Friday, May 12, 2017

Reitmans (Canada) Ltd

Sound bite for Twitter and StockTwits is: Recovering Retail, maybe. This is going into its 5 year of problems. The best stock price test is probably the P/B Ratio test. The P/E Ratio test makes no sense and for the dividend yield test, this is a stock which dropped the dividend 75% some years ago and has had flat dividend ever since. It is probable that this company will survive. However, will it ever thrive again? It is in the clothing business and this is a tough business. See my spreadsheet on Reitmans (Canada) Ltd.

I think the thing to ask is has this been a worthwhile investment. So far the answer is no, but then I have only been in this stock for some 3.6 years. I did not invest much into this company, just over $3,000. My loss to date has been at 6.3% per year. My capital loss is at 29%, but with dividends it is lower at 18.5%. I have not invested much in this so at the moment I will continue to hold it. It is fun to watch.

They used to be a dividend growth company. Because of problems they reduced their dividends by 75% in 2014. Since then they have been flat. Problem is that they are having a hard time paying the dividends that they are giving. For the financial year ending in January 2017, the Dividend Payout Ratio for EPS was 118%. This is the best it has been for the last few years.

The dividend coverage is better if you look at cash flow. The Dividend Payout Ratio for CFPS is 25% for the financial year ending in January 2017. The 5 year median is quite a bit higher at 45%. Also, their cash balance is at $1.90. This is almost 32% of the value of the stock.

The financial year ending January 2017 was a good one with higher Revenue, Earnings and Cash Flow. However, the only analyst following this stock feels that the next two years Reitman's will continue their downward tread. I guess only time will tell. People seem to think that the first quarterly report due soon will not be a good one.

The 5 year low, median and high median Price/Earnings per Share Ratios are 26.24, 32.95 and 39.67. The corresponding 10 year ratios are 15.16, 17.71 and 21.05. The corresponding historical ratios are 10.56, 13.13 and 15.61. For a consumer stock the 10 and historical ratios are more realistic. The current P/E Ratio is 55.56 based on 2018 EPS estimate of $0.09 and a stock price of $5.00. I think that P/E Ratio testing of the stock price makes no current sense. The P/E Ratios have been high lately because of low earnings and the company is probably worth more than what the EPS currently shows.

I get a Graham Price of $3.46. The 10 year low, median and high median Price/Earnings per Share Ratios are 0.98, 1.19 and 1.51. The current P/GP Ratio is 1.45. This stock price suggests that the stock price is relatively reasonable but above the median. Since the Graham Price is partly based on EPS it is not surprising that the stock does not show as cheap on this test.

The 10 year median Price/Book Value per Share is 1.72. The current P/B Ratio is 0.85 based on a stock price of $5.00 and BVPS of $5.90. The current ratio is some 51% below 10 year median. Also, the stock is selling at a price below it theoretical breakup value. Generally speaking when a P/B Ratio is below 1.00 a stock is cheap. This stock points to the stock being relatively cheap.

I own this stock of Reitmans (Canada) Ltd. (TSX-RET.A, OTC-RTMAF). I bought this company in September 2013. It was in financial difficulties and so was quite cheap. I believe it will recover.

I get an historical median dividend yield of 3.12%. The current dividend yield is 4.00% based on dividends of $0.20 and a stock price of $5.00. The current dividend yield is some 28% below the historical median dividend yield. This stock price testing suggests that the stock is relatively cheap.

There seems to be only one analyst still following this stock and the recommendation is a Hold. The 12 month stock price consensus is $6.00. This implies a total return of 24% with 20.00% from capital gains and 4.00% from dividends based on a current stock price of $5.00.

Reitmans is to report on the first quarter of 2018 is due soon and EPS is expected to be $0.00 says Peter Erickson on Whats on Thorold. There is some technical analysis of this stock on Providence Standard. The F-Score of 7 is not a bad one. Benj Gallander rather likes this stock on Stock Chase

Reitmans (Canada) Limited is a Canada-based company engaged in the sale of women's specialty apparel at retail. The Company operates retail banners: Reitmans, Penningtons, Addition Elle, RW & CO., Thyme Maternity and Hyba. Its web site is here Reitmans (Canada) Ltd.

The last stock I wrote about was about was TFI International (TSX -TFII, OTC-TFIFF)... learn more. The next stock I will write about will be Pizza Pizza Royality Corp. (TSX-PZA, OTC-PZRIF)... learn more on Monday, May 15, 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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