Friday, March 10, 2017

Goodfellow Inc.

Sound bite for Twitter and StockTwits is: High Risk Dividend Stock. My stock price testing suggests that perhaps the stock price is not currently low enough to justify the risk of owning this stock. I plan to hold on for a while longer, but it would seem that this company has not done well since the last recession. On the other hand a lot of companies have had problems since the last recession. See my spreadsheet on Goodfellow Inc.

I own this stock of Goodfellow Inc. (TSX-GDL, OTC-GFELF). I started to look at this stock when I was searching for small cap stocks that paid dividends. It looked like an interesting stock. Goodfellow is a small cap stock that the Investor Reporter has written about a number of times. It is about 42% owned by insiders.

Investment Reporter in February 2017 says that recent drop in share price is due to much lower earnings and cash Flow. However, this largely reflects one-time items. They expect the company's earnings, cash flow and share price to recover. They say it remains a buy for long-term share price recovery and attractive dividends. It is of higher risk.

I was looking to see if I should sell this company because it is worth less than what I paid for it. My loss is at 3.19% per year. Dividend payments have covered some 14% of the cost of my stock. I have a capital loss of 19% on this stock. However, after reading the report from the Investment reporter I decided to give it another chance.

This is not a dividend growth company. At least is not that currently. Dividends are paid semi-annually and the board decides twice a year what the dividends will be. They go up as well as down. They have decline in both 2015 and 2016. We will not know what the dividends will be this year until they are declared. Over the past 5 and 10 years dividends have declined by 5.6% and 6.7% per year.

The dividend yield has always been good. The current dividend is 3.50% based on dividends of $0.30 and a stock price of $8.56. The 5 year median dividend yield is 3.46%, the 10 year median dividend yield is 3.97% and the historical dividend yield is 3.74%.

They have been cutting the dividends as the Dividend Payout Ratio was getting too high. The DPR for 5 year to 2016 is 120%. This is because they had an earnings loss in 2016. The DPR for the 5 years to 2015 is 58.9%. Dividends have not been declared for this year yet so it is hard to know what they will be.

Currently no analysts are following this stock so there are no estimates. Therefore I can do no testing using the Price/Earnings per Share Ratios. I also cannot use the latest 12 month EPS because it is negative.

I get a Graham Price of $6.33. This is a drop of 59% from the Graham Price of $15.46 for 2016. The 10 year price/Graham Price Ratios are 0.50, 0.57 and 0.70. The current Price/Graham Price Ratio is 1.35 based on a stock price of $8.56. From this testing it looks like the stock price is relatively expensive. However, the P/GP Ratio for 2016 was only 0.59 based on a stock price $9.05. It would seem perhaps that the stock price is not relatively expensive.

The 10 year Price/Book Value per Share Ratio is 0.70. It has not been over 1.00 since 2008. The current P/B Ratio is 0.66 based on BVPS of $13.01 and stock price of $8.56. The current P/B Ratio is some 6% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

Generally speaking a stock is cheap if the P/B Ratio is below 1.00. This would mean that the BVPS (or the company's breakup value) is below the stock price. A P/B Ratio below 1.00 would point to a cheap price, but since it has been below 1.00 for the past 9 years, the stock's value may not be that clear.

The current dividend yield is 3.50% based on dividends of $0.30 and a stock price of $8.56. The historical median dividend yield is 3.74%. The current dividend yield is lower than the historical dividend yield by some 6.4%. This testing suggests that the stock price is relatively reasonable but above the median. Part of the reason for this results is that the dividends have been going south lately.

I found only one report and that is from Investment Reporter that feels that this stock is a Buy. They also rate it a higher risk buy.

This company talks about the fourth quarter results on Market Wired. They talks about the major loss is a result of the very difficult implementation of an Enterprise Resource Planning (ERP) system. Bill Esler on Woodwork Network about this company getting a new CEO. Robert Tattersall on the Globe and Mail looks for net-net stocks. This means stocks with a price below the Book Value per Share. This company is selling below the BVPS.

Goodfellow Inc. is one of eastern Canada's largest independent re-manufacturers and distributors of lumber and hardwood flooring products. The company serves customers throughout Canada, the United States and abroad including the UK and China and the Middle East. H.Q is Delson, Quebec, just outside Montreal. Its web site is here Goodfellow Inc.

The last stock I wrote about was about was Canadian Tire Corp. (TSX-CTC.A, OTC-CDNAF)... learn more . The next stock I will write about will be Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF)... learn more on Monday, March 13, 2017 around 5 pm.

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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