Enghouse Systems Ltd. 2

On my other blog I am today writing about a sample dividend growth stock portfolio 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 dividends.

When I look at insider trading over the past year, I see $1.4M of insider buying with $2.6M of insider selling with a net of insider selling at $1.3M. This amount of net insider selling amounts to just 0.13% of the stock's market cap and so is a relatively small amount.

There is some insider ownership with the CEO and Chairman having shares worth around $172.7M and a director having shares worth around $15.4M. Last year the number of outstanding shares was increased by 121,000 shares for stock options. The book value of these shares is $1.4M. This amount of shares has a value of $4.6M at the end of the October 2014 financial year.

The 5 year low, median and high median Price/Earnings per Share Ratios are 15.70, 20.06 and 22.88. This is somewhat lower than the corresponding 10 year P/E Ratios of 17.65, 22.80 and 29.53. The current P/E Ratio is 28.01 based on a stock price of $38.93 and 2015 EPS estimate of $1.39. This stock price testing suggests that the stock price is relatively high.

I get a Graham Price of $15.78. The 10 year low, median and high median Price/Graham Price Ratios are 1.12, 1.34 and 1.65. The current P/GP Ratio is 2.47 based on a stock price of $38.93. This stock price testing suggests that the stock price is relatively high.

I get a 10 year median Price/Book Value per Share Ratio of 1.92. The current P/B Ratio is 4.89 based on a stock price of $38.93 and a current Book Value per Share of $7.96. The current P/B Ratio is 155% higher than the 10 year median P/B Ratio. This stock price testing suggests that the stock price is relatively high.

The current Dividend Yield is 1.03% based on a dividend of $0.40 and a stock price of $38.93. The 5 year median, the historical average and the historical median dividend yields are 1.74%, 1.85% and 1.74%. These dividend yields are 41%, 44% and 41% higher than the current dividend yield. This stock price testing suggests that the stock price is relatively high.

When I look at analysts' recommendations, I find Buy and Hold recommendations. The consensus would be a Buy. However, there are only 4 analysts following this stock. The 12 month stock price consensus is $45.20. This implies a total return of 17.135 with 1.03% from dividends and 16.11% from capital gains.

Joseph Solitro of the Motley Fool thinks this stock might be an interesting long term buy but he cautions that dividend yield is low. According to Legacy there was recent insider selling and TD lowered their recommendation on this stock from a Buy to a Hold. Michael Cloherty at Number Crunchers at the Globe and Mail was looking for good wealth creator stocks and this is one he came up with. The Dividend Guy blogger talks about Enghouse being on the Canadian Aristocrats list.

Sound bite for Twitter and StockTwits is: Tech stock's price is relatively high. I still like this stock, but I would not buy it at the present price as the price seems to be high. However, this stock has been relatively higher in the past. See my spreadsheet at esl.htm.

This is the second of two parts. The first part was posted on Tuesday, January 20, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

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.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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