Dorel Industries Inc. 2

Sound bite for Twitter and StockTwits is: Stock is probably cheap, but risky. The market cap is 95% of the Goodwill and intangible assets. This is not good. The first quarter was not very good. High stock options to insiders not a great sign either. The market has been valuing this stock very low for a while. For example, the 10 year median P/GP Ratio is very low at just 0.72. See my spreadsheet at dii.htm.

I do not own this stock of Dorel Industries Inc. (TSX-DII.B, OTC-DIIBF), but I used to. This was a stock recommended by Investment Reporter as a conservative investment. I sold the stock in 2006 because I had it for 7 years from 1999 and it was going nowhere. I bought this stock before I stopped working and at that time I did not mind buying stocks with no dividends.

There is no insider trading at all over the past year. Outstanding shares were increased by 406,000 in 2014 for stock options. This is 1.27% of outstanding shares. This is high. Some 70% of the stocks I cover have stock options as a percentage of outstanding shares at 0.57% or less. Last two years are high too at .92% and 1.13%.

There are two classes of shares, Class A with 10 votes and Class B with 1 vote. There is concentrated ownership of this company by the Schwartz and Segel families. The CEO, CFO and an officer, the first two of the Schwartz family and second of the Segel family, have Class A shares worth around $30M and Class B shares worth around $20M.

The 5 year low, median and high median Price/Earnings per Share Ratios are 7.35, 8.91 and 10.60 in CDN$. The 10 year corresponding P/E Ratios are similar at 8.88, 9.03 and 10.67. These are rather low P/E Ratios. The current P/E Ratio is 13.18 based on a stock price of $33.35 and 2015 EPS of $2.53 CDN$ and $1.94 US$. This stock price test suggests that the stock price is relatively expensive. The CDN$ is currently falling against the US$.

The 5 year low, median and high median Price/Earnings per Share Ratios are 7.33, 857 and 10.53 in US$. The 10 year corresponding P/E Ratios are similar at 6.84, 8.52 and 10.12. These are rather low P/E Ratios. The current P/E Ratio is 10.07 based on a stock price of $25.49 and 2015 EPS of and $1.94 US$. This stock price test suggests that the stock price is relatively reasonable, but at the very top end of the reasonableness range.

I get a Graham Price of $51.37 CDN$. The 10 year low, median and high median Price/Graham Price Ratios are 0.54, 0.63 and 0.72. The current P/GP Ratio is 0.65 based on a stock price of $33.35 CDN$. This stock price test suggests that the stock price is relatively reasonable. This company used to have more normal P/GP Ratios, but they have been quite low since 2008. A P/GP Ratio of less than 1.00 says that this company is cheap.

I get a 10 year Price/Book Value per Share Ratio of 0.86 in CDN$. The current P/B Ratio is 0.72 based on a stock price of $33.35 CDN$ and is some 16% lower than the 10 year median ratio. This stock price test suggests that the stock price is relatively reasonable. A P/B Ratio of less than 1.00 is a very low ratio. The company used to have a more normal P/B Ratio, but it has been very low since 2007.

For dividend yields, since they have only had dividends for 7 years, you cannot really get an historical yield. The 5 year median 2.51% and the current dividend yield at 4.69% is some 87% higher. Also, the 7 year median dividend yield is 2.48% a value some 89% higher than the current dividend yield. This stock price test suggests that the stock price is relatively cheap.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most of the recommendations are a Hold and the consensus recommendation is a Hold. The 12 month stock price consensus is $31.00 US$. This implies a total return of 21.62% from capital gains and 4.71% from dividends. This does not really fit with the Hold recommendation.

This newswire story is about Dorel selling $105M in Unsecured Subordinate Debentures. This article in Newswire is about Dorel buying the remaining 30% interest in Dorel Juvenile Brazil. This article in the G&M by Bertrand Marotte talks about the surging US having a negative effect on their earnings.

This is the second of two parts. The first part was posted on Wednesday, August 5, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Dorel Industries Inc. is a world class juvenile products and bicycle company. Dorel's Home Furnishings segment markets a wide assortment of both domestically produced and imported furniture products, principally within North America. Dorel has facilities in seventeen countries, and sales worldwide. Its web site is here Dorel.

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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