Is it a good company at a reasonable price? I bought this small cap stock with my fooling around money. It is a small cap and therefore risky. I do not have much of this and I have no plan to sell the shares I hold.
I own this stock of Supremex Inc (TSX-SXP, OTC-SUMXF). I read about it in Money Sense article of 15 Stocks to help investors ride market swings by Michael Pe on Mar 4, 2018 . They were an envelope company, but are diversifying into packaging.
When I was updating my spreadsheet, I noticed by total return has gone down from last year when the stock was worth $6.15 with a total return of $26.65 with 18.34T from capital gains and 8.34% from Dividends. This year, at the end of March, the stock price is $4.04 and my total return is 11.66%, with 8.39% from capital gains and 3.27% from dividends. (A dividend is generally paid in March, but this year it did not come in until early April.)
If you had invested in this company in December 2013, for $1,001.88 you would have bought 484 shares at $2.07 per share. In December 2023, after 10 years you would have received $847.00 in dividends. The stock would be worth $2,066.68. Your total return would have been $2,913.68. This would be a total return of 14.42% per year with 7.51% from capital gain and 6.91% from dividends
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $2.07 | $1,001.88 | 484 | 10 | $847.00 | $2,066.68 | $2,913.68 |
The current dividend yield is moderate with dividend growth restarting after a dividend suspension. The current dividend is moderate (2% to 4% ranges) at 3.92%. The 5 and 10 year median dividend yields are also moderate at 3.09% and 3.66%. The historical median dividend yield is good (5% to 6% ranges) at 6.86%. This company used to be an income trust and these companies have generally high yields because they can. Dividends were suspended in 2021. They were started in 2022. The last dividend increase was in 2024 and it was for 14.3%.
The Dividend Payout Ratios (DPR) are currently good, but have varied a lot in the past. The DPR for 2023 for Earnings per Share (EPS) is good at 21% with 5 year coverage at 24%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 20% with 5 year coverage at 24%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 10% with 5 year coverage at 11%. The DPR for 2023 for Free Cash Flow (FCF) is good at 10% with 5 year coverage at 13%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 20.90% | 23.29% |
| AEPS | 19.72% | 33.59% |
| CFPS | 9.96% | 11.49% |
| FCF | 9.58% | 13.36% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.51 and currently at 0.53. The Liquidity Ratio for 2023 is good at 2.82. The Debt Ratio for 2023 is good at 2.04. The Leverage and Debt/Equity Ratios for 2023 are good at 1.96 and 0.96.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.51 | 0.53 |
| Intang/GW | 0.89 | 0.93 |
| Liquidity | 2.28 | 2.28 |
| Liq. + CF | 3.29 | 3.35 |
| Debt Ratio | 2.04 | 2.04 |
| Leverage | 1.96 | 1.96 |
| D/E Ratio | 0.96 | 0.96 |
The Total Return per year is shown below for years of 5 to 17 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | -11.65% | 16.47% | 11.75% | 4.72% |
| 2013 | 10 | 0.74% | 14.42% | 7.51% | 6.91% |
| 2008 | 15 | -13.10% | 8.00% | 2.01% | 6.00% |
| 2006 | 17 | -11.65% | 1.08% | -3.95% | 5.03% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 4.19, 6.72 and 9.25. The corresponding 10 year ratios are 4.99, 7.60 and 9.91. The corresponding historical ratios are 4.95, 7.10 and 9.47. The current P/E Ratio is 6.80 based on a stock price of $4.08 and EPS estimate for 2024 of $0.60. 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 2.89, 4.49 and 6.18. The corresponding 10 year ratios are 4.84, 7.51 and 9.80. The current P/AEPS Ratio is 6.80 based on a stock price of $4.08 and AEPS estimate of $0.60. The current ratio is between the low and median ratios of the 10 year ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $8.42. The 10-year low, median, and high median Price/Graham Price Ratios are 0.40, 0.63 and 0.86. The current ratio is 0.48 based on a stock price of $4.08. The current ratio is between the low and median ratios of the 10 year 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 1.13. The current ratio is 0.78 based on a stock price of $4.08, Book Value of $134.7M and Book Value per Share of $5.25. 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 4.25. The current P/CF Ratio is 2.22 based on Cash Flow per Share estimate for 2024 of $1.84, Cash Flow of $47.2M and a stock price of $4.08. The current ratio is 47% 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 6.86%. The current dividend yield is 3.92% based on dividends of $0.16 and a stock price of $4.08. The current dividend yield is 43% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 4.66%. The current dividend yield is 3.92% based on dividends of $0.16 and a stock price of $4.08. The current dividend yield is 16% below the 10 year 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 0.50. The current P/S Ratio is 0.37 based on Revenue estimate for 2024 of $284M, Revenue per Share of $11.08 and a stock price of $4.08. The current ratio is 26% 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 reasonable, but could be cheap. The problem with the dividend yield tests is that dividends were cut recently. Dividend cuts are never a good sign, but the company has restored the dividends and are currently raising them. The 10 year dividend yield test is saying that the stock price is relatively reasonable. The P/S Ratio test is showing the stock price as cheap. However, most of the testing is showing stock price as reasonable.
When I look at analysts’ recommendations, I find Strong Buy (2) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $5.33 with a High of $6.00 and low of $5.00. The consensus price of $5.33 implies a total return of 34.56% with 30.64% from capital gains and 3.72% from dividends.
There is only one entry on Stock Chase for 2024 and the recommendation is a sell because of declining Revenue and Earnings. This is from i5 Research. Last year they liked this stock. Stock Chase gives this stock 3 stars out of 5. Amy Legate-Wolfe on Motley Fool thinks this is one of the best Canadian stocks to buy in July 2023. Aditya Raghunath on Motley Fool thinks this is a great stock for you TFSA. The company put out a press release via Newswire about their 2023 results.
Simply Wall Street via Yahoo Finance talks about this stock’s dividend. Simply Wall Street put out 4 warnings on this stock of profit margins (5.7%) are lower than last year (10.4%); has a high level of debt; does not have a meaningful market cap (CA$107M); and unstable dividend track record. Simply Wall Street gives this stock 3 and one half stars out of 5.
Supremex Inc is engaged in the manufacturing and marketing of envelopes and is a growing provider of paper-based packaging solutions and specialty products. The Company operates in two reporting segments: the manufacturing and sale of a broad range of standard and custom envelopes and the manufacturing and sale of paper-based packaging solutions and specialty products. Its web site is here Supremex Inc.
The last stock I wrote about was about was Toromont Industries Ltd (TSX-TIH, OTC-TMTNF) ... learn more. The next stock I will write about will be Leon's Furniture Ltd (TSX-LNF, OTC-LEFUF) ... learn more on Wednesday, April 17, 2024 around 5 pm. Tomorrow on my other blog I will write about Buy Your First Car.... learn more on Tuesday, April 16, 2024 around 5 pm.
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