Enghouse Systems Ltd's fundamentals demonstrate strong growth profile
25.12.2014 • About Enghouse Systems Ltd (
$ESL) • By InTwits
Enghouse Systems Ltd is a growth stock in Technology industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Enghouse Systems Ltd showed fast growth in the last financial year. Enghouse Systems Ltd's revenue surged on 22.3% in FY2014. Together with revenue growth Enghouse Systems Ltd also managed to keep EBITDA growth. EBITDA grew 28.1% for the same period.
If we look for the longer period Enghouse Systems Ltd showed fast revenue growth of 21.5% from FY2011 to FY2014 annually. EBITDA surged on 21.3% from FY2011 to FY2014 annually.
Enghouse Systems Ltd ($ESL) financials for the last 5 years
| mln. CAD | FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Revenue | 94 | 123 | 136 | 180 | 220 |
|---|
| Revenue growth, % | | 30.1% | 11.3% | 31.9% | 22.3% |
|---|
| Gross margin, % | 69.6% | 72.4% | 73.1% | 71.6% | 70.3% |
|---|
| SG&A, % | 33.8% | 33.3% | 31.6% | 29.7% | 27.7% |
|---|
| EBITDA | 21 | 30 | 35 | 42 | 54 |
|---|
| EBITDA growth, % | | 43.0% | 13.7% | 22.7% | 28.1% |
|---|
| EBITDA margin, % | 22.6% | 24.8% | 25.4% | 23.6% | 24.7% |
|---|
| Net Income | 10 | 23 | 21 | 24 | 30 |
|---|
| Net Income margin, % | 10.9% | 18.8% | 15.3% | 13.5% | 13.5% |
|---|
| |
| CAPEX | 1 | 1 | 2 | 1 | 1 |
|---|
| CAPEX/Revenue, % | 0.942% | 0.773% | 1.68% | 0.780% | 0.602% |
|---|
| Debt | 0 | 0 | 0 | 0 | 0 |
|---|
| Cash | 47 | 66 | 60 | 70 | 73 |
|---|
| Net Debt/EBITDA | -2.2x | -2.2x | -1.7x | -1.7x | -1.3x |
|---|
| |
| ROIC, % | 9.1% | 13.9% | 14.5% | 14.3% | 16.8% |
|---|
| ROE, % | 8.7% | 17.7% | 14.0% | 14.3% | 15.2% |
|---|
Profitability and return on investment
Margin expansion supported EBITDA growth. The company's EBITDA margin increased slightly on 1.10 pp from 23.6% to 24.7% in FY2014. If we look for the longer period the company's EBITDA margin showed almost no change on 0.100 pp from 24.8% in FY2011 to 24.7% in FY2014.
We call Enghouse Systems Ltd an attractive growth stock as together with the growth it delivers high ROIC at 16.8%. During the last three years it surged - it was 13.9% in FY2011. For the last three years the average ROIC was 15.2%.
Net Income margin didn't change on 0 pp from 13.5% to 13.5% in FY2014. In the longer period Enghouse Systems Ltd's Net Income margin dropped on 5.30 pp from 18.8% in FY2011 to 13.5% in FY2014.
Enghouse Systems Ltd operates at ROE of 15.2%. It's average ROE for the last three years was 14.5%.
Capital expenditures (CAPEX)
In FY2014 the company had CAPEX/Revenue of 0.602%. CAPEX/Revenue dropped on 0.171 pp from 0.773% in FY2011 to 0.602% in FY2014. It's average CAPEX/Revenue for the last three years was 1.02%.
Leverage (Debt)
Having such a fast growth profile the company keeps negative net debt at -1.3x Net Debt/EBITDA. In the longer period the company's leverage surged on 0.82x from -2.16x in FY2011 to -1.34x in FY2014.
Management team
Enghouse Systems Ltd is headed by Stephen J Sadler as a CEO. Stephen J Sadler is a longstanding CEO having spent 14.6 years with the company.
