Enghouse Systems (TSE: ENGH) (EGHSF) develops enterprise software solutions. It operates through two segments: Interactive Management Group and Asset Management Group.
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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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