Is it a good company at a reasonable price? I have not made much money on this stock but I still plan to hold on to what I have at present. This is a rather high risk stock, but I bought it for diversification. Most of the money I have earned comes from dividends. The testing is pointing to a reasonable price but above the median. However, I would be cautious and certainly feel more positive if the company raised the dividends being paid.
I own this stock of Russel Metals Inc (TSX-RUS, OTC-RUSMF). In 2007 I needed to reduce my holdings of Loblaws and buy something to help replace the dividends I had been earning. With Russel Metals, both Mike and TD recommended buying at that time.
When I was updating my spreadsheet, I noticed that I have made money on this stock that I bought for diversification, but I have not made much. To the end of January 2023, I have a Total return of 6.61% with 1.61% from capital gains and 5.00% from dividends. To January 2022, I had a Total Return of 6.56% with 1.70% from capital gains and 4.86% from dividends. The dividends are fine, but the capital gain is low. This is a cyclical stock. Dividends are fine, but capital gain is low. I would like it to be in the 4% to 5% range.
The company did better in 2022 than expected. Analysts expected the Revenue to decline slightly, but it went up 20%. They expected EPS to decline by 54%, but it only declined by 14%. Earnings for this company also seem cyclical.
The following table shows growth rate for the 5 year and 10 years. It is interesting that the lowest growth is with dividends and stock price. Dividend growth is usually based on how the company feels about the future and stock price growth is usually based on what analysts see as the future. Revenue also is lower in growth than EPS, Net Income and Cash Flow.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 53.84% | 9.00% |
| 5 | EPS Growth | 195.50% | 24.20% |
| 5 | Net Income Growth | 200.40% | 24.61% |
| 5 | Cash Flow Growth | 626.17% | 48.66% |
| 5 | Dividend Growth | 0.00% | 0.00% |
| 5 | Stock Price Growth | -1.36% | -0.27% |
| 10 | Revenue Growth | 69.01% | 5.39% |
| 10 | EPS Growth | 260.37% | 13.68% |
| 10 | Net Income Growth | 276.42% | 14.17% |
| 10 | Cash Flow Growth | 373.55% | 16.83% |
| 10 | Dividend Growth | 12.59% | 1.19% |
| 10 | Stock Price Growth | 4.39% | 0.43% |
If you had invested in this company in December 2012, for $1,020.09 you would have bought 37 shares at $27.57 per share. In December 2022, after 10 years you would have received $555.74 in dividends. The stock would be worth $1064.86. Your total return would have been $1,620.60.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $27.57 | $1,020.09 | 37 | 10 | $555.74 | $1,064.86 | $1,620.60 |
The dividend yields are moderate with dividend growth non-existent. The current dividend yield is moderate (2% to 4% range) at 4.28%. The 5, 10 and historical dividend yields are good (5% to 6% ranges) at 5.87%, 5.75% and 5.09%. The last dividend increase was 8 years ago in 2015 and it was a 4.1% raise. Analysts do not see any increase any time soon, i.e., the next 3 years.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2022 is 25.7% with 5 year coverage at 42%. The DPRs for EPS was over 100% between 2015 and 2020. The DPR for Cash Flow per Share (CFPS) for 2022 is 17% with 5 year coverage at 24%. The DPR for Free Cash Flow (FCF) by analysts for 2022 is 30% with 5 year coverage at 39%. The company has quite different values for FCF with DPR for their FCF for 2022 at 20% and 5 year coverage at 31%.
Debt Ratios are good. The Long Term Debt/Market Cap for 2022 is good and low at 0.17. The Liquidity Ratio for 2022 is high and good at 3.73. The Debt Ratio for 2022 is high and good at 2.65. The Leverage and Debt/Equity Ratios are low and good at 1.61 and 0.61. Debt Ratio has historically been generally good for this company.
The Total Return per year is shown below for years of 5 to 32 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 0.00% | 4.97% | -0.27% | 5.24% |
| 2012 | 10 | 1.19% | 5.77% | 0.43% | 5.34% |
| 2007 | 15 | -0.93% | 6.07% | 0.82% | 5.25% |
| 2002 | 20 | 2.88% | 22.87% | 9.04% | 13.83% |
| 1997 | 25 | 4.40% | 15.96% | 7.90% | 8.06% |
| 1992 | 30 | 9.50% | 11.93% | 6.71% | 5.22% |
| 1990 | 32 | 4.70% | 9.11% | 4.93% | 4.18% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 5.64, 7.35 and 9.06. The corresponding 10 year ratios are 12.49, 14.72 and 16.96. The corresponding historical ratios are 10.22, 9.69 and 14.38. The current P/E Ratio is 9.61 based on a stock price of $35.55 and EPS estimate for 2023 of $3.70. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. As you can see from my first chart, EPS has gone up a lot higher than the Stock Price over the past 5 and 10 years and this is why the 5 year ratios are so low.
