Computer Modelling Group Ltd 2

I own this stock of Computer Modelling Group Ltd. (TSX-CMG, OTC- CMDXF). I bought this tech stock in 2008 and 2009. It had almost doubled in price by 2011, so I sold half of what I owned to lock in some profit.

When I look at insider trading I find some 13.6M of insider selling and $13.5M of net insider selling. There is a small bit of insider buying. Selling is by CEO, CFO, officers and directors. Buying is by officers and directors. Some of the selling is options, but other are share on the open market.

The CEO has shares worth $26.3M and has options are worth $5.3M. The CFO has shares worth $2.8M and has options are worth $3.2M. An officer has shares worth $1M and has options are worth $1.7M. A Director have some shares and has options are worth $0.3M. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings Ratios are 21.31, 22.26 and 26.87. The current P/E Ratio is 30.50 based on a stock price of $23.18 and 2014 earnings of $0.76. (This stock has a financial year ending in March each year.) This test shows that the stock price is relatively rather high. A P/E of 30 is rather an high P/E Ratios, but fast growing companies often have quite high P/E Ratios.

I get a Graham Price of $4.80. The 10 year low, median and high median Price/Graham Price Ratios are 1.42, 1.92 and 2.37. The current P/GP Ratio is 4.83. This also shows that the stock price is relatively rather high. A P/GP Ratio is 4.83 is also rather high on an absolute basis.

The 10 year Price/Book Value per Share Ratio is 6.64 and the current P/B Ratio is 17.19, a value some 160% higher. The P/B Ratio has been climbing in recent years and the 5 year P/B Ratio is 12.87. Still the current P/B Ratio is some 34% higher than the 5 year P/B Ratio. This test says that the stock price is relatively high. Also a P/B Ratio of 17.19 is rather high on an absolute basis.

The current Dividend yield is 3.11% and the 5 year median is 3.63%, a value some 15% higher. If you include the special dividend (and this company generally declares a special dividend every year) the dividend yield becomes 3.32% a value only 8.6% lower than the 5 year average. You want the current dividend yield to be higher than the 5 year median for a good price, but the current dividend yield is not that far off the median. This test puts the stock price more in the reasonable category than the high category. (Note that the company has declared a dividend increase of 12.5% and a special dividend.)

So it really comes down to the fact that on a number of measures, the stock price is relatively high and it only comes inter a reasonable range looking at dividend yield. This is a growth company and you can expect ratios to be on the high side.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold. The consensus recommendation would be a Buy. Most of the recommendations are a buy. The 12 month consensus stock price is $25.70. This implies a 12 month total return of 13.63%, with 10.87% from capital gains and 2.67% from dividends.

Because this is a tech stock, CanTech has commented on it on their site. An analysts in October 2012 thought it was overpriced then at $20. He is not the only analysts to think that the stock is overpriced. However, there are analysts who believe that this company will continue to grow strongly so they consider it a buy.

By the way, there is also a recent article in CanTech about 11 other Canadian Tec stocks besides CMG that pay dividends.

Since I have already made money on this stock having sold some to lock in a profit, I feel comfortable holding on to what I have. I think that this stock has some ways to go up yet, but since this is June, it may not happen immediately. When buying any sort of fast growing stock, you really need to keep an eye on it as things can change rapidly in the stock market, especially to fast growing stocks. See my spreadsheet at cmg.htm.

This is the second of two parts. The first part was posted on Wednesday, June 12, 2013 and is available here.

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.

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 or StockTwits.