Enghouse Systems (TSE: ENGH) (EGHSF) develops enterprise software solutions. It operates through two segments: Interactive Management Group and Asset Management Group.
The Interactive Management Group segment offers customer interaction software and services that are designed to provide customer service, increase efficiency, and manage customer communications.
The Asset Management Group segment provides a portfolio of products to telecommunication service providers, fleet management, and public safety software solutions for various industries.
Enghouse’s Earnings Results: A Disappointing Miss
The company recently announced its earnings report for the second quarter, with the results coming in lower than the prior year’s numbers. Revenue was down 9.4% year-over-year for the three-month period and down 8% for the six-month period.
For the Asset Management Group, the decrease in revenue can be attributed to unfavorable foreign exchange rates, which negatively impacted revenue by C$3.7 million. On the other hand, the Interactive Management Group is seeing increased competition from cloud solutions providers.
In addition, earnings per share fell 13.5% to C$0.32, which missed analysts’ expectations of C$0.38. As a result, the stock is currently down about 14% on the day. Enghouse has missed earnings estimates five times over the past six quarters.
Nevertheless, the company is still highly profitable with a very strong balance sheet. At the end of the quarter, it had C$231.2 million in cash and no external debt. The company remains focused on its long-term growth strategy by investing in products while ensuring profitability.
Analyst Recommendations
Enghouse Systems has a Moderate Buy consensus rating based on two Buys assigned in the past three months. The average Enghouse Systems price target of C$50 implies 71.2% upside potential.
Final Thoughts
Although the company had a relatively disappointing quarter, Enghouse still remains a highly-profitable company that will likely return to growth in the future.
In addition, both analysts covering the stock have $50 price targets. This suggests that there is minimal variability in the business, allowing the analysts to arrive at the same conclusion.
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