I get a Graham Price of $45.72. The 10-year low, median, and high median Price/Graham Price Ratios are 0.88, 1.08 and 1.33. The current P/GP Ratio is 0.78 based on a stock price of $35.55. This ratio is below the low ratio of the 10 year median ratios. 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 1.59. The current ratio is 1.42 based on a Book Value of $1559M, Book Value per Share of $25.10 and a stock price of $35.55. The current ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have an estimate for the Book Value per Share for 2023 and it is 27.50. This implies a Book Value of $1,708M and a P/B Ratio 1.29. This ratio is 18.7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. It is close to cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.80. The current P/CF Ratio is 10.43 based on Cash Flow per Share estimate for 2023 of $3.41 and a stock price of $35.50. The current ratio is 80% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. Analysts are projecting the Cash Flow per Share to fall 61% in 2023. You must wonder about this.
I get an historical median dividend yield of 5.09%. The current dividend yield is 4.28% based on dividends of $1.52 and a stock price of $35.55. The current yield is 16% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. Dividends have been flat from 2015.
I get a 10 year median dividend yield of 5.75%. The current dividend yield is 4.28% based on dividends of $1.52 and a stock price of $35.55. The current yield is 25.6% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. Dividends have been flat from 2015.
The 10-year median Price/Sales (Revenue) Ratio is 0.46. The current P/S Ratio is 0.50 based on Revenue estimate for 2023 of $4,413M, Revenue per Share of $71.05 and a stock price of $35.55. The current ratio is 9% 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 maybe reasonable. The price maybe reasonable, judging by the testing for the historical median dividend yield and the P/S Ratio testing. But I am hesitant because analysts expect a worse financial year in 2023m and the company is cautious as it is leaving the dividend flat. Some of my testing is saying the stock price is cheap and others that it is expensive.
The reason for the P/S Ratio test showing a reasonable but above the median stock price is that analysts expect Revenue to go down in 2023. They expected the Revenue go down by 4% in 2022, but it went up 20%. The testing for P/CF came in as expensive because analysts expect the Cash Flow per Share to drop in 2023 by 61%. They expected a drop also in 2022 of $30%, but CFPS went up 20%. But the company also seems negative about the future because they are not increasing the dividends.
If you look at Beginning ratios for P/E Ratios, P/S Ratios and yield compared to Total Returns for the 5, 10, 15, 20, 25, 30 and 32 year periods, I find the following. For example, total return over the past 15 years is 6.07% per year, the starting P/E Ratio (the one from 15 years ago) was 14.46, starting P/S Ratio was 0.63 and starting yield was 3.92.
For the best returns on this company, the P/E Ratios of year 20 and 25 the P/E was lower than today. For best returns using P/S Ratios, was years 20 to 32 and all these P/S Ratios are lower than today. The yield is a bit more mixed as dividends were started some 30 years ago, then stopped and restarted 22 years ago. The current yield is only lower than it was 32 years ago.
From this history, the current stock price would appear to be on the expensive side. This is especially so for the P/S Ratio testing.
| Year | Cap Gains | Tot Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|---|
| 5 | -0.27% | 4.97% | 14.59 | 0.55 | 5.21% |
| 10 | 0.43% | 5.77% | 16.81 | 0.55 | 4.90% |
| 15 | 0.82% | 6.07% | 14.46 | 0.63 | 6.88% |
| 20 | 9.04% | 22.87% | 7.50 | 0.14 | 3.92% |
| 25 | 7.90% | 15.96% | 9.56 | 0.13 | 0.00% |
| 30 | 6.71% | 11.93% | -16.40 | 0.15 | 2.44% |
| 32 | 4.93% | 9.11% | 77.13 | 0.14 | 5.67% |
| current | 9.61 | 0.50 | 4.28% |
When I look at analysts’ recommendations, I find Buy (2) and Hold (3). The consensus would be a Buy. The 12 months stock price consensus is $39.00. This implies a Total Return of 13.98% with 9.70% from capital gains and 4.28% from dividends based on a current stock price of $35.55.
Mostly analysts on Stock Chase like this stock, but there a sell rating last year. Stock Chase gives this stock 3 stars out of 5. It is on the Money Sense List with an A rating. Ambrose O'Callaghan on Motley Fool and has a positive view of this stock. Ambrose O'Callaghan on Motley Fool in November looked at 5 cheap stocks including this one. The company put out a press release on Newswire about their 2022 results. Simply Wall Street has a positive view of this stock in a report on Yahoo Finance. Simply Wall Street has one warning sign of significant insider selling over the past 3 months.
Russel Metals Inc is a Canada-based metal distribution company. The company conducts business primarily through three metals distribution segments: metals service centers; energy products; and steel distributors. The company generates all its revenue from the North American market. Its web site is here Russel Metals Inc.
The last stock I wrote about was about was Choice Properties REIT (TSX-CHP.UN, OTC-PPRQF) ... learn more. The next stock I will write about will be Atrium Mortgage Investment Corp (TSX-AI, OTC-AMIVF) ... learn more on Wednesday, March 1, 2023 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks for 2023 .... learn more on Tuesday, February 29, 2023 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.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment