Over the past year there has been insider trading, with insider selling at $10.4M and insider buying at $1.3M. The net insider selling is at $9.1M and since this is only 0.05% of the stock's market cap, it is a relatively small amount.
In 2014 some 2.945M shares were issued for stock options purposes. This represents 0.89% of the outstanding shares and is a little high. As you can see from the table below the relative amount of stock options shares issued for the National Bank is much higher than the other banks. Whether you are looking at percentage of outstanding shares or market cap, the percentage is the same. On a relatively basis, which is the one that really counts, National Bank is issuing more stock options than the other banks.
| Bank | Symbol | Shares | % of o/s Shares | Value 2014 |
|---|---|---|---|---|
| Bank of Montreal | BMO | 2.133 | 0.33% | $173.187M |
| Bank of Nova Scotia | BNS | 3.493 | 0.29% | $241.121M |
| Royal Bank | RY | 2.723 | 0.19% | $217.867M |
| National Bank | NA | 2.945 | 0.89% | $155.117M |
| TD Bank | TD | 5.000 | 0.27% | $277.350M |
There is some insider ownership with the CEO having shares worth around $13.8M and the chairman having shares worth around $1.3M. The above ownership does not add up to much of a percentage of outstanding shares. They are around 0.09% of outstanding shares or market cap.
The 5 year low, median and high median Price/Earnings Ratios are 9.26, 10.28 and 11.30. The corresponding 10 year median P/E Ratios are similar at 9.36, 10.49 and 12.18. The current P/E Ratio is 9.71 based on a stock price of $45.04 and 2015 EPS estimates of $4.64. This stock price test suggests that the stock price is relatively reasonable. The stock price is good because it is relatively below the median.
It is interesting to compare historical ratios. If you look at 5 year median P/E Ratios, National Bank has the lowest of all the other banks. This means that investors are willing to pay relatively more money for the other banks than for this bank.
| Bank | Symbol | Low | Median | High |
|---|---|---|---|---|
| Bank of Montreal | BMO | 10.51 | 11.34 | 12.10 |
| Bank of Nova Scotia | BNS | 10.64 | 11.88 | 13.11 |
| Royal Bank | RY | 11.34 | 12.60 | 13.85 |
| National Bank | NA | 9.26 | 10.28 | 11.30 |
| TD Bank | TD | 11.40 | 12.63 | 13.84 |
I get a Graham Price of $51.86. The 10 year low, median and high median Price/Graham Price Ratios are 0.80, 0.89 and 1.05. The current P/GP Ratio is 0.87 based on a stock price of $45.04. This stock price test suggests that the stock price is relatively reasonable. The stock price is good because it is relatively below the median.
It is also interesting to look at the relative 10 year low, median and high P/GP Ratios for all the bank stocks. The chart below shows the 10 year low, median and high Price/Graham Price Ratios. This chart really shows the same results as the last chart. Investors are willing to pay more relative to the Graham Price for the other bank stocks than for National Bank.
| Bank | Symbol | Low | Median | High |
|---|---|---|---|---|
| Bank of Montreal | BMO | 0.82 | 0.93 | 1.12 |
| Bank of Nova Scotia | BNS | 0.97 | 1.09 | 1.24 |
| Royal Bank | RY | 1.03 | 1.21 | 1.41 |
| National Bank | NA | 0.80 | 0.89 | 1.05 |
| TD Bank | TD | 0.88 | 1.00 | 1.11 |
I get a 10 year median Price/Book Value per Share Ratio of 1.79. The current P/B Ratio is 1.75 based on a stock price of $45.04 and Book Value per Share of $25.76. The current P/B Ratios is some 2% lower than the 10 years P/B Ratio. This stock price test suggests that the stock price is relatively reasonable. The stock price is good because it is relatively below the median.
