TECSYS Inc 2

I came across this stock (TSX-TCS) when I was looking for a dividend paying small cap stock as a filler stock. I consider a filler stock to be one to soak up small amounts of investment money that I have. The thing with investing, you can only lose what you have invested. However, your potential gain is unlimited. But, make no mistake about such a stock, as it is risky. I have invested in this stock recently.

When I look at insider trading, I find there is a slight bit of insider buying and no insider selling. The other thing is that more than 60% of this company is owned by insiders. One of the insiders is an investment management firm (Gestion de portefeuille Natcan Inc.) that owns 15.5%. The last thing to mention is that management has just raised the dividend, for the next dividend payment by 20%. My experience has been that when insiders hold a lot of a small company, they try harder, which makes a company a better investment.

I get a 5 year median low Price/Earnings Ratio of 8 and a 5 year median high P/E Ratio of 13. I get a current P/E ratio of 17 and this is a bit high. The reason is that this company’s earnings are expected to drop by about 35% for year ending in April 2011. However, the forward P/E using expected earnings for year ending in April 2012 earnings are expected to climb and this gives a forward P/E of just 8.4.

I get a Graham Price for the years ending in April 2010 of $2.30, April 2011 of $1.84 and April 2012 of $2.60. The one for the financial ending in April 2011 is depressed because earnings are expected to be lower. The current price of $1.90 is 3.3% higher than the current Graham price. However, the current price of $1.90 is lower than the Graham price for the financial year ending in April 2012 by 27%.

When I look at the Price/Book Value Ratio, I get a current one of 1.39 and a 10 year average of 1.47. The current one is 95% lower than the 10 year average. The current dividend yield is 3.2% and the average yield over the past couple of years is 2.7%. The 3.2% dividend yield is the highest dividend yield of this company.

When I look for analysts’ recommendations, I can find only 1 and that recommendation is a Hold. So the consensus recommendation would be a Hold. (See my site for information on analyst ratings.) I do not know the reason for the Hold rating.

Comments I see on this stock says that it has currency headwinds because it is a Canadian company selling into the US. Other comments remark on the good management this company has. The latest financials for the first 3 quarters show declining revenues and earnings. The financial year end in April 2011 is expected show the same. However, things are expected to improve greatly for the financial year ending in April 2012, so I would think if you buy now, you profit from future results.

The analyst’s recommendation may just be a philosophical difference. I have no problem buying a stock now that is currently overpriced by the spreadsheet ratios, if it is not overpriced by future ratios. The problem with waiting for a better relative price is that it may never come. People could recognize the future potential of this company and drive the price up, so that on a relative basis, the stock stays overpriced.

Here is a story on this company.

TECSYS Inc. is a supply chain management software provider that delivers powerful enterprise distribution, warehouse and transportation logistics software solutions. The company's customers include about 600 mid-size and Fortune 1000 corporations in healthcare, heavy equipment, third-party logistics, and general wholesale high- volume distribution industries. Its web site is here TECSYS. See my spreadsheet at tcs.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.