Enghouse Systems (ENGH-T)

Trend has gone sideways lately. Would recommend a watch phase. If stock begins to trend upwards, would recommend buying. 

EPS of 37c beat estimates of 35.7c. Revenue of $130.5M slightly beat estimates of $129.7M. EBITDA of $37.7M beat estimates by 4.6%. Revenue rose 18%. EBITDA rose 13%. Recurring revenue rose 22.8%. Net income rosr 17%. Seachange is being integrated well. Net cash is $245M. Nothing too extraordinary here, but a beat and decent overall growth. Earnings are expected to rise 13% in 2025. 
Unlock Premium - Try 5i Free

Very frustrating. He stays because of the valuation. Massive free cashflow yield, debt-free. Not doing all it can to realize value for shareholders. Needs an activist. He's holding, and would buy today for new clients.

Likes it, especially for the long term. He owns it in a few separately managed accounts. Well run, financially disciplined. Cleaned up debt. Has $200M in cash. Focus is like a mini-CSU, but doesn't have the scale yet. 40 global acquisitions over its history. 12-month price target of $36.50.

Pick it up in thirds here around $30, $28, and $26.50.

Shares have fallen since the pandemic, but they've re-created themselves and changed their business model. Like MSFT, they stopped selling software and license it through subscriptions. So operating margins are starting to rise and they just raised the dividend by 18%. Also, they have strong free cash flows and the dividend is growing from 3.5%, rare for a smallcap.

He's traded in and out of it, not really invested for the long haul. Hasn't performed all that well. Builds the business the way CSU does, but without the success.

We need to see more commercial opportunities open up. All Canadian tech has rolled over, including ENGH. The space needs more acquisitions. If the companies don't grow quickly, they will decline, on relative terms.

They reported a beat last Thursday. They're turning their software business into the monthly subscription model like Microsoft's. Margins will be smaller, but incremental revenues will be more regular and less lumpy. Earnings were good. Dividend rises 10% annually. He holds it in TFSAs and just made a major purchase.

ENGH recorded EPS of $0.45 in Q4, beating analysts revenue expectations of $0.42. Revenue came in at $123.1M, displaying year-over-year growth of 13.9% but missed estimates of $125M. Recurring revenue grew 35%. Cash from operations was decent at $28.3M. Cash was strong at $240.4M while total debt was only $12.4M, but the company stated that none of the debt was external. Net income was $25.1M but decreased from the prior year’s total at $36.9M. This was a decent quarter for ENGH as the company shifts its focus to expanding its recurring SaaS revenue base.
Unlock Premium - Try 5i Free

His apologies on this one. He'd underwater too, but stills owns it and is still buying. Wonderful company. Very well run. Well-positioned for this environment of distressed acquisitions. $200M in cash, no debt. Don't give up, people will come around again.

Follows it. Stock's come down as company digests acquisitions. Interesting.

ENGH is now trading at 22x times' Forward P/E. Revenue was in a decline in the last two years after a very strong 2020, which was partly covid-driven. The balance sheet is strong, with net cash of $160M. ENGH could see upside potential when management ramps up on acquisitions. ENGH is still a decent company with a solid portfolio of businesses (high gross margins, in the 70% range). The multiple ENGH is trading also at the lower range of historical averages (ranging from 22x to 37x). We think ENGH is a HOLD for now, we would want to see management do something with the cash balance to create shareholder value (either do more M&A or buybacks). We would reconsider the position a while from now if management does not show improvement in capital allocation.
Unlock Premium - Try 5i Free

Very defensive business model. Over $200M on balance sheet, no debt. Accelerated acquisitions in a difficult time. Transitioning to SaaS, with bumps along the way, resulting in temporary margin compression in latest results. Undervalued. He'd add today.

35 recent local acquisitions. Vertical software solutions in virtual healthcare, contact centres, and telecom. Pretty healthy balance sheet. Lots of cash for more acquisitions. Solid recurring revenue, significant free cashflow. Price target of $59.50. Yield is 2.4%.

Excellent company with good long term prospects.
Lots of cash on the balance sheet.
Shares not cheap enough to buy.
Will buy when shares fall.
Good business for the long term investor.