Last Friday JCTCF got their quarterly releases out. They had, for years now, a legal action pending that they won earlier in 2003 that was in appeal. Last month, this court action was lost and resulted in a one time charge of 1.2M! For a company of net book value around 18m this creates quite a shock.
Apart from this legal action, the company was almost profitable. Losing around 10k.
When a quarterly gets out I revise my target price and check if I sell or not. The company bought back a huge number of shares this quarter at attractive prices. Over the course of the quarter, Jewett-Cameron spent $2.4 million (a fraction of its cash holdings) to buy back 15% of its outstanding shares! This increased management participation by the same percentage (55% * 1.15) to around 63% ownership!
The historical profit per share can now be calculated up to 1.06$! Getting the cash out of the calculation, current historical P/E is around 5 to 6! My target in 2 years would be to have an historical P/E of 10 after cash substraction resulting in a total target price around 14$.
For a total expected gain of 54% on today’s price (9.20) in a 2 years target, I think the risk/reward is in our favor.
Disclosure : Author has a position in JCTCF.