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 I included in this spreadsheet, the 5 year total returns from 1999 to 2021. The 5 year total return to December 31, 1999 was 16.77%. The 5 year total return to December 31, 2006 was 3.93%. The 5 year total return has certainly varied a lot over the years. However, it does count on the starting and ending values of the stock. For yield, the higher the yield, the cheaper the stock. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock.
For the total return for the 5 years to December 31, 2002, the beginning yield was low, but the P/S Ratio and the P/E Ratio were relatively high. The result is a loss of 19.40% per year. For the total return for the 5 years to December 31, 2013, the beginning yield was high, but the P/S Ratio and the P/E Ratio were relatively low. The result is a gain of 66.95% per year.
| Date | Tot. Ret | Beg Yield | Beg P/S | Beg P/E | End Yield | End P/S | End P/E |
|---|---|---|---|---|---|---|---|
| 1999 | 16.77% | 1.01 | 13.48 | 0.79% | 0.74 | 14.35 | |
| 2000 | 9.51% | 1.54% | 0.94 | 13.54 | 1.17% | 0.58 | 10.23 |
| 2001 | -2.35% | 0.99% | 1.60 | 15.95 | 1.25% | 0.71 | 20.52 |
| 2002 | -19.40% | 0.59% | 2.47 | 21.28 | 1.43% | 0.46 | 10.96 |
| 2003 | -14.12% | 0.52% | 1.83 | 21.67 | 1.48% | 0.54 | 20.25 |
| 2004 | 4.27% | 0.79% | 0.74 | 14.35 | 1.22% | 0.59 | 11.76 |
| 2005 | 2.40% | 1.17% | 0.58 | 10.23 | 1.72% | 0.39 | 8.33 |
| 2006 | 3.93% | 1.25% | 0.71 | 20.52 | 1.72% | 0.43 | 9.93 |
| 2007 | 19.56% | 1.43% | 0.46 | 10.96 | 1.20% | 0.61 | 12.88 |
| 2008 | -17.11% | 1.48% | 0.54 | 20.25 | 2.32% | 0.11 | 3.52 |
| 2009 | -0.53% | 1.22% | 0.59 | 11.76 | 1.36% | 0.54 | -19.08 |
| 2010 | 13.13% | 1.72% | 0.39 | 8.33 | 1.31% | 0.59 | 14.96 |
| 2011 | 1.80% | 1.72% | 0.43 | 9.93 | 1.77% | 0.32 | 8.97 |
| 2012 | 3.94% | 1.20% | 0.61 | 12.88 | 1.70% | 0.47 | 10.31 |
| 2013 | 66.95% | 2.32% | 0.11 | 3.52 | 0.96% | 0.80 | 12.55 |
| 2014 | 39.73% | 1.36% | 0.54 | -19.08 | 0.70% | 1.11 | 14.48 |
| 2015 | 30.78% | 1.31% | 0.59 | 14.96 | 0.52% | 0.94 | 11.27 |
| 2016 | 34.30% | 1.77% | 0.32 | 8.97 | 0.69% | 0.63 | 7.28 |
| 2017 | 26.95% | 1.70% | 0.47 | 10.31 | 0.71% | 0.73 | 8.80 |
| 2018 | 1.46% | 0.96% | 0.80 | 12.55 | 0.80% | 0.39 | 5.07 |
| 2019 | -6.35% | 0.70% | 1.11 | 14.48 | 1.07% | 0.43 | 7.49 |
| 2020 | -1.42% | 0.52% | 0.94 | 11.27 | 0.75% | 0.76 | 15.79 |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at just 0.95%. The yield on this stock is often low. The 5, 10 year and historical median yields are also low at 0.75%, 0.78% and 1.19%. The dividend increases have lately been moderate (8% to 14% ranges). The spreadsheet shows a decline for the past 5 years of 2%, but this is because dividends were temporarily suspended because of Covid. The dividend increases to date are 8.45% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2020 is 8.43% (and this is in line with DPR for other years). For example, the DPR for EPS for 2019 was 7.32% and for 2021, it is expected to be 8.05%. The 5 year coverage is at 6.11%. The DPR for CFPS for 2020 is 3.05% with 5 year coverage at 3.22%. The DPR for Free Cash Flow or 2020 is 2.06% with 5 year coverage at 5.45%. This is lower than normal and DPR for Free Cash Flow for 2021 is expected to be 10.88% with 5 year coverage at 6.40%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2020 is good at 0.16. The Liquidity Ratio for 2020 is low at 1.25, but if you add in cash flow after dividends, it is 1.85. They generally have a good Liquidity Ratio. The current one is 1.77. The Debt Ratio for 2020 is 2.36. The Leverage and Debt/Equity Ratios are good at 1.74 and 0.74.
