Is it a good company at a reasonable price? This company is starting to grow again. It is risky because of the volatility of its earnings and the stock price. A plus is that they have good debt ratios and they are paying out little in the way of dividends. Another plus is that the stock seems to be relatively cheap at present. I do not buy stocks when their dividends are lower than 1%. Currently the dividend yield is 1.36%.
I do not own this stock of Linamar Corporation (TSX-LNR, OTC-LIMAF). I looked at this stock back in 2000 and it was not a stock I thought fit my investment philosophy. In 2008 I read an article that recommended this company as a dividend stock with good value. This stock used to be on the Investment reporter portfolio stock list as an average risk stock. However, it has now been taken off this list. It is on the Money Saving list of Top 100 Canadian Dividend stocks.
When I was updating my spreadsheet, I noticed Revenue, Earnings and Net Income hit a low point in 2020 (2 years ago) and have been growing ever since. The 10 year growth is good, but the 5 year growth not so much. Analysts think that Cash Flow Growth will begin in 2023.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 2 | Revenue Growth | 36.15% | 16.68% |
| 2 | AEPS Growth | 30.15% | 14.08% |
| 2 | Net Income Growth | 52.68% | 23.57% |
| 2 | Cash Flow Growth | -67.36% | -42.87% |
| 2 | Dividend Growth | 122.22% | 49.07% |
| 2 | Stock Price Growth | -9.08% | -4.65% |
| 5 | Revenue Growth | 20.95% | 3.88% |
| 5 | AEPS Growth | -25.03% | -5.60% |
| 5 | Net Income Growth | -22.42% | -4.95% |
| 5 | Cash Flow Growth | -40.44% | -9.84% |
| 5 | Dividend Growth | 66.67% | 10.76% |
| 5 | Stock Price Growth | -16.27% | -3.49% |
| 10 | Revenue Growth | 145.75% | 9.41% |
| 10 | AEPS Growth | 178.22% | 10.77% |
| 10 | Net Income Growth | 191.71% | 11.30% |
| 10 | Cash Flow Growth | 32.70% | 2.87% |
| 10 | Dividend Growth | 150.00% | 9.60% |
| 10 | Stock Price Growth | 164.22% | 10.20% |
If you had invested in this company in December 2012, for $1,020.80 you would have bought 44 shares at $23.20 per share. In December 2022, after 10 years you would have received $211.20 in dividends. The stock would be worth $2,697.20. Your total return would have been $2,908.40. This is a total return would be a loss of 11.51% per year with 10.20% from capital gain and 1.31% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $23.20 | $1,020.80 | 44 | 10 | $211.20 | $2,697.20 | $2,908.40 |
The current dividend yield is Low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.36%. The 5, 10 and historical dividend yields are also low at 0.88%, 0.78% and 1.19%. The dividend growth is moderate (8% to 14% ranges) at 10.8% per year for 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 12% with 5 year coverage at 9%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 13% with 5 year coverage at 9%. The DPR for 2022 for Cash Flow per Share (CFPS) is 6% with 5 year coverage at 4%. The DPR for 2022 for Free Cash Flow (FCF) is 99% with 5 year coverage at 7%. The problem with FCF no site I looked at agree on what it was.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 11.99% | 8.52% |
| AEPS | 12.78% | 8.58% |
| CFPS | 5.69% | 4.11% |
| FCF | 98.90% | 6.78% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2022 is 0.34 with current ratio at 0.14. These are good. The Liquidity Ratio for 2022 is 1.71 and that is good. The current is low at 1.32, but add in Cash Flow after dividends and it is good at 1.58. The Debt Ratio for 2022 is good at 2.28 and the current one is good at 2.34. The Leverage and Debt/Equity Ratios for 2022 are good at 1.78 and 0.78 and good currently at 1.75 and 0.75.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.34 | 0.14 |
| Intang/GW | 0.49 | 0.45 |
| Liquidity | 1.71 | 1.32 |
| Liq. + CF | 1.91 | 1.58 |
| Debt Ratio | 2.28 | 2.34 |
| Leverage | 1.78 | 1.75 |
| D/E Ratio | 0.78 | 0.75 |
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 | 10.76% | -2.66% | -3.49% | 0.83% |
