Sound bite for Twitter and StockTwits is: Recovering and cheap. I think that this company is finding its feet again. It has made good efforts to recover and I still think it is relatively cheap. See my spreadsheet on Transcontinental Inc.
I own this stock of Transcontinental Inc. (TSX-TCL, OTC-TCLAF). This is a dividend growth stock. It was on a number of dividend lists. However, it fell on hard times after 2008, but currently seems to be recovering. It is still on the Canadian Dividend Aristocrats Index.
The question I think you have to ask yourself about this stock is, is it making any progress?
They have not made much progress in regards to Revenue. It was down by some 3% in 2015 and is only expected to rise by 1.4% in 2016. Over the past 5 and 10 years Revenue is down by around 1% per year.
EPS is up by 10.2% and 8.1% per year over the past 5 and 10 years. This is only because 2015 was a great year. The 5 year running averages over the past 5 and 10 years for EPS is down by 4.9% and 6.6% per year. They could not cover their dividends in 2012 and 2013. The Dividend Payout Ratio for 2015 was 20% for EPS and 13.8% for CFPS. So DPR are currently good.
However, this company did but out an adjusted EPS value since 2005. Companies do that when they feel that the EPS calculated in the approved normal way does not properly reflect how well they are really doing. Here the growth over the past 5 and 10 years is 4.1% and 4.4% per year. The 5 year running average growth over the past 5 and 10 years is similar at 4.7% and 5.2% per year.
What would support having an adjusted EPS this is that the Return on Equity on comprehensive income has been higher over the past 3 years than for the ROE on net income. The ROE on comprehensive income was 27% in 2015 and it has a 5 year value of 9.6%. The ROE on net income was 25.8% in 2015 and its 5 year median value was 5.9%.
Growth in cash flow has been moderate. Cash Flow has grown at 3.7% and 3.4% per year over the past 5 and 10 years. CFPS has grown at 4.3% and 5.1% per year over the past 5 and 10 years. (There is no discrepancy over the 5 year running average growth in CFPS which runs at 4.6% and 4.5% per year over the past 5 and 10 years.)
I just bought this stock in January of 2015. My total return to date is 15.9% per year with 12.1% from capital gains and 3.8% from dividends. The 5 and 10 year total return on this stock is 12.88% and 1.36% per year with 5.89 and 2.98% per year from dividends and 6.99% and a capital loss of 1.63% per year
The debt ratios are a mixed bag. The Liquidity Ratio has never been high. The one for 2015 was 1.26 and it has a 5 year median of 1.00. I would rather this be 1.50 or more. If you add in cash flow after dividends the ratio becomes 1.78 for 2015 with a 5 year median of 1.62. So the company depends on cash flow to meet current liabilities would be the implication of this.
The Debt Ratio has always been good. The current one is 1.93 and its 5 year median is 1.78. I like this ratio to be at 1.50 or higher. The Leverage and Debt/Equity Ratios for 2015 are 2.08 and 1.08 and their 5 year ratios are 2.09 and 1.13. These ratios have been declining since 2012. I prefer these to be less than 2.00 and less than 1.00 respectively. However, these ratios are not really out of line for this sort of company.
The 5 year low, median and high median Price/Earnings per Share Ratios are 4.33, 5.24 and 6.14. The corresponding 10 year ratios are a little higher at 7.85, 8.98 and 10.11. The current P/E Ratio is 7.28 based on a stock price $17.68 and 2016 EPS estimate of $2.43. Analysts think that the EPS will drop by some 14% in 2016. Analyst's estimates for EPS and Adjusted EPS are quite close for the future. It would seem to me that the P/E Ratio is relatively reasonable and below the median.
(The same test using Adjusted EPS would get you a relatively reasonable price above the median. In this case the P/E Ratio would currently be 7.34)
I get a Graham Price of $26.66. The 10 year Price/Graham Price Ratios are 0.71, 0.89 and 0.97. The current P/GP Ratio is 0.66. This stock price testing suggests that the stock price is relatively cheap.
The historical median dividend is 1.29% and the current dividend yield is 3.85%. The current dividend yield is based on $0.68 and a stock price of $17.68. This stock price testing suggests that the stock price is relatively cheap.
When I look at analysts' recommendations I find Buy, Hold and Underperform recommendations. Most of the recommendations are a Hold and the consensus would be a Hold. The 12 month stock price is $20.44. This implies a total return of 19.46% with 3.85% from dividends and 15.61% from capital gains. Recommendations and total return does not match up as a 19% return is high for a Hold recommendation. Also, analysts still expect the dividends to grow.
In this article in the Financial Post from by Christina Pellegrini talks about how this company is a winner with Rogers and Toronto Star cutting back on their printing and giving it to Transcontinental. When TV came into wide spread use, everyone was saying that Radio was dead. However, people are still making a living off of radio. It is not that new technology does not change things; they just do not change things in ways people expect.
Nelson Smith of Motley Fool talks about three dividend stocks I like that aren't on many investors' radars. One of these companies is Transcontinental. This report in Zolmax talks about recent analysts' rating on Transcontinental. By the way a "sector perform" rating is a Hold rating.
I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see these reports here and here.
Transcontinental creates marketing products and services that allow businesses to attract, reach and retain their target customers. The Corporation is the largest printer in Canada and the third-largest in North America. Its web site is here Transcontinental Inc.
Transcontinental creates marketing products and services that allow businesses to attract, reach and retain their target customers. The Corporation is the largest printer in Canada and the third-largest in North America. Its web site is here Transcontinental 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.
See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.
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