Wednesday, January 22, 2014

Enghouse Systems Ltd

On my other blog I am today writing about Canadian Bank Stocks...continue...

I do not own this stock of Enghouse Systems Ltd (TSX-ESL, OTC-EGHSF). This stock has been recommended by Keystone Financial Publishing as a good Small Cap tech stock with dividend.

This company started to dividends in 2008, which is just 5 years ago. The 5 year growth in dividends is 27.42%. The last dividend increase was in 2013 and it was for 23%. The current dividend yield is just 1.01%. The 5 year median dividend yield is much better, but still low at 1.87%. So this dividend growth company has the configuration of low yields and high increases for dividends.

The 5 year median Dividend Payout Ratios are good with the one for earnings at 31.5% and the one for cash flow at 16.6%. The DPR for 2013 were similar at 31.5% for EPS and 18.9% for cash flows. The DPRs are expected to be similar again in 2014.

Total return is also quite good with 5 and 10 year growth at 52.06% and 15.53% per year. The dividend portion of this growth is at 1.90 and 0.49% per year over the past 5 and 10 years. The capital gain portion is at 50.16% and 15.05% per year over the past 5 and 10 years.

Outstanding shares have increased by less than 1% per year over the past 5 and 10 years. The shares have increased due to Stock Options and have decreased due to Buy Backs. The growth in revenue, earnings and cash flow has all basically been quite good.

Revenue per Share has grown at 27% and 14% per year over the past 5 and 10 years. If you look at the 5 year running averages, it has grown at a lower rate of 17% and 15% per year. Earnings have grown at 32% and 9% per year over the past 5 and 10 years. If you look at the 5 year running averages the growth is a bit less at 15% and 7% per year.

The growth in cash flow is similar with the 5 and 10 year growth at 23% and 10% per year and the 5 year median growth at 13% and 10% per year. There has been good growth over the past 5 years, but exactly 5 years ago revenue, earnings and cash flow were lower than in prior years as the company hit a low point.

Over the past 10 years there were 6 years where the Return on Equity was below 10%. During the past 3 years ROE has been above 10%. The ROE is expected to be above 10% over the next two years. For 2013, the ROE on comprehensive income is higher at 16.2%, but it has varied in other years.

All the debt ratios are good. The Liquidity Ratio for 2013 was 1.68. The Debt Ratio was 2.92. The Leverage and Debt/Equity Ratios are 1.52 and 0.52. All these values are very good.

I certainly like this tech company. I do not have any shares for the simple fact that you cannot invest in everything. I already have some 50 different stocks in my various accounts. This stock has grown their dividends nicely and they have good debt ratios. These are things I very much like in a stock. See my spreadsheet at esl.htm.

This is the first of two parts. The second part will be posted on Thursday, January 23, 2014 and will be available here.

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 Systems.

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.

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