The Total Return per year is shown below for years of 5 to 32 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 | -2.09% | -1.42% | -2.04% | 0.61% |
| 2010 | 10 | 4.14% | 13.89% | 12.73% | 1.16% |
| 2005 | 15 | 2.74% | 13.62% | 12.35% | 1.27% |
| 2000 | 20 | 4.14% | 10.44% | 9.37% | 1.08% |
| 1995 | 25 | 5.55% | 10.23% | 9.08% | 1.15% |
| 1990 | 30 | 17.98% | 15.39% | 2.59% | |
| 1988 | 32 | 16.17% | 14.21% | 1.96% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 5.60, 7.37 and 9.33. The corresponding 10 year ratios are 6.42, 8.93 and 11.44. The corresponding historical ratios are 8.31, 11.59 and 15.95. The current P/E Ratio is 9.06 based on a stock price of $67.52, and EPS estimate for 2021 of $7.45. The current ratio is between the low and median ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $107.24. The 10 year low, median, and high median Price/Graham Price Ratios are 0.53, 0.71 and 0.88. The current P/GP Ratio is 0.63 based on a stock price of $67.52. The current P/GP Ratio is between and low and median 10 year ratios. 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 1.36. The current P/B Ratio is 0.98 based on a Book Value of $4,493M, Book Value per Share of $68.65 and a stock price of $67.52. The current P/B Ratio is 27% 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 4.70. The current P/CF Ratio is 4.53 based on a stock price of $67.52, Cash Flow per Share estimate for 2021 of $14.90 and Cash Flow of $975.2M. The current P/CF Ratio is 3.7% below the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 1.19%. The current dividend yield is 0.95% based on a stock price of $67.52 and dividends of $0.64. The current dividend yield is 20% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 0.78%. The current dividend yield is 0.95% based on a stock price of $67.52 and dividends of $0.64. The current dividend yield is 22% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.57. The current P/S Ratio is 0.65 based on a stock price of $67.52, Revenue estimate for 2021 of $6,792, and Revenue per Share of $103.77. The current P/S Ratio is 14% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The 10 year dividend median dividend yield test says it is cheap, but the P/S Ratio says it is reasonable but above the median. Most of the testing, expect for the historical median dividend yield test says the stock is cheap or reasonable and below the median. However, if you look at the chart above, the best total returns were when the P/S Ratio was lower and the yields higher than they are today. This is especially true with the dividend yields.
Is it a good company at a reasonable price? The price might be reasonable. I think this is a good company, but it is cyclical in nature. It might not be a long term hold unless it is brought at a cheap price, and bought at a price with a dividend yield of at least 1.30%.
When I look at analysts’ recommendations, I find Strong Buy (2), and Buy (3). The consensus would be a Strong Buy. The 12 month stock price consensus is $97.60. This implies a total return of 45.50% with 0.95% from dividends and 44.55% from capital gains.
When I was updating my spreadsheet, I noticed if you looked at Total Returns for the 5, 10, 15, 20, 25, and 30 year periods, I find the following. For example, total return over the past 15 years is 13.62% per year, the starting Dividend yield (the one from 15 years ago) was 2.04%, the starting P/E Ratio was 8.33 and the starting P/S Ratio was 0.39. From the point of view of this chart, the highest dividend yield, the lowest P/E Ratio, and the lowest P/S Ratio got a high total return per year.
| # Years | Total Ret | Beg P/E | Beg Yield | Beg P/S |
|---|---|---|---|---|
| 5 | -1.42% | 11.27 | 0.54% | 0.94 |
| 10 | 13.89% | 14.96 | 1.18% | 0.59 |
| 15 | 13.62% | 8.33 | 2.04% | 0.39 |
| 20 | 10.44% | 10.23 | 1.42% | 0.58 |
| 25 | 10.23% | 13.54 | 1.22% | 0.94 |
| 30 | 17.98% | 9.86 | 0.57 |
Some analyst on Stock Chase say the company is their top pick. Others say do not buy because it is cyclical. It is indeed cyclical, but that does not mean you cannot make money on the stock. Chris MacDonald on Motley Fool likes the company for insider buying and the current fundamentals. The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5 and lists 2 risks. There has been both insider buying and selling over the past year. A writer on Simply Wall Street says the fair value price for this stock is $63.55. A writer on Simply Wall Street talks about ownership of this stock.
Linamar Corp makes powertrains and drivelines for vehicle and power generation markets and operates under two business segments: Transportation and Industrial. The three largest customers account for nearly half of total revenue. Its web site is here Linamar Corporation.
The last stock I wrote about was about was BRP Inc (TSX-DOO, OTC-DOOO) ... learn more. The next stock I will write about will be Teck Resources Ltd (TSX-TECK.B, NYSE-TECK) ... learn more on Wednesday, September 29, 2021 around 5 pm. Tomorrow on my other blog I will write about Warren Buffett Quotes.... learn more on Tuesday, September 28, 2021 around 5 pm.
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