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A fantastic week for Dorel, up about $5 per share to close at $47.95 (the more liquid B shares) on both the TSE and the MSE, an all-time high. It's time to review the forecasts for Dorel. All of the analysts (including amateur me) have been far too tame in their predictions (the pros much more off course, in this case, than me). Last September HSBC James Capel targeted Dorel at $40 by the end of 1998. A bit later Research Capital suggested a target of $40 by the early fall of 1998. Around that time, I was targetting $45 to $50 by the end of 1998 (http://www3.techstocks.com/~wsapi/investor/reply-2366497). In January of this year, HSBC James Capel raised their target to $50 "over the next 24 months." Hey, we're almost there, just two years early, although I wouldn't discount the possibility of substantial retracement and consolidation of DII share prices, given how far they have come so quickly. But I certainly wouldn't sell here. My new target, for the record, is around $75 to $85 in 24 months. The company earned about $2 per share for 1997, and even without its Ameriwood acquisition is forecast to earn about $2.70 in 1999. With the incremental earnings from the Ameriwood assets once they have been rationalized, I don't see $2.80 to $3.00 as unrealistic for 1999 (with much more of the earnings gain coming in 1999 than in 1998). If you put the TSE-300 market PE multiple on those earnings, you get a number even higher than my price target range. Dorel, despite the cyclical element in its product mix, has demonstrated those value and growth qualities that make it something you want to hold "forever," using the words of Peter Lynch. Institutional investors are also starting to recognize the sterling merits of Dorel, and the quieting situation on Quebec separation can't hurt things either. Jay |
