I own this stock of Supremex Inc (TSX-SXP, OTC-SUMXF). I read about it in Money Sense article of 15 Stocks to help investors ride market swings by Michael Pe of Mar 4, 2018. They were an envelope company, but are diversifying into packaging. I investigated this stock for buying for my TFSA.
When I was updating my spreadsheet, I noticed I have lost money on this stock. I have had it for 2 years and my total return of a loss of 9.49% with a capital loss of 13.39% and dividends of 3.90%. I see that a director and the Chairman are buying stocks. The other thing is that Intangibles/Market Cap Ratio for 2020 is 0.43 going to 0.39 currently. The Goodwill/Market Cap Ratio for 2020 is 0.87 going down to 0.78 currently. This gives a total for Intangibles Goodwill/Market Cap for 2020 at 1.30 for 2020 and going down to 1.17 currently. These values are too high.
The dividend has recently been suspended and dividends have gone down as well as up. Over the past 14 years, dividends were increased 7 times and decreased 4 times and rest of the time flat. The company started out as an income trust. Income Trusts have had a hard time adjusting their dividends after becoming corporations. I expect that the company will restart dividends in the future, but it is unknown at this time when.
The Dividend Payout Ratios (DPR) too high before the dividend cut in 2020. The DPR for 2020 was 49% with 5 year coverage at 86%. The DPR for CFPS for 2020 was 15% with 5 year coverage at 26%. The DPR for Free Cash Flow for 2020 was 11% with 5 year coverage at 40%.
Debt Ratios are fine, but it would be better if Long Term Debt was lower. The Long Term Debt/Market Ratio for 2020 was quite high at 0.93 but has moved down to 0.84 with the increase in market value. The Liquidity Ratio for 2020 was 1.65. The Debt Ratio for 2020 was 1.73. The Leverage and Debt/Equity Ratios for 2020 were 2.36 and 1.36.
The Total Return per year is shown below for years of 5 to 14 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | -8.25% | -10.09% | -16.38% | 6.29% |
| 2010 | 10 | -2.05% | 6.14% | -1.65% | 7.79% |
| 2006 | 14 | -14.42% | -2.42% | -9.67% | 7.25% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.15, 10.55 and 11.62. The corresponding 10 year ratios are 4.95, 7.10 and 9.47. The corresponding historical ratios are 5.29, 7.49 and 9.69. The current P/E Ratio is 4.96 based on a stock price of $2.33 and EPS estimate for 2021 of $0.47. The current ratio is just above the low median 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $5.48. The 10 year low, median, and high median Price/Graham Price Ratios are 0.49, 0.68 and 0.86. The current P/GP Ratio is 0.43 based on a stock price of $2.33. The current ratio is below the low median 10 year P/GP Ratio. 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 1.21. The current P/B Ratio is 0.82 based on a book Value of $78.96M, Book Value per Share of $2.84 and a stock price of $2.33. The current ratio is 32% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 3.94. The current P/CF Ratio is 1.75 based on last 12 month Cash Flow of $37M, Cash Flow per Share of $1.33 and a stock price of $2.33. The current ratio is 56% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I cannot do the dividend yield test because the dividend has been suspended.
The 10 year median Price/Sales (Revenue) Ratio is 0.48. The current P/S Ratio is 0.30 based on Revenue estimate for 2021 of $215.5M, Revenue per Share of $7.74 and a stock price of $2.33. The current ratio is 37% 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. Dividend yield tests cannot be done because dividend is suspended. The P/S Ratio test shows that the stock is relatively cheap as does the P/B Ratio test. I know that the P/E Ratio test does not say it is cheap, but the P/E Ratio are really low. A P/E Ratio test below 10.00 is showing a cheap price.
Is it a good company at a reasonable price? I still have hope for this company. I understand the risks as it is a small company that has gotten into problems. I will continue to hold my shares. The stock is cheap.
When I look at analysts’ recommendations, I find only one recommendation of Buy. The Consensus would be a buy. The 12 month stock price consensus is $3.50. This implies a total return of $50.21%, all from capital gains.
There are only old entries on Stock Chase and this stock is not well covered. There is also nothing recent on Motley Fool. The executive summary on Simply Wall Street list 4 risks and gives this stock 3 stars out of 5. A writer on Simply Wall Street looks at this company’s debt. A writer on Simply Wall Street says this company is cheap, but wonders about its growth prospects.
Supremex Inc is engaged in manufacturer and marketer of a broad range of custom envelopes and packaging products. The company operates in two business segments that are Manufacturing and Sale of Envelopes, and the manufacturing and sale of paper-based packaging solutions and specialty products. Its web site is here Supremex Inc.
The last stock I wrote about was about was Toromont Industries Ltd (TSX-TIH, OTC-TMTNF) ... learn more. The next stock I will write about will be Leon's Furniture Ltd (TSX-LNF, OTC-LEFUF) ... learn more on Friday, April 16, 2021 around 5 pm. Tomorrow on my other blog I will write about Long Live Debtism.... learn more on Thursday, April 15, 2021around 5 pm.
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