Is it a good company at a reasonable price? The current stock price seems relatively reasonable. This company has provided shareholders with great returns over long periods of time. With the combination of low dividend yields but high dividend growth, dividends will do well for shareholders over time.
As with all Tech stocks, the ratios have been getting higher and higher as this bull market goes on. For example, the P/E Ratio is high at 25.62. A reasonable P/E is considered around 15. But Tech stocks tend to have higher P/E Ratios. The Tech stocks that died in the 2000 bear market generally had not earnings and some had no revenue.
One of the things I look at, using current data, is dividend yield on original investments after 5 to 15 years. I am also looking at how much of the stock cost would be covered by dividends after 5 to 15 years. In the chart below I show the numbers for this stock. For example, if you bought this stock now at the current price, you could have yield on your investment of 7.70% and 79% of your cost could be paid by dividends in 15 years’ time. This is based on the current dividend growth.
| Years | Yield | Cost Cov |
|---|---|---|
| 5 | 2.08% | 10.66% |
| 10 | 3.39% | 31.46% |
| 15 | 7.70% | 78.65% |
I do not own this stock of Enghouse Systems Ltd (TSX-ENGH, OTC-EGHSF). This stock has been recommended by Keystone Financial Publishing as a good Small Cap tech stock with dividend.
When I was updating my spreadsheet, I noticed that the company did not meet analyst’s expectations. Analysts expected Revenue of $549M, an increase of 9%, but Revenue came in at $467M, and decrease of 7%. Analysts expected EPS of $1.77, the same as in 2020, but EPS came in at $1.66, a decrease of 6%.
If you had invested in this company in December 2000, $1001.53 you would have bought 413 shares at $2.43 per share. In December 2021, after 20 years you would have received $1,364.97 in dividends. The stock would be worth $20,001.59. Your total return would have been $21,366.56.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $2.43 | $1,001.53 | 413 | 20 | $1,364.97 | $20,001.59 | $21,366.56 |
The dividend yields are low with dividend growth good. The current dividend is low (under 2%) at 1.50%. The 5, 10 and historical dividend yields are also low at 0.98%, 1.03% and 1.12%. The dividend growth is good (15% and above) with the dividends being raised by 17.8% per year for the past 5 years. The last increase was in 2021 and it was for 18.5%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2021 is 36% with 5 year coverage at 54%. The DPR for CFPS for 2021 is 20% with 5 year coverage at 30%. The DPR for Free Cash Flow is 23% with 5 year coverage at 21%.
Debt Ratios are good. They have no Long Term Debt. The Liquidity Ratio is good at 1.74. The Debt Ratio is good at 3.06. The Leverage and Debt/Equity Ratios are good at 1.48 and 0.48.
The Total Return per year is shown below for years of 5 to 26 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 17.81% | 13.46% | 11.61% | 1.85% |
| 2011 | 10 | 20.69% | 25.09% | 22.98% | 2.11% |
| 2006 | 15 | 20.91% | 19.51% | 18.09% | 1.42% |
| 2001 | 20 | 17.71% | 16.73% | 0.98% | |
| 1996 | 25 | 19.31% | 18.47% | 0.85% | |
| 1995 | 26 | 13.54% | 12.91% | 0.63% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 25.42, 32.85 and 40.24. The corresponding 10 year ratios are 24.94, 31.39 and 37.25. The corresponding historical ratios are 17.72, 22.48 and 28.52. The current P/E Ratio is 25.62 based on a current stock price of $42.79 and EPS estimate for 2022 of $1.67. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $17.53. The 10 year low, median, and high median Price/Graham Price Ratios are 2.16, 2.69 and 3.15. The current P/GP Ratio is 2.44 based on a stock price of $42.79. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. These P/GP Ratios are high. Generally, an acceptable P/GP Ratio is between 1.00 and 1.50. A ratio below 1.00 says the stock is cheap.
I get a 10 year median Price/Book Value per Share Ratio of 5.17. The current P/B Ratio is 5.23 based on a stock price of $42.79, Book Value of $454M and Book Value per Share of $8.18. The current ratio is 1% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 19.25. The current P/CF Ratio is 17.12 based on a stock price of $42.79, Cash Flow per Share of $2.50 and Cash Flow of $138.89M. The current ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 1.12%. The current dividend yield is 1.50% based on a stock price of $42.79 and Dividends of $0.64. The current dividend yield is 34% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 1.03%. The current dividend yield is 1.50% based on a stock price of $42.79 and Dividends of $0.64. The current dividend yield is 46% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 4.89. The current P/S Ratio is 4.90 based on Revenue estimate for 2022 of $485M, Revenue per Share of $8.73 and a stock price of $42.79. The current ratio is 0.3% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
Results of stock price testing is that the stock price is probably relatively reasonable. The dividend yield tests are showing the stock price as cheap, but the P/S Ratio test is only showing the stock price as reasonable. Most of the other testing is showing the stock price as reasonable and around the median.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus is $60.25. This implies a total return of 42.30% with 40.80% from capital gains and 1.50% from dividends based on a current stock price of $42.79.
When I looked at analysts’ recommendations last year, I found Strong Buy (1), Buy (3) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus is $79.20. This implies a total return of 28.63% with 27.76% from capital gains and 0.87% from dividends based on a stock price of $61.99. What happened was a loss of 30.10% with a capital loss of 30.97% and dividends of 0.87. Stock price moved from $61.99 to $42.79.
Last year, I said that I thought the stock price was on the expensive side. I said that both the dividend yield tests show the stock price as expensive and it is confirmed by P/S Ratio test. There is nothing wrong with any of the tests and they all show that the stock price is expensive. Whether or not I was right, the stock price did move down. The pandemic has affected a lot of companies.
A number of analysts are saying on Stock Chase to buy on weakness. Kay Ng on Motley Fool thinks this stock is currently undervalued. Puja Tayal on Motley Fool thinks this is a good growth stock to buy. The company talks about their fourth quarterly results on Newswire. A Simply Wall Street Report on Yahoo Finance says that the annual increase in share price is reasonably close to the annual rise in EPS.
Enghouse Systems Ltd is a Canada-based provider of software and services to a variety of end markets. The firm's operations are organized in two segments namely, the Interactive Management Group and the Asset Management Group. The firm has operations in Canada, the United States, the United Kingdom, France, Germany, Sweden, Israel, Croatia, Denmark, Norway, India, Japan, Hong Kong, Singapore, and Australia etc. Its web site is here Enghouse Systems Ltd.
The last stock I wrote about was about was Sylogist Ltd (TSX-SYZ, OTC-SYZLF) ... learn more. The next stock I will write about will be Shaw Communications Inc (TSX-SJR.B, NYSE-SJR) ... learn more on Monday, January 31, 2022 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.
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