Evaluating Publix Stock

[jkl3391]

Hey guys,

I was looking for some insight and opinions on the value of Publix stock.

For those unfamiliar with the company, https://en.wikipedia.org/wiki/Publix.  You can read more about the stock info here: http://www.publixstockholder.com/servlet/ProxyServlet?path=/stockholder/Home.do

This was the First Quarter 2016 press release:
Publix’s sales for the first quarter of 2016 were $8.7 billion, a 4.5 percent increase from last year’s $8.3 billion. Comparable-store sales for the first quarter of 2016 increased 3.3 percent. The company estimates sales increased 1.2 percent due to the effect of the Easter holiday being in the first quarter of 2016. In 2015, the effect of the Easter holiday was in the second quarter.
Net earnings for the first quarter of 2016 were $581.9 million, compared to $548.9 million in 2015, an increase of 6 percent. Earnings per share for the first quarter increased to $0.75 for 2016, up from $0.71 per share in 2015.
These amounts are based on unaudited reports that will be filed today with the U.S. Securities and Exchange Commission and made available on the company’s website at www.publix.com/stock.
Effective May 1, 2016, Publix’s stock price decreased from $45.20 per share to $43.95 per share. Publix stock is not publicly traded and is made available for sale only to current Publix associates and members of its board of directors.
“I’m pleased that our Publix associates delivered strong results,” said Publix CEO & President Todd Jones. “Unfortunately, these results were not enough to offset the challenges in the stock market.”

Here’s a graph of the stock’s price history since 2011: http://www.publixstockholder.com/managed_images/2016/sif3185539217672210258.png

When I first received dividends in the summer of 2015, the dividend rate was .39 semi-annually. In the fall, they went to quarterly dividends at .20 and this spring increased them to .2225.

I’ve been with the company for 3.5 years. As a vested employee, I received stock equal to about 8.5% of my take home pay every year. Between the company’s contributions to my PROFIT Plan and those I’ve purchased, I hold 180 shares. While the company culture is very “all-in” on the stock and plenty of real examples of average employees turned millionaires after long careers with the company, I’m aware of the risk of having too much tied to your own job.

I have a 401k (started last year) and Roth IRA (started this year, fully funded) in index funds, but was considering other investments options (interested in Dividend Growth Stocks and REITs) and wanted to weigh them against my investments in Publix. Just looking for opinions and insight as I’m still learning a lot about stocks and investments. Look forward to any responses, thanks!

[carclown]

.75 * 4 = 3 Annual EPS (Earnings per share)
43.95 / 3 = 14.65 Trailing P/E (price/earnings)
3 / 43.95 = 6.8% Annual rate of return

Without knowing much about the company, it is hard to say. You are in for some tough competition though. Grocery chains ALDI and Wegman's are growing. Both ALDI and Wegman's have recently reached Hampton Roads in southern Virginia, just north of Publix northern most operation in North Carolina. Something else I would think about is where your stocks are coming from. Is the company currently issuing them to raise cash or are other share holders selling them? If new shares are being issued, this will dilute your shares. See http://www.investopedia.com/terms/d/dilution.asp . Definitely find this out first. I don't have the time right now to dive into the SEC filings on their web site, but I would take a very close look at their Balance Sheet, Income Statement, and Cashflow Statement before making a decision. I would also find out the shares outstanding, and use that to calculate the market capital. Using the market capital I would then take that number divided by the net assets to find the book value per share. Once you have some of these metrics, I would compare them to other grocery chains to see if the profits are on par with the industry in general. I would also check glassdoor.com to see if employees are happy with management. As an employee, do you see any issues with business processes that are inefficient or lead to a poor product quality? How are the processes different from other grocers? What are the prices like? What is the produce and meat quality like compared to other stores?
 Do you shop there? Why or why not?

Stock analysis is very complex.

[Seppia]

You also have to consider what kind of advantages you get.
Do you get the shares at full value or do you get a discount?
All else being equal, I would always take cash, but I would imagine you get some sort of incentive to go the stock route.

We need to know more

Publix is one of the very best retail chains on the planet, and in Florida they basically own the market, their closest competitors being a fraction of their size. This is a major competitive advantage.

