Tuesday, October 11, 2016

Linamar Corporation

Sound bite for Twitter and StockTwits is: Reasonable to expensive. It is interesting that it is only a P/E Basis that this stock is showing as cheap. On other measures it is looking rather expensive. I would like to see the dividend yield over 1% for it to be a buy. I would not purchase any stock with a yield under 1%. See my spreadsheet on Linamar Corporation.

I do not own this stock of Linamar Corporation (TSX-LNR, OTC-LIMAF). I looked at this stock back in 2000 and it was not a stock I thought fit my investment philosophy. In 2008 I read an article that recommended this company as a dividend stock with good value. This stock used to be on the Investment reporter portfolio stock list as an average risk stock. However, it has now been taken off this list.

This stock has a low dividend and a low Dividend Payout Ratio. The current dividend is below 1% at just 0.71% based on stock price of $56.03 and Dividends of $0.40. The DPR for EPS was 6.03% in 2015 with a 5 year median of 9.09%. The DPR for CFPS was 3.64% in 2015 with a 5 year median of 4.45%

Dividend increases have been inconsistent. Generally most years have no increases with some years having big increases. The last increase was in 2014 and it was for 25%. The dividends have grown by 10.8% and 5.2% per year over the past 5 and 10 years.

The dividend yield on initial purchase is quite good. The 5, 10 or 15 year yield on original purchase at a median price is at 10.2%, 21.5% and 30.9%. This is because of the surge in the stock price over the past few years. From the low in January 2012 to the high in June 2015, the stock price was up some 516%.

The total return to the end of 2015 was 30.78% and 21.42% per year over the past 5 and 10 years. Of this return 29.71% and 20.32% per year was due to capital gains. Of this return, 1.10% and 1.07% per year was due to dividends. The stock has been backing off its highs and is down some 25% so far this year.

When I look at my spreadsheet all is see is green. That is because Revenue, Earnings and Cash Flow have grown by at least 8% per year over the past 5 and 10 years. Outstanding shares have not moved much so we can look at per share values and other values.

Revenue per Share is up by 17.8% and 10.1% per year over the past 5 and 10 years. EPS is up by 37.3% and 16.7% per year over the past 5 and 10 years, although growth in EPS tends to be a bit volatile. Cash Flow per share is up by 26.6% and 12.5% per year over the past 5 and 10 years.

The 5 year low, median and high median Price/Earnings per Share Ratios are 8.31, 11.50 and 13.38. The 10 year corresponding values are 8.34, 10.74 and 14.04. The corresponding historical values are 8.98, 11.68 and 15.95. These values are remarkable similar. The current P/E Ratio is 7.31 based on a stock price of $56.03 and 2016 EPS estimate of 7.66%. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $78.86. The 10 year low, median and high Price/Graham Price Ratios are 0.59, 0.82 and 1.07. The current P/GP Ratio is 0.71. This stock price testing suggests that the stock price is relatively reasonable but below the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.34. The current P/B Ratio is 1.55. The current ratio is ratio is based on BVPS of $36.08 and a stock price of $56.03. This stock price testing suggests that the stock price is reasonable but above the median.

The historical median dividend yield is 1.25%. The current dividend yield at 0.71% is some 43% lower. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median P/S Ratio of 0.48. The current P/S Ratio is 0.60 based on 2016 Revenue estimate of $6,148M. Revenue per Share would be $92.91. The current P/S Ratio is some 25% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendation would be a buy. The 12 month stock price consensus is $65.00. This implies a total return of 7.80% with 7.09% from capital gains and 0.71% from dividends.

Renee Jackson on Cerbat Gem talk about three analysts giving this stock a hold recommendation and three giving it a buy recommendation. Kay Ng of Motley Fool thinks that the returns will be better with Linamar than Magna. Kristine Owram in the Financial Post talks about how this company is betting that Aluminum will continue to replace steel as automakers strive to produce more fuel-efficient vehicles. There is an analysis of this company's dividend at Capital Cube

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 those reports here and here.

The last stock I wrote about was about was K-Bro Linen Inc. (TSX-KBL, OTC-KBRLF)... learn more . The next stock I will write about will be Enbridge Income Fund Holdings Inc. (TSX-ENF, OTC-EBGUF)... learn more on Wednesday, October 12, 2016 around 5 pm. Today on my other blog I will write about Money Show 2016 - Money Sense Panel... learn more .

Linamar Corporation is a diversified global manufacturing company of highly engineered products. It is a world-class designer and diversified manufacturer of precision metallic components and systems for the automotive industry, and mobile industrial markets. Its web site is here Linamar Corporation.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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