I do not own this stock of Linamar Corporation (TSX-LNR, OTC-LIMAF). I looked at this stock back in 2000 and it was not a stock I thought fit my investment philosophy. In 2008 I read an article that recommended this company as a dividend stock with good value. This stock used to be on the Investment reporter portfolio stock list as an average risk stock. However, it has now been taken off this list.
When I was updating my spreadsheet, I noticed that new estimates for 2019 and 2020 were lower than last year. For example, the Revenue estimates for these years were $8,185M and $8,613M last year, but lower at $7,653 and $7,833M. The EPS estimates for these years were $10.30 and $11.50 for EPS, but the current estimates for these years are now $7.75 and $8.12.
Dividend yields are low (below 2%). The current dividend yield is 1.13%. The 5, 10 and historical dividend yields are 0.70%, 0.88% and 1.21%. The growth in dividends has often been low overall, but the increases are quite good when made. For example, a lot of years have no increases then a big one is made. The years 2013, 2015, 2016 and 2018 had no increases, but there was a 25% increase in 2014 and a 20% in 2018. Dividends have gone down as well as up.
The Dividend Payout Ratios are very low and therefore good. The DPR for 2018 is 5% with 5 year coverage at 6%. The DPR for CFPS for 2018 is 3% with 5 year coverage also at 3%.
Debt Ratios for Long Term Debt/Market Cap shows some vulnerability, but other ones are fine. The Long Term Debt/Market Cap Ratio for 2018 is getting high at 0.83 and is even higher currently at 0.92. It used to be much lower, but debt increased by 91% in 2018. The Liquidity Ratio has been good and the 2018 one is at 2.01. The Debt Ratio is also good at 1.88. I like these two to be 1.50 or above and this is why they are good. The Leverage and Debt/Equity Ratios are fine, but it would be nice if they were lower. The 2018 ratios are 2.14 and 1.14 respectively.
The Total Return per year is shown below for years of 5 to 24 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.
As you can see, total return has varied a lot. Most of the total return is in capital gains.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 8.45% | 1.46% | 0.50% | 0.97% |
| 2008 | 10 | 7.18% | 31.67% | 28.47% | 3.20% |
| 2003 | 15 | 7.60% | 10.90% | 9.55% | 1.35% |
| 1998 | 20 | 6.48% | 3.57% | 2.81% | 0.75% |
| 1993 | 24 | 7.38% | 9.82% | 8.45% | 1.37% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 6.64, 8.16 and 9.67. The corresponding 10 year ratios are 6.55, 8.95 and 11.44. The corresponding historical ratios are 8.44, 11.60 and 15.03. The current P/E Ratio is 5.50 based on a current stock price of $42.59 and 2019 EPS estimate of $7.75. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $102.64. The 10 year low, median, and high median Price/Graham Price Ratios are 0.57, 0.77 and 0.96. The current P/GP Ratio is 0.41 based on a stock price of $42.59. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.41. The current P/B Ratio is 0.70 based on a Book Value of $3,938M, Book Value per Share of $60.42 and a stock price of $42.59. The current ratio is 50% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.21%. The current dividend yield is 1.13% based on a dividend of $0.48 and a stock price of $42.59. The current yield is 1% below the historical median yield. This stock price testing suggests that the stock price is relatively reasonable and at the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.57. The current P/S Ratio is 0.36 based on 2019 Revenue estimate of $7,653, Revenue per Share of $117.41 and a stock price of $42.59. The current ratio is 36% 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 cheap, but you should be caution. Most of the testing I have done show this stock price as being relatively cheap. However, the dividend yield does not, but showing a reasonable price that is just above the median. Often the dividend and it increases reflect how the company feels about the future. So, this would be a caution warning.
Is it a good company at a reasonable price? This is not my sort of dividend growth company. I do not mind companies with a low yield, but I like it accompanied by a moderate to good dividend growth. This very low dividend yield company has a low dividend growth. Dividend increases are good when given, but they are few and far between. The stock price seems relatively cheap to relatively reasonable.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (1) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $53.20. this implies a total return of 26.04% with 1.13% from dividends and 24.91% from capital gains.
See what analyst are saying Stock Chase. They do not see a strong auto sector at present. Will Ashworth on Motley Fool said he was a bad performer in August, but even with flat revenue they could generate $179M in free cash flow. A writer on Simply Wall Street says the stock is higher than its intrinsic value and therefore it is not a good time to buy. Brian Madden on BNN Bloomberg discuss this stock and see a slide in auto sales. Natalie Wong and Kristine Owram from Bloomberg on Financial Post says Canadian companies maybe affected by the GM Strike.
Linamar Corp makes powertrains and drivelines for vehicle and power generation markets and operates under two business segments: Powertrain/Driveline and Industrial. Its web site is here Linamar Corporation .
The last stock I wrote about was about was K-Bro Linen Inc (TSX-KBL, OTC-KBRLF) ... learn more. The next stock I will write about will be Teck Resources Ltd (TSX-TECK.B, NYSE-TECK)... learn more on Friday, October 04, 2019 around 5 pm. Tomorrow on my other blog I will write about Something to Buy October 2019.... learn more on Thursday, October 03, 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.
No comments:
Post a Comment