I am wondering if Gibsons is worth a punt at less than $20 ish to be treated as a trading stock whilst being paid to wait for an uplift?
1. Highly leveraged - Could this be a big problem going forward? Are the dividends safe?
2. From what I can tell, 5 separate Insiders bought meaningful amounts of stock on Feb 20th - They must know something?
3. Sudden steep decline - Maybe an over reaction?
4. Trading range - Since 2019 the stock seems to be trading in the range $20 - $26 - Can we hope on a reversion to the mean?
5. Are it's problems self inflicted or general market sentiment ?
Many thanks!
1) 12 month payout ratio is 57%, which is OK, but this is where the high leverage comes in. With high debt, and decline in business will make the dividend more vulnerable. No dividend is guaranteed, and we would not use the word 'safe' here. But to be fair it has never cut and raised the dividend by 5% in February. 2) Insiders buying is generally positive but never guarantees anything. We have seen insiders buy other companies just before very bad news. But buying is certainly a better indicator than selling. 3) The decline relates to the earnings 'miss' and broker downgrades. The sector has also been weak. 4) A reversion is possible, and if interest rates do decline as expected the stock could perform better. 5) Problems are half and half. It does need better execution and lower debt would really help sentiment here. But the market and sector certainly have not helped much at all.