Is Enghouse Systems Ltd a solid growth stock? - The numbers tells it is
23.12.2015 • About Enghouse Systems Ltd (
$ESL) • By InTwits
Enghouse Systems Ltd is a growth stock in Technology industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Enghouse Systems Ltd showed fast growth in the last financial year. Enghouse Systems Ltd's revenue surged on 27.0% in FY2015. EBITDA also increased: 12.5% for the same period.
In the last 3 years the company showed fast revenue growth of 27.0% from FY2012 to FY2015 annually. EBITDA surged on 20.9% from FY2012 to FY2015 annually.
Enghouse Systems Ltd ($ESL) financials for the last 5 years
| mln. CAD | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Revenue | 123 | 136 | 180 | 220 | 279 |
|---|
| Revenue growth, % | | 11.3% | 31.9% | 22.3% | 27.0% |
|---|
| Gross margin, % | 72.4% | 73.1% | 71.6% | 70.3% | 68.2% |
|---|
| SG&A, % | 33.3% | 31.6% | 29.7% | 27.7% | 27.8% |
|---|
| EBITDA | 30 | 35 | 42 | 54 | 61 |
|---|
| EBITDA growth, % | | 13.7% | 22.7% | 28.1% | 12.5% |
|---|
| EBITDA margin, % | 24.8% | 25.4% | 23.6% | 24.7% | 21.9% |
|---|
| Net Income | 23 | 21 | 24 | 30 | 31 |
|---|
| Net Income margin, % | 18.8% | 15.3% | 13.5% | 13.5% | 11.3% |
|---|
| |
| CAPEX | 1 | 2 | 1 | 1 | 3 |
|---|
| CAPEX/Revenue, % | 0.773% | 1.68% | 0.780% | 0.602% | 1.04% |
|---|
| Debt | 0 | 0 | 0 | 0 | 0 |
|---|
| Cash | 66 | 60 | 70 | 73 | 94 |
|---|
| Net Debt/EBITDA | -2.2x | -1.7x | -1.7x | -1.3x | -1.5x |
|---|
| |
| ROIC, % | 13.9% | 14.5% | 14.3% | 16.8% | 15.0% |
|---|
| ROE, % | 17.7% | 14.0% | 14.3% | 15.2% | 13.9% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. In the longer period Enghouse Systems Ltd showed big decline in EBITDA margin of 3.50 pp from 25.4% in FY2012 to 21.9% in FY2015.
Enghouse Systems Ltd shows attractive ROIC at 15.0% for the last 12 months which assumes stable development model. Three years ago it was about the same at 14.5%. It's average ROIC for the last three years was 15.4%.
The company showed big decline in Net Income margin of 2.20 pp from 13.5% to 11.3% in FY2015. In the last 3 years the company showed big decline in Net Income margin of 4 pp from 15.3% in FY2012 to 11.3% in FY2015.
Enghouse Systems Ltd operates at ROE of 13.9%. For the last three years the average ROE was 14.5%.
Capital expenditures (CAPEX)
In FY2015 the company had CAPEX/Revenue of 1.04%. The company showed big decline in CAPEX/Revenue of 0.644 pp from 1.68% in FY2012 to 1.04% in FY2015. For the last three years the average CAPEX/Revenue was 0.807%.
Leverage (Debt)
Enghouse Systems Ltd has negative net debt at -1.5x Net Debt/EBITDA - at the same time with high growth. In the longer period Enghouse Systems Ltd's leverage surged on 0.18x from -1.72x in FY2012 to -1.54x in FY2015.