| 2012 | 10 | 9.60% | 11.51% | 10.20% | 1.31% |
| 2007 | 15 | 8.36% | 8.78% | 7.67% | 1.11% |
| 2002 | 20 | 8.38% | 11.63% | 10.14% | 1.49% |
| 1997 | 25 | 7.43% | 3.94% | 3.23% | 0.70% |
| 1992 | 30 | 8.28% | 11.99% | 10.31% | 1.69% |
| 1988 | 34 | 15.24% | 13.00% | 2.24% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 5.85, 9.58 and 12.17. The corresponding 10 year ratios are 6.55, 9.54 and 12.36. The corresponding historical ratios are 8.31, 11.59 and 15.18. The current P/E Ratio is 7.70 based on a stock price of $64.85 and EPS estimate for 2023 of $8.42. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 5.19, 9.93 and 12.96. The corresponding 10 year ratios are 6.53, 9.72 and 12.76. The current P/AEPS Ratio is 7.55 based on a stock price of $64.85 and AEPS estimate for 2023 of $8.59. 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 $120.23. The 10-year low, median, and high median Price/Graham Price Ratios are 0.53, 0.71 and 0.86. The current P/GP Ratio is 0.54 based on a stock price of $64.85. 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 10-year median Price/Book Value per Share Ratio of 1.26. The current P/B Ratio is 0.87 based on a Book Value of $4,602M, Book Value per Share of $78.20 and a stock price of $64.85. The current ratio is 31% 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 5.59. The current P/CF Ratio is 4.24 based on a stock price of $64.85, Cash Flow per Share estimate for 2023 of $15.30 and Cash Flow of $727M. The current ratio is 39% 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 1.19%. The current dividend yield is 1.36% based on a stock price of $64.85 and Dividends of $0.88. The current dividend yield is 14% 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 0.78%. The current dividend yield is 1.36% based on a stock price of $64.85 and Dividends of $0.88. The current dividend yield is 75% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 0.62. The current P/S Ratio is 0.42 based on Revenue estimate for 2023 of $9,523M, Revenue per Share of $154.77 and a stock price of $64.85. The current ratio is 32% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The 10 year dividend yield test says this and it is confirmed by the P/S Ratio test. The historical median dividend yield test says the stock price is reasonable. The other tests say the stock price is either reasonable or cheap.
When I look at analysts’ recommendations, I find Strong Buy (2), and Buy (4). The consensus would be a Strong Buy. The 12 month stock price consensus is $89.33 with a high of $96.00 and a low of $84.00. A consensus price of $89.33 implies a total return of 39.11% with 37.75% from capital gains and 1.36% from dividends.
The recommendations on Stock Chase is a mixed bag with the latest a buy, but the prior one a Sell. Stock Chase gives this company 5 stars out of 5. It is on the Money Sense dividend list I follow. Aditya Raghunath on Motley Fool thinks this stock is current a buy for long-term shareholders. Kay Ng on Motley Fool compared Magna and Linamar and thinks Linamar is cheap, but Magna is a lower risk. The company put out a Press Release on Newswire about their 2022 year-end results. The company put a press release on Newswire about their second quarter of 2023.
Simply Wall Street on Yahoo Finance is worried about this company because the ROCE is declining. They have 1 warning of earnings have declined by 7% per year over past 5 years.
Linamar Corporation is an advanced manufacturing company. The Company is made up of two operating segments – the Industrial segment and the Mobility segment, both global leaders in manufacturing solutions and world-class developers of highly engineered products. Its web site is here Linamar Corporation.
The last stock I wrote about was about was BRP Inc (TSX-DOO, OTC-DOOO) ... learn more. The next stock I will write about will be Teck Resources Ltd (TSX-TECK.B, NYSE-TECK) ... learn more on Monday, October 2, 2023 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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