Absolute Software Corporation

Sound bite for Twitter and StockTwits is: High Risk Tech. This is not the sort of company I like to buy. It has a negative book value and cannot afford its dividends. This is the sort of company you can lose money one. It would be a very speculative stock buy .See my spreadsheet on Absolute Software Corporation.

I do not own this stock of ). The Motley Fool published an article by Matt DiLallo in December 2014 called The 10 Best Stocks in Canada. It is basically a list of the best-performing Canadian stocks of the past decade.

This company reports in US$, but the dividends are paid in CDN$. They just started to pay dividends in 2013. I think that they cannot afford to pay dividends. The Dividend Payout Ratio for EPS for 2016 is 134%. In the past 4 year they have paid out 190% of the EPS in dividends. I think that dividends are at risk but others think not because they have lots of cash.

Their outstanding shares have decreased by 2.3% and 1.2% per year over the past 5 and 10 years. If you want to see what growth this company has you have to look at Revenue, Earnings and Cash Flow rather than the per share values. For example, the 5 and 10 year growth in Revenue is at 4.6% and 24.4% per year. The 5 and 10 year growth in Revenue per Share is 7% and 25.9% per year. Not a big difference, but there is a difference.

Their debt ratios are awful. The Liquidity Ratio for 2016 is 0.63. When this ratio is less than 1.00 it means that the current assets cannot cover the current liabilities. Cash Flow is no help as cash flow cannot cover dividends. The Debt Ratio is just 0.72. Here again when this ratio is less than 1.00 it means that the assets cannot cover the liabilities. The company has a negative book value. You cannot calculate Leverage or Debt/Equity Ratios.

The 5 year low, median and high median Price/Earnings per Share Ratios are 35.39, 46.18 and 56.98. These ratios are rather high. Longer term ratios are negative because this company did not have positive earnings before 2013. Since the EPS for 2017 is expected to be negative, I cannot get a current P/E Ratio.

The P/E Ratio for 2018 is 180.77 based on a stock price of $7.09 CDN$ and 2018 EPS of $0.04 CDN$. The P/E Ratio for 2019 is 20.09 based on a stock price of $7.09 CDN$ and 2019 EPS of $0.35 CDN$. Problem with looking so far ahead is that the EPS are probably wrong. Analysts have a hard enough time getting EPS for this year anywhere near correct, let alone EPS for future years. Future year earnings are purely speculative. But if you want to speculate, this is what to look for.

I cannot calculate a Graham Price as the book value is negative. I cannot do any testing using the book value because it is negative.

Using the dividend yield, it would seem that the current dividend yield of 4.51% is higher than the 4 year median dividend yield of 3.46% by some 30%. This would suggest that the stock price is relatively cheap. The current dividend yield is based dividends of $0.32 CDN$ and a stock price of $7.09.

Possibly the only test you can do is for Revenue. The 10 year median P/S Ratio is 3.00 in US$. The current P/S Ratio is 2.22 in US$. This value is some 26% lower than the 10 year median. The current P/S Ratio is based on 2017 Revenue estimate of $92.6M US$, Revenue per Share of $2.38 US$ and stock price of $5.28 US$. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform Recommendations. Most of the recommendations are a Strong Buy and the consensus is a Buy recommendation. The 12 month stock price is $6.58 US$ or $8.60 CDN$. This implies a total return of 25.85% with a capital gain of 21.34% and dividends of 4.51%. This is based on a current stock price of $7.09 CDN$.

Scott Perkins in an article at Simply Wall Street comments on the fact that this company has no long term debt, but does have a liquidity problem. Don Majors on Sports Perspectives says that Scotia Bank confirmed their sector perform (or Hold rating) and a target price of $7.50. This site of Investors Ideas look at Defense and Security stocks, including this company. National Bank Financial analysts Richard Tse is bearish on this company in a recent Can Tech article.

Absolute Software Corporation is the industry standard in persistent endpoint security and management for computers, laptops, tablets and smartphones. The Company, a leader in device security and management tracking for 20 years, has over 30,000 commercial customers worldwide. Its web site is here Absolute Software Corporation.

The last stock I wrote about was about was Canadian National Railway (TSX-CNR, NYSE-CNI)... learn more . The next stock I will write about will be ARC Resources Ltd. (TSX-ARX, OTC-AETUF)... learn more on Wednesday, February 15, 2017 around 5 pm. Tomorrow I will publish an update for Mullen Group Ltd. (TSX-MTL, OTC- MLLGF... learn more on Tuesday, February 14, 2017 around 5 pm.

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.