Thursday, March 3, 2011


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.

The current dividend yield at 3.2% is good rate, but considerable lower than the last small cap dividend paying tech stock that I had. They have had two dividend rises since starting dividends in dividends in 2008. They first raised the dividend 25% and the recent rise for the next dividend payment is 20%.

So the dividend growth potential is very good on this stock. If the dividend increases say at 20%, then you could be earning 7.9% in 5 years time or 20% in 10 years time on an investment in this stock today. However, be aware that this stock is thinly traded and this also adds to its risk.

This stock was part of the tech stock boom in and hit a high price of $40.50 in March 2000. This fact will affect the 10 year value for this company and the fact that they had many years with no earnings. The total return on this company is negative for the past 10 years. However, the total return over the last 5 years has been positive, but low at 5.4% per year.

As far as growth goes, the 5 and 10 year growth in revenue per share is 11.9% and 3.9% per year, respectively. Because this company had a lot of years of negative earnings, I only have earnings growth for the past 5 years and it is very good at 33.5% per year.

Growth in cash flow has the same problem, with lots of years of negative cash flow, so I only have growth for 5 years. The growth in cash flow is 27% per year. The growth in cash flow excluding working capital is much lower at only 4.5% per year. When I look at growth in book value, the 5 year growth is low, but ok at 6.3% per year. The 10 year growth is negative because this company had many negative earnings years in the past.

The next thing to look at is the debt ratios. The Liquidity Ratio is a little low at a current rate of 1.22. The 5 year average is better at 1.49. The Asset/Liability Ratio is much better at a current ratio of 2.12 and a 5 year average of 2.29. The Leverage Ratio is ok at 1.89 with a better ratio average ratio over the past 10 years of 1.65. The Debt/Equity Ratio at 0.89 is a little high for this sort of company. I would prefer it to be closer to 0.50. The 10 year average at 0.65 is better.

The last thing to look at is the Return on Equity. The ROE for the financial year ending in April 2010 is good at 12.9%. The one for the 12 months financial period ending on the third quarter at October 31, 2010 is also fine at 9.3%. The 5 year average is lower at 8.5% because of past negative earning years.

It will be interesting to watch and see how this company does in the future.

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.

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