Cursory Analysis: Richelieu Hardware Ltd. (RCH.TO)

The following is a brief summary of an analysis note that I posted to Seeking Alpha. The full article may be found at this link.

Richelieu Hardware Ltd. (RCH.TO) was brought to my attention by a colleague when he was searching for stocks that he found that met Peter Lynch’s stock selection criteria. Upon first hearing about Richelieu, it seemed to hit on some of the key levers I look for in a stock:

  • Small/medium capitalization
  • Dividend paying, with increasing payments
  • Canadian based
  • A boring industry
  • Focused on a tangible product/service (e.g. they make/sell things that you can “hug and hold”)

Headquartered in Montreal, Quebec, Richelieu Hardware Ltd. is an importer, distributor, and manufacturer of specialty hardware and related products, focused on the North American Markets. Its primary customers are split amongst retail customers vis-à-vis the residential and commercial woodworking industry, home furnishing and office furniture manufacturers, and hardware and renovation superstores (e.g. Home Depot, Lowes). In performing a cursory analysis of the past five years of Richelieu’s fundamentals, the company has a strong balance sheet, great profitability, and a compelling dividend. However, it is presently overpriced.

A cursory analysis shows that Richelieu appears to be a strong company based on the past five years of fundamentals. Richelieu’s fundamentals have some intriguing characteristics, but based on the most recent fiscal year it is overvalued. Based on this cursory analysis, I would rate this company a hold, pending further analysis into the fundamentals, over a larger window (e.g. 10 years vs. the 5 years used for my cursory analysis). That said, Richelieu certainly deserves a deeper analysis to establish if it is a company which should be placed on long term watch-lists, to purchase on dips.