Is it a good company at a reasonable price? A lot of people seem to feel that this company will be doing well in the future. I would think at some point in the future it will again become and dividend growth company, but it is hard to predict when. Analysts do not think this will occur within the next couple of years. It maybe in a rather boring business, but it is in a necessary business. Analyst maybe right that it has a good future coming. I would guess from the results of the P/S Ratio testing that the stock price is relatively 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 this company has been increasing their debt, intangibles, and goodwill. They have been buying other business. See my article on Newswire about them buying Montreal Healthcare Laundry business.
If you had invested in this company in December 2013, for $1,029.60 you would have bought 26 shares at $39.60 per share. In December 2023, after 10 years you would have received $312.00 in dividends. The stock would be worth $858.00. Your total return would have been $1,170.00. This would be a total return of 1.47% per year with 1.81% from capital loss and 3.28% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $39.60 | $1,029.60 | 26 | 10 | $312.00 | $858.00 | $1,170.00 |
The current dividend yield is moderate with dividend growth non-existent. The current dividend yield is moderate (2% to 4% ranges) at 3.43%. The 5, 10 and historical median dividend yields are also moderate at 3.43%, 3.11% and 3.80%. However, the dividend yields used to be much higher (8% and 9% etc.) because stock started out as an Income Trust which can and do have very high yields. The yields have been flat since 2014 because of the change from an Income Trust to a Corporation.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is too high at 73% with 5 year coverage at 143%. The DPR for 2023 for Distributable Cash Flow (DCF) is good at 39% with 5 year coverage at 47%. This is an important one. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 27% with 5 year coverage at 32%. This is also an important ratio. The DPR for 2023 for Free Cash Flow (FCF) is good at 44% with 5 year coverage at 48%. There is some agreement on what FCF, but some values are way off.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 73.17% | 142.86% |
| DCF | 39.47% | 47.22% |
| CFPS | 27.09% | 32.28% |
| FCF | 43.52% | 48.09% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.20 and currently at 0.37. The Liquidity Ratio for 2023 is good at 1.73 and 1.80 currently. The Debt Ratio for 2023 is good at 1.92 and 1.67 currently. The Leverage and Debt/Equity Ratios for 2023 are fine at2.09 and 1.09 and currently at 2.50 and 1.50.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.20 | 0.37 |
| Intang/GW | 0.17 | 0.27 |
| Liquidity | 1.73 | 1.80 |
| Liq. + CF | 2.22 | 2.41 |
| Debt Ratio | 1.92 | 1.67 |
| Leverage | 2.09 | 2.50 |
| D/E Ratio | 1.09 | 1.50 |
The Total Return per year is shown below for years of 5 to 19 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 | 0.00% | 3.34% | -0.26% | 3.61% |
| 2013 | 10 | 0.18% | 1.47% | -1.81% | 3.28% |
| 2008 | 15 | 0.58% | 16.38% | 8.49% | 7.89% |
| 2004 | 18 | 0.85% | 12.40% | 5.62% | 6.78% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 41.67, 49.35 and 70.27. The corresponding 10 year ratios are 36.48, 42.73 and 39.21. The corresponding historical ratios are 20.57, 23.30 and 26.99. The current ratio is 20.00 based on a stock price of $35.00 and EPS estimate for 1.75. This ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have Distributable Cash Flow (DCF) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 11.51, 13.28 and 15.58. The corresponding 10 year ratios are 13.27, 15.55 and 17.74. The current ratio is 9.23 based on DCF estimate for 2024 of $3.79 and a stock price of $35.00. Thid ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. (Also note that this company seems to be switching to Adjusted Earnings per Share (AEPS) values.)
I get a Graham Price of $25.66. The 10-year low, median, and high median Price/Graham Price Ratios are 1.95, 2.28 and 2.59. The current P/GP Ratio is 1.36 based on a stock price of $35.00. 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 2.08. The current ratio is 2.09 based on a Book Value of $177.8M, Book Value per Share of $16.72 and a stock price of $35.00. The current ratio is 0.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I also have a Book Value per Share estimate for 2024 of $17.08. This implies a ratio of 2.05 based on a stock price of $35.00 and Book Value of $181.7M. This ratio is 1.7% below the 10 year median ratio. 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 7.13 based on a stock price of $35.00, Cash Flow of per Share estimate for 2024 of $4.91 and Cash Flow of $52.2M. The current ratio is 48% 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 3.80%. The current ratio is 3.43% based on dividends of $1.20 and a stock price of $35.00. The current dividend yield is 10% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. Note that this test works best when dividends are increasing and for this stock, dividends are flat.
I get a 10 year median dividend yield of 3.11%. The current ratio is 3.43% based on dividends of $1.20 and a stock price of $35.00. The current dividend yield is 10% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median. Note that this test works best when dividends are increasing and for this stock, dividends are flat.
The 10-year median Price/Sales (Revenue) Ratio is 1.91. The current ratio is 1.01 based on Revenue estimate for 2024 of $367.2M, Revenue per Share of $34.53 and a stock price of 35.00. The current ratio is 47% 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 could be reasonable or cheap. The 10 year dividend yield testing is showing the stock price as reasonable and below the median. However, this is not generally a good test when dividends are flat. The P/S Ratio testing is showing the stock price as cheap. This is why I think that the stock price could be cheap. A lot of the testing is showing the stock price as relatively cheap, but some also show the price as reasonable.
When I look at analysts’ recommendations, I find Strong Buy (3), and Buy (3). The consensus is a Strong Buy. The 12 month stock price consensus is $45.83 with a high of $48.00 and a low of $43.00. The stock price consensus of $45.83 implies a total return of 34.37% with 30.94% from capital gains and 3.43% from dividends based on a current stock price of $35.00.
There are two recommendations on Stock Chase for this stock as Buys. One says solid business with excellent management team. Stock Chase gives this stock 4 stars out of 5. Daniel Da Costa on Motley Fool says this company is cheap with long term potential. Christopher Liew on Motley Fool says company is lesser-known and outperforming more popular names. The company put out a press release via Newswire about it fourth quarter of 2023 results. The company put out a press release via Newswire about their second quarter of 2024.
Simply Wall Street via Yahoo Finance reviews this stock and likes that fact that it is 19% owned by Hedge Funds. Simply Wall Street has one warning out on this stock of has a high level of debt. Simply Wall Street also gives this stock 4 stars out of 5.
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. The next stock I will write about will be BRP Inc (TSX-DOO, OTC-DOOO) ... learn more on Friday, September 27, 2024 around 5 pm. Tomorrow on my other blog I will write about Money Show Toronto .... learn more on Thursday, September 26, 2024 around 5 pm.
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