I do not own this stock of K-Bro Linen Inc (TSX-KBL, OTC-KBRLF). People were talking about this stock at the 2009 Toronto Money Show. This was one income trust being touted as currently a good buy with very good yield. It was also recommended by Aaron Dunn who is the Senior Equity Analyst for Keystone Publishing Corp, a publisher of Canadian investment newsletters.
When I was updating my spreadsheet, I noticed the stock price has caught up with the declining EPS and shareholders capital gain was negative in 2018. The stock declined almost 20% last year, but is up by almost 8% this year. EPS is expected to rise this year. The EPS for the past 12 months is higher than to the end of last year.
Dividend yields are moderate (2 to 4% ranges) to good (5% or over). The current dividend yield is moderate at 3.53%. The 5, 10 and historical median dividend yields are 2.83%, 3.36% and 5.02%. If you look at median dividend yield since the company became a corporation, the yield is 3.09%. Dividends have been flat since 2014. Since this is an old income trust, current yields are likely to continue and the company will not get back to the yields it had as an income trust. See dividend growth in the chart below.
The Dividend Payout Ratios are still too high, but analysts expect them to improve. The DPR for 2018 for EPS for 2018 was 204% with 5 year coverage at 170%. The DPR for EPS is expected to be this year at 98% with 5 year coverage at 111%. The DPR for CFPS for 2018 was 44% with 5 year coverage at 42%.
Debt Ratios are fine and mostly quite good. The Long Term Debt/Market Cap Ratio for 2018 is good and low at 0.20. The Liquidity Ratio good at 1.97. The Debt Ratio is good and high at 2.61. I like the last two ratios to be at 1.50 or higher. The Leverage and Debt/Equity Ratios are good and low at 1.62 and 0.62 respectively.
The Total Return per year is shown below for years of 5 to 14 to the end of 2018. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 0.35% | -0.09% | -3.32% | 3.24% |
| 2008 | 10 | 0.87% | 20.81% | 13.15% | 7.66% |
| 2004 | 14 | 1.17% | 14.37% | 7.80% | 6.57% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 29.73, 33.61 and 37.49. The 10 year corresponding ratios are 20.57, 23.99 and 27.42. The corresponding historical ratio are 18.04, 18.71 and 20.62. The current P/E Ratio is 29.27 based on a stock price of $36.00 and 2019 EPS estimate of $1.23. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $22.46. The 10 year low, median, and high median Price/Graham Price Ratios are 1.59, 1.86 and 2.13. The current P/GP Ratio is 1.60 based on a stock price of $36.00. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 2.46. The current P/B Ratio is 1.97 based on a stock price of $36.00, Book Value of $193M, and a Book Value per Share of $18.23. The current ratio is 19.7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 5.02%. The median dividend yield since becoming a corporation is 3.09%. The current dividend yield is 3.33% based on dividends of $1.20 and a stock price of $36.00. The current dividend yield is 33.6% below the historical median yield but it is 7.9% above the yield since becoming a corporation. This stock price testing suggests that the stock price is relatively reasonable and below the median going by the yield since the company has become a corporation.
The 10 year median Price/Sales (Revenue) Ratio is 1.73. The current P/S Ratio is 1.51 based on 2019 Revenue estimate of $252M, Revenue per Share of $23.86 and a stock price of $36.00. The current ratio is 13% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. In this case the best test is the P/S Ratio test. This test shows the stock price is relatively reasonable and below the median. The rest of the testing shows these same results except for the P/E Ratio testing. The P/E Ratios are all relatively high for this sort of company. The dividend yield test is suspect because the company used to be an income trust.
Is it a good company at a reasonable price? I think that this company has a lot of potential. It would appear, on a number of tests, to be reasonable priced.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus is $45.43. This implies a total return of 29.53% with 3.33% from dividends and 26.19% from capital gains.
See what analysts are saying on Stock Chase. It is not well covered but analysts like the company. Kris Knutson on Motley Fool likes this company, but report is from last year. A writer on Simply Wall Street points out a lot of negatives for this company, but does not understand that this used to be an income trust company that had to switch to a corporation because changes to the CDN Tax Laws. A writer on Simply Wall Street talks about who owns shares in this company. A writer on Simply Wall Street says that the company’s intrinsic value says the stock is undervalued. Stock Muse Staff on Stock Muse say the Piotroski F-Score is 4 showing the company of middling strength .
K-Bro Linen Inc is a healthcare and hospitality laundry and linen processor in Canada. K-Bro operates nine facilities in eight major cities across Canada, and two distribution centres, providing management services and laundry processing of hospitality, healthcare, and specialty linens. Its web site is here K-Bro Linen Inc.
The last stock I wrote about was about was Le Chateau Inc (TSX-CTU, OTC-LCUAF) ... learn more. The next stock I will write about will be Linamar Corporation (TSX-LNR, OTC-LIMAF) ... learn more on Wednesday, October 2, 2019 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks October 2019.... learn more on Tuesday, October 2, 2019 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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