Thursday, January 13, 2011

Wi-Lan Inc

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. The other thing is that they completely refocused their company, or completely changed it to earn money on their patents.

A couple of interesting things have happened concerning this company. First is that it started to pay a dividend in the last 2 quarters of 2009. However, the dividend yield is very low at less than 1%. They have been earning money over the last couple of years as far as earnings per share go, but there is not much in the way of cash flow. To pay dividends you need cash flow. Things may be turning up for this company, as they seem to be winning patent court cases or getting settlements with patent licenses. They are certainly trying to earn money.

If you look at revenue, it is increasing. The growth for the last 5 and 10 years is 7% and 20% per year, respectively. However, if you look at revenue per share it is a very different story. The growth for revenue per share over the past 5 and 10 years is -11% and 2% per year respectively. The problem is the increase in the number of shares outstanding. This has been increasing at a rate of 18% per year for the last 10 years.

The return on equity for this company is low. The ROE was negative at the end of 2008 financial year and it is again negative for the last 12 months. However, most analysts seem to feel that the company will end this financial year with some earnings. The 5 year average ROE is just over 2%. At the end of 2009, the ROE was also low at just 4.3%.

One good thing is that this company does not have much in the way of debt. The Liquidity ratio is 9.49 with a 5 year average of 13.82. The Asset/Liability Ratio is 24.17 with a 5 year average of 14.23. What is considered a good Liquidity Ratio or A/L Ratio is 1.50. So both of these ratios are way over being good.

A bright spot is also the increase in book value. This growth in book value per share over the past 5 and 10 years is 20% and 11% per year, respectively. Between last year and this year there has been an almost 200% increase in stock price. You have to wonder if the stock price is getting rather too high. Tomorrow, I will look to see what the analysts are saying about this stock.

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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