K-Bro Linen Inc. 2

On my other blog I am today writing about stocks I looked at more closely in my monthly update learn more...

Sound bite for Twitter and StockTwits is: Expensive, wait for better entry point. See my spreadsheet on K-Bro Linen Inc.

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.

This is the second of two parts. The first part was posted on Friday, October 09, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

There is not much insider ownership. However, the CEO has shares worth $6.2M. His shares are only 1.6% of outstanding shares. Stock options as a percentage of outstanding shares were not high in 2015 at 0.31% of outstanding shares, but stock options given out in 2013 and 2014 were 0.70% and 0.57% of the outstanding shares. I think that outstanding shares should be increased a maximum of 0.50% for stock options. So stock options given are a rather high.

Also, in the past year insider selling was at 0.11% of market cap. This is also rather high. Most of the stock I look at has insider selling at 0.01% or 0.02% of market cap. 70% of the stocks I follow had net insider selling at less than 0.09% of market cap.

The 5 year low, median and high median Price/Earnings per Share Ratios are 15.56, 17.74 and 19.91. The 10 year corresponding ratios are a bit lower at 14.53, 16.42 and 19.03. The current P/E Ratio is 30.61 based on a stock price of $49.90 and 2015 EPS estimate of $1.63. This stock price testing suggests that the stock price is expensive. A P/E Ratio of 30.61 is quite a high one for this type of company.

I get a Graham Price of $22.66. The 10 year low, median and high median Price/Graham Price Ratios are 1.00, 1.14 and 1.27. The current P/GP Ratio is 2.20 based on a stock price of $49.90. This stock price testing suggests that the stock price is expensive.

The 9 year Price/Book Value per Share Ratio is 1.70. The current P/B Ratio is 3.56 based on BVPS of $14.00 and a stock price of $49.90. This stock price testing suggests that the stock price is expensive.

I do not know how valuable it is to use dividend yields to judge the stock price because this stock used to be an Income Trust and as such had quite high dividend yields. It was thought that old income trust would end up with dividend yields between 4 and 5%. This stock has a current dividend yield of 2.40%. The 5 year median dividend yield is 4.60 % which is some 48% higher than the current dividend yield. The historical median dividend yield is 7.11% a value some 66% higher than the current dividend yield. If this testing says anything, it is that the stock price is expensive.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price is $51.30. This implies a total return of 5.21% with 2.40% from dividends and 2.81% from capital gains. This is rather a low return for a buy recommendation.

This company is doing jobs previously done by unionized workers in the public sector. This is controversial as show in this blog on Rabble.ca. A number of analysts mention this stock on Stock Chase. Some think it is overpriced.

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts. K-Bro currently has seven processing plants in six Canadian cities: Quebec City, Toronto, Edmonton, Calgary, Vancouver and Victoria. Its web site is here K-Bro Linen Inc.

This blog is meant for educational purposes only, and is not to provide investment advice. 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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