Friday, November 24, 2017

PFB Corp

Sound bite for Twitter and StockTwits is: Dividend Growth Industrial. On most tests except for the P/S Ratio test this stock looks cheap. Long term investors have mostly done fine, but dividend growth is a problem if you are investing for income. This seems to be changing at present though with last two dividend increases. This suggests that the management is positive about the future. See my spreadsheet on PFB Corp.

I do not own this stock of PFB Corp. (TSX-PFB, OTC-PFBOF). I am following this stock as I read a positive article on this stock in November 2009 and thought I would do a spreadsheet on it. This stock is a dividend paying small cap stock. The article said that this stock would be good for long-term gains and rising dividends. This is the thing with small cap stock; you can get a blend of capital gains and rising dividends in the long term only if the company is successful.

On this stock the dividends are moderate with very low dividend growth. The current dividend is 3.56% with the 5 year, 10 year and historical median dividend yields at 3.91%, 3.94 and 2.93%. The dividend growth over the past 5 and 10 years to the end of 2016 were at 2.38% and 1.18%. The dividend growth to date over the past 5 year is 3.86%.

For much of this stock's life dividend increases were good when given, but then dividends were flat for a long period. For example dividends were flat for 4 years and then increased by50%. Then they were flat for 4 years and then increased by 60%. After that they were flat for 10 years and they just started to increase them again in 2016 and 2017. The last two increases were for 16.7% and 14.3%.

Currently they afford their dividends with the Dividend Payout Ratio for 2016 at 39% with 5 year coverage at a higher 84%. The DPR for CFPS for 2016 is 15% with 5 year coverage at 41%. It would seem that the company is confident of its future.

It is a rather small company with a Market Cap of around 60M with quite strong debt ratios. The Liquidity Ratio for 2016 was 3.16 with a 5 year median of 2.60. The Debt Ratio for 2016 was 2.90 with 5 year median ratio of 2.61. Leverage and Debt/Equity Ratios are good with ratios for 2016 at 1.53 and 0.53 respectively. The 5 year median ratios are 1.48 and 0.48 respectively.

A problem is that the Return on Equity has not been that great. The ROE for 2016 was 9.1% with 5 year median of 9.1%. The ROE was only 10% or higher 2 years in the last 5 years and 2 years in the last 10 years. The ROE on Comprehensive Income is similar with the ROE for 2016 at 9.3% and the 5 year median also at 9.3%. Here again the ROE was only above 10% for 2 years in the past 5 and 2 years in the past 10. This is not a great showing.

The total return for investors has been mostly good. Looking at total return over 5, 10, 15and 20 years you get 16.63%, 3.19%, 10.79 ad 10.26% per year. The reason the 10 year return is low it that the was at a high 10 years ago.

If you had bought this stock 5, 10, 15 or 10 years ago, the current dividend yield on your investment if you paid a median price would be 4.7%, 3.3%, 5.6% and 5.4%. If you had bought this stock 5, 10, 15 or 10 years ago, dividends would have covered 37.2%, 39.2%, 91.1% and 136.67% or your purchase price if you paid a median price would be 4.7%, 3.3%, 5.6% and 5.4%. So holding this stock for the long term would not have been a bad decision.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.13, 13.06 and 15.00. The 10 year corresponding ratios are 11.61, 13.93 and 16.25. The historical ratios are 8.90, 11.43 and 14.89. The current P/E Ratio is 21.40 based on a stock price of $8.99 and 2017 EPS estimate of $0.42. Since we are close to the end of the year, we should also look at the 2018 EPS estimate of $0.86 and its P/E Ratio which is 10.45. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $8.38 for this stock for 2017 and $12.00 for 2018. The 10 year low, median and high median Price/Graham Price Ratios are 0.70, 0.88 and 0.99. The P/GP Ratio for 2017 is 1.07 and for 2018 are 0.75. This stock price testing suggests that the stock price is relatively cheap.

The 10 year Price/Book Value per Share Ratio is 0.93. The current P/B Ratio is 1.21 a value some 30% higher. The current P/B Ratio is based on Book Value of $49.96M, BVPS of $7.44 and a stock price of $8.99. By this test the stock price is relatively expensive.

However, on an absolute basis any P/B Ratio at or below 1.50 say that the stock is cheap. The 10 year median P/B Ratio is below 1.00 and this is a very low P/B Ratio. So on an absolute basis the stock price is cheap.

The current dividend yield is 3.56% based on dividends of $0.32 and a stock price of $8.99. The historical dividend yield is 2.93% which is some 21.5% lower than the current dividend yield. This stock price testing suggests that the stock price is relatively cheap.

The Price/Sales (Revenue) Ratio is 0.51. The current P/S Ratio is 0.58 a values some 14.8% higher. This current P/S Ratio is based on 2017 Revenue of $104M, Revenue per Share of $15.49 and a stock price of $8.99. This stock price testing suggests that the stock price is reasonable but above the median. The 2018 P/S Ratio is 0.55 and would not change the result.

When I look at analysts' recommendations I find Buy (2) and Hold (1). The 12 month stock price consensus is $11.00. This implies a total return of $25.92% with 21.36% from capital gains and 3.36% from dividends.

Ingrid Hart has an interesting analysis of this company on Simply Wall Street. SDR Staff on Stock Daily Review says via the Williams Percent Range that the stock is neither overbought nor oversold. The December 2016 Daily Advice likes this company for long-term share-price gains and attractive dividends.

PFB Corporation, through its wholly-owned subsidiaries, is a vertically-integrated manufacturer of proprietary insulating building products that are based on expanded polystyrene (EPS) technology. This expanded polystyrene (EPS) rigid insulation is used in a wide variety of residential and commercial construction projects across North America. It was founded in 1968 as Plasti-Fab Ltd, now a subsidiary of PFB. Its web site is here PFB Corp.

The last stock I wrote about was about was IBI Group Inc. (TSX-IBG, OTC-IBIBF)... learn more. The next stock I will write about will be Innergex Renewable Energy (TSX-INE, OTC-INGXF)... learn more on Monday, November 27, 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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