Leon's Furniture Ltd. 2

Sound bite for Twitter and StockTwits is: Getting cheap. The time to buy good stocks for the longer term is when they are cheap. I think that this stock has shown that is a good stock over time. A lot of retail stocks are having a hard time at the moment. Still buy good stocks when cheap or relatively cheap. See my spreadsheet at lnf.htm.

I own this stock of Leon's Furniture Ltd. (TSX-LNF, OTC-LEFUF). I had some money in 2006 and this stock has been on MPL Communication's Investor Reporter list for some time. It was also on Mike Higgs' Dividend Growth Stock list. I bought some in 2006 and then some more in 2008, 2009 and 2010.

In 2014 the outstanding shares were increased by some 422,000 shares or 0.59% of the outstanding shares. These shares have a book value of $3.8M and were worth at the end of 2014$7.6M. This is a bit high but in 2013 increase in outstanding shares was only 0.10%. Employees are given interest free loans to buy convertible non-voting shares with dividends and cash.

The Leon family owns a lot of the outstanding shares. As far as I can see they current own some 83% of the outstanding shares. Last year they seemed to own some 86% of the outstanding shares. The Leon siblings own shares through their own limited companies.

The 5 year low, median and high median Price/Earnings per Share Ratios are 14.16, 16.40 and 18.65. These are slightly higher than the corresponding 10 year ratios at 13.37, 15.09 and 17.50. The current P/E Ratio is 14.22 based on a stock price of $15.36 and 2015 EPS estimate of $1.08. This stock price test suggests that the stock price is reasonable. It is also near the bottom of the range.

I get a Graham Price of $13.27. The 10 year low, median and high median Price/Graham Price Ratios are 1.08, 1.25 and 1.41. The current P/GP Ratio is 1.16 based on a stock price of $15.36. This stock price test suggests that the stock price is reasonable.

The 10 year Price/Book Value per Share Ratio is 2.17. The current P/B Rati is 2.12 some 2.2% lower. The current P/B Ratio is based on a BVPS of $7.25 and a stock price of $15.36. This stock price test suggests that the stock price is reasonable.

The 5 year median dividend yield is 2.70% and the current dividend yield at 2.60% is lower by 3.4%. This stock price test suggests that the stock price is reasonable. However, the Historical Average and Historical Median is 2.34% and 1.85% values that are some 12% and 41% lower than the current dividend yield. This is starting to show that the price is getting cheap historically. However, the historical dividend low is lower than the current dividend yield and it is at just 1.17%.

I can only find one analysts following this stock and the recommendation given is a Hold. The target stock price given is $16.00. This suggests a total return of 6.77% with 2.60% from dividends and 4.17% from capital gains.

In February 2015, Leon's announced a good fourth quarter. In late March 2015Dakota Financial News talks about some insider buying. This March 2015 article by Michael J. Knell in Furniture Today talks about Leon's good fourth quarter for 2014 and the positive integration of The Brick into Leon's.

This is the second of two parts. The first part was posted on Monday, May 04, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Leon's Furniture Limited is a Canada-based company is retailer of home furnishings, electronics and appliances across Canada from Alberta to Newfoundland and Labrador. Leon's sells under several banners including Leon's, The Brick, Appliance Canada and United Furniture Warehouse. Its web site is here Leon's.

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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