Enghouse Systems Ltd 2

This company (TSX-ESL) is another small tech firm. This stock has been recommended by Keystone Financial Publishing as a good Small Cap tech stock with dividend. For their website, see Keystone Publishing. As far as I can see, Keystone Publishing tends to recommend stocks for the short term, rather than for long term buy and hold investors.

What I see in the Insider Trading report is some $.84M of net Insider Buying. There is a minimum of Insider Selling. There seems to be a number of insiders who has 2-3% of the company’s outstanding shares in stock options. Also, a couple of insider own almost 35% of this company. Insiders seem to be holding on to their stock options recently and this is a good sign.

The company has just raised their dividend by 25%. This is also a sign that the management is confident in the future earnings and cash flow of the company. There are also some 8 institutions that own just over 25% of this company. Over the past 3 months, there have been 2 institutional buyers and 2 institutional sellers with a net increase in shares owned. (See my site for information on Insider Trading.)

When I look at 5 year median Price/Earnings Ratios, I find the low P/E to be 18 and the high to be 28.5. That puts 19.4 closer to the low, relatively speaking. However, the P/E ratios of this stock are on the high side. I get a current Graham Price of $7.53. The current stock price of $10.09 is some 34% higher. The median difference between the Graham Price and stock price is 21% and the high difference is 54%. So the current difference is towards the high side. (See my site for information on calculating Graham Price.)

I get a 10 year median Price/Book Value Ratio of 1.76. The current P/B Ratio is 2.08, which is some 18% higher and this points to a relatively high stock price. The last thing to look at is yield. The current yield is 1.98% and the 5 year median yield is 1.87%. This points a relatively low stock price. If you take everything together, you get a price that is pretty average on a relative basis for this stock.

It is hard to know if there is one or two analysts following this stock. However, the only recommendation I can find is a Buy recommendation for this stock. So, the consensus recommendation would be a buy. (See my site for information on analyst ratings.) The 12 month stock price given is $11, so the 12 month total return on this stock would be around 12%. This company is thought to be well-run and the CEO, Stephen Sadler, is well-respected.

I find a blog entry about small cap stocks talking about this stock, Enghouse. This stock seems to be a well managed tech small cap stock and might be a good investment for those who can afford the risk of investing in a small cap.

Enghouse Systems Limited is a global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a large diverse enterprise software company through strategic acquisitions and managed growth. Its web site is here Enghouse. See my spreadsheet at esl.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.