Thursday, August 9, 2012

Wi-Lan Inc 2

I own not own this stock (TSX-WIN), but I used to when it was considered an up and coming company. However, it crashed with the 2000 bear market and I lost over 99% of my invested money. Good job I only bought a few hundred shares and did not loss that much in actual money terms. Wi-Lan has been trying to recover ever since the 2000 bear market, but the stock price is still only some 94% off the highs of 2000.

The insider trading report shows $0.59M of insider buying and $0.75M of insider selling with $0.16M net of insider selling. Insiders have options and also Restricted Share Units and Deferred Stock Units. Everyone has more options than shares however there are insiders with millions of dollars in shares. Wi-Lan has also been buying stock on the market for cancellation.

There are some 79 institutions holding 38% of the outstanding shares. Over the past 3 months they have increased their shares by just over 2%.

The 5 year low, median and high Price/Earnings Ratios are 6.06, 14.43 and 22.09. This is quite a wide spread. The company has had a number of years of earnings loses so this gets us to some negative P/E Ratios. The current P/E Ratio is 12.18. This is just below the median P/E Ratio for the last 5 years and shows a relatively good price. The ratio of 12.18 is also a reasonable one.

I get a current Graham Price of $4.67. The 6 year low, median and high Price/Graham Price Ratios are 0.52, 1.14 and 1.81. The current P/GP Ratio 1.04. This is a relatively reasonable one. Also a good stock price is near the Graham Price (or a P/GP Ratio of 1.00). (I only have 6 years of Graham Prices as the company did not earning any profits before 2006.)

The 10 year Price/Book Value Ratio is 2.41 and the current P/B Ratio of 2.01 is some 83% of the 10 year ratio and therefore shows that the stock price is reasonable. You would want the current ratio to be 80% of the 10 year ratio to show a good stock price. This is quite close.

It is hard to get much out of the dividend yield statistics as I only have them for 3 years. The 3 year median dividend yield is 1.2% and the current one of 2.87% is quite a bit higher. However, they have recently been ramming up their dividends. On the other hand 2.87% is not a bad dividend rate. They also just raised their dividend by 16.7% for the October payment. The Dividend Payout Ratio for 2011 was 35% and the one for 2012 is expected to be lower at 30%. You would want a rather low Dividend Payout Ratio for this company and it currently seems reasonable.

One note of caution is that you would want a company to have higher cash flow than earnings. This company often seems to have higher earnings than cash flow. (Also see article on Sustainable Dividends Depend on the Payout Ratio investing daily.)

However, one good thing is that currently the company has $1.54 in cash per outstanding share. This is just over 30% of the value of these shares.

When I look at analysts' recommendations I find only Strong Buy and Buy recommendations. The consensus recommendation would be a Strong Buy. Consensus 12 month stock price is $9.11. This implies a total return of 89% over the next 12 months.

One other thing I should point out is that this company has on hand in cash some $1.50 per shares. This is almost 32% of the current stock price. One analyst that thinks this is a buy talks about this. One analyst who said not to buy this company says he does not find their business attractive. He thinks that they are like ambulance chasers.

See a report on the second quarter at with Earnings and Revenue lower. See article at Financial Post.

CanTech has lately been talking about insider buying at Wi-Lan. See recent article at CanTech. They also had another article called "Wi-LAN is becoming a key player in patent monetization, says Byron's Astle". See article.

It is an interesting tech company, but they did not have a great second quarter and analysts' are revising their estimates down a bit. They have done a good job of growing this company since the 2000 bear market, but I do wonder about their future ability to pay dividends. The stock price seems reasonable, but it is not a great price, so I have a hard time believing that the 12 months consensus stock price will be met. It is not a stock I would buy at this time.

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 WiLan. 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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