Power Financial Corp. 2

Sound bite for Twitter and StockTwits is: Stock is at a good price. In a lot of the stock price testing, the stock price is below the relative median price and this suggests that the price is good. It is not cheap, but rather at a relatively good price. See my spreadsheet at pwf.htm.

I own this stock of Power Financial Corp. (TSX-PWF, OTC- POFNF). When I sold some bonds in 2001, I had money to spend. This was a stock on my hit list and was selling at a reasonable price. This stock was on Mike Higgs' dividend growth stocks and that is why I started a spreadsheet to investigate this stock in the first place.

When I look at insider trading, I find insider selling at $74.3M and no insider buying. Insider selling is at 0.28% of the market cap. This is a bit high. There is insider ownership by the Desmarais Family and they own some 65.7% of the outstanding shares. They have been doing some selling over the past few years. See article linked below. The CEO also owns shares worth around $14.5M or 0.06% of the company.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.38, 11.87 and 13.17. These are a bit lower than the 10 year values of 10.48, 12.13 and 14.60. The current P/E Ratio is 11.45 based on a stock price of $36.97 and 2015 EPS estimate of $3.23. This testing suggests that the stock price is reasonable, but towards the lower end of the reasonableness scale.

I get a Graham Price of $39.37. The 10 year low, median and high median Price/Graham Price Ratios are 0.83, 1.03 and 1.21 and the current P/GP Ratio is 0.94 based on a stock price of $36.97. This stock price testing suggests that the stock price is reasonable. It is a bit below the median P/GP Ratio and this is good. Also a P/GP Ratio of less than 1.00 shows also that the price is good.

I get a 10 year Price/Book Value per Share Ratio of 1.77 and a current P/B Ratio of 1.73. The current ratio is based on a BVPS of $21.33 and a stock price of $36.97. The current P/B Ratio is 2% lower than the 10 year median ratio. This stock price testing suggests that the stock price is reasonable.

The current Dividend Yield is 4.03%. The 5 year median dividend yield is 13% higher at 4.61%. This testing suggests that the stock price is reasonable, but towards the higher end of the reasonableness scale. However, interests have recently been high historically.

The historical average dividend yield at 3.92% is lower than the current dividend yield by 3%. This suggests that the stock price is reasonable. However, the historical median dividend yield at 2.98% is some 35% lower than the current dividend yield. This testing suggests that the stock price is reasonable, but towards the lower end of the reasonableness scale. Using a median value is thought to be a better reflection of value that an average value.

The analysts' recommendations are Buy and Hold. There are more Hold recommendations than Buy recommendations (4 to 3), so the consensus recommendations is a Hold. The 12 month stock price consensus is $40.70. This implies a total return of 14.12% with 4.03% from dividends and 10.09% from capital gains. This is a good return for an insurance company so it matches more to a Buy recommendation than a Hold recommendation. (That is a think there is a mismatch between the recommendations and expected total return over the next 12 months.)

This Financial Post article of 2014 by Barry Critchley talks about the third time in less than 6 years when the disposed of a major block of stock in Power Corp. Power Corp controls Power Financial Corp. This Financial Post article by Sean Silcoff talks about the restoration of dividend increases for this stock.

This is the second of two parts. The first part was posted on Monday, May 25, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

This company is a holding and management company. Its operations provide a range of individual and corporate financial and fiduciary services in North America and Europe. It holds interest in the following companies: Great-West Lifeco, Great-West Life, London Life, Canada Life, Great-West Life & Annuity, Putnam Investments, IGM Financial, Investors Group Mackenzie Financial, and Pargesa Group. Its web site is here Power Financial.

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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