Is it a good company at a reasonable price? The current price looks reasonable. I have been happy with this stock and I have no intentions of selling any shares. However, I feel that I have enough of this stock and have no intentions of buying any more shares.
I own this stock of Leon's Furniture Ltd (TSX-LNF, OTC-LEFUF). I had some money in 2006 and this stock has been on MPL Communication's Investor Reporter list for some time. It was also on Mike Higgs' Dividend Growth Stock list. I bought some in 2006 and then some more in 2008, 2009, 2010, 2013 and 2019.
When I was updating my spreadsheet, I noticed the analysts expected Revenue to come in at $2,388M, an increase of 7.6%, but it came in at $2,513M, an increase of 13%. They also expected a lower EPS to $1.73, a decrease of 13%. However, EPS came in at $2.62, an increase of 32%.
I also noticed that this company, has not yet raised their dividends for 2021, but they gave out two special dividends in 2021.
If you had invested in this company in December 2011, $1,004.40 you would have bought 81 shares at $12.40 per share. In December 2021, after 10 years you would have received $520.02 in dividends. The stock would be worth $2,012.85. Your total return would have been $2,532.87.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $12.40 | $1,004.40 | 81 | 10 | $520.02 | $2,012.85 | $2,532.87 |
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 3.04%. The 5, 10 and historical median dividend yields are also moderate at 2.95%, 2.85% and 2.17%. The dividend growth for the last 5 years has been moderate (8% to 14% ranges) at 9.86% per year. The last dividend increase was in 2021 and it was for 14.3%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 was 84% with 5 year coverage at 51%. The DPR for EPS for 2022 is expected to be 25%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 was 25% with 5 year coverage at 34%. The DPR for EPS for Cash Flow per Share (CFPS) for 2021 was 60% with 5 year coverage at 39%. The DPR for CFPS for 2022 is expected to be 22%. The DPR for Free Cash Flow (FCF) for 2021 was 15% with 5 year coverage at 16%.
Debt Ratios could improve. There is no long term debt in 2021. The Liquidity Ratio for 2021 is 0.90. If you add in Cash Flow after dividends, it is only 1.02 and this is very low. I prefer this to be at 1.50 or higher. They have always had a rather low Liquidity Ratio. The Debt Ratio for 2021is 1.48 and this is low as I would prefer it to be 1.50 or higher. They generally meet this standard. The Leverage and Debt/Equity Ratios for 2021 are 3.10 and 2.10. I prefer these to be below 3.00 and below 2.00 and they generally are.
The Total Return per year is shown below for years of 5 to 33 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 9.86% | 10.55% | 6.57% | 3.98% |
| 2011 | 10 | 5.92% | 10.68% | 7.20% | 3.48% |
| 2006 | 15 | 6.47% | 7.41% | 4.52% | 2.89% |
| 2001 | 20 | 9.73% | 11.14% | 7.59% | 3.55% |
| 1996 | 25 | 10.74% | 12.28% | 8.48% | 3.80% |
| 1991 | 30 | 9.92% | 10.87% | 7.73% | 3.14% |
| 1988 | 33 | 8.98% | 12.47% | 8.92% | 3.54% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.78, 12.00, 13.23. The corresponding 10 year ratios are 12.89, 14.65 and 16.37. The corresponding historical ratios are 12.15, 14.56 and 16.28. The current P/E Ratio is 8.10 based on a stock price of $21.05 and EPS estimate for 2022 of $2.60. The current P/E Ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
This company has recently been putting out an Adjusted Earnings per Share (AEPS). These are not significantly different from the EPS. The 5 year low, median, and high median P/AEPS Ratios are 10.78, 12.00, 13.23. The corresponding 6 year ratios are 11.27, 12.96 and 14.65. The current P/AEPS Ratio is 8.10. The current P/E Ratio is below the low of the 6 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $24.55. The 10 year low, median, and high median Price/Graham Price Ratios are 0.93, 1.06 and 1.19 based on a stock price of $21.05. The current P/GP Ratio is 0.86 based on a stock price of $21.05. The current ratio is below the low of the 10 year median 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 1.81. The current ratio is 2.04 based on a book value of $791M, Book Value per Share of $10.30 and a stock price of $21.05. The current ratio is 13% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 7.29. The current P/CF Ratio is 7.21 based on a Cash Flow per Share estimate for 2022 of $2.92, Cash Flow of $224M and a stock price of $21.05. The current ratio is 1% below the 10 year median 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 2.17%. The current dividend yield is 3.04% based on dividends of $0.64 and a stock price of $21.05. The current dividend is 40% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.85%. The current dividend yield is 3.04% based on dividends of $0.64 and a stock price of $21.05. The current dividend is 7% above 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 0.57. The current P/S Ratio is 0.65 based on Revenue estimate for 2022 of $2,477M, Revenue per Share of $32.25 and a stock price of $21.05. The current ratio is 15% 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 dividend yield tests say it is cheap, but the P/S Ratio test shows that it is reasonable, but above the median. All the other tests are showing this stock as either cheap or reasonable and below the median.
Last year I said the results of stock price testing is that the stock price is probably reasonable. I know a number of people that like the 10 year median dividend yield test compared to the historical median yield test. Revenue has not grown much since the 2008 recession, especially in the last 5 years. Most tests, except for the P/S Ratio test is showing the stock price as reasonable. However, caution is probably called for as it is a consumer stock and it is a small cap company because its Market Cap is under $2B at $1.7B. However, in Canada, sometimes a Mid-Cap size company is considered to be from $1.5B to $5B.
When I look at analysts’ recommendations, I find a Hold (1) recommendation. The consensus would be a Hold. The 12 month stock price consensus is $28.00. That implies a total return of 36.06% with 33.02% from capital gains and 3.04% from dividends. This makes no sense to have a capital gain of 36% and a recommendation of Hold. However, a number of sites are saying the same thing.
One Analysts on Stock Chase says that the growth is not high enough for him. Stock Chase gives this stock 3 stars out of 5. Demetris Afxentiou on Motley Fool says this is a good long-term value stock. Ambrose O'Callaghan on Motley Fool thinks you should buy this stock because of a low P/E and a 2.7% yield. Nikhil Kumar on Motley Fool talks about the ways this company makes it money. The company released its fourth quarter results on Newswire. A Simply Wall Street Report on Yahoo Finance talks about this company’s ROE.
Leon's Furniture Ltd is a Canada-based retailer which is involved in the sale of home furnishing, mattresses, appliances, and electronics. The firm is also the country's commercial retailer of appliances to builders, developers, hotels, and property management companies. Its web site is here Leon's Furniture Ltd.
The last stock I wrote about was about was Supremex Inc (TSX-SXP, OTC-SUMXF) ... learn more. The next stock I will write about will be Barrick Gold Corp (TSX-ABX, NYSE-GOLD) ... learn more on Wednesday, April 20, 2022 around 5 pm. Tomorrow on my other blog I will write about Stocks that Raise their Dividends.... learn more on Tuesday, April 19, 2021 around 5 pm.
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