Saputo Inc. 2

Sound bite for Twitter and StockTwits is: price is reasonable and below relative median. It is great to pick up a stock cheap, but the next best thing is to pick up a stock at a price below the relative median price for that stock. For example, the historical median dividend yield is 1.74% and the current dividend yield is 3% higher at 1.79%. So to buy at current price you will pay a price that is relatively lower than the relative median price for that stock. See my spreadsheet at sap.htm.

I own this stock of Saputo Inc. (TSX-SAP, OTC-SAPIF). This was a stock on Mike Higgs' Canadian Dividend Growth Stock list and on the dividend lists that I followed. I bought this stock first in 2006 for my RRSP account. Because I am now taking money from my RRSP accounts, I have been selling this stock because of the low dividend. I still like this stock so I have been buying it in my TFSA.

In insider trading there is some $2M of insider buying and 21M of insider selling. Net insider selling is at $19M and that is 0.14% of market cap. It is relatively speaking a lot of insider selling. Most stock I cover have net insider selling at 0.09% or less. The main insiders are keeping their shares and even increasing them somewhat. However, others seem to be cashing in their stock options.

Relatively speaking, this company gives out a lot of stock options to insiders. For the financial year ending March 2015, outstanding shares were increased by 3.59M shares, and this is a 0.92% increase in shares for stock options. Most stock I cover increase shares for stock options by 0.56% or less. In this respects they seem to be acting more like a Tech company rather than a Consumer Staples company.

The 5 year low, median and high median Price/Earnings Ratios are 17.14, 19.31 and 21.43. The 10 year corresponding P/E Ratios are similar at 15.76, 18.81 and 21.43. The current P/E Ratio is 17.34 based on a stock price of $29.13 and 2016 EPS estimate of $1.68. This stock price testing suggests that the stock price is relatively reasonable and below the relative median price.

I get a Graham Price of $18.53. The 10 year low, median and high Price/Graham Price Ratios are 1.39, 1.61 and 1.94. The current P/GP Ratio is 1.57 based on a stock price of $29.13. This stock price testing suggests that the stock is relatively reasonable and below the relative median price.

I get a 10 year Price/Book Value per Share Ratio of 3.33. The current P/B Ratio is 3.21 a value some 3.7% less. The current P/B Ratio is based on a stock price of $29.13 and BVPS of $9.08. This stock price testing suggests that the stock price is relatively reasonable and below the relative median price.

When looking at the dividend yield, I find that the current dividend yield of 1.79% is just above the 5 year median dividend yield of 1.74%, the historical average dividend yield of 1.66% and the historical median dividend yield of 1.74%. The current dividend yield is based on dividends of $0.52 and a stock price of $29.13. This stock price testing suggests that the stock price is relatively reasonable and below the relative median price.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most of the recommendations are Hold recommendations so the consensus recommendation is a Hold. The 12 month stock price consensus is $33.60. This implies a total return of 17.13% with 1.79% from dividends and 15.35% from capital gains.

There is a recent interesting article in Canadian Business about Saputo expansion into Australia and emerging markets. For the Motley Fool, Joseph Solitro talks about this stock and two other Canadian food companies. Andrew Walker of Motley Fool also recently talked about this company and their recent problems.

This is the second of two parts. The first part was posted on Wednesday, July 15, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Saputo produces, markets, and distributes a wide array of products of the utmost quality, including cheese, fluid milk, yogurt, dairy ingredients and snack-cakes. Saputo is the twelfth largest dairy processor in the world, the largest in Canada; the third largest in Argentina and among the top three cheese producers in the United States. Their products are sold in more than 50 countries under well-known brand names. Its web site is here Saputo.

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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