Is it a good company at a reasonable price? The stock price looks to be reasonable and below the median and close to cheap. I still think that this company will do fine. I have no intention of selling my shares.
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 on March 4, 2018. They were an envelope company, but are diversifying into packaging.
When I was updating my spreadsheet, I noticed that they have restarted their dividends and that is always a good sign. This company used to be an income trust and a lot of these x-income trust companies are having a hard time getting their dividends right as corporations. Once income trust companies become corporations, they simply cannot give the high dividends they could as income trust.
I have done well with this stock. My total return over the 3 years I have had this stock is 13.78% per year with 10.74% from capital gains and 3.04% from dividends.
If you had invested in this company in December 20101, $1,000.33 you would have bought 599 shares at $1.67 per share. In December 2021, after 10 years you would have received $1,033.28 in dividends. The stock would be worth $4,647.25. Your total return would have been $2,680.53.
If you had invested in this company in December 2016, $1000.00 you would have bought 200 shares at $5.00 per share. In December 2021, after 5 years you would have received $178.00 in dividends. The stock would be worth $550.00. Your total return would have been $728.00.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $1.67 | $1,000.33 | 599 | 10 | $1,033.28 | $1,647.25 | $2,680.53 |
| $5.00 | $1,000.00 | 200 | 5 | $178.00 | $550.00 | $728.00 |
The dividend yields are moderate with dividend growth will probably restart. The current dividend yield is moderate (2% to 4% ranges) at 2.82%. The 5 and historical median dividend yields are high (7% and above) at 7.24T and 7.22%. The 10 year median dividend yield is good (5% to 6% ranges) at 6.86%. The company used to be an Income Trust and as such could afford to pay high dividends. I would expect the dividends to be in the 2% to 3% range going forward.
The Dividend Payout Ratios (DPR) are good for the future. There was no dividend in 2021 so, there is not DPR for EPS for 2021, but the 5 year coverage is 65%. However, the DPR for EPS for 2022 is expected o be 17%. The DPR for Cash Flow per Share (CFPS) for 2021 is 0% because there were no dividends, but the 5 year coverage is 22%. The DPR for CFPS is expected to be 9% in 2022. The 5 year coverage in 2021 for DPR for Free Cash Flow (FCF) is 29%. The DPR for FCF is expected to be 21%.
Debt Ratios are fine. The Long Term Debt/Market Cap ratio for 2021 is 0.44 and is fine. The Liquidity Ratio for 2021 is 1.36 and if you add in cash flow after dividends it is 2.37. The Debt Ratio is good at 1.89. The Leverage and Debt/Equity Ratio for 2021 is fine at 2.12 and 1.12 respectively.
The Total Return per year is shown below for years of 5 to 15 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 | n/a | -6.96% | -11.27% | 4.31% |
| 2011 | 10 | n/a | 13.66% | 5.11% | 8.55% |
| 2006 | 15 | n/a | -1.11% | -7.23% | 6.11% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 4.19, 6.72 and 9.25. The corresponding 10 year ratios are 4.40, 6.67 and 8.94. The corresponding historical ratios are 4.95, 7.10 and 9.47. The current P/E Ratio is 6.12 based on a stock price of $3.55 and EPS estimate for 2022 of $0.58. The current ratio is between the low and the median 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 $6.94. 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 0.51 based on a stock price of $3.55. The current ratio is between the low and the median of the 10 year median ratio. 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 1.21. The current P/B Ratio is 0.96 based on a stock price of $3.55, Book Value of $94.4M and Book Value per Share of $3.69. The current ratio is 20.2% 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 3.13 based on last 12 month Cash Flow of $30M, Cash Flow per Share of $1.14 and a stock price of $3.55. The current ratio is 20.7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 7.22%. The current dividend yield is 2.82% based on a stock price of $3.55 and dividends of $0.10. The current dividend yield is 61% 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 6.86%. The current dividend yield is 2.82% based on a stock price of $3.55 and dividends of $0.10. The current dividend yield is 59% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 0.48. The current P/S Ratio is 0.39 based on Revenue estimate for 2022 of $243M, Revenue per Share of $9.20 and a stock price of $3.55. The current ratio is 19% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is that the stock is reasonable and below the median. It may even be cheap. The P/S Ratio shows the stock price is reasonable and below the median (and close to cheap). The dividend yield tests do not but dividends have been cut mostly due to the change in this company from an income trust to a corporation. Most of the other tests is showing the stock price as either cheap or reasonable and below the median.
Last year my results of stock price testing were that the stock price was 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.
When I look at analysts’ recommendations, I find only a Buy (1) recommendation. The consensus would be a Buy. Yahoo Finance gives a Buy (2) recommendations. WSJ shows a 12 month stock price consensus of $6.00 from one analyst. Alpha Spread is showing 3 analysts 12 month stock price consensus of $6.12. This implies a total return of 75.21% with 72.39% from capital gains and 2.82% from dividends.
When I looked at analysts’ recommendations last year, I found 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 based on a stock price of $2.33. What happened was a move to $3.55 and a total return of 52.36% all from capital gains. The analyst was fairly accurate.
The last analyst recommendation on Stock Chase was in 2016. Stock Chase gives this company 1 star out of 5. Kris Knutson Motley Fool in 2019 thought this company is positioned well to profit from the shift towards online marketing. The company on Newswire talk about their fourth quarter. A March 2022 report from Simply Wall Street on Yahoo Finance is more upbeat on this stock. A Simply Wall Street report on Yahoo Finance talks about Return on Capital Employed (ROCE).
Simply wall Street has 3 warnings on this stock of earnings have declined by 6.9% per year over past 5 years; dividend of 2.79% is not well covered by earnings; and does not have a meaningful market cap (CA$94M). I get EPS up by 2.6% per year over the past 5 years. EPS was up 117% in 2021. The new lower dividend will be covered by earnings. They are right about it being a small cap stock.
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. The majority of its revenue is derived from its business in Canada. 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 Monday, April 18, 2022 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.
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