Gennum Corp

I am reviewing this stock (TSX-GND) because I follow it. I have always liked technology stock. I used to own this stock. I held it between 1998 and 2006. I make some 5.5% per year return. I sold this stock, as it seemed to go up and down within a band and never getting anywhere. Since I sold this stock, it has only gone down. It seemed to have had its best days prior to 1999. This is a dividend paying stock, but it is not on anyone’s list of good dividend paying stock.

All my following figures are for the year ending at the last annual statement of November 2008. The earnings growth for the last 5 and 10 years was 12% and 5% per year. This is not bad, especially, the 5 year growth figures. The 5 and 10 years growth for dividend was 3% and 6 % per year. These also are not bad figures. Other positive figures are Liquidity Ratio and the Asset/Liability Ratio at 4.63 and 5.37 respectively. These are exceptionally strong figures. Also, the Return on Equity (ROE) for 2008 and last 5 years average were 20.8% and 10.9%. The one for 2008 is especially strong. The other good thing to note is the accruals are negative with an Accrual Ratio of -2.72%. Negative accruals are a good sign.

There are lots of negatives. The 5 and 10 year figures for growth in the Closing Price was -19% and -10%. These are awful. The 5 and 10 year figures for revenue growth are .15% and 4.3% per year. The 5 year growth is especially bad. The 5 and 10 year figures for cash flow growth are -7% and 1.3% per year.

The thing to note on this stock is that the Graham Price has been consistently lower than the stock price until recently. Currently this stock is trading below its Graham Price. This stock is becoming a mature stock from a growth stock and mature stocks usually have a stock price much nearer to the Graham Price than growth stocks. Since this is a dividend paying stock, it might have a worth while future as a good stock.

The main problems with this stock are the lack of Revenue growth and the lack of Cash Flow. In better economic times, this may change. What I would like to see is an increase in the dividends, showing that the company has faith in the future of this stock. The current dividend yield is 3.4% and this is much better than the 5 year average of 1.5%. For 2006 and prior it had a dividend yield of less than 1%. This is acceptable in the growth stock, but not a mature stock. In a mature stock, you want a yield closer to 4% than 1%.

Gennum Corporation designs innovative semiconductor solutions and intellectual property (IP) cores for the world's most advanced consumer connectivity, video broadcast and data communications products. Leveraging the company's proven optical, analog and mixed-signal products and IP, Gennum enables multimedia and data communications products to send and receive information without compromising the signal integrity. A recognized award-winner for advances in high definition (HD) broadcasting, Gennum is headquartered in Burlington, Canada, and has global design, research and development and sales offices in Canada, Germany, India, Japan, Korea, Mexico, Taiwan, the United States and the United Kingdom. Its web site is www.gennum.com. See my spreadsheet on this company at www.spbrunner.com/stocks/gnd.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.