Is it a good company at a reasonable price? Certainly, analysts seem to expect this stock to do better in the future. After stock declines for the 3 years prior, this stock is up 18.8% this year. The problem with dividends is that the company used to be an income trust and all companies that used to be income trusts are having a hard time getting the dividends right for a corporation. I suspect this will turn out to be a solid stock in the future and will produce a reasonable return and reasonable dividends. The stock price is reasonable and may be cheap.
I do not own this stock of K-Bro Linen Inc (TSX-KBL, OTC-KBRLF). People were talking about this stock at the 2009 Toronto Money Show. This was one income trust being touted as currently a good buy with very good yield. It was also recommended by Aaron Dunn who is the Senior Equity Analyst for Keystone Publishing Corp, a publisher of Canadian investment newsletters.
When I was updating my spreadsheet, I noticed that they Revenue is up by 23.5%, but their expenses are up 28%, and especially the cost of sales up by 32.5%. EPS is down by 55.6% from $0.81 to $0.36. EPS seems to be quite volatile. Analyst do expect the EPS to improve this year and the next two years. Analyst expect EPS to go up 340% in 2023 to $1.58 and 27% in 2024 to 2.01. The EPS for the last 12 month to the end of the second quarter of 2023, see EPS up by 142% to $0.87.
If you had invested in this company in December 2012, for $1,010.10 you would have bought 35 shares at $28.86 per share. In December 2022, after 10 years you would have received $419.27 in dividends. The stock would be worth $955.50. Your total return would have been $1,374.77. This is a total return would be a gain of 3.69% per year with 0.55% from capital loss and 4.25% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $28.86 | $1,010.10 | 35 | 10 | $419.27 | $955.50 | $1,374.77 |
The current dividend yield is moderate with dividend growth non-existent. The current dividend yield is moderate (2% to 4% range) at 3.70%. The 5, 10 year and historical median dividend yields are also moderate at 3.27%, 3.11% and 3.62%. The dividends have been flat since 2014. The problem is that this company used to be an income trust. Income Trust companies can have quite high dividend compared to corporations. They might have been better off if they had cut the dividend and then started to grow it again.
The Dividend Payout Ratios (DPR) will probably be fine but there is no sign of a dividend increase. The DPR for 2022 for Earnings per Share (EPS) is very high at 333% with still high for the 5 year coverage at 191% Analysts believe it will moderate to 76% in 2023 and then to 60% in 2024. The DPR for 2022 for Distributable Cash (DC) is 66% with 5 year coverage at 49%. The DPR for 2022 for Cash Flow per Share (CFPS) is 41% with 5 year coverage at 36%. The DPR for 2022 for Free Cash Flow (FCF) is 88% with 5 year coverage at 76%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 333.33% | 190.60% |
| DC | 66.30% | 49.49% |
| CFPS | 40.72% | 35.51% |
| FCF | 87.54% | 75.52% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2022 is good and low at 0.15. The Liquidity Ratio for 2022 is good at 1.86. The Debt Ratio for 2022 is good at 2.18. The Leverage and Debt/Equity Ratios for 2022 are good at 1.85 and 0.85. The current ratios are close to the 2022 year end ones.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.15 | 0.18 |
| Intang/GW | 0.14 | 0.14 |
| Liquidity | 1.86 | 1.93 |
| Liq. + CF | 2.16 | 2.50 |
| Debt Ratio | 2.18 | 2.03 |
| Leverage | 1.85 | 1.97 |
| D/E Ratio | 0.85 | 0.97 |
The Total Return per year is shown below for years of 5 to 18 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% | -4.52% | -7.95% | 3.43% |
| 2012 | 10 | 0.43% | 3.69% | -0.55% | 4.25% |
| 2007 | 15 | 0.58% | 11.42% | 4.81% | 6.61% |
| 2004 | 18 | 0.90% | 12.03% | 4.83% | 7.20% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 54.44, 62.36 and 70.27. The corresponding 10 year ratios are 36.48, 41.52 and 42.73. The corresponding historical ratios are 21.54, 23.99 and 27.42. The problem is that when earnings get really low on good companies, the stock will only fall so far. This sometimes how you get really high P/E Ratios and these ratios are really high. The current P/E Ratio 20.53 based on a stock price of $32.44 and EPS estimate for 2023 of $1.58. The current P/E Ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. Still a ratio of 20.53 is relatively high for a consumer stock.
