Is it a good company at a reasonable price? This company has done quite well recently. More like it was doing in the 1990’s when I bought it. There is a lot of mixed feelings about this stock with some analysts feeling that it will not do as well in the future has it has in the near past. I think that my testing is showing that it is not cheap by any means at present. Whether the stock price is reasonable is hard to judge. It might be. However, it may also be rather expensive at this time. I now have Metro and I am happy with this company and would not buy Loblaws because I have Metro. One grocery store stock is enough.
I do not own this stock of Loblaw Companies Ltd (TSX-L, OTC-LBLCF). I owned it from 1996 to 2007. It was originally a great stock. I sold it in 2007 because it was having problems with its tech upgrade to its supply system and it did not seem that it would be fixed anytime soon. This system must still have problems as I notice that if an item is out in a Loblaws store, it takes awhile for it to be in stock again. On the other hand, I have notice that with Metro, if they are out of stock on an item, it is back in stock the next day.
When I was updating my spreadsheet, I noticed that after having trouble with their supply chain system in 2005, it took this company until 2021 before it again reached the stock price of 2005. Dividend recovered earlier as they started to increase again in 2013, 6 years after 2005. This past problem is still showing up in the long term returns for 20 and 25 years. See Chart on Total Return below.
If you had invested in this company in December 2012, for $1,006.32 you would have bought 24 shares at $41.93 per share. In December 2022, after 10 years you would have received $279.96 in dividends. The stock would be worth $2,873.28. Your total return would have been $3,153.24. This is a total return would be 12.80% per year with a capital gain of 11.06% and dividends of 1.74%.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $41.93 | $1,006.32 | 24 | 10 | $279.96 | $2,873.28 | $3,153.24 |
The current dividend yield is low with dividend growth low. The current dividend yield is low (below 2%) at 1.52%. The 5, 10 and historical dividend yields are also low at 1.82%, 1.76% and 1.47%. The dividend growth is low (below 8% per year) at 6.3% per year over the past 5 years. The last dividend increase was in 2023 and it was for 10%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2022 for Earnings per Share (EPS) is 27% with 5 year coverage at 36%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 23% with 5 year coverage at 27%. The DPR for 2022 for Cash Flow per Share (CFPS) is 8% with 5 year coverage at 9%. The DPR for 2022 for Free Cash Flow (FCF) is 18% with 5 year coverage at 18%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 27.48% | 35.87% |
| AEPS | 23.17% | 26.81% |
| CFPS | 8.22% | 8.92% |
| FCF | 18.22% | 17.84% |
Some Debt Ratios are fine, but debt is high. The Long Term Debt/Market Cap Ratio for 2022 is low and good at 0.18. The Liquidity Ratio is low at 1.32, but if you add in Cash Flow after dividends it is good at 1.75. The Debt Ratio is fine at 1.43. The Leverage and Debt/Equity Ratios are too high at 3.33 and 2.33. I prefer them to be below 3.00 and below 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.18 | 0.18 |
| Intang/GW | $0.28 | $0.28 |
| Liquidity | 1.32 | 1.36 |
| Liq. + CF | 1.75 | 1.85 |
| Debt Ratio | 1.43 | 1.45 |
| Leverage | 3.33 | 3.24 |
| D/E Ratio | 2.33 | 2.24 |
The Total Return per year is shown below for years of 5 to 34 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 | 8.11% | 13.46% | 11.91% | 1.55% |
| 2012 | 10 | 6.40% | 12.80% | 11.06% | 1.74% |
| 2007 | 15 | 4.30% | 10.50% | 8.75% | 1.74% |
| 2002 | 20 | 6.14% | 5.29% | 4.06% | 1.23% |
| 1997 | 25 | 9.59% | 7.77% | 6.30% | 1.47% |
| 1992 | 30 | 10.46% | 12.46% | 10.20% | 2.27% |
| 1988 | 34 | 9.76% | 14.43% | 11.67% | 2.76% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 19.43, 22.04 and 24.65. The corresponding 10 year ratios are 20.18, 22.78 and 25.39. The corresponding historical ratios are 17.03, 19.41 and 21.83. The current P/E Ratio is 18.57 based on a stock price of $117.54 and EPS estimate for 2023 of $6.33. 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.
I also have Adjusted Earnings per Share data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 13.56, 15.98 and 18.39. The corresponding 10 year ratios are 14.48, 16.22 and 18.40. The current P/AEPS Ratio is 15.45 based on a stock price of $117.54 and AEPS estimate for 2023 of $7.61. The current ratio is between the low and median ratios 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 $77.38. The 10-year low, median, and high median Price/Graham Price Ratios are 1.12, 1.26 and 1.39. The current P/GP Ratio is 1.52 based on a stock price of $117.54. The current ratio is above the high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Book Value per Share Ratio of 2.16. The current P/B Ratio is 3.36 based on a stock price of $117.54 and Book Value of 411,332M and Book Value per share of $34.97. The current ratio is 56% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 8.47. The current P/CF Ratio is 6.68 based on Cash Flow per Share estimate for 2023 of $17.60, Cash Flow of $5,704 and a stock price of $117.54. The current ratio is 21% 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 1.47%. The current dividend yield is 1.52% based on dividends of $1.56 and a stock price of $117.56. The current dividend yield is 3% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 1.76%. The current dividend yield is 1.52% based on dividends of $1.56 and a stock price of $117.56. The current dividend yield is 14% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 0.51. The current P/S Ratio is 0.64 based on a stock price of $117.54, Revenue estimate for 2023 of $59,294M, and Revenue per Share of $182.97. The current ratio is 25% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably on the expensive side, but could still be within a reasonable range. The dividend yield tests show the stock price is reasonable and the 10 year dividend yield test says above the median. The P/S Ratio test does not confirm this but says the stock price is expensive. Other tests vary from cheap to expensive.
When I look at analysts’ recommendations, I find Strong buy (3), Buy (3), Hold (3) and Underperform (1). As in my testing, analysts are split on their recommendations. The consensus would be a Buy. The 12 month stock price consensus is $138.00. This implies a total return of 18.92% with 17.41% from capital gains and 1.52% from dividends.
A couple of analysts on Stock Chase feel that the recent growth will not continue. Stock Chase gives this company 5 stars out of 5. It is on the Money Sense list and the Aristocrat list. Joey Frenette on Motley Fool thinks this stock might be a shelter from inflation. Amy Legate-WolfeMotley Fool thinks this stock will return to be a stable one and a good stock to own. The company put out a press release on Newswire about its results for 2022. The company put out a press release on Newswire about its results for the first quarter of 2023.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street has one risk warning of has a high level of debt. Simply Wall Street gives this stock 2 and one half stars out of 5.
Loblaw is one of Canada's largest grocery, pharmacy, and general merchandise retailers, operating the most expansive store footprint in Ontario and maintaining sizable presences in provinces like Quebec and British Columbia. The firm's controlling shareholder is George Weston, which owns 52.6% of the equity. Its web site is here Loblaw Companies Ltd.
The last stock I wrote about was about was Ballard Power Systems Inc (TSX-BLDP, NASDAQ-BLDP) ... learn more. The next stock I will write about will be Stingray Digital Group Inc (TSX-RAY.A, OTC-NONE) ... learn more on Monday, July 31, 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 site for an index to these blog entries and for stocks followed. 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment