Monday, June 12, 2017

Liquor Stores N.A. Ltd

Sound bite for Twitter and StockTwits is: Turnaround situation? I think that the price may not be bad, but it is a risk. The thing is that this is a turnaround situation on a consumer type company. These companies do not generally have big wins so even if it is turned around, can you image shareholders making a really big profit for the risk taken? However, I can see a current shareholder keeping the stock and possibly get a decent return for their money. The problem is how long will this take? See my spreadsheet on Liquor Stores N.A.

I do not own this stock of Liquor Stores N. A. Ltd. (TSX-LIQ, OTC-LQSIF). The idea of following this stock came from a reader of my blog. My first impression and continuing impression on this stock is that this is liquor sales company that cannot seem to make a profit.

This used to be an income trust company. It decreased its dividends by some 33% when it because a corporation. It obviously was not enough because the lower dividend was unstainable also. For this year they further decreased the dividend by 66.7% or 78% in total from its income trust dividend.

They are expected to be able to cover their dividend in 2017 with a Dividend Payout Ratio for EPS of around 87.8%. It was at 2700% in 2017. This is because they made so little in 2017. The DPR for CFPS was also high and for 2016 it was 84.7%, but is expected to be a more respectable value of 41.8% in 2017. Analysts do not expect any more changes to the dividends over the next few years.

Not only does a company need increasing revenue, but they need to be able to make a profit on their revenue. For this company, their earnings peaked in 2010. I must say that a lot of consumer companies are currently having a hard time in the long slow recovery that has been going on.

The 5 year low, median and high median Price/Earnings per Share Ratios are 18.91, 22.96 and 27.02. The 10 year values are 16.7, 19.01 and 24.05. The historical values are 14.86, 16.43 and 23.47. The current P/E Ratio is 25.12 based on a stock price of $10.30 and 2017 EPS estimate of $0.41. This is rather a high P/E Ratio for a stock that might be a turnaround situation. This stock price testing suggests that the stock price is relatively expansive.

I would think that the historical ratios are more realistic P/E Ratios for a consumer stock. The thing is that no matter how low the EPS goes the stock price will only fall so much because there is value in the company. The P/E Ratios are sometimes not the best way to determine if a stock price is good or not.

I get a Graham Price of 8.63. The 10 year low, median and high median Price/Graham Price Ratios are 0.82, 1.04 and 1.26. The current P/GP Ratio is 1.19 based on a stock price of $10.30. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year Price/Book Value per Share Ratio is 1.13. The current P/B Ratio is 1.27 based on a BVPS of $8.08 ($223.5M BV) and a stock price of $10.30. The current P/B Ratio is some 13% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. Also, note that a P/B Ratio of 1.50 and below is considered a good P/B Ratio. So the current P/B Ratio of 1.27 is still on the low side.

Using the Dividend Yield as a test is not great one for this stock. First the stock used to be an income trust and income trust had higher dividend yields that the stock will ever see again. Secondly, the dividend have but cut twice by 33% in 2011 and by 66.7% in 2016. I get an adjusted historical median dividend yield of 4.38%.

The current dividend is 3.5% based on a current dividend of $0.36 and a stock price of $10.30. The current dividend is some 20% below the adjusted historical median and this would suggest that the stock is relatively expensive. On this test a current dividend at 20% or higher above the historical median suggest a relatively expensive price. So this test put the stock price just over the line.

The only stock price test that shows something different is the P/S Ratio test. The 10 year median P/S Ratio is 0.57. The current P/S Ratio is 0.35 based on Revenue estimate for 2017 of $819M, Revenue per Share estimate for 2017 of $29.61 and a stock price of $10.30. The current P/S Ratio is some 39% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

However, not only does a company need to have revenue, it also needs to make a profit from the revenue. This company so far has lately shown it can do that. It is certainly not easy to get a handle on what is a good price for the company. The current one could be reasonable.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold Recommendations. There are more Strong Buy and Buy recommendations than Hold recommendations and the consensus would be a Buy. The 12 month stock price consensus is $11.25. This implies a total return of 12.72% with 3.50% from dividends and 9.22% from capital gains.

According to a press release by Market Wired there are two proxy's for this company. One set of proxies are from the company and one set is from dissidents. Barry Critchley also talks about the proxy fight in a May article on the Financial Post. This news release by CNWsays that ISS agrees change is needed at Liquor Stores N.A. Renata Jones on Sports Perspectives talks about recent ratings on this company. See what analysts are saying about this company on Stock Chase.

Liquor Stores N.A. Ltd. is a Canada-based operator of retail liquor stores. The Company operates over stores in Alberta, British Columbia, New Jersey, Alaska and Kentucky. Its web site is here Liquor Stores N.A.

The last stock I wrote about was about was Intertape Polymer Group Inc. (TSX-ITP, OTC-ITPOF)... learn more. The next stock I will write about will be Power Corp of Canada (TSX-POW, OTC-PWCDF)... learn more on Wednesday, June 14, 2017 around 5 pm. Tomorrow on my other blog I will write about Success Long Term... learn more on Tuesday, June 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

3 comments:

  1. Susan,
    You mention that "current dividend is some 20% above the adjusted historical median". Isn't it actually 20% less?

    Regards,
    MG

    ReplyDelete
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    1. This comment has been removed by the author.

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    2. You are right and it is fixed.

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