Is it a good company at a reasonable price? This seems like a very solid stock for the long term. It is on the Money Sense Dividend List. It is probably the sort to buy and hold forever. However, the stock price has climbed a lot this year. According to the dividend tests and P/S Ratio test, the stock price is relatively expensive. The other tests do say reasonable, but I like the combination of the dividend tests and P/S Ratio tests so I go with these.
I do not own this stock of North West Company (TSX-NWC, OTC-NWTUF). I wanted to review all the income trust stocks touted in the Money Show of 2009. There was a lot of talk at this show about some of the Income Trust being currently good buys with very good yields. This stock changed from an income trust to a corporation in 2011.
When I was updating my spreadsheet, I noticed that they have had a good year with Revenue up 5% and expected to up another 5% this year. Adjusted EPS was up 11.6% and is expected to rise 1.5% this year. EPS was up 7% and is expected to rise another 6% this year. Cash Flow was up 26% and is expected to rise another 15% this year. The stock price has taken off this year rising 28.7%. Note that this company has a January 31 year end, so I am reviewing the January 31, 2024 financials.
If you had invested in this company in December 2013, for $1,003.86 you would have bought 39 shares at $25.74 per share. In December 2023, after 10 years you would have received $520.65 in dividends. The stock would be worth $1,531.53. Your total return would have been $2,052.18. This would be a total return of 8.60% per year with 4.31% from capital gain and 4.29% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $25.74 | $1,003.86 | 39 | 10 | $520.65 | $1,531.53 | $2,052.18 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.09%. The 5, 10 and historical dividend yields are also moderate at 4.35%, 4.36% and 4.64%. Note that yields used to be much higher in the past as this company was once an income trust. The dividend growth rate is low (below 8% per year) at 3.8% per year over the past 5 years. This stock is on Money Sense 100 Best Dividend Stocks.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is fine at 58% with 5 year coverage at 56%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is fine at 51% with 5 year coverage at 57%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 25% with 5 year coverage at 25%. The DPR for 2023 for Free Cash Flow (FCF) is fine at 52% with 5 year coverage at 65%. There is not agreement on what the FCF is.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 57.68% | 56.00% |
| AEPS | 50.73% | 57.38% |
| CFPS | 24.54% | 25.11% |
| FCF | 51.75% | 65.07% |
Debt Ratios are fine, but it does have a lot of debt. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.15 and currently at 0.13. The Liquidity Ratio for 2023 is good at 2.01 and 2.22 currently. The Debt Ratio for 2023 is good at 2.02 and 2.03 currently. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.04 and 1.01 and currently at 2.04 and 1.01.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.15 | 0.13 |
| Intang/GW | 0.04 | 0.03 |
| Liquidity | 2.01 | 2.22 |
| Liq. + CF | 2.63 | 2.99 |
| Debt Ratio | 2.02 | 2.03 |
| Leverage | 2.04 | 2.04 |
| D/E Ratio | 1.01 | 1.01 |
The Total Return per year is shown below for years of 5 to 33 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 | 3.77% | 8.74% | 4.56% | 4.18% |
| 2013 | 10 | 3.24% | 8.60% | 4.31% | 4.29% |
| 2008 | 15 | 1.24% | 11.19% | 5.78% | 5.41% |
| 2003 | 20 | 5.58% | 15.87% | 8.11% | 7.76% |
| 1998 | 25 | 6.31% | 17.76% | 8.86% | 8.90% |
| 1993 | 30 | 8.88% | 11.80% | 6.61% | 5.18% |
| 1990 | 33 | 8.13% | 17.64% | 9.65% | 7.99% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 11.19, 13.02 and 14.85. The corresponding 10 year ratios are 15.24, 17.33 and 18.90. The corresponding historical ratios are 9.98, 12.97 and 15.03. The current P/E Ratio is 16.75 based on a stock price of $51.75 and EPS estimate for 2025 of $3.09. 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/Earnings per Share Ratios are 9.90, 11.45 and 13.06. The corresponding 10 year ratios are 15.06, 17.36 and 19.24. The current P/AEPS Ratio is 16.80 based on a stock price of $51.75 and AEPS estimate for 2025 of $3.08. The current ratio is between the median and high ratios of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $32.25. The 10-year low, median, and high median Price/Graham Price Ratios are 1.49, 1.66 and 1.83. The current P/GP Ratio is 1.60 based on a stock price of $51.75. 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 3.54. The current P/B Ratio is 3.45 based on a Book Value of $716M, Book Value per Share of $15.01 and a stock price of $51.75. The current ratio is 3% 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 9.53. The current P/CF Ratio is 9.36 based on Cash Flow per Share estimate for 2025 of $5.53, Cash Flow of $264M, and a stock price of $51.75. The current ratio is 2% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 4.46%. The current dividend yield is 3.09% based on a stock price of $51.75 and Dividends of $1.60. The current dividend yield is 33% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. The problem with this test is that this stock used to be an income trust and income trust have much higher dividend yields than corporation.
I get an historical median dividend yield of 4.36%. The current dividend yield is 3.09% based on a stock price of $51.75 and Dividends of $1.60. The current dividend yield is 29% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. The problem with this test is that this stock used to be an income trust and income trust have much higher dividend yields than corporation.
The 10-year median Price/Sales (Revenue) Ratio is 0.72. The current P/S Ratio is 0.95 based on Revenue estimate for 2025 of $2,593M, Revenue per Share of $54.35 and a stock price of $a stock price of 51.75. The current ratio is 33% 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 relatively expensive. The dividend tests say this and it is confirmed by the P/S Ratio test. If the P/S Ratio test was different and said reasonable I would go with that because all the rest of the testing says reasonable. However, the P/S Ratio test is saying expensive.
When I look at analysts’ recommendations, I find Strong Buy (1), Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $54.00 with a high of $59.00 and low of $47.00. The stock price consensus of $54.00 implies a total return of 7.44% with 4.35% from capital gains and 3.09% from dividends.
There is one analyst on Stock Chase making comments on this stock. Analysts says the stock is a Buy. Stock Chase gives this stock 4 stars out of 5. Joey Frenette on Motley Fool says this is a hot dividend stock. Amy Legate-Wolfe on Motley Fool thinks this stock is a great one to buy for your RRSP. The company put out a press release via Newswire about their annual report. The company put out a press release via Newswire about their second quarter of 2024 results.
Simply Wall Street via Yahoo Finance reviews this stock and its dividend. Simply Wall Street gives this stock 2 and one half stars out of 5. Simply Wall Street has one warning on this stock of significant insider selling over the past 3 months. It looks to me more like officers are not taking up stock options rather than selling. The CEO and CFO have increased their shares over the past year.
The North West Co Inc is a Canada-based company that is principally engaged in retail business in underserved rural communities and urban neighborhoods. Its geographical segment includes Canada and International. It generates maximum revenue from Canada. Its web site is here North West Company.
The last stock I wrote about was about was Teck Resources Ltd (TSX-TECK.B, NYSE-TECK) ... learn more. The next stock I will write about will be Medtronic PLC (NYSE-MDT) ... learn more on Monday, October 7, 2024 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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