Transcontinental Inc. 2

I do not own this stock of Transcontinental Inc. (TSX-TCL.A, OTC-TCLAF). This is a dividend growth stock. It was on a number of dividend lists. However, it fall on hard times after 2008, but currently seems to be recovering. It is still on the Canadian Dividend Aristocrats Index.

Over the past year there has been $0.5M of inside selling and no insider buying. All the selling seems recent and it would seem from the insider trading reports that insiders are getting rid of or not holding on the stock options. However, this selling is at 0.04% of market cap and therefore a relatively small amount.

There is insider ownership. One director Rémi Marcoux seems to own some 88% of the Class B shares which have 20 votes per share compared to the Class A share's one vote. His shares are worth around $199M.

The 5 year low, median and high median Price/Earnings per Share Ratios based on Adjusted EPS are 5.20, 6.89, and 7.89. The corresponding 10 year P/E Ratios are similar at 6.09, 6.99 and 8.41. Also note that prior to 2008, the P/E Ratios were much higher and the 5 year median P/E Ratio was 14.02. The current P/E Ratio is 7.11 based on a stock price of $15.72 and 2015 Adjusted EPS estimate of $2.21. This stock price testing suggests that the stock price is relatively reasonable.

I get a Graham Price of $21.95. The 10 year Price/Graham Price Ratios are 0.80, 0.91 and 1.02. The current P/GP Ratio is 0.72 based on a stock price of $15.72. This stock price test suggests that the stock price is cheap. Also, a stock price is considered good if the P/GP Ratio is below 1.00.

The 10 year Price/Book Value per Share Ratio is 1.28. The current P/B Ratio is 1.55 based on BVPS of $10.15 and current stock price of $15.72. The current P/B Ratio is some 21% higher than the 10 year median P/B Ratio. This stock price test suggests that the stock price is expensive. Note that BVPS has been declining by 6% and 0.8% per year over the past 5 and 10 years.

The current dividend yield is 4.07%. The 5 year median, historical average and historical median dividend yields are 4.10%, 2.73% and 1.26%. Since 2008, the dividend yields have been climbing. Prior to 2008, the median dividend yield was around 1%. The dividend yield hit highs in 2011 and has been falling since then.

The current dividend yield is a bit above the 5 year median, but it is 49% below the historical average and some 233% lower than the historical median dividend yield. It is about 13% lower than the historical high dividend yield. Most of this stock price testing suggests that the stock price is relatively cheap.

According to Joseph Solitro of the Motley Fool this stock is cheap and it has current strong earnings growth. Brenda Bouw in October 2014 says in a Globe and Mail that investors are sticking with Transcontinental as it diversifies.

When I look at analysts' recommendations I find Buy, Hold and Underperform Recommendations. The consensus recommendation would be a Hold as most of the recommendations are a Hold. The 12 month stock price target is $16.90. This implies a total return of 11.58% with 4.07% from dividends and 7.51% from capital gains.

Sound bite for Twitter and StockTwits is: Stock price is cheap, but there is risk. If you are interested in this stock, now is the time to buy. The company has had its problems, but it does seem to be recovering and diversifying. The best time to buy is when a recovery is on the way. Once a stock is recovered, the price would probably be recovered also. I needed something to buy with my new TFSA money so bought some of these shares. See my spreadsheet at tcl.htm.

This is the second of two parts. The first part was posted on Monday, January 26, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Transcontinental creates marketing products and services that allow businesses to attract, reach and retain their target customers. The Corporation is the largest printer in Canada and the third-largest in North America. Its web site is here Transcontinental Inc.

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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