Monday, June 22, 2015

IGM Financial Inc. 2

On my other blog I am today writing investing and Mutual Funds continue...

Sound bite for Twitter and StockTwits is: Stock price is probably relatively cheap. This stock could become a good dividend growth stock again. The time to buy good stocks is when the price is low. See my spreadsheet at igm.htm.

I do not own this stock of IGM Financial Inc. (TSX-IGM, OTC- IGIFF), but I used to. I originally bought this stock to replace AGF Management (TSX-AGF.B). IGM was known as a dividend growth stock and it was on a lot of lists of good stocks, including Mike Higgs' and Dividend Aristocrats. I sold this 2011 because I had Power Financial, of which this company is partially owned by and I wanted to rationalize my portfolio. So I sold this stock and bought more of Power Financial.

When I look at insider trading, I see $3.1M of insider selling and no insider buying. This insider selling is some 0.03% of the stock's market cap and so relatively small. In 2014 some 747,000 shares were issued for stock options. This has a book value of $35.1M and the value of this number of shares at the end of 2014 was $30.9M. This number of shares is 0.30% of outstanding shares and is relatively fine.

As far as insider ownership, the Desmarais Family owns some 62.5% of the company's outstanding stock. The company is part of Power Corp (TSX-POW) and Power Financial (TSX-PWF).

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.30, 14.80 and 16.30. The 10 year corresponding ratios are close at 13.47, 15.72 and 17.53. The current P/E Ratio is 12.34 based on a stock price $41.33 and 2015 estimate EPS of $3.35. This stock price test suggests that the stock price is relatively cheap.

This EPS estimate is some 12.4% higher than the 2014 EPS. If you look at the EPS for the 12 months to the end of 3014 and the 12 months to the end of the first quarter, EPS is up just 1%. For 2014 the EPS was $3.36, but EPS for 2014 was lower at $2.98. The EPS estimate for 2013 was $3.07 and came in at $3.02. This was a better estimate but still low. If you use the last 12 month EPS, P/E Ratio is 13.73. By this measure the stock price is still low, but in the reasonableness range.

I get a Graham Price of $37.48. The 10 year low, median and high median Price/Graham Price Ratios are 1.17, 1.33 and 1.60. The current P/GP Ratio is 1.10 based on a stock price of $41.33. This stock price testing suggests that the stock price is relatively cheap.

The 10 year Price/Book Value per Share Ratio is 2.68. The current P/B Ratio is 2.22, a value some 17.4% lower. The current P/B Ratio is based on BVPS of $18.64 and a stock price of $41.33. This stock price testing suggests that the stock price is relatively reasonable. For the stock to be considered cheap, the current P/B Ratio would have to be 20% lower than the 10 year ratio. It is getting close.

The current Dividend Yield is 5.44% based on dividends at $2.25 and a stock price of $41.33. The 5 year median, historical average and historical median Dividend Yields are 4.55%, 3.95% and 3.33%. The current Dividend Yield is some 19.6%, 387.8% and 63.5% lower than these yields. All this suggests that the current stock price is relatively cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. Most of the recommendations are a Hold and the consensus recommendation is a Hold. The 12 month stock price is $49.00. This price implies a total return of 24% with 5.44% from dividends and 18.56% from capital gains. It is rather a high return considering the recommendations.

The Stock House site is announcing growth in Assets under Management for IGM Financial for May 2015. Nelson Smith of the Motley Fool thinks that people will turn away from Mutual Funds. I must admit, I wonder about this. Recent changes to analysts' rating is discussed at Sleek Money.

This is the second of two parts. The first part was posted on Friday, June 19, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

This is a mutual fund, managed asset and personal financial services company. The company has three operating units, Investors Group, Mackenzie Financial Corporation and Investment Planning Counsel Inc. IGM Financial Inc. is a member of the Power Financial Corporation group of companies. Its web site is here IGM 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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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