Peers in Technology
Below we provide Enghouse Systems Ltd benchmarking against other companies in Technology industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Redknee Solutions Inc ($RKN) | | 25.9% | -4.5% | 151.6% | 81.4% |
| Cortex Business Solutions Inc ($CBX) | | -29.2% | 61.2% | 24.8% | 45.6% |
| Descartes Systems Group Inc/The ($DSG) | | 34.4% | 14.9% | 11.3% | 19.2% |
| Open Text Corp ($OTC) | | 13.3% | 16.9% | 12.9% | 19.2% |
| Computer Modelling Group Ltd ($CMG) | | 14.4% | 17.8% | 12.4% | 8.6% |
| |
|---|
| Median (12 companies) | | 13.8% | 10.1% | 11.4% | 5.3% |
|---|
| Enghouse Systems Ltd ($ESL) | | 30.1% | 11.3% | 31.9% | 22.3% |
Top companies by Gross margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Absolute Software Corp ($ABT) | 76.7% | 71.6% | 73.6% | 76.3% | 78.4% |
| Open Text Corp ($OTC) | 74.1% | 73.6% | 72.4% | 71.2% | 72.8% |
| Descartes Systems Group Inc/The ($DSG) | 68.8% | 65.8% | 66.4% | 66.6% | 67.6% |
| Redknee Solutions Inc ($RKN) | 73.2% | 64.4% | 68.6% | 55.6% | 51.1% |
| TECSYS Inc ($TCS) | 44.1% | 44.0% | 44.2% | 41.8% | 43.6% |
| |
|---|
| Median (11 companies) | 49.6% | 46.9% | 44.6% | 41.8% | 42.3% |
|---|
| Enghouse Systems Ltd ($ESL) | 69.6% | 72.4% | 73.1% | 71.6% | 70.3% |
Top companies by EBITDA margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Computer Modelling Group Ltd ($CMG) | 50.3% | 51.5% | 53.8% | 52.2% | 51.5% |
| Open Text Corp ($OTC) | 24.5% | 27.1% | 26.5% | 29.1% | 30.0% |
| Descartes Systems Group Inc/The ($DSG) | 20.6% | 21.8% | 26.0% | 27.0% | 23.8% |
| Absolute Software Corp ($ABT) | -2.4% | 8.3% | 16.7% | 18.6% | 21.1% |
| SMART Technologies Inc ($SMA) | 23.3% | 20.4% | 12.8% | -2.0% | 17.0% |
| |
|---|
| Median (12 companies) | 15.3% | 15.1% | 12.2% | 6.8% | 12.6% |
|---|
| Enghouse Systems Ltd ($ESL) | 22.6% | 24.8% | 25.4% | 23.6% | 24.7% |
Top companies by CAPEX/Revenue, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| BlackBerry Ltd ($BB) | 6.8% | 5.2% | 4.9% | 3.8% | 4.2% |
| Open Text Corp ($OTC) | 2.1% | 3.5% | 2.1% | 1.7% | 2.6% |
| SMART Technologies Inc ($SMA) | 3.8% | 3.5% | 3.1% | 3.3% | 1.9% |
| Absolute Software Corp ($ABT) | 13.4% | 1.8% | 1.7% | 1.2% | 1.9% |
| CGI Group Inc ($GIB.A) | 1.3% | 1.5% | 1.4% | 1.4% | 1.7% |
| |
|---|
| Median (12 companies) | 2.9% | 2.0% | 2.3% | 1.7% | 1.6% |
|---|
| Enghouse Systems Ltd ($ESL) | 0.9% | 0.8% | 1.7% | 0.8% | 0.6% |
Top companies by ROIC, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Computer Modelling Group Ltd ($CMG) | 70.8% | 75.5% | 74.2% | 68.6% | 62.9% |
| SMART Technologies Inc ($SMA) | 66.2% | 43.2% | 21.4% | -18.9% | 28.1% |
| CGI Group Inc ($GIB.A) | 15.2% | 14.7% | 5.7% | 10.9% | 17.1% |
| Open Text Corp ($OTC) | 9.6% | 11.6% | 9.7% | 11.1% | 12.7% |
| TECSYS Inc ($TCS) | 11.1% | 7.7% | 8.5% | 7.4% | 11.8% |
| |
|---|
| Median (12 companies) | 13.4% | 11.6% | 8.5% | 4.7% | 5.8% |
|---|
| Enghouse Systems Ltd ($ESL) | 9.1% | 13.9% | 14.5% | 14.3% | 16.8% |
Top companies by Net Debt / EBITDA
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Open Text Corp ($OTC) | -0.1x | 0.0x | 0.1x | 0.2x | 1.8x |
| CGI Group Inc ($GIB.A) | 1.4x | 1.3x | 6.0x | 2.4x | 1.3x |
| SMART Technologies Inc ($SMA) | 5.1x | 1.4x | 2.1x | | 1.2x |
| Descartes Systems Group Inc/The ($DSG) | -5.9x | -3.2x | -2.2x | -1.1x | -0.6x |
| TECSYS Inc ($TCS) | -0.9x | -1.1x | -1.6x | -0.2x | -1.3x |
| |
|---|
| Median (8 companies) | -0.4x | -0.3x | -1.1x | -1.1x | -0.9x |
|---|
| Enghouse Systems Ltd ($ESL) | -2.2x | -2.2x | -1.7x | -1.7x | -1.3x |
