Today’s company has had stiff competition from big-box home improvement retailers, but has restructured, is in the midst of a stock buyback program, and insiders are scooping up shares.
Rona (RON.TO)
from Market Insider Bulletin
Rona (T-RON) is a major distributor and retailer of hardware, home improvement and gardening products. It operates a network of approximately 530 corporate, franchise and affiliate retail stores of various sizes and formats under different banners.
Nearly 50% of revenues are generated in Quebec. Until mid 2000s Rona steadily grew its revenues and profits. During its best year its return on equity was as high as 20%. However, the last seven years saw competition from Home Depot and Lowe’s flattening revenues and diminishing profits.
The latest quarter ending September 2013 shows that—so far—the on-going restructuring reduced revenues by 4.3% and adjusted net income by 10% to $0.25/share. from a year ago. On the positive side the balance sheet remains healthy, with net debt of $347.8 million being 16.9% of total capital.
The company also announced a one-year buyback of up to 10% of the 121.9 million outstanding shares to start on November 18, 2013. Though corporate recovery is still a work in progress,
twelve insiders have been putting their own money on its successful outcome. Over the last year, they have bought 169,235 shares, including 57,600 bought by three insiders in the last three months. The purchases have been executed in the $10.19-$11.96 range. The largest buyer, with 75,000 shares, has been the CEO.
Over the last two years, the stock has formed what appears to be a major trend reversal in the form of a symmetrical triangle. Its relative strength to the TSX Composite has also halted its downtrend. On the upside, the stock faces major resistance at $14.50-$15, while the $10 level should provide technical support .
Tony Jasansky, Market Insider Bulletin, 106 Neighbourly Lane, Richmond Hill, Ontario L4C 5L7, Canada, December 2013