Jean Coutu Group Inc. a case of understanding the new environment

Dec 6th, 2013 – 1 Comment

What you should also review in making your final decision on this stock is what attracted you to it in the first place.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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PJC.A LOGO

Hi Lou:

What do you think of PJC.A? Is it time to take profit or continue to hold?

Thanks.

Humayun

 

Hey Humayun,

Thanks for the assignment. Jean Coutu Group Inc. (PJC.A TSX) operates 411 pharmacies with 92% in the province of Quebec. The research conducted on your behalf indicates that the company announced a share buyback and a special dividend to shareholders in October.  The company had held over $450 million in cash as the results of the sale of its 28% stake in Rite Aid Corp. (RAD NYSE). With a lack of debt the company could also be looking for strategic acquisitions to bolster their position in an increasingly competitive retail environment.

A study of the charts will add some new insight to your decision.

 

 

 

PJC.A

The three-year chart outlines a healthy advance from the lows near $9.00 in late 2010. What is evident is that the shares hit resistance near $19.00 in the summer of 2013 as the RSI and the MACD generated sell signals. PJC.A pulled back to $17.25 by September where it caught a bounce to trade back above the 50-day moving average.

 

 

 

 

 

 

 

 

PJC.A2

The six-month chart indicates that the MACD and the RSI are not generating much in the way of signals to buy or sell. The trend is gently higher from the September lows near $17.25.  At this point there is no strong evidence to support a buy or a sell so at best PJC.A is a hold. The dividend yield is 1.88% which will at least generate income if you decide to hold.

What you should also review in making your final decision on this stock is what attracted you to it in the first place. Over the last year the market has seen Target open in Canada and Loblaw buy Shoppers both of which turn up the competitive heat. In addition generic drugs have eaten into PJC.A’s revenue.

Make it a profitable day and happy capitalism!

Categories: Retail
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