Management team
Enghouse Systems Ltd is headed by Stephen J Sadler as a CEO. Stephen J Sadler is a longstanding CEO having spent 15.6 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, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Mitel Networks Corp ($MNW) | -9.0% | 3.8% | -5.7% | 91.4% | |
| Redknee Solutions Inc ($RKN) | | -4.5% | 151.6% | 81.4% | -13.6% |
| Intrinsyc Technologies Corp ($ITC) | -19.0% | -26.8% | -21.7% | 70.8% | |
| Espial Group Inc ($ESP) | 10.2% | -9.5% | -5.5% | 59.4% | |
| iLOOKABOUT Corp ($ILA) | -7.6% | 19.6% | 8.9% | 58.8% | |
| |
|---|
| Median (33 companies) | 1.5% | 3.7% | 11.4% | 13.7% | 4.0% |
|---|
| Enghouse Systems Ltd ($ESL) | | 11.3% | 31.9% | 22.3% | 27.0% |
Top companies by Gross margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| ProntoForms Corp ($PFM) | 90.1% | 96.1% | 98.1% | 98.0% | |
| Constellation Software Inc/Canada ($CSU) | 85.5% | 86.2% | 85.5% | 86.1% | |
| Symbility Solutions Inc ($SY) | 82.1% | 80.6% | 79.9% | 81.0% | |
| Espial Group Inc ($ESP) | 77.9% | 77.5% | 81.7% | 78.5% | |
| Absolute Software Corp ($ABT) | 71.6% | 73.6% | 76.3% | 78.4% | 81.1% |
| |
|---|
| Median (31 companies) | 49.7% | 52.4% | 48.8% | 51.1% | 48.1% |
|---|
| Enghouse Systems Ltd ($ESL) | 72.4% | 73.1% | 71.6% | 70.3% | 68.2% |
Top companies by EBITDA margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Wi-LAN Inc ($WIN) | 26.5% | 40.9% | 12.2% | 56.2% | |
| Computer Modelling Group Ltd ($CMG) | 51.5% | 53.8% | 52.2% | 51.5% | 50.8% |
| Open Text Corp ($OTC) | 27.1% | 26.5% | 29.1% | 30.0% | 31.8% |
| Sandvine Corp ($SVC) | 5.1% | 0.9% | 24.0% | 28.2% | |
| Descartes Systems Group Inc/The ($DSG) | 21.8% | 26.0% | 27.0% | 23.8% | 27.9% |
| |
|---|
| Median (33 companies) | 8.5% | 8.3% | 5.5% | 7.0% | 17.1% |
|---|
| Enghouse Systems Ltd ($ESL) | 24.8% | 25.4% | 23.6% | 24.7% | 21.9% |
Top companies by CAPEX/Revenue, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Halogen Software Inc ($HGN) | | 4.9% | 9.0% | 8.4% | |
| Intermap Technologies Corp ($IMP) | 0.4% | 1.0% | 3.2% | 7.4% | |
| Kinaxis Inc ($KXS) | 2.2% | 2.9% | 2.3% | 5.0% | |
| BlackBerry Ltd ($BB) | 5.2% | 4.9% | 3.8% | 4.2% | 2.6% |
| ProntoForms Corp ($PFM) | 1.3% | 1.1% | 0.8% | 3.6% | |
| |
|---|
| Median (33 companies) | 1.3% | 1.5% | 1.5% | 1.3% | 1.6% |
|---|
| Enghouse Systems Ltd ($ESL) | 0.8% | 1.7% | 0.8% | 0.6% | 1.0% |
Top companies by ROIC, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Kinaxis Inc ($KXS) | | | 61.8% | 63.6% | |
| Computer Modelling Group Ltd ($CMG) | 75.5% | 74.2% | 68.6% | 62.9% | 63.5% |
| SMART Technologies Inc ($SMA) | 43.2% | 21.4% | -18.9% | 28.1% | 43.8% |
| Constellation Software Inc/Canada ($CSU) | 45.8% | 45.9% | 22.4% | 24.7% | |
| Sandvine Corp ($SVC) | -1.7% | -4.9% | 16.9% | 20.2% | |
| |
|---|
| Median (33 companies) | 4.7% | 2.9% | -4.8% | 0.5% | 7.9% |
|---|
| Enghouse Systems Ltd ($ESL) | 13.9% | 14.5% | 14.3% | 16.8% | 15.0% |
Top companies by Net Debt / EBITDA
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Data Group Ltd ($DGI) | 3.2x | 3.5x | 3.7x | 4.0x | |
| Critical Control Energy Services Corp ($CCZ) | 1.9x | | 1.4x | 2.7x | |
| Mitel Networks Corp ($MNW) | 4.9x | 3.7x | 3.8x | 2.6x | |
| Open Text Corp ($OTC) | 0.0x | 0.1x | 0.2x | 1.8x | 1.5x |
| CGI Group Inc ($GIB.A) | 1.3x | 6.0x | 2.4x | 1.3x | 1.0x |
| |
|---|
| Median (21 companies) | -0.3x | -0.2x | -0.2x | -1.3x | 0.5x |
|---|
| Enghouse Systems Ltd ($ESL) | -2.2x | -1.7x | -1.7x | -1.3x | -1.5x |
