Monday, January 16, 2017

Sylogist Ltd

Sound bite for Twitter and StockTwits is: Lost Momentum. This tech stock seems to have lost momentum lately and seems to have a comparatively high price. There has been insider buying this year, but most insider bought stock around $9.00. See my spreadsheet on Sylogist Ltd.

I do not own this stock of Sylogist Ltd (TSX-SYZ, OTC-SYZLF). I learned about this stock from the newsletter I subscribe to. This is a small cap stock that I have not reviewed before.

This is a relatively small Tech company that is growing fast. They are currently worth some $237M, but just 10 years ago the company was worth just $12M. This stock also pays a dividend. It started to pay dividends in 2007 and has a done a good job of increasing the dividends each year. Dividends have grown at 22.7% per year over the past 5 years. The last dividend increase was for 13.7% and it was made in 2016.

The dividends are moderate with current good growth in dividends as discussed above. The current dividend is 2.71% based on dividends of $0.28 and a stock price of $10.35. The 5 year median dividend yield is 2.91%. However, dividend yield has been much higher as it topped out in 2012 at 7.84%.

The dividend growth has slowed down. Probably because they were paying out too much in regards to earnings. The Dividend Payout Ratio for 2016 is 89%, but the 5 year coverage DPR is 118%. The DPR for CFPS is also a bit high at 44% with 5 year coverage at 61.6%. Basically it is preferred that DPR for EPS be at or under 80% and for CFPS at or under 40%. (Note the financial year ends in September each year.)

In 2012, CEO Jim Wilson says the company's practice is to pay out, over the year, less than one-half of its expected annual operating cash flow. However, over the last 3 years they have been paying out 85.95%, 70.23% and 53.56% of the annual operation cash flow. Maybe the expected cash flow was less than expected.

Even with this high dividend payout, the company is in quite good shape. It has cash on hand of $1.24 per share which is some 15.7% of the stocks' price. It also has some very good debt ratios. The Liquidity Ratio for 2016 is 2.61 with a 5 year median of 3.49. The Debt Ratio for 2016 is 3.57 with a 5 year median ratio of 3.97. The Leverage and Debt/Equity Ratios for 2016 are 1.39 and 0.39 with 5 year median ratios of 1.34 and 0.34 respectively. Whichever way you look at this stock, they have very little debt.

This stock has certainly been rewarding its investors. The total return over the past 5 and 10 years to the end of December 2016 is 40.38% and 28.94% per year. The portion of this return attributable to dividends is 5.96% and 3.04% per year. The portion of this return attributable to capital gains is 34.42% and 25.83% per year.

The 5 year low, median and high median Price/Earnings per Share Ratios are 22.07, 31.30 and 40.54. The corresponding 10 year ratios are 14.63, 22.63 and 29.17. It would seem that the stock price rise has a lot to do with increasing P/E Ratios. If we use the EPS for 2016 of $0.28 and the current price of $10.35, then the P/E Ratio is 39.96. This would appear to be a rather high P/E Ratio.

I get a Graham Price of $3.49. The 10 year low, median and high median Price/Graham Price Ratios are 1.16, 1.64 and 2.11. The current P/GP Ratio is 2.97 based on a stock price of $10.35. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 2.68. The current P/B Ratios is 5.36 a value 100% higher. The current P/B Ratio is based on BVPS of $1.93 and a stock price of $10.35. The problem is that the stock price is rising faster than Book Value. This stock price testing suggests that the stock price is relatively expensive.

The 5 year and 7 year median dividend yields are 2.85% and 2.91%. They are some 5% and 7% higher than the current dividend yield of 2.71%. The current dividend yield is based on dividends $0.28 and a stock price of $10.35. This stock price testing suggests that the stock price is relatively reasonable but above the median.

Generally the time to buy fact rising tech stocks is when they have rising momentum. This stock seems to have lost its momentum in August 2016 and has been mucking about since then. You can often make money on tech stocks with very high P/E Ratios if they have momentum.

I cannot find any analysts that follow this stock so there are no recommendations. However, Stephen Groff on Stock Chase gave it a Buy Rating in December 2016 at $10.25.

Nick Waddell of CanTech talked about this stock in 2012 and said it reminds some of a junior version of Constellation Software. Staff at Stock Newsweek say that the Value Composite score for this stock is 66. This is using a scale from 0 to 100 where a lower score may indicate an undervalued company and a higher score would represent an expensive or possibly overvalued company. Some analysts at Stock Chase like this company. The Catalyst Tree has an interesting post on Seeking Alpha. He says that Sylogist buy backs have been funded by issuing shares.

The last stock I wrote about was about was Calian Technologies Ltd. (TSX-CTY, OTC- CLNFF)... learn more . The next stock I will write about will be Toronto Dominion Bank (TSX-TD, NYSE-TD)... learn more on Wednesday, January 18, 2017 around 5 pm. Tomorrow on my other blog I will write about Dividend Payout Ratios... learn more on Tuesday, January 17, 2017 around 5 pm.

Sylogist Ltd. is a technology innovation and licensing company, which, through strategic acquisitions, investments and operations management, provides intellectual property solutions to a range of public and private sector customers. Its web site is here Sylogist Ltd.

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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