I do not own this stock of CCL Industries Inc. (TSX-CCL.B, OTC-CCDBF). In 2009 I read a favorable report on this stock of which I had also heard before. This is also a dividend paying stock and in 2009 it was on Dividend Achievers list.
When I was updating my spreadsheet, I noticed there seems to be a lot of insider selling. However, insider selling is due to officers and directors selling their stock options. The CEO, CFO and Chairman are not selling the stock they already own. The spreadsheet is filled with green ink. They also seem to be raising money via debt. Cash is up 47% in the second quarter compared to the last annual statement.
However, the Debt and Intangible and Goodwill are still increasing at a high clip. Long term debt is up by 31.54% in 2017 after increasing by 90.49% last year. Intangibles and Goodwill are up by 58.40% in 2017 after increasing by 44.73% in 2016. They are making business acquisitions.
Dividends have been low (0% to1% range) recently but they were higher in the past. The current dividend is just 0.91%, with 5, 10 and historical yields at 0.89%, 1.60% and 2.10%. I prefer yields at are at least 1%. This is because, even with great growth, if yield is really low it takes a very long time to get to a decent yield.
Dividend growth has been increasing. See the chart below. The 10 year growth is 17% but the 5 year growth is 24%. However, the most recent increase was this year and it was for 13%. Last year was 15%. The last 5 years growth is high because of high increases for 2014 to 2016 inclusive.
They can afford their dividends. The 2017 Dividend Payout Ratio is 17.3% with 5 year coverage of 19.1%. The DPR for CFPS for 2017 is 8.5% with 5 year coverage at 8.8%.
Long Term Debt/Market Cap Ratio is low at 0.20. The Liquidity Ratio for 2017 is 1.42 with 5 year median at 1.41. If you add in cash flow after dividends, the ratios are 1.91 with 5 year median at 1.97. The Debt Ratio is 1.54 with 5 year median at 1.74. I like these last two ratios to be 1.50 or higher.
The Leverage and Debt/Equity Ratios for 2017 are 2.85 and 1.85 with 5 year median ratios at 2.20 and 1.20. I would prefer ratios that are lower, however, these ratios are not unusual.
The Total Return per year is shown below for years of 5 to 30. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
As you can see from the chart below, shareholders have done very well with this stock.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 24.14% | 48.14% | 46.53% | 1.61% |
| 10 | 16.96% | 23.88% | 22.82% | 1.06% |
| 15 | 13.59% | 20.86% | 19.74% | 1.12% |
| 20 | 11.10% | 16.30% | 15.33% | 0.97% |
| 25 | 8.79% | 15.73% | 14.54% | 1.19% |
| 30 | 8.10% | 14.34% | 13.02% | 1.32% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 14.59, 21.84 and 27.26. The corresponding 10 year ratios are 14.31, 19.44 and 23.05. The corresponding historical ratios are 11.65, 14.31 and 18.79. The current P/E Ratio is 19.90 based on a stock price of $27.12 and EPS estimate for 2018 of $2.87. This stock price testing suggests that the stock price is reasonable and around the median.
I get a Graham Price of $29.64. The 10 year low, median, and high median Price/Graham Price Ratios are 0.93, 1.27 and 1.54. The current P/GP Ratio is 1.93 based on a stock price of $57.12. This stock price testing suggests that the stock price is expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.81. The current P/B Ratio is 4.20 based on Book Value of $2,408M, Book Value per Share of $13.60 and a stock price of $57.12. The current ratio is some 131% higher than the 10 year ratio. This stock price testing suggests that the stock price is expensive.
I get an historical median dividend yield of 2.10%. The current yield is 0.91% based on a dividend of $0.52 and a stock price of $57.12. The current yield is some 57% below the historical ratio. This stock price testing suggests that the stock price is expensive.
The 10 year median dividend yield is 1.60%. The current yield is 43% higher. It is only looking at the 5 year median yield that the current yield looks fine. The 5 year median dividend yield is 0.89% and the current one is 2% higher.
The 10 year median Price/Sales (Revenue) Ratio is 1.08. The current P/S Ratio is 1.96 based on 2018 Revenue of $5,154M, Revenue per Share of $26.89 and a stock price of $57.12. The current ratio is some 82% above the 10 year ratio. This stock price testing suggests that the stock price is expensive.
The reason that this stock is expensive for the P/GP Ratio and P/B Ratio testing is that the stock price has been climbing much faster than the Book Value. The P/B Ratio is quite high at 4.20. Liabilities are increasing at a faster rate than assets.
On a number of different measures, this stock seems expensive. The market tends to over or underprice stocks. Stock can stay over or underpriced for a long time. Our market is relatively high, so it is not surprising that I find a stock expensive.
When I look at analysts’ recommendations I find Buy (8) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $72.61. This implies a total return of 28.03% with 27.12% from capital gains and 0.91% from dividends based on a stock price of $57.12
James Harlett on Simply Wall Street says this stock is undervalued by 21%. Alexis Guardo on Simply Wall Street says that the CEO of CCL is paid $7M CDN$ compared to similar companies with average of $4M CDN$. However, he thinks that shareholders might think the CEO is worth his pay. Caroline Biscotti on Wheaton Business Journal says that the company has a Piotroski F-Score of 6, where 1 is a low valued company and 9 is a high valued company. Stephanie Bedard-Chateauneuf on Motley Fool thinks this is a great company to buy and hold. See what analysts are saying about this stock on Stock Chase. Analysts like it but some complain it has gone sideways for the last 2 years and that you should buy at $50 and sell at $70.
CCL Industries Inc manufactures and sells packaging and packaging-related products. It produces labels used for packaging of various consumer products, extruded aerosol containers as well as provides inventory management and labelling solutions. Its web site is here CCL Industries Inc.
The last stock I wrote about was about was Brookfield Asset Management Inc. (TSX-BAM.A, NYSE-BAM) ... learn more. The next stock I will write about will be Encana Corp. (TSX-ECA, NYSE-ECA) ... learn more on Monday, November 5, 2018 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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Thanks for your valuable information.
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