I do not own this stock of Empire Company Ltd (TSX-EMP.A, OTC-EMLAF). I have known about this stock for some time before I decided to follow it.
When I was updating my spreadsheet, I noticed the financial statements took a big hit in 2016 because of the Safeway buy. The last 5 year grow has not been very good. Look at book value, it is down over the past 5 years by 7.6% per year and up over the past 10 years is up just 0.2% per year. They have not been able to growth Book Value since 2016. However, these has been some growth in Revenue over the past couple of years, and growth in EPS over the past couple of years.
The dividend yields are low with dividend growth low. The current dividend yield is low (under 2%) at 1.59%. The 5, 10 and historical median dividend yields are also low at 1.64%, 1.56% and 1.45%. The dividend increases are low (under 8% per year) with the 5 year growth at 5.92% per year. However, the last increase was better. It was just over 8% at 8.33% and it was for this year. See chart below.
The Dividend Payout Ratios (DPR) are very good. The DPR for EPS for 2019 is 22% with 5 year coverage at 34%. The DPR for2019 for CFPS is 7% with 5 year coverage at 10%. The DPR for 2019 for Free Cash Flow is 9% with 5 year coverage at 20%. Dividend Coverage Ratio for 2019 is 11.30 with the 5 year ratio at 5.02.
Debt Ratios are need improving. The Long Term Debt/Market Cap Ratio is good and low at 0.23. The Liquidity Ratio is low at 0.80. If you add in cash Flow after dividends it is still too low at 1.28. The Debt Ratio is also too low at 1.38. I like these last two debt ratios to be at 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 3.73 and 2.71. I prefer them to be under 3.00 and under 2.00 respectively. The 5 year ratios are better at 2.40 and 1.38.
The Total Return per year is shown below for years of 5 to 35 to the end of 2019. 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.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.99, 18.95 and 21.91. The corresponding 10 year ratios are 13.94, 17.32 and 20.70. The corresponding historical ratios are 10.96, 12.17 and 14.18. The current P/E Ratio is 14.44 based on a stock price of $32.64 and 2020 EPS estimate of $2.26. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $27.31. The 10 year low, median, and high median Price/Graham Price Ratios are 0.93, 1.16 and 1.36. The current P/GP Ratio is 1.20 based on a stock price of $32.64. 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 1.32. The current P/B Ratio is 2.23 based on a stock price of $32.64, Book Value of $3947M, and Book Value per Share of $14.67. The current ratio is 69% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. Since taking a big loss in 2016, they have not been able to build their Book Value. This account for the high P/B Ratio. It can be a problem if they continue to not be able to build up the Book Value.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.64. The current P/CF Ratio is 6.16 based on 2020 CFPS estimate of $5.30, Cash Flow of $1,426 and a stock price of $32.64. The current P/CF ratio is 7% below the 10 year 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 1.45%. The current dividend yield is 1.59% based on dividends of $0.52 and a stock price of $32.64. The current dividend is 10% higher than the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 1.56%. The current dividend yield is 1.59% based on dividends of $0.52 and a stock price of $32.64. The current dividend is 2% higher than the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.27. The current P/S Ratio is 0.32 based on 2020 Revenue estimate of $27,149, Revenue per Share of $100.88 and a stock price of $32.64. The current ratio is 21% above 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 reasonable and below the median. This is the results of the dividend yield tests and it was confirmed by the P/S Ratio test. The P/S Ratio test said that the stock price was cheap, but at 21%, it was just over the line to cheap. The other test says that the stock price is reasonable and below the median except for the P/B Ratio test.
Is it a good company at a reasonable price? The stock price is reasonable. They have done a decent job for their shareholders over the years. They seem to have started to recover from the problems of 2016. Their purchase of Safeway and expansion into the Western Canada was not handled well. Personally, I own Metro and I have been pleased with them. I will not be purchasing any other grocery store stock.
When I look at analysts’ recommendations, I find Strong Buy (2) Buy (5) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $37.67. This implies a total return of 17% with 15.41% from capital gains and 1.59% from dividends.
Some analysts on Stock Chase talk about liking Metro or Loblaws better. Ambrose O'Callaghan on Motley Fool thinks if there is another correction grocery stocks would be good, and this stock in particular. A writer on Simply Wall Street says the CEO of this company is being paid a similar amount as the median CEO pay. A writer on Simply Wall Street says that although the yield is not high the company has a good record of dividend payments and can afford their dividends. Empire starts online shopping in GTA says company item on News Wire.
Empire Co Ltd key businesses are food retailing, investments, and other operations. The food retailing division operates through Empire's subsidiary Sobeys and represents nearly all of the company's income. Its web site is here Empire Company Ltd.
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