Rogers Sugar Inc. 2

I do not own this stock of Rogers Sugar Inc. (TSX-RSI, OTC-RSGUF). This stock was brought to my attention by Dividend Ninja. This company used to be a Unit Trust (TSX-RSI.UN) but it has recently converted to corporation. On change to a corporation, it lowered its dividend.

When I look at insider trading for the past year, I find $0.3M of insider buying and no insider selling. This is a very small amount of insider buying being some 0.06% of the market cap of this stock. In 2014 there was no increase to outstanding shares due to stock options. There have been increases to outstanding shares due to stock options in the past.

There is very little insider ownership with the CEO owing shares worth around $0.6M and the chairman owning shares worth around $0.7M. There are only 5 directors for this company and none of these directors is a women or of a minority group.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.90, 14.79 and 15.62. The corresponding 10 year P/E Ratios are a lot lower at 8.50, 9.71 and 11.10. The thing is that the P/E Ratios increased after this company because a corporation and this is quite common when income trust companies became corporations.

The current P/E Ratio is 13.82 based on a stock price of $4.56 and 2015 EPS estimate of $0.33. Using the 5 year range of P/E Ratios, this stock price test suggests that the stock price is relatively cheap.

I get a Graham Price of $4.43. The 10 year low, median and high median Price/Graham Price Ratios are 0.72, 0.85 and 0.97. The current P/GP Ratio is 0.99. This stock price test suggests that the stock price is relatively expensive. However note that on an absolute basis, a P/GP Ratio of less than 1.00 says the stock price is cheap.

I get a 10 year Price/Book Value per Share Ratio of 1.58. The current P/B Ratio at 1.72 is based on a BVPS of $2.65 and a stock price of $4.56. The current P/B Ratio is just 9% higher than the 10 year median P/B Ratio. The stock price testing suggests that the stock price is relatively reasonable.

(Note that yesterday I was incorrect about the drop in BVPS and it is at 2.8% and 4% over the past 5 and 10 years and not at the 17% and 11% per year I stated. Yesterday's blog has been updated on this point. My spreadsheet had an error.)

Because this company used to be an income trust, there is not much point in doing a test using historical average or historical median dividend yields. For all x-income trust companies, the current dividend yields are considerably lower. However, the 5 year median dividend yield at 6.18% is some 27.7% lower than the current dividend yield of 7.89%. This stock price test suggests that the stock price is relatively cheap.

When I look at analysts' recommendations I find Hold and Underperform recommendations. The consensus recommendation is a Hold as most of the recommendations are a Hold. The 12 month consensus stock price is $4.56. Since I am dealing with a current stock price of $4.56, the total return over the next 12 months would be 7.89% with 0% from capital gains and 7.89% from dividends.

Brenda Bouw of the Globe and Mail thinks that investors are growing sour on this company. She says that a TD Bank analyst sees a dividend cut in the near future because of this company's challenging outlook.

The company just reported on the first quarter of 2015 today. Revenue is down by 6% compared to the first quarter of 2014. Net income is down by 25% and EPS is down by 23%.

Sound bite for Twitter and StockTwits is: Price is cheap. Maybe dividend cut risk. See my spreadsheet at rsi.htm.

This is the second of two parts. The first part was posted on Wednesday, January 28, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Rogers Sugar Inc. was established to hold all of the common shares and notes of Lantic Inc. Lantic Inc. is a refiner, processor, distributor and marketer of sugar products in Canada. Its web site is here Rogers Sugar.

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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