2024-07-09 01:06:18 ET
Summary
- Value Line Inc. shares have returned 12.3% in 6 months, underperforming the S&P 500.
- The company remains a low growth cash cow with a solid balance sheet and dividend that has grown at an unsustainable rate.
- Relative valuation shows the stock dividend needs to grow at 11.25% CAGR to match 10-Year Note cash flows, making stock too risky at current prices.
It’s been a little over six months since I put out my “avoid” article on Value Line Inc. ( VALU ), and in that time the shares have returned about 12.3% against a gain of about 16.6% for the S&P 500. I also think it would be fair to mention that the yield on the 10 Year Note that I recommended in lieu of shares has climbed from 4.146% on the day my article was published to 4.284 % now, so my alternative has underperformed the stock for the past half year. Much has happened since, including the release of some new financial results, so I thought I’d review the name again to see if it now makes sense to buy. I’ll make this determination by looking at the relative valuation here, and by looking at alternatives available to investors. If you’re one of my regulars you know that the “alternative” I’ll be looking at is the risk free 10 Year Note....
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Value Line Remains Less Attractive Than The Risk Free Alternative