Is it a good company at a reasonable price? The stock price is cheap to reasonable. 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.
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 analysts expected the EPS to go down some 38% to $0.15, however, the EPS went down some 71% to $0.07. The big increase seems to be in General and Administration Expenses which increased some 83%.
In the first quarter of 2022 financial year (September 2021), there is a huge increase in both Intangible Assets and Goodwill. At the end of the 2021 financial year, these items were so small that the Intangible, Goodwill /Market Cap Ratio was 0.00, but now it is 1.01. That is these two items are higher than the market cap of the stock. Part of the problem is that the stock price, since the end of the last financial year, has declined almost 50%.
If you had invested in this company in December 2010, $1002.70 you would have bought 271 shares at $3.70 per share. In December 2021, after 10 years you would have received $707.31 in dividends. The stock would be worth $3,214.06. Your total return would have been $3,921.37.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $3.70 | $1,002.70 | 271 | 10 | $707.31 | $3,214.06 | $3,921.37 |
The dividend yields are moderate with no current dividend growth. The current dividend yield is moderate (2% to 4% ranges) at 3.25% (CDN$). The 5, 8 and historical dividend yield is 3.96% and 3.58%. Dividends have only been paid for 8 years. Dividend have been flat for the last 5 years. Analysts give no indication on whether or not this will change. Dividend are paid in CDN$ but the stock does report in US$. So, in US$ terms, the dividends are fluctuating.
The Dividend Payout Ratios (DPR) are too high, but they are being covered by cash flow. The DPR for EPS for 2021 is 457% with 5 year coverage at 273% in CDN$. The DPR for Cash Flow per Share for 2021 is 48% with 5 year coverage also at 47% in CDN$. The DPR for Free Cash Flow for 2021 is 27% with 5 year coverage at 65% in US$.
Debt Ratios are probably fine. The company has no long term debt per se, but it does have Deferred Revenue as its biggest long term liability. However, the Deferred Revenue/Market Cap is currently at 0.09 and so not a problem. The Liquidity for 2021 is better than it has ever been at 1.13. The Debt Ratio is also better than ever at 1.13. The problem in the past was the Deferred Revenue. Leverage and Debt/Equity Ratios are still too high at 8.80 and 7.80. The problem again is Deferred Revenue. The company, until recently, had a negative book value because of Deferred Revenue.
The Total Return per year is shown below for years of 5 to 21 to the end of 2021 in CDN$. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 0.64% | 17.21% | 13.20% | 4.01% |
| 2011 | 10 | 6.05% | 12.51% | 9.15% | 3.36% |
| 2006 | 15 | 8.79% | 6.87% | 1.92% | |
| 2001 | 20 | 25.54% | 22.65% | 2.89% | |
| 1996 | 21 | 18.84% | 16.74% | 2.10% |
The Total Return per year is shown below for years of 5 to 20 to the end of 2021 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2016 | 5 | 1.62% | 18.85% | 14.80% | 4.05% |
| 2011 | 10 | 4.04% | 9.66% | 6.66% | 3.00% |
| 2006 | 15 | 7.02% | 5.23% | 1.79% | |
| 2001 | 20 | 24.02% | 21.23% | 2.78% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 29.42, 34.32 and 42.22. The corresponding 10 year ratios are 40.32, 51.17 and 61.88. The corresponding historical ratios are all negative so useless. The current P/E Ratio for 2022 is negative, as it the P/E Ratio for 2023. I cannot do a P/E Ratio test. This testing is done in CDN$.
I estimate a Graham Price of $2.82. The 10 year low, median, and high median Price/Graham Price Ratios are 2.37, 3.11 and 3.88. The current P/GP Ratio 3.49 based on a stock price of $9.84. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is done in CDN$.
I get a 10 year median Price/Book Value per Share Ratio that is negative and so cannot be used. The current P/B Ratio is 21.79. This is a rather high ratio. If you ignore Deferred Revenue, then the 10 year medina P/B Ratio is 2.57. The current P/B Ratio is 1.94 based on a Book Value of $197M, Book Value per Share of $3.97 and a stock price of $7.71. In this case the current ratio is 24% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$.
I get a 10 year median Price/Cash Flow per Share Ratio of 16.00. The current P/CF Ratio is 18.80 based on a stock price of $7.71, Cash Flow per Share estimate for 2022 of $0.41 and Cash Flow of $20.3M. The current ratio is 18% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$.
The estimate for Cash Flow per Share for 2022 is a drop in Cash Flow of 25%. The 2023 P/CF Ratio is 9.40 based on a stock price of $7.71, Cash Flow per Share estimate for 2023 of $0.82 and Cash Flow of $40.7M. In this case, the 2023 ratio is 41% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical and 8 year median dividend yield of 3.58%. The current Dividend Yield is 3.25% based on Dividends of $0.32 and a stock price of $9.84. The current dividend yield is 9% below the historical and 8 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. The problem with this test is the flat dividends that the company cannot afford.
The 10 year median Price/Sales (Revenue) Ratio is 2.89. The current P/S Ratio is 1.85 based on Revenue estimate for 2022 of $206M, Revenue per Share of $4.16 and a stock price of $7.71. The current ratio is 36% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable cheap. This testing is done in US$ and you will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably reasonable to cheap. The P/S Ratio test shows the stock price is cheap as does the P/CF Ratio test for 2023. There is a problem with the dividend yield test as the dividend yield is flat and they cannot currently really afford what they are paying in dividends. They can cover dividends with cash flow and they have not said they will cut dividends. A number of tests are showing the stock price as reasonable, but above the median. Look at the P/GP Ratio and P/B Ratio tests for 2022.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (3) and Hold (2). The current consensus would be a Buy. The 12 month stock price consensus is $18.85 ($14.87 US$). This implies a total return of 94.84% with 3.25% from dividends and 91.59% from capital gains based on a stock price of $9.84.
Because it is a rather small company, there is not much coverage on Stock Chase. However, most analysts like this company. Rajiv Nanjapla on Motley Fool thinks the stock is cheap and its outlook is healthy. Sneha Nahata on Motley Fool is bullish about this company. Zacks Equity Research report on Yahoo Finance says that they expect an earnings decline on higher revenue for Q2 of 2022. A Simply Wall Street report on Yahoo Finance talks about the CEO pay.
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 Exco Technologies Ltd (TSX-XTC, OTC-EXCOF) ... learn more. The next stock I will write about will be Canadian National Railway (TSX-CNR, NYSE-CNI) ... learn more on Monday, February 07, 2022 around 5 pm.
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