I do not own this stock of Absolute Software Corporation (TSX-ABST, NASDAQ-ABST). 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.
When I was updating my spreadsheet, I noticed since March 2020 low, this stock has risen quite a bit. In 2020, it was up over 74% and 15% year to date.
The dividend yields are low with dividend growth non-existent. The current dividend yield is low (below 2%) at 1.84%. The 5, 7 and historical median dividend yields are moderate (2% to 4% ranges) at 4.26%. 3.77% and 3.77%. The dividends have only been granted for the past 7 years. Dividends have been flat since 2017 and analysts do not expect any increases in the near term. There were dividend increases in the past. The dividends are paid in CDN$ but the company is reporting in US$.
The Dividend Payout Ratios (DPR) need improving. The DPR for EPS is 133% with 5 year coverage at 199%. The DPR for CFPS is 32% with 5 year coverage at 58%. This is in CDN$ terms. The DPR for Free Cash Flow is 48% with 5 year coverage at 136%. This is in US$. The DPR for Net Income in US$ is 97%.
Debt Ratios are fine. The problem with looking at debt ratios is that a lot of the debt is in Deferred Revenue. Deferred revenue is a liability on a company's balance sheet that represents a prepayment by its customers for goods or services that have yet to be delivered. So, the Balance Sheet for this company is better than it first appears to be.
The Total Return per year is shown below for years of 5 to 20 to the end of 2020 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 3.46% | 18.18% | 14.92% | 3.26% |
| 2010 | 10 | 6.94% | 17.95% | 15.14% | 2.81% |
| 2005 | 15 | 17.17% | 15.35% | 1.83% | |
| 2000 | 20 | 20.66% | 19.09% | 1.57% |
The Total Return per year is shown below for years of 5 to 19 to the end of 2020 in US$. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 1.64% | 21.74% | 18.26% | 3.48% |
| 2010 | 10 | 3.22% | 14.97% | 12.40% | 2.57% |
| 2005 | 15 | 15.25% | 13.51% | 1.74% | |
| 2001 | 19 | 26.09% | 24.00% | 2.10% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 21.98, 32.10 and 39.22. The corresponding 10 year ratios are 25.70, 33.21 and 40.72. The corresponding historical ratios are all negative. The current P/E Ratio is 90.77 based on a stock price of $17.40 and EPS of $0.19 ($0.15 US$). This stock price testing suggests that the stock price is relatively expensive. This testing is using CDN$.
I get a Graham Price of $3.13. The 10 year low, median, and high median Price/Graham Price Ratios are 2.36, 2.96 and 3.75. The current P/GP Ratio is 5.56 based on a stock price of $17.40. This stock price testing suggests that the stock price is relatively expensive. This testing is using CDN$.
I cannot do a Price/Book Value per Share Ratio test because I get a 10 year median Price/Book Value per Share Ratios that are negative because the book value is negative due to Deferred Revenue liabilities.
I get a 10 year median Price/Cash Flow per Share Ratio of 16.00. The current P/F ratio is 18.41 based on a stock price of $13.62 and Cash Flow per Share estimate for 2021 of $0.74 and Cash Flow of $31.5M. This stock price testing suggests that the stock price is relatively expensive. This testing is using US$. The company reports in US$.
I get an historical and 7 year median dividend yield of 3.77%. The current dividend yield is 1.84% based on dividends $0.32 and a stock price of $17.40. The current dividend yield is 51% below the historical and 7 year dividend yield. This stock price testing suggests that the stock price is relatively expensive. This testing is using CDN$. Dividends are paid in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 2.68. The current P/S Ratio is 4.95 based on Revenue estimate for 2021 of $117M, Revenue per Share of $2.75 and a stock price of $13.62. The current ratio is 85% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is using US$. The company reports in US$.
Results of stock price testing is that the stock price is probably expensive. The testing I have done shows this. The only problems test would be the dividend yield test because dividends are currently flat and this test works best when dividends are increasing.
Is it a good company at a reasonable price? It would seem that the stock price is expensive. This is not surprising as the stock market is generally relatively high and this stock has had a good run up in price recently. This is a tech company so is on the risky side. It is currently not a dividend growth company so would not be on my radar.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (3) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $18.76 ($14.68 US$). This implies a total return of 9.66% with 7.82% from capital gains and 1.84% from dividends. The analysts’ recommendations and the 12 month stock price do not seem to match up.
There is only one recent analyst’s comment on Stock Chase which has a target price of $13.49. Stock Chase gives this stock one star out of 5. Adam Othman on Motley Fool says to buy this for potential growth over the next 10 years. The Executive SummarySimply Wall Street list 4 risk factors and gives this stock 3 stars out of 6. A writer on Simply Wall Street says the fair value of this stock is $21.61 CDN$. Nick Waddell on CanTech gives his analysis of this stock.
Absolute Software Corp is engaged in the development, marketing, and provision of a cloud-based endpoint visibility and control platform that provides management and security of computing devices. Geographically, it derives a majority of revenue from the United States and also has a presence in Canada and the Rest of world. Its web site is here Absolute Software Corporation.
The last stock I wrote about was about was AGF Management Ltd (TSX-AGF.B, OTC-AGFMF) ... learn more. The next stock I will write about will be Canadian Pacific Railway (TSX-CP, NYSE-CP) ... learn more on Monday, February 8, 2021 around 5 pm.
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