I also have Distributable Cash (DC) Data. The 5-year low, median, and high median Price/ Distributable Cash per Share Ratios are 13.13, 15.54 and 17.51. The corresponding 10 year ratios are 13.27, 15.55 and 17.74. The current P/DC Ratio is 10.57 based on a stock price of $32.44 and DC estimate for 2023 of $3.07. The current ratio is below the low ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $24.08. The 10-year low, median, and high median Price/Graham Price Ratios are 1.59, 2.28 and 2.59. The current P/GP Ratio is 1.35 based on a stock price of $32.44. 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 2.23. The current P/B Ratio is 1.99 based on a stock price of $32.44, Book Value per Share of $16.31 and a Book Value of $176M. 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 of $16.60. This gives a Book Value of $179M and a P/B Ratio of 1.95 based on a stock price of $32.44. This ratio of 1.95 is 12% below the 10 year median ratio of 2.23. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 13.79. The current P/CF Ratio is 8.56 based on Cash Flow per Share estimate for 2023 of $3.79, Cash Flow of $41M and a stock price of $32.44. The current ratio is 38% 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 3.62%. The current dividend yield is 3.70% based on a stock price of $32.44 and Dividends of $1.20. This dividend yield is 2% 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 3.11%. The current dividend yield is 3.70% based on a stock price of $32.44 and Dividends of $1.20. This dividend yield is 19% 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 1.91. The current P/S Ratio is 1.13 based on a stock price of $32.44, Revenue estimate for 2023 of $310M, and Revenue per Share of $28.78. The current P/S Ratio is 41% 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 certainly reasonable and probably cheap. There is a problem with the dividend yield tests because dividends are flat and this test works best with dividend grower. However, the P/S Ratio test says the stock price is relatively cheap. Other tests also say the stock price is relatively cheap.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4) and Hold (1). The Consensus would be a Buy. The 12 month stock price consensus is $42.46, with a high of $48.00 and a low of $36.00. With the consensus price of $42.46, this implies a total return of 34.59% with 30.89% from capital gains and 3.70% from dividends.
There were two analysts’ recommendations on Stock Chase of this stock being a buy. They say that in 2022 the company had problems with gas prices in Europe. Stock Chase gives this stock 5 stars out of 5. Daniel Da Costa on Motley Fool thinks this is bargain basement stock. Christopher Liew on Motley Fool says this stock is soaring in 2023 and has an attractive dividend. The company put out a press release on Newswire about their 2022 year end results. The company put out a press release on Newswire amount their second quarter of 2023 results.
Simply Wall Street via Yahoo Finance seems rather negative on this stock. However, they do give the stock 4 stars out of 5. Simply Wall Street had one warning on this stock of dividend of 3.62% is not well covered by earnings or cash flows. Simply Wall Street is generally talking about FCF.
K-Bro Linen Inc is a healthcare and hospitality laundry and linen processor in Canada. It operates through two divisions, which are the Canadian division and the United Kingdom division. Its web site is here K-Bro Linen Inc.
The last stock I wrote about was about was Granite REIT (TSX-GRT.UN, NYSE-GRP.U) ... learn more learn more. The next stock I will write about will be BRP Inc (TSX-DOO, OTC-DOOO) ... learn more on Wednesday, September 27, 2023 around 5 pm. Tomorrow on my other blog I will write about Yield and Cost Covered.... learn more on Tuesday, September 26, 2023 around 5 pm.
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