Friday, September 27, 2019

Le Chateau Inc

Sound bite for Twitter and StockTwits is: Consumer Stock. This stock is probably cheap. This is showing up the P/S Ratio testing. However, revenue is declining, they cannot make a profit and the Book Value is negative. It is surprising it is still hanging in there. See my spreadsheet on Le Chateau Inc.

I do not own this stock of Le Chateau Inc (TSX-CTU, OTC-LCUAF). In June 10, 2012 I started spreadsheet because of a request from Blog reader. It was also on my list of dividend and special dividend paying stocks. Jennifer Dowty wrote a column on Dividend Paying stocks in 2010. Jennifer is now a Portfolio Manager for Manulife Asset Management Limited. The title of the article in Investor’s Digest was Dividend Stocks: Buy, Hold and Collect. The Investor’s Digest is a publication of MPL Communications.

When I was updating my spreadsheet, I noticed the investors who have been in this company for more than 15 years have still made money. All their return is in dividends. This is the advantage of dividend stocks. You often do not lose money in the long term. It seems like all analysts have given up on this company because it has not been able to make a profit since 2011. It is interesting that it is still hanging in there.

For the second quarter of 2019, the accounting rules they have introduced take account of lease liabilities and right to use assets. This is part of the reason the Liquidity Ratio is below 1.00 (which means current assets cannot cover current liabilities. The other reasons are the current portion of the credit facility and the current portion of the long term debt.

Dividends were suspended in 2012 because the company could no longer afford them. They started with earnings losses for the 2011 calendar year.

Debt Ratios are not good. The 2018 Long Term Debt/Market Cap is 19.72. However, it moved down to 5.91 for the second quarter of 2019. The Liquidity Ratio was high and good 2018 at 2.11 but it moved to 0.77 currently. Even with cash flow added, it is 0.81. The current assets cannot cover the current liability. The Debt Ratio for 2018 is 1.05. It has moved to 0.94 currently. That means that assets cannot cover liabilities and they have a negative book value.

The Total Return per year is shown below for years of 5 to 26 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 n/a -52.65% -52.65% 0.00%
2008 10 n/a -30.76% -36.45% 5.70%
2003 15 n/a 9.15% -21.52% 30.67%
1998 20 n/a 9.39% -15.46% 24.84%
1993 25 n/a 4.15% -13.77% 17.92%
1992 26 n/a 8.13% -11.43% 19.56%

The 5 year low, median, and high median Price/Earnings per Share Ratios are all negative. The corresponding 10 year ratios are all negative. The corresponding historical ratios are 4.56, 6.57 and 8.76. The current P/E Ratio is negative 0.11 based on a stock price of $0.09 and an earnings loss for the past 12 months of $0.79. We cannot do any testing with the P/E Ratio.

I cannot do any testing with Price/Graham Price Ratios because we have a negative book value. I cannot do any testing re Price/Book Value per Share Ratio because of the negative book Value. I cannot do any testing with the dividend yield because there is no dividend.

The 10 year median Price/Sales (Revenue) Ratio is 0.29. The current P/S Ratio is 0.01 based on last 12 months of Revenue of $182.2M, Revenue per Share of $6.03 and a stock price of $0.09. The current ratio is some 95% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

Results of stock price testing is that the stock price is probably relatively cheap. As noted above, most of what I like to test with cannot be done. The only that there can be any testing is P/S Ratio and this is generally a good test.

Is it a good company at a reasonable price? This company has not made a profit since 2011, it has not dividend, Revenue is declining and the Book Value is negative. It is not the sort of stock I would invest in. It is cheap.

When I look at analysts’ recommendations, I find that no analysts are following this stock.

See what analysts are saying on Stock Chase. Last entries were for 2011 when analyst feared the company was heading into trouble. Susan Portelance on Motley Fool compared this company negatively to Reitmans in 2017. A writer on Simply Wall Street in 2018 said that a high level of debt like this company holds can be dangerous as liquidity can dry up in unexpected downturns. The company reported on Globe Newswire the results for the second quarter of 2019. This article on Globe Newswire talks about the Chairman providing a loan to Le Chateau Inc.

Le Chateau Inc is a Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories, and footwear for style-conscious women and men. Its web site is here Le Chateau Inc.

The last stock I wrote about was about was Granite REIT (TSX-GRT.UN, NYSE-GRP.U) ... learn more. The next stock I will write about will be K-Bro Linen Inc (TSX-KBL, OTC-KBRLF) ... learn more on September 30, 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.

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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