Tuesday, July 7, 2015

Computer Modelling Group Ltd. 2

Sound bite for Twitter and StockTwits is: Price is reasonable to expensive. The easy money has already been made on this stock. When I bought stock in this company it had a market cap of $115M and it is now $1B. They have just slowed during an oil/gas bear market and so really have not done that badly. It could easily take off when the price of oil and gas recover. However, insiders seem to selling not buying at the present time. I will currently hold on to the shares I have. See my spreadsheet at cmg.htm.

I own this stock of Computer Modelling Group Ltd. (TSX-CMG, OTC-CMDXF). I bought this company in 2008 because it is a dividend paying growth stock that would also be considered to be a small cap with a capitalization of around $115 million. Insiders are currently buying this stock. It has great growth and it is information technology, a favourite sector of mine. When I sold some of my TD Bank stock in June 2009, I bought some more. Because the stock grew rapidly and because it is a tech stock, I sold some shares in 2011 to lock in profit.

Outstanding shares were increased by around 876,000 shares in 2015 financial year for stock options. This is around 1.13% of outstanding shares. They are giving out a lot more stock options than other companies are, but tech companies tend to do this. In insider trading there was $2.3M of insider selling and $0.6M of insider buying and net insider selling of $1.7M. This is around 0.17% of the company's market cap and this is a little on the high side for net insider selling.

There is insider ownership with the CEO owning shares worth around $25m and 2.6% of the outstanding shares. An officer owes shares worth around $22.5M and some 2.3% of the outstanding shares. The chairman owns shares worth around $4.6M and some 0.5% of the outstanding shares. Some of the insider own less shares than they did at my last review. For example, the CEO used to own some 3.86M shares and now owns 2.01M shares.

The 5 year low, median and high median Price/Earnings per Share Ratios are 23.47, 28.46 and 35.34. They are higher than the 10 year corresponding values of 14.12, 19.86 and 24.37. The current P/E Rati is 31.98 based on a stock price of $13.11 and 2016 stock price of $0.41. This stock price testing suggests that the stock price is relatively reasonable. However, the price is towards to top end of the reasonableness scale.

I get a Graham Price of $2.73. The 10 year Price/Graham Price Ratios are 1.93, 2.86 and 3.59. These are rather high ratios. The current P/GP Ratio is 4.80 based on a stock price of $13.11. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year Price/Book Value per Share Ratio of 9.31. This is quite a high P/B Ratio. The current ratio at 16.22 is some 74% higher. A P/B Ratio of 16.22 is a high ratio. The current ratio is based on a BVPS of $0.81 and a stock price of $13.11. This stock price testing suggests that the stock price is relatively expensive.

The 5 year median dividend yield is 3.40%. The current dividend yield is 3.05% based on a stock price of $13.11 and dividends of $0.40. The current yield is some 10.3% lower than the 5 year median. I would prefer for the current dividend yield to be higher than the 5 year median dividend yield, but it is not that much lower. This stock price testing suggests that the stock price is relatively reasonable.

The historical median dividend yield is also 3.40% and testing against that would give you also a relatively reasonable stock price. Also, the historical median close dividend yield is 2.97%, some 2.9% lower than the current dividend yield of 3.05% and this testing would suggest that the stock price is relatively reasonable.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. The consensus recommendation would be a Hold. The 12 month stock price is $14.30. This implies a total return of 12.13% with 3.05% from dividends and 9.08% from capital gains.

Nick Waddell at CanTech thought that this company was a buy in February of 2015. In a recent report TD moved CMG ratings to Hold says Dakota Financial News.

This is the second of two parts. The first part was posted on Monday, July 06, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

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. 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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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