Friday, August 14, 2015

Loblaw Companies Ltd. 2

Sound bite for Twitter and StockTwits is: Price is reasonable to expensive. All the test show expensive except for the historical dividend yield test which shows stock price to be reasonable. Compared with the last 5 years, the stock price is expensive, but not historically. The dividend yield is a good test because you use current data (not estimates or last quarters' data) against historical or 5 year values. See my spreadsheet at lob.htm.

I do not own this stock of Loblaw Companies Ltd. (TSX-L, OTC-LBLCF), but I used to. I owned it from 1996 to 2007. It was originally a great stock. I sold it in 2007 because it was having problems with its tech upgrade to its supply system.

George Weston Limited is a large owner of this company. According to the insider trading report they now own some 45.5% of this company worth around $13.5B. They used to own some 62.8% worth around 7.5B. The stock price has gone up and the company issued shares to cover the Shoppers Drug Mart purchase.

In insider trading there was a bit of insider buying and insider selling was at $13.8M with net insider selling at $13.4M. This is some 0.05% of the market cap of this stock. This is a little high relatively speaking. The median net insider selling is at 0.02% for the stock I cover and 70% of the stocks I cover have the net insider selling at 0.09% or lower.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.79, 16.12 and 18.44. This is close to the corresponding 10 years median values of 13.75, 16.06 and 18.36. The current P/E Ratio is 26.97 based on a stock price of $72.00 and 2015 EPS estimate of $2.67. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $43.69 and the 10 year low, median and high median Price/Graham Price Ratios are 1.05, 1.18 and 1.33. The current P/GP Ratio is 1.65 based on a stock price of $72.00. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Book Value per Share Ratio is 1.74. The current P/B Ratio is 2.27 based on BVPS of $31.77 and a stock price of $72.00. The current P/B Ratio is some 30% higher than the 10 years median ratio. This stock price testing suggests that the stock price is relatively expensive.

The 5 year median dividend yield is 2.15% and the current dividend yield at 1.39% is some 35.5% lower. This stock price testing suggests that the stock price is relatively expensive. However, the historical dividend yield is much lower at 1.19%. The current dividend yield is some 16.71 above this. This stock price testing suggests that the stock price is relatively reasonable.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold Recommendations. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month consensus stock price is $76.80. This implies a total return of 8.06%, with 6.67% from capital gains and 1.39% from dividends.

The reason I sold Loblaws was that they could not seem to resolve their supply chain problems. According to this article in 2012, Loblaws says that problems are resolved. I shop at Loblaws and I must admit I wonder about this. When things disappear from the shelves it seems like weeks before they reappear. Metro seems to do a better job. A recent article on CBC says that Loblaws will close 52 unprofitable stores in Canada in the next 12 months. A recent article in the Motley Fool says that Loblaws is still a good buy. (Do not forget that sometimes you need to use your browsers arrows to go out and back into a Motley Fool article to see the fully article.)

This is the second of two parts. The first part was posted on Thursday, August 13, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Loblaw Companies Limited, a subsidiary of George Weston Limited, is Canada's largest food retailer and a leading provider of drugstore, general merchandise and financial products and services. Loblaw offers Canada's strongest control (private) label program, including the unique President's Choice, no name and Joe Fresh brands. In addition, the Company makes available to consumers President's Choice financial services and offers the PC point loyalty program. Its web site is here Loblaw.

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.

No comments:

Post a Comment