Generally the very best long-term shares might not look thrilling at first. In reality, they will look slightly worrying, particularly after a giant drop of their share value. However when a worthwhile firm with loads of money and no debt sees its inventory fall sharply, revenue buyers might wish to take a better look.
That’s the case with Enghouse Methods (TSX:ENGH) proper now. ENGH inventory has fallen about 36% over the previous yr, which has pushed its dividend yield near 7%. Whereas its current outcomes present some delicate stress, the corporate’s regular recurring income, cautious price management, and sensible acquisition technique recommend this could possibly be a powerful buy-and-hold alternative. Let me clarify why.
Enghouse Methods inventory
When you don’t comprehend it already, Enghouse Methods is a Markham-headquartered software program agency. It supplies important software program options for contact centres, video communication, healthcare, telecommunications, public security, and transit programs. The corporate operates by two most important divisions, the Interactive Administration Group and the Asset Administration Group.
Regardless of the broader market rally, ENGH inventory has plunged practically 36% during the last yr to at present commerce at round $18 per share. That offers it a market cap of about $1 billion. After the current decline, the inventory presents a 6.8% annual dividend yield, paid quarterly.
Though buyers have been cautious, Enghouse continues to generate income and strong money stream. Let’s take a better look.
Regular monetary efficiency
For its fiscal 2025 (led to October), Enghouse reported income of $498.9 million. That was barely under the $502.5 million it generated in its fiscal 2024. Within the fourth quarter, its income got here in at $124.5 million, largely unchanged on a YoY (year-over-year) foundation.
Whereas its general income development seemed to be paused within the newest quarter, the standard of that income mirrored power. Notably, the corporate’s recurring income, together with software-as-a-service and upkeep contracts, reached $348 million, reflecting about 69% of whole income for the yr. This secure stream of recurring revenue helps make its outcomes extra predictable, even throughout unsure financial intervals.
In the meantime, Enghouse’s profitability stays sturdy. Within the newest fiscal yr, its adjusted EBITDA (earnings earlier than curiosity, taxes, depreciation, and amortization) was at $127.6 million, giving the corporate a wholesome EBITDA margin of 25.6%.
A robust steadiness sheet and dependable dividend
One of the vital enticing components of the Enghouse story is its steadiness sheet. On the finish of October 2025, the corporate held $269.1 million in money and money equivalents and had no exterior debt. That steadiness sheet power shouldn’t be frequent within the software program business. It offers Enghouse flexibility throughout slower development intervals and permits it to speculate when alternatives come up.
Throughout fiscal 2025, the corporate generated $129.5 million in working money stream earlier than working capital adjustments and taxes. This money stream is enough to assist new acquisitions and its dividend funds.
Extra causes to contemplate this undervalued inventory now
Enghouse is at present specializing in development by increasing its current operations and by making fastidiously chosen acquisitions. In fiscal 2025, the corporate accomplished three strategic acquisitions to broaden its geographic attain and strengthen its transportation and communications software program choices. After year-end, it additionally acquired Sixbell Telco’s telecommunications division, increasing additional into Latin America.
As a result of Enghouse carries no exterior debt, it could possibly make these acquisitions with out placing pressure on its funds. Over time, this technique has helped the corporate steadily develop its software program portfolio whereas staying worthwhile.
Given these sturdy underlying fundamentalsthe current 36% drop in its share value appears extra linked to short-term earnings stress and broader weak spot in know-how shares than to any major problem with the enterprise itself.