Topic: How To Invest
Best Canadian Stocks: Dorel growth spurred by strong bicycle sales and international expansion
Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor.
DOREL INDUSTRIES (Toronto symbol DII.B; www.dorel.com) makes a range of items, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational goods, mainly bicycles.
In the three months ended June 30, 2014, Dorel’s sales rose 9.2%, to $655.8 million from $600.4 million a year earlier (all figures except share price and market cap in U.S. dollars). Sales rose 20.2% at the recreational segment and 3.2% at the juvenile products division. Home furnishing sales fell slightly.
Earnings per share rose 14.6%, to $0.47 from $0.41. Sales of its highly profitable Cannondale and Pacific Cycle premium bikes remain strong. That offset a small loss from Dorel’s 70% stake in Caloi, which it bought for an undisclosed amount last year.
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Stocks to buy: Hong Kong stroller and car seat maker another step in international expansion plans
Established in 1898, Caloi is one of the world’s oldest bike makers. It is also Latin America’s top-selling bicycle brand and the leader in the Brazilian market. Sales slowed in the latest quarter due to a weaker economy in Brazil and less consumer interest in bicycles during the month-long World Cup.
Still, the Caloi purchase fits nicely with Dorel’s plan to focus on international expansion. As well, earlier this year, Dorel bought Hong Kong-based Lerado Group, a maker of baby strollers and infant car seats, for $120 million. China’s new infant-seat laws and growing middle class make the country a great place to expand.
The stock trades at just 8.8 times Dorel’s forecast 2015 earnings of $3.71 a share. It yields a high 3.8%.
Dorel is a buy in our advisory for more aggressive investing, Stock Pickers Digest.
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Tomorrow our Investor Toolkit shows how following share prices can lead investors into a trap. |