Is it a good company at a reasonable price? This stock is certainly off the high it reached in 2020. However, analysts do not seem to be negative about this stock. Their revenue growth has certainly come down. Analysts think that they will do fine in the future because they went from selling software to a subscription base. Personally, I never look at any tech company as a long term buy. I worked in IT and things can change very quickly. Any tech stock I have bought I have always kept a close eye on it. But that is just what I think. It certainly is relatively cheap.
I do not own this stock of Enghouse Systems Ltd (TSX-ENGH, OTC-EGHSF). This stock has been recommended by Keystone Financial Publishing as a good Small Cap tech stock with dividend.
When I was updating my spreadsheet, I noticed Revenue and earnings growth has slowed between the last 5 and 10 year. Cash Flow and dividends have not. Stock price is down over the past 5 years. It is down by almost 8% so far since October 2024. The stock price is expected to rise over the next year. They have a financial year ending in October each year. I am reviewing the financial year ending October 2024.
In the chart below, I am showing 5 and 10 year total growth and per year growth in columns 3 and 4. Column 5 shows growth expected over 12 months to the first quarter in 2025 and expected growth over this year.
| Yr | Item | Tot. Gwth | Per Year | Gwth | Coverage |
|---|---|---|---|---|---|
| 5 | Revenue Growth | 30.23% | 5.43% | 1.21% | <-12 mths |
| 5 | EPS Growth | 13.95% | 2.65% | 3.40% | <-12 mths |
| 5 | Net Income Growth | 14.79% | 2.80% | 4.02% | <-12 mths |
| 5 | Cash Flow Growth | 62.30% | 10.17% | ||
| 5 | Dividend Growth | 140.00% | 19.14% | 8.33% | <-12 mths |
| 5 | Stock Price Growth | -23.85% | -5.30% | -7.97% | <-12 mths |
| 10 | Revenue Growth | 128.42% | 8.61% | 3.82% | <-this year |
| 10 | EPS Growth | 164.86% | 10.23% | 8.16% | <-this year |
| 10 | Net Income Growth | 173.98% | 10.60% | 8.54% | <-this year |
| 10 | Cash Flow Growth | 177.22% | 10.73% | ||
| 10 | Dividend Growth | 433.33% | 18.22% | 16.67% | <-this year |
| 10 | Stock Price Growth | 55.68% | 4.53% | 9.43% | <-this year |
If you had invested in this company in December 2014, for $1,016.51 you would have bought 49 shares at $20.75 per share. In December 2024, after 10 years you would have received $321.44 in dividends. The stock would be worth $1,327.41. Your total return would have been $1,648.85. This would be a total return of 5.33% per year with 2.70% from capital gain and 2.63% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $20.75 | $1,016.51 | 49 | 10 | $321.44 | $1,327.41 | $1,648.85 |
The current dividend yield is moderate with dividend growth good. The current dividend yield is moderate (2% to 4% ranges) at 3.76%. The 5, 10 and historical dividend yields are low (below 2%) at 1.67%, 1.03% and 1.36%. The dividend growth is good (15% and above) at 19 % per year over the past 5 years. The last dividend increase was in 2024 and it was for 18%.
