18% and 3.81%. They are lower by 9.5%, 2.7% and 12.6%. For the stock to be cheap, the current Dividend Yield would have to be lower than the historical high which is at 5.87%. This stock price test suggests that the stock price is relatively reasonable.

Prices seem to be currently moving quickly. You do not need to see a stock at the same price as I quote in my report. I have a blog entry on how to use my Stock Reviews to help you determine if the stock price is reasonable or not when the current price is different than the price I quote.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would be a Hold as most recommendations are a Hold. The 12 month price consensus is $73.30. This implies a total return of 23.36% with 19.07% from capital gains and 4.29% from dividends.

Sound bite for Twitter and StockTwits is: Stock price seems reasonable at present. I do not see the logic in recommendations of Hold when a stock price goes down. To me good companies with low prices because of current difficulties send out signals to buy. Yes, it is risky, but is it not more risky to buy companies when they hit all-time highs? See my spreadsheet at bns.htm.

This is the second of two parts. The first part was posted on Wednesday, January 14, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

The Bank of Nova Scotia is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. It is an international bank having banking in Canada and some 40 other countries around the world in the geographic regions of the Caribbean and Central America, Mexico, Latin America and Asia. Its web site is here Scotia Bank.

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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