Sound bite for Twitter and StockTwits is: Dividend growth consumer. Based on the dividend yield testing, this stock is relatively cheap. When earnings crater it is probably the best measuring for stock price. Revenue seems to be holding up rather well. Their problems basically stem from their purchase of Safeway. I think that the stock price is relatively low, but agree with analysts that think it will be a long recovery. See my spreadsheet on Empire Company Ltd.
I do not own this stock of Empire Company Ltd (TSX-EMP.A, OTC-EMLAF). I have known about this stock for some time, but I had not had the opportunity to follow it before.
This stock has a rather low dividend yield and low growth. The current dividend yield is 1.90% but the historical median is 1.45% and the 10 year median is 1.52%. The current dividend is really at the top range for this stock. The dividend growth over the past 5 and 10 years is at 6.5% and 7.4% per year. This is rather a low growth rate. However, dividend growth has been better in the past with growth rather moderate (in the 8 to 15% range).
They can afford their dividends and the recent modest dividend increases. The Dividend Payout Ratio for 2016 is 70.7%, but the 5 year coverage is 28%. The CFPS Dividend Payout Ratio is 13.8% for 2016 with 5 year coverage of 9.3%. I do not see any cut to the dividend, but the dividend growth will be modest over the next while. The last dividend increase was in 2017 and was for 2.5%.
I think of the debt ratios that the Liquidity Ratio is rather low. The one for 2016 was 0.87 with a 5 year median of 0.96. This means that the current assets cannot cover current liabilities. If you add in cash flow after dividends, the ratio is just 1.11 and has a 5 year median of 1.28. The problem of a low Liquidity Ratio is that a company might get into financial difficulties in bad times.
The 5 year low, median and high median Price/Earnings per Share Ratio are 14.32, 17.60 and 20.88. The 10 year values are 10.52, 11.62 and 13.12. The historical values are 9.80, 11.62 and 13.53. The current P/E Ratio is 78.89 based on a stock price of $22.09 and 2017 EPS estimate of $0.28. This stock price testing would suggest that the stock price is relatively expensive.
However, I do wonder in this case how good or valid this test is. The expected earnings for 2017 are very low for what this company usually earns. When earnings are expected to improve in 2018 to $1.15 the P/E Ratio is 19.21. This is a little high but a lot better than 78.89. Also the company is using an adjusted EPS for which the 2017 estimate is $0.86. This gives a P/E of 25.69 which is still rather high.
I get a Graham Price of $9.19. The 10 year low, median and high median Price/Graham Price Ratios are 0.72, 0.78 and 0.90. The current P/GP Ratio is 2.40 based on a stock price $22.09. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.20. The current P/B Ratio is 1.65 a value some 37% higher than the 10 year median. The current P/B Ratio is based on BV of $3,644.2M, BVPS of $13.41 and a stock price of $22.09. This stock price testing suggests that the stock price is relatively expensive.
The current dividend yield is 1.90%. The historical median is 1.45% a value some 31% lower. The current dividend yield is based on dividends of $0.42 and a stock price of $22.09. This stock price testing suggests that the stock price is relatively cheap. Note that this historical high dividend yield is 1.99%.
I get a 10 year median P/S Ratio of $0.23. The current P/S Ratio is 0.25 based on 2017 Revenue estimate of $24,159, Revenue per Share of $88.93 and a stock price of $22.09. This stock price testing suggests that the stock price is relatively reasonable but above the median.
When I look at analysts' recommendations on this company I find Buy, Hold and Underperform recommendations. Most of the recommendations are a Buy, but the consensus is a Hold. The 12 month stock price target is $22.55. This implies a total return of $3.98% with 2.08% from capital gains and 1.90% from dividends.
Joey Frenette on Motley Fool talks about how Medline has started to turn the company around, but he thinks the current price is too high. Daniel Jordon on Sports Perspectives talks about Raymond James Financial giving the company a market perform (Hold) rating and has lifted the 12 month stock price target to $20.00 from $16.00. There is a Canadian Press article on this company posted on the Toronto Star. See what analysts are saying about this company on Stock Chase. They do not particularly like this company.
Do not forgot that to read the full reports from Motley Fool you have to exit and then go back into the report using the arrows at the top left of your browser. If you click on it from my site you might want to go forward to say Google Search site, then back to Motley Fool's article.
Empire Company Limited is engaged in the business of food retailing and related real estate. The Company operates through two segments: Food Retailing and Investments and Other Operations. The Company's Investments and Other Operations segment includes its equity investments in real estate, which are focused on the ownership of income-producing retail, office and mixed-use properties through an equity accounted ownership interest in Crombie REIT and residential land development in select communities in Ontario, Western Canada and the United States through its investments in Genstar. Its web site is here Empire Company Ltd.
The last stock I wrote about was about was Suncor Energy Inc. (TSX-SU, NYSE-SU)... learn more. The next stock I will write about will be Morneau Shepell Inc. (TSX-MSI, OTC-MSIXF)... learn more on Monday, July 10, 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.
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