For Book Value, the lower the P/B Ratio is, the more book value you get for your money. Theoretically, the book value is the difference between assets and liabilities and therefore is the potential value a company is worth or the breakup value of the stock for the shareholders. Here, on a relative basis shareholders are paying or are willing to pay more for than for TD and BNS stock than for National Bank stock based on the bank's book value.
| Bank | Symbol | P/B Ratio |
|---|---|---|
| Bank of Montreal | BMO | 1.59 |
| Bank of Nova Scotia | BNS | 2.16 |
| Royal Bank | RY | 2.25 |
| National Bank | NA | 1.79 |
| TD Bank | TD | 1.72 |
When I look at the dividend yields, the current dividend yield is 4.44%. The 5 year median, Historical Average and the Historical Median Dividend yields are 4.06%, 4.77% and 3.84%. The current dividend yield is higher than both the 5 year median and the Historical Median dividend yields by 9.3% and 15.6%. The current yield is lower than the Historical Average by 6.8%.
The 5 year median and the Historical Median dividend yields are probably the best ones to use. The current dividend yield is higher than both of these yields. This stock price test suggests that the stock price is relatively reasonable. The stock price is good because it is relatively below the median.
If you compared dividend yields that I have on my spreadsheet for 5 year median, Historical Average and Historical Median, mostly National Bank is higher than all but the for BMO. The only other exception is for Royal Bank's Historical Median Dividend Yield which is higher than National Bank's Historical Median Dividend yield.
| Bank | Symbol | 5 Year | Hist. Ave | Hist. Med |
|---|---|---|---|---|
| Bank of Montreal | BMO | 4.69% | 5.30% | 4.62% |
| Bank of Nova Scotia | BNS | 3.92% | 4.18% | 3.81% |
| Royal Bank | RY | 3.91% | 4.23% | 3.92% |
| National Bank | NA | 4.06% | 4.77% | 3.84% |
| TD Bank | TD | 3.52% | 3.49% | 3.40% |
A problem with my spreadsheets is that I have a different number of years of data for different companies. If I use only the data on Dividend Yield going back to 1988, which is the first year I have data for the National Bank, then things change a bit. The National Bank's dividend yield is higher than all but for BMO's dividend yield.
| Bank | Symbol | 5 Year | Hist. Ave | Hist. Med |
|---|---|---|---|---|
| Bank of Montreal | BMO | 4.69% | 5.13% | 4.46% |
| Bank of Nova Scotia | BNS | 3.92% | 4.18% | 3.81% |
| Royal Bank | RY | 3.91% | 4.05% | 3.65% |
| National Bank | NA | 4.06% | 4.77% | 3.84% |
| TD Bank | TD | 3.52% | 3.40% | 3.33% |
When I look at analyst's recommendations, I find only Hold and Underperform recommendations. The consensus recommendations would be a Hold. Almost all recommendations are Hold recommendations. The 12 month stock price consensus is $53.60. This implies a total return of 23.45% with 4.44% from Dividends and 19.01% from capital gains.
FINRA, a US securities regulator fined National Bank $20,000 this year. The Ticket Reporter site talks about analysts giving National Bank Hold and Sell recommendations. A number of sites are talking about an insider selling National Bank stocks. A recent article from the Motley Fool suggests that this bank might be a good long term investment.
Sound bite for Twitter and StockTwits is: Stock Price is good. I really do not see the point in giving a recommendation of Hold or lower when a stock comes in at a good price. It is the right time to buy a stock when the price is good unless you think that the company is in trouble it is not likely to be able to handle. If you want this stock in your portfolio for the long term, perhaps now is the time to look at buying it. See my spreadsheet at na.htm.
This is the second of two parts. The first part was posted on Thursday, January 22, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.
National Bank of Canada provides financial services to consumers, small and medium-sized enterprises, and large corporations & has branches in every province in Canada. It is also represented in the U.S. and Europe through its subsidiaries and alliances. Its web site is here Nation 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.
See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.
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