Wednesday, September 2, 2015

Jean Coutu Group Inc. 2

On my other blog I am today writing about possible method for funding a portfolio continue...

Sound bite for Twitter and StockTwits is: Reasonable to expensive. A lot of the testing I have done on this stock suggests that the stock price is relatively expensive. However, I am getting very mixed results. The stock has had a very good run up in price since 2011, rising some 194%. The stock price has tumbled some 26% this year. The momentum of this stock price is currently down. See my spreadsheet at pjc.htm.

I do not own this stock of Jean Coutu Group Inc. (TSX-PJC.A, OTC-JCOUF), but I used to. I bought this stock first in 2000 for my RRSP account. In 2004, I bought some of this stock for my trading account. In 2007, I sold this stock in my RRSP account because I wanted money to invest in Saputo which I liked better at that time. Also, in 2007, I was looking to buy a condo and so was looking to raise some money for a mortgage. This company was not doing that well at the moment, so I sold the stock in my Trading Account.

Note that there are two classes of shares, Class A Subordinate Voting shares and Class B Multiple Voting shares. Class A shares are what are sold on the open market and Class B Shares are for insider Jean Coutu. Jean Coutu's Class B shares are worth around $2.8B. He also has 2% of the outstanding Class A shares worth around $80M.

Over the past year in insider trading there has been around $9.2M of insider buying and around $7.6M of insider selling for net insider buying of $1.7M. There is around 0.04% of the outstanding market cap in net insider buying.

The 5 year low, median and high median Price/Earnings per Share Ratios are 9.80, 11.42 and 13.05. The corresponding 10 values are close at 10.21, 11.66 and 13.10. The current P/E Ratio is 17.62 based on a stock price of $20.97 and 2016 EPS estimate of $1.19. (Note this company has an end of February financial year end.) This stock price testing suggests that the stock price is relatively expensive. A P/E Ratio of 17.62 is generally a moderate P/E Ratio however, the range of the P/E Ratios for this type of stock is rather normal.

I get a Graham Price of $12.31. The 10 year low, median and high median Price/Graham Price Ratios are 1.23, 1.46 and 1.74. The current P/GP Ratio is 1.70 based on a stock price of $20.97. This stock price testing suggests that the stock price is still relatively reasonable, but the price is relatively above the median. A P/GP Ratio of 1.71 is a moderate to high ratio. A stock to be a good buy would have to have a P/GP Ratio of 1.00 or less.

The 10 year Price/Book Value per Share Ratio is 3.64. The current P/B Ratio is 3.71 based on a BVPS of $5.66 and a stock price of $20.97. The current P/B Ratio is only some 1.9% higher than the 10 year P/B Ratio. This stock price testing suggests that the stock price is relatively reasonable. It is only slightly above the relative median. However, a P/B Ratio is 3.71 is a bit high.

The 5 year median dividend yield is 2.27%. This is relatively high for this stock. The current dividend yield at 1.91% is some 15.9% lower. This testing suggests that the stock price is relatively reasonable, but getting close to expensive. This test suggests that the stock price is relatively above the median.

The 10 year dividend yield is 1.89% and the historical median dividend yield is 0.81%. On an historical basis this stock price testing suggests that the stock price is relatively cheap. However, the company is paying out a larger and larger share of the earnings and cash flow in dividends. You would expect to have the dividend yield rise under these circumstances. The dividends in 1994 were 8.7% of the EPS and in 2015 were 34.5% of the EPS, an increase of 297%.

There is a big divergent in my stock price testing. If you look at Price/Cash Flow per Share Ratios, the 10 year median ratio is 12.17 compared to the current P/CF Ratio of 18.39. Even a P/CF Ratio of 12.17 is rather high. The current one is some 51.1% higher and this suggests that the stock price is relatively expensive.

You do not get a better answer looking at P/S Ratio. The 10 year P/S Ratio is 0.90, a rather low value. The current P/S Ratio is 1.39 a value some 55% higher. This stock price testing suggests that the stock price is relatively expensive.

When I look at the analysts' recommendations they are all over the place. There are Buy, Hold, Underperform and Sell recommendations. The consensus would be a Hold. The 12 month stock price is $22.10. This implies a total return of 7.3% with 5.39% from capital gains and 1.91% from dividends.

A recent report from Dakota Financial News talks about recent insider buying. (As with a number of sites, this one shows a message over the site's page. You just have to click on the X in the top right corner for message to disappear.) A recent note by Joseph Solitro for the Motley Fool includes this stock in an article about three over sold stocks. (This means that the stocks are cheap.) In a recent Financial Post article, Jean Coutu Group said its first quarterly profits are down due to a tax hit.

This is the second of two parts. The first part was posted on Tuesday, September 01, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

The Jean Coutu Group is one of the most trusted names in Canadian pharmacy retailing. The Corporation operates a network of 413 franchised stores located in the provinces of Québec, New Brunswick and Ontario under the banners of PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté. Furthermore, the Jean Coutu Group owns Pro Doc Ltd ("Pro Doc"), a Québec-based subsidiary and manufacturer of generic drugs. Controlling shareholder is Jean Coutu. Its web site is here Jean Coutu Group.

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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