Value Investing Ideas

Jewett-Cameron Trading Company: Cheap And Consistent Buybacks

Jewett-Cameron Trading Company Ltd. (NASDAQ:JCTCF) is a manufacturer and distributor of specialty metal and wood products in four business segments: Industrial wood products, Lawn/garden/pet/other, seed processing, and industrial tools. We believe JCTCF at $11.30 represents a compelling long opportunity with 35% upside in the next 12 months with limited downside risk.

Thesis

    Cheap valuation. The stock trades at 6.5x EV/EBIT (TTM) and a 15.3% earnings yield. 9 Year average of ROIC is around 20% pre-tax. It is reasonable for JCTCF, based on its fundamentals, to trade at a value of 10x EBIT (50% margin of safety). Management has grown book value by an average of 13-14% per year for 10 years. Company is 'cannibalizing' itself by continuously buying ...
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