Is it a good company at a reasonable price? This is a small Tech company, so there is risk in investing in this company. The stock has mostly done well for shareholders in the past. The dividend yields maybe low, but it is increasing quite nicely. For long term investors, the stock price is reasonable, if not cheap. It is the dividend yield tests that says it is cheap. Some people rely only on the dividend yield tests. I also like that the fact that the debt ratios are good. This is important for small cap stocks.
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. May 2011.
When I was updating my spreadsheet, I noticed that analysts expected a revenue increase of 3.8% from $467M to $485M, but increased revenue declined by 8% to $428M. However, EPS was basically on target coming in at $1.70 compared to estimate of $1.67.
Also, the company has no long term debt and great Debt Ratios. The Liquidity Ratio is important and this, for 2022 is 2.04 (where a good one is 1.50). The Debt Ratio is also good at 3.58 ( where ones at 1.50 and above are good). The Leverage and Debt/Equity Ratios are also good at 1.39 and 0.39 (where good ones are below 2.00 and below 1.00).
You can see from the following chart that growth has slowed. Growth over the past 5 year some growth is a lot lower, for example Revenue Growth over the past 10 years was at 12% per year but over the past 5 years, it has been at 5.6% per year. It is the same for Cash Flow growth and Stock Price Growth.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 31.42% | 5.62% |
| 5 | EPS Growth | 81.82% | 12.70% |
| 5 | Net Income Growth | 85.87% | 13.20% |
| 5 | Cash Flow Growth | 23.95% | 4.39% |
| 5 | Dividend Growth | 130.00% | 18.13% |
| 5 | Stock Price Growth | 11.12% | 2.13% |
| 10 | Revenue Growth | 213.55% | 12.11% |
| 10 | EPS Growth | 325.00% | 15.57% |
| 10 | Net Income Growth | 352.73% | 16.30% |
| 10 | Cash Flow Growth | 339.54% | 15.96% |
| 10 | Dividend Growth | 500.00% | 19.62% |
| 10 | Stock Price Growth | 325.12% | 15.57% |
If you had invested in this company in December 2012, for $1,006.25 you would have bought 115 shares at $8.75 per share. In December 2022, after 10 years you would have received $588.23 in dividends. The stock would be worth $4,136.55. Your total return would have been $4,724.48.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $8.75 | $1,006.25 | 115 | 10 | $588.23 | $4,136.55 | $4,724.78 |
If you had invested in this company in December 2002, for $1,002.38 you would have bought 405 shares now costing at $2.48 per share. In December 2022, after 20 years you would have received $1,617.98 in dividends. The stock would be worth $14,567.85. Your total return would have been $16,185.83.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $2.48 | $1,002.38 | 405 | 20 | $1,617.98 | $14,567.85 | $16,185.83 |
The dividend yields are low with dividend growth good. The current dividend yield is low (below 2%) at 1.88%. The 5, 10 and historical dividend yields are low at 0.98%, 1.03% and 1.13%. The dividend growth for the last 5 years is good (15% and above) at 18.13% per year. The last dividend increase was in 2022 and it was for 15.6%.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2022 is $41% with 5 year coverage at 54%. The DPR for Cash Flow per Share (CFPS) for 2022 is 26% with 5 year coverage at 31%. The DPR for Free Cash Flow (FCF) for 2022 is 38% with 5 year coverage at 40%.
Debt Ratios are good. The company currently has no Long Term Debt. The Liquidity Ratio for 2022 is good at 2.04. The Debt Ratio for 2022 is good at 3.58. The Leverage and Debt/Equity Ratios are good at 1.39 and 0.39.
The Total Return per year is shown below for years of 5 to 27 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 18.13% | 5.56% | 3.19% | 2.38% |
| 2012 | 10 | 19.62% | 17.65% | 15.18% | 2.46% |
| 2007 | 15 | 20.62% | 18.43% | 16.27% | 2.16% |
| 2002 | 20 | 15.74% | 14.32% | 1.42% | |
| 1997 | 25 | 12.27% | 11.31% | 0.96% | |
| 1995 | 27 | 13.61% | 12.66% | 0.95% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 24.39, 32.85 and 40.27. The corresponding 10 year ratios are 24.94, 31.39 and 37.25. The corresponding historical ratios are 17.48, 22.80 and 29.46. The current P/E Ratio is 26.01 based on a stock price of $39.27 and EPS estimate for 2023 of $1.51. 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 $17.68. The 10-year low, median, and high median Price/Graham Price Ratios are 2.16, 2.69 and 3.27. The current ratio is 2.22 based on a stock price of $39.27. 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 10-year median Price/Book Value per Share Ratio of 5.17. The current ratio 4.27 based on a Book Value of $508M, Book Value per Share of $9.20 and a stock price of $39.27. The current ratio is 17% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 20.70. The current ratio is 20.66 based on Cash Flow estimate for 2023 of $105M, Cash Flow per Share of $1.90 and a stock price of $39.27. The current ratio is 0.2% 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 1.13%. The current dividend yield is 1.88% based on a stock price of $39.27 and dividends of $0.74. The current ratio is 67% 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 1.88% based on a stock price of $39.27 and dividends of $0.74. The current ratio is 84% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 5.18. the current P/S Ratio is 4.93 based on Revenue estimate for 2023 of $440M, Revenue per Share of $7.96 and a stock price $39.27. The current ratio is 5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable and maybe be cheap. The dividend yield tests both show the stock price as cheap. However, the P/S Ratio test just says it is reasonable, so this test does not confirm the dividend yield test. Most of the other tests are say the stock price is reasonable.
When I look at analysts’ recommendations, I find Buy (2) and Hold (2). The Consensus would be a Buy. The 12 month stock price consensus is $39.13. This implies a total return of 1.53%, with 1.88% from dividends and a capital loss of $0.36% based on a current stock price of $39.27.
Last year when I look at analysts’ recommendations, I found Strong Buy (1), Buy (2) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus was $60.25. This implied 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. What happened was a loss of 6.73% with a capital loss of 8.23% and dividends of 1.50%. The stock price moved from $42.79 to $39.27.
Analysts on Stock Chase like this company. Stock Chase gives this stock 4 stars out of 5. It is on the Money Sense list with a C rating. Stephanie Bedard-Chateauneuf on Motley Fool looks at this stock and says why she thinks it is a buy. Christopher Liew on Motley Fool also looks at this stock and says why he thinks it is a buy.
The company put out a press release via Newswire about their 2022 results. Simply Wall Street reviews this stock via Yahoo Finance. Simply Wall Street gives this stock 4 stars out of 5. It lists 2 risks of earnings are forecast to decline by an average of 2.4% per year for the next 3 years; and significant insider selling over the past 3 months.
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 30, 2023 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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