I own this stock of Computer Modelling Group Ltd (TSX-CMG, OTC-CMDXF). I first bought this stock when I was looking for something to buy after selling SNC in July 2008. This company is a dividend paying growth stock that would also be considered to be a small cap with a capitalization at that time of around $115 million. At that time Insiders were buying this stock. It has great growth and it is information technology a favourite sector of mine.
When I was updating my spreadsheet, I noticed insiders started to buy in the bear market when the stock price went below $7 and stop around $4.50. There have been no further buys since April. This company hit a peak in 2015 and it has not done much since. However, it is connected to the Oil and Gas industry and I think that this accounts for it.
The dividend yields are moderate with dividend growth currently non-existent. When this company was doing well, it gave out special dividends as it could afford them. The current dividend is moderate (2% to 4% ranges) at 3.93%. The 5, 10 and historical dividend yields are also moderate at 4.52%, 3.65% and 3.65% respectively.
The Dividend Payout Ratios (DPR) were unsustainable and dividends have been cut to a level that appears to be sustainable. The DPR for EPS for 2020 is 138% with 5 year coverage at 137%. The DPR for CFPS for 2020 is $112% with 5 year coverage at 88%. The DPR for Free Cash Flow for 2020 is 164% with 5 year coverage at 139%. The dividend was unsustainable and they have just cut it by 50%. The new dividend should be fine as the DPR for EPS for 2021 is expected to be 83%, the DPR for CFPS for 2021 is expected to 60% and the DPR for FCF for 2021 is expected to be 58%.
Debt Ratios are fine, but needs some adjustment for the future. The Long Term Debt/Market Cap Ratio is 0.15. The Liquidity Ratio for 2020 is 1.65 with a 5 year median of 1.96. The Debt Ratio for 2020 is 1.47 with a 5 year ratio of 2.22. The Leverage and Debt/Equity Ratios are 3.15 and 2.15 with 5 year medians at 1.69 and 0.69. These ratios have changed mainly because of new account rules (for lease liabilities and right-of-use Assets).
The Total Return per year is shown below for years of 5 to 23 to the end of 2019. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
|From||Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.98, 30.26 and 33.81. The corresponding 10 year ratios are 21.01, 28.93 and 33.96. The corresponding historical ratios are 10.22, 16.72 and 20.34. The current P/E Ratio is 19.96 based on a stock price of $4.79 and 2021 EPS estimate of $0.24. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $1.61. The 10 year low, median, and high median Price/Graham Price Ratios are 3.15, 4.04 and 4.86. The current P/GP Ratio is 2.98 based on a stock price of $4.79. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 12.69. The current P/B Ratio is 10.02 based on a stock price of $4.79, Book Value of $38.4M, and Book Value per Share of $0.48. The current ratio is 21% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 24.13. The current P/CF Ratio is 14.52 based on 2021 Cash Flow per Share estimate of $0.33, Cash Flow of $26.5M and a stock price of $4.79. The current ratio is 40% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 3.65%. The current dividend yield is 4.18% based on a stock price of $4.79 and dividends of $0.20. The current dividend yield is 14% above the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of also of 3.65%. The current dividend yield is 4.18% based on a stock price of $4.79 and dividends of $0.20. The current dividend yield is 14% above the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 10.39. The current P/S Ratio is 5.62 based on a stock price of $4.97, 2021 Revenue estimate of $68.4M and Revenue per Share of $0.85. The current ratio is 56% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably reasonable and below the median. The dividend yield tests are showing that the stock price is reasonable and below the median. The P/S Ratio test confirms this and suggests it might be cheap. The dividend yield tests are just showing the price as reasonable because the company has cut the dividends by 50%. Dividend cuts signal that management do not expect things to get better in the short term.
Bye the way, there is nothing particularly wrong with the other tests which signal that the stock price is relatively cheap. Ratios are, of course, rather high, but that is because this stock was a fast growing tech stock. The problem for this tech stock is that it services the Oil and Gas industry and this industry is currently in trouble.
Is it a good company at a reasonable price? I still like this company and I am going to hold on to the shares that I have. I am not buying any stock because basically I do not have spare money. The price is reasonable at this time.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2) and Hold (4). The consensus would be a Buy. The 12 month stock price consensus is $5.46. This implies a total return of 18.16% with 13.99% from capital gains and $4.18% from dividends.
Analysts were never very interested in this small company and they stopped being interested in 2017 as shown by the entries on Stock Chase. Stephanie Bedard-Chateauneuf likes this stock on Motley Fool back in February. A writer on Simply Wall Street talks about this company’s beta and what it means. There are risks to this stock as shown on Simply Wall Street Executive Summary. Nick Waddell on CanTech talks about this stock.
Computer Modelling Group Ltd is a Canada-based provider of reservoir simulation software for the oil and gas industry. Its capabilities include integrated analysis and optimization, black oil and unconventional simulation, reservoir and production system modelling, post-processor visualization, compositional simulation, thermal processes simulation, and fluid property characterization. The firm has operations in over 50 countries in the Americas, Europe, Middle East, Africa, and Asia-Pacific regions. Its web site is here Computer Modelling Group Ltd.
The last stock I wrote about was about was CI Financial Corp (TSX-CIX, OTC-CIFAF) ... learn more. The next stock I will write about will be Parkland Fuel Corp (TSX-PKI, OTC-PKIUF) ... learn more on Friday, June 26, 2020 around 5 pm. Tomorrow on my other blog I will write about Predictable Interest.... learn more on Thursday, June 25, 2020 around 5 pm.
Also, on my book blog I have put a review of the book Future of Capitalism by Paul Collier learn more...
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