The North West Company 2

On my other blog I am today writing about Money Show 2015 and Andrew Busch learn more...

Sound bite for Twitter and StockTwits is: Stock is reasonable to expensive. This company has done well. A positive is lots of insider buying. See my spreadsheet on The North West Company.

I do not own this stock of The North West Company (TSX-NWC, OTC-NWTUF). I wanted to review all the income trust stocks touted in the Money Show of 2009. There was a lot of talk at this show about some of the Income Trust being currently good buys with very good yields. This stock changed from an income trust to a corporation in 2011.

There is not much in the way of insider ownership. However, looking at insider trading, I see there is a small amount of insider selling but a much larger amount of net insider buying at 0.17% of market cap. This is when most insider trading accounts for around 0.01% to 0.02% of market cap.

The 5 year low, median and high median Price/Earnings per Share Ratios are 15.45, 17.18 and 18.91. The corresponding 10 year values are lower at 11.29, 13.70 and 16.92. The historical median P/E Ratio is 12.20. The current P/E Ratio is 17.59 based on a stock price of $26.56 and 2016 EPS estimate of $1.51. This stock price testing suggests that the stock price could be reasonable, but above the relative median using 5 year values, but using longer term values it is expensive.

I get a Graham Price of $15.39. The 10 year low, median and high median Price/Graham Price Ratios are 1.19, 1.43 and 1.68. The current P/GP Ratio is 1.73 based on a stock price of $26.56. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year Price/Book Value per Share Ratio of 3.34. The current P/B Ratio is 3.81 based on a stock price of $26.56 and BVPS of $6.97. The current P/B Ratio is some 14% higher than the 10 year P/B Ratio. This suggests that the stock price is relatively reasonable, but above the relative median.

The current dividend yield is 4.67% based on a stock price of $26.56 and dividends of $1.24. The 5 year median dividend yield is 4.82%, a value some 3% higher than the 5 year median dividend yield. This suggests that the stock price is relatively reasonable, but above the relative median.

The current dividend yield is within the 4 to 5% range that old income trusts are expected to be. Testing using historical dividend yields are not valid because dividend yields are lower on corporations that income trust companies.

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 consensus stock price is $29.00. This implies a total return of 13.86% with 4.67% from dividends and 9.19% from capital gains. (I was recently to the Money Show in Toronto and there were a few speakers who said investors should totally ignore consensus stock prices. This had not happened at other Money Shows.)

In this article in the Winnipeg Free Press, Murray McNeill talks about The North West Company's plan for expansion of Giant Tiger stores in Western Canada. In this Motley Fool article, Joseph Solitro talks about three small caps he likes including The North West Company. The company is talked about on Stock Chase by a few analysts.

This is the second of two parts. The first part was posted on Monday, November 2, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

The North West Company is a leading retailer of food and everyday products and services to rural communities and urban neighborhoods in Canada, Alaska, the South Pacific and the Caribbean. North West operates 225 stores under the trading names Northern, NorthMart, Giant Tiger, AC Value Center, and Cost-U-Less. Its web site is here The North West Company.

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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