Is it a good company at a reasonable price? The company has done well for its shareholders in the past. Growth has slowed down, but analysts expect some pickup this year. There is the problem with the ratios being high. See the next two paragraphs. The result of the testing is showing that the stock price is relatively cheap.
The problem I see with stock is that the ratios are quite high. For example, the current P/E Ratio is 22.41 where 20.00 is considered on the high side. Another example is the P/GP Ratio where 1.00 is considered to be normal and a high ratio to be 1.20 and above and for this stock it is 1.92. The current ratios are below the median for this stock which can sometimes be justified for fast growing companies, and especially tech companies. The question is, does this company have the sort of growth to justify its high ratios? Generally speaking, Tech companies do have rather high ratios when compared to other sectors.
In the chart below, I am showing 5 and 10 year total growth and per year growth in columns 3 and 4. Column 5 shows growth expected over 12 months to the first quarter in 2024 and expected growth over the next year. This shows growth over the past 5 years is lower than over the past 10 years for most items. It also shows better growth is expected over the next year.
| Year | Item | Tot. Growth | Per Year | Gwth | Coverage |
|---|---|---|---|---|---|
| 5 | Revenue Growth | 32.43% | 5.78% | 2.86% | <-12 mths |
| 5 | EPS Growth | 24.17% | 4.42% | 6.87% | <-12 mths |
| 5 | Net Income Growth | 31.33% | 5.60% | 5.54% | <-12 mths |
| 5 | Cash Flow Growth | 17.35% | 3.25% | ||
| 5 | Dividend Growth | 138.24% | 18.96% | 8.64% | <-12 mths |
| 5 | Stock Price Growth | -11.89% | -2.50% | 14.25% | <-12 mths |
| 10 | Revenue Growth | 152.39% | 9.70% | 7.04% | <-this year |
| 10 | EPS Growth | 184.78% | 11.03% | 26.72% | <-this year |
| 10 | Net Income Growth | 196.74% | 11.49% | 17.65% | <-this year |
| 10 | Cash Flow Growth | 256.33% | 13.55% | ||
| 10 | Dividend Growth | 458.62% | 18.77% | 8.64% | <-this year |
| 10 | Stock Price Growth | 134.67% | 8.90% | 14.25% | <-this year |
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 analysts expected the EPS to drop 11%, but it dropped 23%. Now analysts expect the EPS to go up by 27% this year. The lower EPS is accounted for by the company providing a Provision for Income Taxes. This company has little debt and a strong Balance Sheet.
If you had invested in this company in December 2013, for $1,003.45 you would have bought 61 shares at $16.45 per share. In December 2023, after 10 years you would have received $352.58 in dividends. The stock would be worth $2,141.10. Your total return would have been $2,493.68. This is a total return would be a total return of 10.07% per year with 7.87% from capital gain and 2.20% from dividends. This calculation takes into consideration stock splits, which means that the original cost would be lowered by these splits.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $16.45 | $1,003.45 | 61 | 10 | $352.58 | $2,141.10 | $2,493.68 |
The current dividend yield is moderate with dividend growth good. The current dividend yield is moderate (2% to 4% ranges) at 2.37%. The 5, 10 and historical dividend yields are low (below 2%) at 1.13%, 1.03% and 1.25%. The dividend growth is good (15% and over) at 19% per year over the past 5 years. The last dividend increase was in 2023 and it was for 15.6%.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is fine at 62% with 5 year coverage at 58%. A problem is that the DPRs for EPS are going up, but analysts expect them to moderate over the next couple of years. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 32% with 5 year coverage at 33%. The DPR for 2023 for Free Cash Flow (FCF) is good at 39% with 5 year coverage at 43%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 61.83% | 57.96% |
| CFPS | 31.86% | 32.99% |
| FCF | 39.19% | 42.95% |
Debt Ratios are good. The company has little and has had little long term debt. The Liquidity Ratio for 2023 is good at 1.77. The Debt Ratio for 2023 is good at 3.43. The Leverage and Debt/Equity Ratios for 2023 are good at 1.41 and 0.41.
