Is it a good company at a reasonable price? I do like this company. However, it is risky as it is a small materials sector company. We may be going into a bear market, but who knows. A bear market is overdue as the last one was really in 2008. I have not bought much over the past 3 years as I thought that the market was generally too high. I am interested in buying more of this company at some time in the future.
I own this stock of Hardwoods Distribution Inc (TSX-HDI, OTC-HDIUF). In April 2017, I asked for suggestions on what stocks I should now follow because of a number that I had followed had been bought out. This was one of the suggestions. I bought 100 shares 2020 and then the price skyrocketed. I am waiting to buy more in the future.
When I was updating my spreadsheet, I noticed that this company has changed their reporting currency from CDN$ to US$. The other thing is that the stock is traded so seldom on the US market that it is difficult to get probable US$ stock prices. They vary, sometimes by a lot, from CDN$ prices. They also have an Adjusted Earnings Per Share.
If you had invested in this company in December 2011, $1001.63 you would have bought 287 shares at $3.49 per share. In December 2021, after 10 years you would have received $703.15 in dividends. The stock would be worth $12,550.51. Your total return would have been $13,253.66.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $3.49 | $1,001.63 | 287 | 10 | $703.15 | $12,550.51 | $13,253.66 |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.45%. The 5, 10 and historical dividend yields are also low at 1.90%, 1.72% and 1.92%. The dividends have been increasing at a moderate rate (8% to 14%). The dividends were increased at the rate of 12% per year over the past 5 years. The last dividend increase occurred in 2022 and it was for 20%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 6.6% with 5 year coverage at 13%. The DPR for Cash Flow per Share for 2022 is 3.9% with 5 year coverage at 6.8%. The DPR for Free Cash Flow for 2021 is negative. The 5 year coverage at 34%.
Debt Ratios are going high quickly. The Long Term Debt/Market Cap Ratio went from 0.00 to 0.34 in 2021. The long term debt went up again by 30% in 2022 and now the ratio is 0.44. The ratio is good, but they are taking on a lot of debt. For Intangibles and Goodwill, the Ratio to the market cap in 2020 was 0.19 and now is 0.32 because of an increase in these items by 230% in 2021. These items increased another 80% in 2022 and now the ratio is 0.57. It not so much that the ratios are bad, but that there is such an increase in one year.
The Liquidity Ratio for 2021 is 2.29. The Debt Ratio for 2021 is 1.59. These are both good ratios as any ratio at 1.50 or better are good. The Leverage and Debt/Equity Ratio for 2021 are fine at 2.69 and 1.69. However, the current ones are higher at 3.37 and 2.37. In 2020 these ratios were good at 1.92 and 0.92. I prefer these ratios to be under 3.00 and 2.00, respectively.
The Total Return per year is shown below for years of 5 to 17 to the end of 2021 in CDN$. 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 | 11.95% | 20.85% | 19.59% | 1.26% |
| 2011 | 10 | 17.46% | 30.98% | 28.76% | 2.22% |
| 2006 | 15 | -5.40% | 18.07% | 15.24% | 2.83% |
| 2004 | 17 | -3.47% | 10.23% | 7.98% | 2.25% |
The Total Return per year is shown below for years of 5 to 17 to the end of 2021 in US$. 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 | 13.24% | 22.23% | 20.97% | 1.27% |
| 2011 | 10 | 14.90% | 28.82% | 26.75% | 2.07% |
| 2006 | 15 | -5.94% | 17.51% | 14.52% | 2.99% |
| 2004 | 17 | -3.76% | 10.14% | 7.75% | 2.39% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 6.85, 10.34 and 14.15. The corresponding 10 year ratios are 8.86, 11.24 and 14.68. The corresponding historical ratios are 7.69, 10.47 and 14.09. The current P/E Ratio is 4.67 based on a stock price of $33.04 and EPS estimate for 2022 of $7.07. The current ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$.
I get a Graham Price of $62.25. The 10 year low, median, and high median Price/Graham Price Ratios are 0.57, 0.74 and 1.06. The current ratio is 0.53 based on a stock price of $33.04. The current ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.48. The current P/B Ratio is 1.36 based on a stock price of $33.04, Book Value of $580M and a Book Value per Share of $24.36. The current ratio is 9% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in CDN$.
I cannot do a Price/Cash Flow per Share Ratio because the Cash Flow is negative. This is not a good thing. Also, the Free Cash Flow for 2021 is also negative. It is expected to be positive again in 2022. The Cash Flow without Working Capital has been positive and this is good.
I get an historical median dividend yield of 1.92. The current dividend yield is 1.45% based on a stock price of $33.04 and dividends of $0.48. The current dividend yield is 24% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a 10 year median dividend yield of 1.72. The current dividend yield is 1.45% based on a stock price of $33.04 and dividends of $0.48. The current dividend yield is 15% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 0.36. The current P/S Ratio is 0.25 based on a stock price of $33.04, Revenue estimate for 2022 of $3,188M and Revenue per Share of $133.85. The current ratio is 31% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$.
Results of stock price testing is that the stock price could be reasonable, but also could be expensive. In this case, the P/S Ratio test is saying the stock price is cheap, but the dividend tests are saying above the median to expensive. I like the P/S Ratio test to confirm the dividend yield tests, but it does not. I do like the dividend yield tests the best, especially when they say a stock is cheap or reasonable. However, the other tests do say the stock price is cheap to reasonable.
When I look at analysts’ recommendations, I find Strong Buy (3) and Buy (4). The consensus is a Strong Buy. The 12 months stock price consensus is $66.36. This implies a total return of 102.30% with 100.85% from capital gains and 1.45% from dividends based on a stock price of $33.04.
When I looked at analysts’ recommendations last year, I found Strong Buy (3), Buy (2). The consensus was a Buy. The 12 months stock price consensus is $44.40. This implies a total return of 39.56% with 38.32% from capital gains and 1.25% from dividends based on a stock price of 32.10. What happened was a stock price of $33.04 and a total return of $4.18% with 2.93% from capital gains and 1.25% from dividends. In the past year the stock price certainly has gone up over $44.40, but as with all stocks it has been falling lately.
It is not well followed on Stock Chase as the last entry was in 2020. Stock Chase gives this company 1 star out of 5. Robin Brown Motley Fool says this is a high growth stock selling cheap. Christopher Liew Motley Fool says that you should have this growth stock on your buy list. The company reports their fourth quarter results on Newswire. The company announces the results for the first quarter of 2022 on Newswire.
A recent Simply Wall Street Report on Yahoo Finance talk about this company. Simply Wall Streets says there are four risks to this stock of earnings are forecast to decline by an average of 2.9% per year for the next 3 years; debt is not well covered by operating cash flow; high level of non-cash earnings and shareholders have been diluted in the past year. According to the estimates I got, the earnings will increase over the next two years. Outstanding shares have increase by 12% since last year.
Hardwoods Distribution Inc is a Canadian company that operates a network of distribution centers in Canada and the United States, engaged in the wholesale distribution of hardwood lumber and related sheet goods and specialty products. Geographically the company generates the majority of revenue from the United States region. Its web site is here Hardwoods Distribution Inc .
The last stock I wrote about was about was IA Financial Corp (TSX-IAG, OTC-IDLLF) ... learn more. The next stock I will write about will be Ensign Energy Services (TSX-ESI, OTC-ESVIF) ... learn more on Wednesday, June 8, 2022 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks June 2022 .... learn more on Tuesday 7, 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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