[jkl3391]

.75 * 4 = 3 Annual EPS (Earnings per share)
43.95 / 3 = 14.65 Trailing P/E (price/earnings)
3 / 43.95 = 6.8% Annual rate of return

Without knowing much about the company, it is hard to say. You are in for some tough competition though. Grocery chains ALDI and Wegman's are growing. Both ALDI and Wegman's have recently reached Hampton Roads in southern Virginia, just north of Publix northern most operation in North Carolina. Something else I would think about is where your stocks are coming from. Is the company currently issuing them to raise cash or are other share holders selling them? If new shares are being issued, this will dilute your shares. See http://www.investopedia.com/terms/d/dilution.asp . Definitely find this out first. I don't have the time right now to dive into the SEC filings on their web site, but I would take a very close look at their Balance Sheet, Income Statement, and Cashflow Statement before making a decision. I would also find out the shares outstanding, and use that to calculate the market capital. Using the market capital I would then take that number divided by the net assets to find the book value per share. Once you have some of these metrics, I would compare them to other grocery chains to see if the profits are on par with the industry in general. I would also check glassdoor.com to see if employees are happy with management. As an employee, do you see any issues with business processes that are inefficient or lead to a poor product quality? How are the processes different from other grocers? What are the prices like? What is the produce and meat quality like compared to other stores?
 Do you shop there? Why or why not?

Stock analysis is very complex.

I appreciate the detailed answer. You've made it clear there's a lot for me to research and consider. For what it's worth, this article touches on some of things you mentioned (balance sheet, investments, profit margins relative to industry competitors, etc.): http://www.dailyfinance.com/2015/03/05/publix-trend-setting-grocery-chain/
We are held as the model of success in the industry, and Wegman's is the only true competitor that rivals our business model/customer service.

I'm very aware that their steady expansion northward puts them head to head with some of the strongest most comparable competition they've faced, but if any company is poised for the challenge, it's Publix. Publix's growth in the Southeast beyond Florida has been incredibly successful, and they have some brand since so much of the country vacations/seasonally lives in FL and have a strong positive relationship ahead of their arrival.

Overall, I believe in our management structure and the way it strengthens our culture (incredibly important as the company expands to prevent a dilution of quality). There's always things to improve on, but our quality is as high and ever and the expansion of our private label items is very profitable (especially our 'Greenwise' organic products to keep more of the market share away from Whole Foods, Fresh Market, etc.) Processes are thoughtful. Prices are reasonable, Walmart/Winn Dixie might be cheaper in some areas but if you shop our sales, especially the Buy One, Get One weekly specials, you can come out ahead of shopping anywhere else. Our fresh departments, especially the deli and bakery, are well loved and a cornerstone of our brand. I do shop there, as its convenient, pleasant, I know how to shop the weekly deals, and I like putting my money back into the company and in turn my own pocket over Walmart or somewhere else.

You also have to consider what kind of advantages you get.
Do you get the shares at full value or do you get a discount?
All else being equal, I would always take cash, but I would imagine you get some sort of incentive to go the stock route.

We need to know more

Publix is one of the very best retail chains on the planet, and in Florida they basically own the market, their closest competitors being a fraction of their size. This is a major competitive advantage.

Since its private stock, there's no discount, but there's no fees for buying/selling. The money in stock is on top of our regular pay (as part of the company's Profit Plan to help associates plan for retirement), but I guess it's semantics whether you inherently consider that 8.5% in stocks as part of yearly base pay or not. Retail associates also get quarterly inventory bonuses which helps motivate our efficiency and profitably at the store level.

You are definitely correct that Florida is Publix country, but we do have to remain vigilant to push out newcomers and expand out edge over the multitude of competitors for the market share. The 1990's were a huge expansionary period for the company and it looks like we're entering the next phase now as we push further north. If we can continue to do this successfully, this could be the next renaissance for the company

[seattlecyclone]

When can you sell the stock? Do you have to hold on to the shares the company gives you? How do they determine the price if it isn't publicly traded?

I receive part of my pay in company shares but I sell them immediately to diversify my investments. Not sure if I would do differently if the company were employee owned instead of publicly traded.

[jkl3391]

When can you sell the stock? Do you have to hold on to the shares the company gives you? How do they determine the price if it isn't publicly traded?

I receive part of my pay in company shares but I sell them immediately to diversify my investments. Not sure if I would do differently if the company were employee owned instead of publicly traded.

There are 4 quarterly buying/selling periods that last about a month, right after they announce the price/results. They intend for it be a long term investment, so if you sell shares you can't buy again for 12 months (you still receive your yearly contributions to your PROFIT Plan).

I believe in the company as a successful long term investment but I definitely want to diversify.

I'm not exactly sure how they calculate price but I know they make their determinations relative to the rest of the grocery industry (which I get, but we are killing it compared to our competitors so I don't if it's fair). Guess I would need to dig more into the stock reports.