| Type | Year End |
|---|---|
| Lg Term R | 0.00 |
| T. Lg Term R | 0.02 |
| Intang/GW | 0.22 |
| Liquidity | 1.77 |
| Liq. + CF | 2.13 |
| Debt Ratio | 3.43 |
| Leverage | 1.41 |
| D/E Ratio | 0.41 |
The Total Return per year is shown below for years of 5 to 28 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 18.96% | 3.73% | 1.12% | 2.62% |
| 2013 | 10 | 18.77% | 10.07% | 7.87% | 2.20% |
| 2008 | 15 | 20.40% | 23.86% | 20.45% | 3.41% |
| 2003 | 20 | 12.91% | 11.40% | 1.51% | |
| 1998 | 25 | 13.85% | 12.58% | 1.27% | |
| 1995 | 28 | 13.18% | 12.08% | 1.10% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 21.33, 32.80 and 42.49. The corresponding 10 year ratios are 24.94, 32.82 and 41.38. The corresponding historical ratios are 17.72, 23.12 and 30.40. The current P/E Ratio is 22.41 based on a stock price or $37.20 and EPS estimate for 2024 of 1.66. The current ratio is below the 1ow ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $19.37. The 10-year low, median, and high median Price/Graham Price Ratios are 2.16, 2.69 and 3.41. The current P/GP Ratio is 1.92 based on a stock price of $37.20. This ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Book Value per Share Ratio of 5.17. The current P/B Ratio is 3.70 based on Book Value of $555M, Book Value per Share of $10.05 and a stock price of $37.50. The current ratio is 28% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 21.37. The current P/CF Ratio is 17.83 based on Cash Flow for the last 12 months of $115M, Cash Flow per Share of $2.09 and a stock price of $37.20. 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 an historical median dividend yield of 1.25%. The current dividend yield is 2.37% based on dividends of $0.88 and a stock price of $37.20. The current dividend yield is 89% 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 103%. The current dividend yield is 2.37% based on dividends of $0.88 and a stock price of $37.20. The current dividend yield is 130% 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 5.29. The current P/S Ratio is 4.23 based on Revenue estimate for 2024 of $486M, Revenue per Share of $8.80 and a stock price of $37.20. The current ratio is 20% 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 is probably relatively cheap. The dividend yield tests point to the stock price being cheap. It is confirmed by the P/S Ratio test. Most of the other tests are also showing the stock price as relatively cheap.
When I look at analysts’ recommendations, I find Buy (1), and Hold (2). The consensus would be a Hold. The 12 months stock price consensus is $39.33 with a high of $43.00 and low of $37.00. The consensus price of $39.33 implies a total return of 8.09% with 5.73% from capital gains and 2.37% from dividends.
Analysts on Stock Chase like this stock, but not everyone thinks it is a Buy. Stock Chase gives this stock 4 stars out of 5. It is on the dividend lists that I follow. Amy Legate-Wolfe on Motley Fool thinks this is a great stock to buy and hold and make money. Robin Brown on Motley Fool says this company should be bought for your TFSA. The company issued a press release on Newswire about their fourth quarter of 2023.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street gives this stock 4 stars out of 5. They list one risk of Significant insider selling over the past 3 months. (However, when I reviewed INK it appears that the CEO did sell some stock, but mostly the problem is that the insiders are not picking up stock options.)
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. It earns majority of its revenue from Interactive Management Group. The firm has operations in Canada, the United States, the United Kingdom, Europe, excluding Scandinavia, Germany, Asia-Pacific and other. Its web site is here Enghouse Systems Ltd.
The last stock I wrote about was about was Transcontinental Inc (TSX-TCL.A, OTC-TCLAF) ... learn more. The next stock I will write about will be Exco Technologies Ltd (TSX-XTC, OTC-EXCOF) ... learn more on Friday, January 26, 2024 around 5 pm. Tomorrow on my other blog I will write about Desjardins Top Picks 2023.... learn more on Thursday, January 25, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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