The Dividend Payout Ratios (DPR) for EPS should be improved. The DPR for 2024 for Earnings per Share (EPS) is too high at 65% with 5 year coverage at 64%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 35% with 5 year coverage at 36%. The DPR for 2024 for Free Cash Flow (FCF) is good at 32% with 5 year coverage at 42%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 65.31% | 63.72% |
| CFPS | 35.02% | 35.60% |
| FCF | 32.44% | 42.58% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2024 is good at 0.00 and currently at 0.00. Other long term liabilities are low at just 0.02. They do not have much in debt. The Liquidity Ratio for 2024 is good at 1.81 and 1.81 currently. The Debt Ratio for 2024 is good at 3.51and 3.51 currently. The Leverage and Debt/Equity Ratios for 2024 are good at 1.40 and 0.40 and currently at 1.40 and 0.40.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.00 | 0.00 |
| T. Lg Term R | 0.02 | 0.02 |
| Intang/GW | 0.25 | 0.27 |
| Liquidity | 1.81 | 1.81 |
| Liq. + CF | 2.19 | 2.17 |
| Debt Ratio | 3.51 | 3.51 |
| Leverage | 1.40 | 1.40 |
| D/E Ratio | 0.40 | 0.40 |
The Total Return per year is shown below for years of 5 to 29 to the end of 2024. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2019 | 5 | 19.14% | -8.24% | -10.88% | 2.63% |
| 2014 | 10 | 18.22% | 5.33% | 2.70% | 2.63% |
| 2009 | 15 | 21.00% | 16.51% | 13.14% | 3.37% |
| 2004 | 20 | 20.28% | 11.50% | 9.43% | 2.06% |
| 1999 | 25 | 13.55% | 11.71% | 1.84% | |
| 1995 | 29 | 12.12% | 10.65% | 1.47% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 20.68, 32.80 and 42.49. The corresponding 10 year ratios are 24.90, 32.82 and 41.38. The corresponding historical ratios are 17.88, 22.80 and 29.46. The current ratio is 17.40 based on a stock price of $27.67 and EPS estimate for 2025 of 1.59. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $19.62. The 10-year low, median, and high median Price/Graham Price Ratios are 2.16, 2.69 and 3.41. The current ratio is 1.41 based on a stock price $27.67. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Book Value per Share Ratio of 5.17. The current P/B Ratio is 2.57 based on a Book Value of $596M, Book Value per Share of $10.76 and a stock price of $27.67. The current ratio is 50% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have a Book Value per Share estimate for 2025 of $11.26. This implies a Book Value of 624M, and a Ratio of 2.46 with a stock price of $27.67. This ratio is 52% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 21.37. The current ratio is 11.60 based on Cash Flow for the last 12 months of $132M, Cash Flow per Share of $2.39 and a stock price of $27.67.
I get an historical median dividend yield of 1.36%. The current dividend yield is 3.76% based on dividends of $1.04 and a stock price of $27.67. The current dividend yield is 176% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 1.03%. The current dividend yield is 3.76% based on dividends of $1.04 and a stock price of $27.67. The current dividend yield is 266% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 5.29. The current ratio is 2.94 based on a stock price of $27.67, Revenue estimate for 2025 of $522M, and Revenue per Share of $9.42. The current ratio is 44% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The dividend yield tests say this. It is confirmed by the P/S Ratio test. All the testing is pointing to a relatively cheap stock price.
When I look at analysts’ recommendations, I find Buy (1), and Hold (3). The consensus would be a Hold. The 12 month stock price consensus is $32.25 with a high of $40.00 and low of $29.00. The stock price consensus of $32.25 implies a total return of 20.31% with 16.55% from capital gains and 3.76% from dividends.
Analysts on Stock Chase still like this stock. Their large cash flow and no debt is mentioned. Stock Chase gives this stock 4 stars out of 5. Jitendra Parashar on Motley Fool says to buy for long term gains. Robin Brown on Motley Fool says to buy for long term wealth in you TFSA. However, he notes it is currently depressed. The company put out a press release via Newswire about their fourth quarter for 2024.
Simply Wall Street via Yahoo Finance talk about insider buying at this company. They have one warning out on this stock of significant insider selling over the past 3 months. Simply Wall Street gives this stock 4 stars out of 5.
Enghouse Systems Ltd is a Canada-based provider of software and services to a variety of end markets. The firm's operations are organized in two segments namely, the Interactive Management Group (IMG) and the Asset Management Group (AMG). The firm has operations in Canada, the United States, the United Kingdom, Europe, excluding Scandinavia, Germany, Asia-Pacific and other, with revenue from USA. Its web site is here Enghouse Systems Ltd.
The last stock I wrote about was about was Transcontinental Inc (TSX-TCL.A, OTC-TCLAF) ... learn more. The next stock I will write about will be Exco Technologies Ltd (TSX-XTC, OTC-EXCOF) ... learn more on Monday, January 27, 2025 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment