Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

This share price of this stock has surged to a record high and the positive price momentum may not be over.

The company will be reporting its second-quarter financial results (fiscal year-end is Oct. 31) after the market closes on Thursday, and, if it delivers strong financial results and management provides a positive outlook, this could boost the share price even higher.

The stock I am referring to is Enghouse Systems Ltd.(ENGH-T).

Story continues below advertisement

Enghouse Systems

$65

Downside

support

55

45

35

25

15

2017

2018

2019

2020

THE GLOBE AND MAIL, SOURCE: BARCHART

Enghouse Systems

$65

Downside

support

55

45

35

25

15

2017

2018

2019

2020

THE GLOBE AND MAIL, SOURCE: BARCHART

Enghouse Systems

$65

Downside

support

55

45

35

25

15

2017

2018

2019

2020

THE GLOBE AND MAIL, SOURCE: BARCHART

Based in Markham, Ont., the company is a software provider serving the financial, telecom, utilities, and government sectors. The company has an attractive business model with 57 per cent of its total revenue recurring and relatively predictable.

Management is focused on growth - organic, or internal, as well as acquisition growth.

In fiscal 2019, the company made six acquisitions. Most recently, on Dec. 31, 2019, the company acquired Dialogic Group Inc., expanding its video conferencing platform. The company generates strong cash flows and has a healthy balance sheet to fund its growth.

The company remains committed to returning capital to its shareholders. In March, management announced a 23-per-cent dividend hike, lifting its quarterly dividend to 13.5 cents per share from 11 cents per share. Enghouse has announced double-digit dividend increases every year for the past 12 years. In addition, management announced its plan to renew its share buyback program in late April.

On the first-quarter earnings call held in March, CEO Steve Sadler commented on the potential impact from COVID-19, “Enghouse does not have much impact to date on the COVID-19, but there could be a global business develop impact. We are a distributed organization in terms of premises and staffing, therefore, limited concentration. A lot of our staff have worked from home, so it's not foreign for us to do so. We have a high mix of recurring revenue with communication products. Possibly, we could deploy capital and acquisitions at lower valuations. Understanding opportunities and risk is key at this time. Maybe demand for video and contact centers will increase as a result of this virus. We do have a small presence in Italy, but not in other high-risk geographies. In summary, we believe our exposure is limited beyond an overall global impact.”

On June 4, the company may report solid second-quarter financial results given 1) its high recurring revenues 2) demand for its video conferencing and contact centers and 3) potential integration benefits realized from its recent acquisition of Dialogic.

According to Refinitiv, the Street is anticipating the company to report total revenue of $125-million, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $34.5-million, and earnings per share of 29 cents.

Story continues below advertisement

Management will be hosting an earnings call on Friday.

From a technical perspective, the share price could extend its rally to the $70 level. Should the share price pullback, there is strong support around $55.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies