Gluskin Sheff + Associates Inc. 2

Sound bite for Twitter and StockTwits is: Price is reasonable and below relative median. A plus for this company is the special dividends given each year. However, dividends are tax higher than capital gains and there is not much in capital gains. See my spreadsheet on Gluskin Sheff + Associates Inc.

I do not own this stock of Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF). I started to review some of the stock recommended by Jennifer Dowty from a column she wrote and I reviewed in February 2010 on Dividends and Special Dividends. I did a spreadsheet on this stock in February 2010. I chose this stock because I recognized the names of Gluskin and Sheff. Their financial year ends June 30 each year.

First I should mention that the two founders have basically left this company and there are some concerns about how the company will be run in the future. Currently some insiders own shares in this company. The CEO has shares worth around $47M and some 5.9% of the outstanding shares.

Also a couple of officers own shares with $20M and $45.8M which is 2.6% and 5.8% of the outstanding shares. They do not seem to have a new chairman for the board, but there is a lead director. He has shares worth around $0.3M and this is some 0.04% of the outstanding shares.

The 5 year low, median and high median Price/Earnings per Share Ratios are 9.47, 11.60 and 13.73. The 10 year corresponding ratios are a bit higher at 10.41, 15.57 and 18.49. The historical median P/E Ratio is 15.57. The current P/E Ratio is 13.71 based on a stock price of $22.76 and 2016 EPS of $1.70. This stock price testing suggests that the stock price is relatively reasonable and possibly below the relative median.

I get a Graham Price of $12.27. The 10 year low, median and high median Price/Graham Price Ratios are 1.49, 2.07 and 2.55. The current P/GP is 1.85 based on a stock price of $22.76. This stock price testing suggests that the stock price is reasonable and below the relative median.

These P/GP Ratios are high. According to Graham Price theory, a good price to pay for a stock is when the Graham Price is 1.00. However, there are lots of stocks that never get a Graham Price that low. I deal with relative values as a lot of things about the stock market are based on relative values. On a relative basis, this testing says that the stock price is reasonable and below the relative median.

I get a 10 year median Price/Book Value per Share Ratio of 6.67. The current P/B Ratio is 5.78 a value some 13% lower than the 10 year median ratio. This current P/B Ratio is based on BVPS of $3.94 and a stock price of $22.76. This stock price testing suggests that the stock price is reasonable and below the relative median. As with the P/GP Ratios, this P/B Ratio of 5.78 is a rather high P/B Ratio.

The current Dividend Yield is 3.95% based on dividends of $0.90 and a stock price of $22.76. The 5 year median Dividend Yield is 3.16% a value some 25% lower. Also, the historical median dividend yield is 2.93% which is some 35% lower than the current Dividend Yield. This stock price testing suggests that the stock price is relatively reasonable and below the relative median. However note that this stock has not been around that long and the historical median is based on only 8 years.

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 stock price consensus is $27.80. This implies total returns of 26.10% with 3.95% from dividends and 22.14% from capital gains.

In this Dakota Financial News release, RBC Capital have rated this company as "outperform" (a Buy recommendation). Joseph Solitro at Motley Fool thinks this is a great small cap to buy. Michael Decter on Stock Chase wonders about the effect of the departure of the founders of this company will have on it.

This is the second of two parts. The first part was posted on Wednesday, October 28, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Gluskin Sheff is an independent investment firm that manages portfolios for high net-worth individuals and institutional clients. Its web site is here Gluskin Sheff + Associates Inc.

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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