Is it a good company at a reasonable price? It is never a good sign when a company cancels their dividends. However, they cannot afford to pay a dividend, especially since they are not expected to make much in earnings or cash flow in the short term. Even Revenue is expected to lower this year by some 39%. On the other hand, the stock price is probably cheap. But, this company’s past record, buying this stock is quite risky.
I do not own this stock of Quarterhill Inc (TSX-QTRH, OTC-QTRHF). I am still following stock because I once owned it. I held it from 2000 to 2006 and basically lost all my investment. It was called Wi-Lan (TSX-WIN, NASDAQ-WILN) at that time.
When I was updating my spreadsheet, I noticed that they have a new CEO, CFO, and Chairman from last year. In fact, any persons I have listed as Executive, Officer and on the board from last year, is no longer there. I did find that the current chairman was on the board last year. They have also cancelled their dividends for 2023.
They have cancelled their dividends in 2023 and this is a smart move as they cannot afford them. Analysts do not expect the company to have any earnings over the next two years. They also expect Revenue to drop 39% in 2023 and the second quarter of 2023 results confirms this trend. Revenue for this company has been quite volatile in the past. I have 27 years of data and revenue went up in 18 of those years and down in 9 of those years.
If you had invested in this company in December 2012, for $1,001.13 you would have bought 221 shares at $4.53 per share. In December 2022, after 10 years you would have received $229.84 in dividends. The stock would be worth $349.18. Your total return would have been $579.02. This is a total return would be a total loss of 6.63% per year with 10.00% from capital loss and 3.73% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $4.53 | $1,001.13 | 221 | 10 | $229.84 | $349.18 | $579.02 |
The Dividend Payout Ratios (DPR) no longer matters as dividends have been cancelled. The DPR for 2022 for Earnings per Share (EPS) is 250% with 5 year coverage at 250%. The DPR for 2022 for Cash Flow per Share (CFPS) is 20% with 5 year coverage at 30%. The DPR for 2022 for Free Cash Flow (FCF) is 18% with 5 year coverage at 70%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 250.00% | 250.00% |
| CFPS | 19.60% | 29.86% |
| FCF | 18.41% | 69.74% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2022 is good at 0.27. The Liquidity Ratio for 2022 is good at 1.81 and 3.06 currently. The Debt Ratio for 2022 is good at 2.67 and currently at 2.55. The Leverage and Debt/Equity Ratios for 2022 are good at 1.60 and 0.60 and are currently good at 1.64 and 0.64.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.27 | 0.55 |
| Intang/GW | 1.09 | 1.13 |
| Liquidity | 1.81 | 3.06 |
| Liq. + CF | 2.19 | 3.00 |
| Debt Ratio | 2.67 | 2.55 |
| Leverage | 1.60 | 1.64 |
| D/E Ratio | 0.60 | 0.64 |
The Total Return per year is shown below for years of 5 to 24 to the end of 2022 in CDN$. 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 | 0.00% | -4.88% | -7.40% | 2.52% |
| 2011 | 10 | -8.38% | -6.63% | -10.00% | 3.37% |
| 2006 | 15 | 5.48% | 0.12% | -3.88% | 4.00% |
| 2001 | 20 | 3.67% | -0.06% | 3.73% | |
| 1998 | 24 | 3.26% | 0.22% | 3.05% |
The Total Return per year is shown below for years of 5 to 21 to the end of 2022 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. |
|---|---|---|---|---|---|
| 2017 | 5 | -1.52% | -6.46% | -8.97% | 2.51% |
| 2012 | 10 | -11.14% | -9.87% | -12.83% | 2.97% |
| 2007 | 15 | 3.43% | -1.39% | -5.41% | 4.02% |
| 2002 | 20 | 3.90% | -0.30% | 4.19% | |
| 2001 | 21 | -0.77% | -3.77% | 3.01% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.31, 12.97 and 16.34. The corresponding 10 year ratios are 10.96, 16.59 and 21.70. The corresponding historical ratios are negative and useless. The current P/E Ratio is negative, so I cannot do this test. The P/E Ratio for 2024 is 60.41 because very low earnings estimate. No testing can be done with this information.
I get a Graham Price of $1.19. The 10-year low, median, and high median Price/Graham Price Ratios are 0.56, 0.98 and 1.39. The current P/GP Ratio is 1.33 based on a stock price of $1.58. The current ratio is between the median and high ratios of the 10 year median ratios.
I get a 10-year median Price/Book Value per Share Ratio of 1.01. The current P/B Ratio is 0.66 based on a Book Value of $201M, Book Value per Share of $1.76 and a stock price of $1.155. The current ratio is 35% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$.
I get a 10-year median Price/Cash Flow per Share Ratio of 6.41. However, the current P/CF Ratio is negative so useless. However, the P/CF Rati for 2022 is 4.51. This is 30% below the 10 year median ratio. By this measure the stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$.
Since the dividends were cancelled, I cannot do any dividend yield testings.
The 10-year median Price/Sales (Revenue) Ratio is 2.27. The current P/S Ratio is 0.96 based on Revenue estimate for 2023 of $138M, Revenue per Share of $1.20 and a stock price of $1.155. The current ratio is 58% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price could be cheap. This is what the testing for P/S Ratio says. The other tests that were good ones say the same thing. However, I could not do some times because the lack of a reasonable earnings in 2023 and 2024 and the cancelling of the dividend.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (1) and Hold (1). The consensus would be a Buy. The 12 months stock price consensus is $1.717, with a high of $2.00 and low of $1.350. The consensus stock price of $1.717 implies a total return of 8.67%, all from capital gains.
Analyst talk on Stock Chase about the company getting into the Intelligent Transportation space and they feel very positive about this. Stock Chase gives this stock 4 stars out of 5. It is not on any dividend list I follow. Vishesh Raisinghani on Motley Fool thinks that this growth stock has hit bottom. Ambrose O'Callaghan on Motley Fool thinks you should buy this stock before it soars. The company put out a Press Release on their results for 2022. Press Release on their second quarter results for 2023.
Simply Wall Street viaYahoo Finance provides a report on this stock. They have one warning of high level of non-cash earnings. Simply Wall Street gives this stock 1 and one half stars out of 5.
Quarterhill Inc is focused on the acquisition, management, and growth of companies in the intelligent transportation systems (ITS) and innovation and licensing industries. Its geographical segments are the United States, Canada, Chile, China, Korea, Singapore, Taiwan, Thailand, Ukraine, and the Rest of the world. The majority of the revenue comes from the United States. Its web site is here Quarterhill Inc.
The last stock I wrote about was about was Finning International Inc (TSX-FTT, OTC-FINGF) ... learn more. The next stock I will write about will be Chesswood Group Ltd (TSX-CHW, OTC-CHWWF) ... learn more on Wednesday, November 15, 2023 around 5 pm. Tomorrow on my other blog I will write about Plan for Retirement.... learn more on Tuesday, November 14, 2023 around 5 pm.
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