Wednesday, August 3, 2016


Sound bite for Twitter and StockTwits is: Price seems a little high. Tech stocks often have rather high valuations, but this current price seems a little too high. It might be wise to get a pullback in price closer to $5.00 to pick stock up at a good price. See my spreadsheet on TECSYS Inc.

I own this stock of TECSYS Inc. (TSX-TCS, OTC-TCYSF). I came across this stock when I was looking for a dividend paying small cap stock as a filler stock. I consider a filler stock to be one to soak up small amounts of investment money that I have left over in my account, especially in the TFSA after I have made my main purchase for the year.

The first thing I noticed in that there is a lot of insider selling. Usually insider selling is relatively small to the company's market cap (like around 0.02%). In this case it is 1.94%. It is a rather small company but market cap is still $141M. Even David Brereton, the founder and chairman sold stock over the past year. He went from owner 27.3% of the company to 23.6%. In fact David Brereton has been selling off stock over the last few years. In 2013 he owned 30.8% of the outstanding share, in 2014 he owned 27.9% and in 2015 he owned 27.3% as per above.

Also both the CEO and CFO sold stock last year. The trouble with people selling is that you never know why. They could just need the money. This is not the first time that the chairman and the CEO have sold stock. Both are of the Brereton family.

They started to pay dividends in 2008. Dividend yield is low and growth is moderate. The current dividend yield is 1.04% based on dividends $0.12 per year and a stock price of $11.50. The 5 year median dividend yield is also low at 1.57%. The 8 year median dividend is higher at 2.53%. The dividends have grown at 12.7% and 12.1% per year over the past 5 and 8 years. The last dividend increase to occur was in 2016 and it was a 10% increase in dividends.

The Dividend Payout Ratio for EPS was 26% in 2015. The 5 year median is higher at 67%. The DPR for EPS for 2017 is expected to be around 30%. (This company has a reporting date in April each year, so the last annual report was for April 2016 and we are now in the 2017 financial year.)

Outstanding shares have gone down by 1% and up by 1% over the past 5 and 10 years. Shares have increased due to Share Issues and Stock Options and decreased due to Buy Backs. The stock option plan has been cancelled. There has been good growth in Revenue, Earnings and Cash Flow.

Revenue is up by 13.6% and 7.2% per year over the past 5 and 10 years. EPS is up by 27% per year over the past 5 years. I do not have EPS per year over the past 10 years as EPS was negative 10 years ago. However, total EPS is up by 425% over the past 10 years. Cash Flow is up by 30.5% over the past 5 years. Total Cash Flow is up by 998% over the past 10 years. Cash Flow was also negative 10 years ago.

The 5 year low, median and high median P/E Ratios are 21.69, 29.912 and 38.13. The corresponding 10 year values are lower at 15.00, 19.15 and 23.46. The historical values are even lower at 8.69, 11.51 and 14.33. The problem is that Tech companies tend to have rather high valuation, especially once they get going. The current P/E Ratio is 30.26 based on a stock price of $11.50 and 2017 EPS of $0.38. This P/E would seem a little high and also above the median.

I get a Graham Price of $4.37. The 10 year median Price/Graham Price Ratios are 0.94, 1.19 and 1.46. The current P/GP Ratio is 2.63 based on a stock price of $11.50. This testing would suggest that the stock price is relatively high.

The 10 year Price/Book Value per Share is 1.51. The current P/B Ratio is 5.16 based on BVPS of $2.23 and a stock price of $11.50. The current P/B Ratio is some 242% higher than the 10 year median P/B Ratio. This testing would suggest that the stock price is relatively high. The problem is that stock price (36% over 5 years) has been increasing much quicker than Book Value (9.2% over 5 years).

The current dividend yield is 1.04% based on dividends of $0.12 and a stock price of $11.50. The historical dividend yield is 2.53% a value some 58% higher. This testing would suggest that the stock price is relatively high.

When I look at analysts' recommendations, I only find one and it is a Buy Recommendation. The 12 month stock price is $12.30. This implies a total return of 8% with 6.965 from capital gains and 1.04% from dividends.

This is an article by Dean Beeby of the Canadian Press published in the Toronto Star. TECSYS's project for LCBO was more expensive and a year late. They quoted the fact that they could not use TECSYS's system out of the box and also changes to the original specs. I worked in IT. First it should have been known at the beginning that the system would not be used as is. Secondly, you can never ever bring projects in on time and on budget when there are changes to the specifications. Changes to the specifications should never be allowed. If really necessary, they should be done later.

Jared Coughlin at Community Financial News about a report from research analysts at Cormark on TECSYS.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those reports here and here.

The last stock I wrote about was about was Pulse Seismic Inc. (TSX-PSD, OTC-PLSDF)... learn more . The next stock I will write about will be Savaria Corporation (TSX-SIS, OTC-SISXF)... learn more on Friday, August 5, 2016 around 5 pm. Tomorrow on my other blog I will write about Something to Buy August 2016... learn more on Thursday, August 4, 2016 around 5 pm.

TECSYS Inc. is a supply chain management software provider that delivers powerful enterprise distribution, warehouse and transportation logistics software solutions. The company's customers include about 600 mid-size and Fortune 1000 corporations in healthcare, heavy equipment, third-party logistics, and general wholesale high- volume distribution industries. Its web site is here TECSYS Inc. .

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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