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Summary
- As at Thursday’s market close, the S&P/TSX Information Technology Index fell approximately 1%.
- Propel Holdings Inc., a fintech sector player, has a P/E ratio of 9.68x based on Thursday’s closing price.
- Enghouse Systems Ltd., a software and services provider, has a P/E ratio of 22.52x based on Thursday’s closing price.
As of November 9, 2023, Canadian technology stocks have experienced diverse performance over the past week. The S&P/TSX Information Technology Index, which tracks the performance of Canadian-listed technology companies, fell approximately 1% as at Thursday’s market close.
Overall, the performance of Canadian technology stocks has been mixed in the past week, with some companies outperforming the market while others have underperformed.
ALSO READ: Two stocks to watch as the IT sector index beats market gains
With that, let us examine two potentially undervalued stocks in the Canadian IT sphere.
Propel Holdings Inc. (TSX:PRL)
Propel Holdings Inc is a fintech sector player with two major brands, MoneyKey and CreditFresh. These brands offer flexible financing options in the form of instalment loans or lines of credit.
The company reported a 39% increase in revenue to reach US$ 83.2 million in the third quarter of 2023. The year-to-date revenue through Q3 2023 also exhibited an increase of 34%, totalling US$ 220.5 million.
Adjusted EBITDA rose by 113% to US$ 18.7 million in Q3 2023. The year-to-date results through Q3 2023 showed a parallel increase of 100%, reaching US$ 53.9 million. Net Income escalated by 47% to US$ 6.2 million in Q3 2023. Meanwhile, diluted EPS increased by 42% to US$ 0.17 (CA$ 0.22) in Q3 2023. Propel also increased its dividend from CA$ 0.40 to CA$ 0.42 per share.
PRL Price Chart; Powered By: TradingView
Based on Thursday’s closing price of CA$ 8.64, PRL has a P/E ratio of 9.68x and a dividend yield of 4.86%. As at Thursday’s market close, PRL marked intraday loss of 0.58% and a YTD increase of 17.55%.
ALSO READ: Two financial stocks moving in the green as central bank’s interest rate decision looms
Enghouse Systems Ltd. (TSX: ENGH)
Enghouse Systems offers software and services across diverse end markets. The company is structured into two segments: the Interactive Management Group and the Asset Management Group.
ENGH reported a revenue increase of 8.7% in Q3 2023, with recurring revenue expanding by 13.8% to reach CA$ 72.3 million compared to the same period in the previous year. Operating profits demonstrated improvement, achieving a 30.1% EBITDA margin.
The rise in operating profits and efficient cash collections contributed to an increase in operating cash flows. Augmented revenue, improved operating profits, and enhanced cash flows ultimately resulted in quarter-end holdings of cash, cash equivalents, and short-term investments amounting to CA$ 249.7 million.
This reflects a substantial recovery, approaching the January 31, 2023 cash balance of CA$ 250.7 million, even after disbursing CA$ 22.4 million in shareholder dividends and allocating CA$ 29.0 million for acquisitions subsequent to January 31st.
ENGH shareholders are expected to receive a quarterly dividend of CA$ 0.22 per common share on November 30, 2023.
ENGH Price Chart; Powered By: TradingView
Based on Thursday’s closing price of CA$ 33.70, ENGH has a P/E ratio of 22.52x and a dividend yield of 2.61%. As at Thursday’s market close, ENGH marked an intraday loss of 1.55% and a YTD loss of 7.29%. Meanwhile, the stock was 11.77% higher monthly at Thursday’s close.
