Monday, June 27, 2011

Computer Modelling Group Ltd 2

I own this stock (TSX-CMG, OTH-CMDXF-). I bought this stock in November 2008 and some more in June 2009. This is a small dividend paying technology company that does business internationally. I have made a total return of 48% per year on this stock. About 6% per year would be attributable to dividends. It was not a large investment.

When I look at insider trading I find some $11M of net insider selling. There is too small amount of insider buying to mention. Although insiders do own stock in this company in the millions of dollars, they do not own a substantial amount of outstanding shares. The CEO has sold off $2.3M in shares, but he still owns some $8M in shares. A number of officers have sold off shares to the tune of $7.3M, but it seems they are mostly selling off stock options. I consider all this action to be neutral.

It is a smart move for insiders of small fast growing companies to sell their shares in the company they work for and diversify their stock holdings. Also, except for the CFO, all other insiders generally have more shares than stock options. I glad to see a lot of insiders holding sizable amounts of this stock. This is positive. Also, the company has just raised the dividends by 5% and given a special dividend in June of this year. This is also positive. The recent stock split is also positive. You often get an uptick in the stock price with a split and this is what happened.

Just under 60% of the shares are held by 33 institutions. There has been some buying and selling over the past 3 months, but there is a net increase of 1.8M shares held by institutions over the past 3 months.

When I look at 5 year median Price/Earnings Ratios, I get a low of 11.56 and a high of 20.34. The current P/E of 24.63 is on the relatively high side. However, the P/E ratios have been increasing over the past 10 years and a P/E of 24.63 is not particularly high for a fast growing tech company.

I get a 10 year median Price/Book Value ratio of 4.85. The current one of 13.54 is a lot higher. This ratio has also been growing of late. However, on an absolute basis, a P/B Ratio of 13.54 is high. I get a Graham Price of $3.45 and a current stock price of $13.30. The current price is 285% higher than the Graham Price. However, the low and high difference between the Graham Price and Stock price last year ran from 156% to 305%. As you can see, the stock price has been moving up quite quickly on this stock.

I get a current dividend yield of 3.16% and a 5 year median dividend yield of 4.18%. By this this standard the current stock price is high also. There is not any good news on current stock price looking at the Price/Sales ratio also. The 5 year P/S Ratio is 4.58 and the current one is 8.79. On this ratio, lower is better.

There are few analysts following this stock, but the recommendations I see are Strong Buy, Buy, Hold and Underperform. The consensus would be a Buy. There is a big discrepancy in earnings estimates from $.54 to $.80 to $1.10. The P/E of each is 24.6, 16.6 to 12.09, respectively. The thing is that if you want to buy this stock, the price may never get any better as it seems to be a fast moving tech stock. But, it is a risky stock.

See a Can Tech Letter interview on this company. Also, there is another blog entry on this stock at All Time High Stocks.

I have done very well by this stock. But, as I said yesterday, I will hold on to what I have at the moment, but I will probably sell stock equal to my original purchase price at some point in the future.

Computer Modelling Group Ltd. is a computer software technology and consulting company serving the oil and gas industry. CMG is the leading supplier of advanced processes reservoir modelling software in the world with a blue chip client base of international oil companies and technology centers in approximately 50 countries. Its web site is here Computer Modelling. See my spreadsheet at cmg.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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