Friday, January 14, 2011

Wi-Lan Inc 2

I bought this company (TSX-WIN) in 2000, as it was an up and coming company in communications. I sold it in 2006 after losing most of my investment. This stock has never recovered from the bubble that occurred in 2000. Today it is selling at $6.24. I would never have made any money on it even if I were still holding.

To properly discuss investing, you should look at a variety of companies, ones to invest in and ones not to. This is one that was a failed investment for me. However, what attracted me to this company in the first place might play out well in the end. There is interesting things happening, like the dividends that were just started. However, I would like to see a better cash flow to pay these dividends. I would also like to see a higher yield. I am not much interested in companies where the yield is less than 2%. (The dividend is currently at .8%, but it started out over 2%.)

When I looked at the insider trading report, I wondered about how insider feel amount this company. There is some $5.4M of insider selling over the past year. I note that the CEO (Jim Skippen) and CFO (Shaun McEwan) are listed as officers of the company and not as CEO and CFO. They seem to be doing some, but not all of the selling, especially of stock options. You never know why insiders sell, and there has been a lot lately due to the recession. However, this would discourage me from buying these shares. There has been some insider buying, but not enough to even talk about compared to the selling.

So, what does my spreadsheet say about the current stock price? First, the Price/Earnings Ratio is currently at 21. The 5 year median low P/E is 6 and the 5 year median high P/E is 22. So the current one at 20 is high and 20 is also rather a high absolute P/E ratio. Sites that use a P/E based on the last 12 months earnings have no P/E Ratio, as there has been no earnings in the last 12 months.

I get a Graham Price of $3.86. The current stock price is $6.25. So, the current stock price is almost 40% higher than the Graham price. I would also like to say that the stock price has risen sharply this year, and since the end of last year, it is up almost 200%. The stock price has spent most of its time before 2006 far below the Graham Price. I cannot calculate a Graham Price prior to 2006 as there was no positive earnings prior to 2006.

When I look at the Price/Book Value ratio, I get a 10 year average of 3.17 and a current one of 2.90. The current one is lower than the average by almost 10%. A great stock price would have the current one lower than the average by 20%, but this points to a not bad stock price.

I guess we can look at the dividend yield on this, but since dividends were just started, it is hard to tell anything from this. The yield at the start of dividend payments was just over 2%. They are now about .8%. This is because of the sharp price increase. Wi-Lan has not made any indication whether or not they intend to raise dividends in the future.

When I look at the analysts’ recommendations, all I find are Strong Buy and Buy recommendations. The consensus would be a Strong Buy. (See my site for information on analyst ratings.) It is an intellectual patent company. They have just won big time with their settlement with Intel. This hit today, and the stock, today, went up 10%. Whether or not it is a good time to buy, or if that time has now past is hard to tell. However, their future business is all about collecting money from their patents.

Wi-Lan was founded in 1992 to commercialize technology inventions that made low-cost, high-speed wireless networking a reality. Proven through several generations of products manufactured by Wi-Lan and applied in multiple technology standards, Wi-Lan’s inventions were, by 2005, commercialized in millions of wireless networking devices worth many billions of dollars. Realizing the value that its intellectual property brought to industry, Wi-Lan chose in 2006 to focus its business on the development, protection and monetization of patented inventions. Its web site is here Wi-Lan. See my spreadsheet at win.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 for stocks followed and investment notes. Follow me on twitter.

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