Enghouse Systems Ltd (ENGH:CN)
12-month performance: +45%
Insider activity: Bearish
Selling pattern: Large sale from Chairman/CEO
Recent news: Strong Q2 results
Enghouse Systems is a leading Canadian software company that provides enterprise software solutions to vertical markets across the globe through its three subsidiaries, Enghouse Interactive, Enghouse Networks, and Enghouse Transportation. It is listed on the Toronto Stock Exchange and currently has a market capitalization of CAD4.02 billion.
Enghouse Systems share price has exhibited a good run over the last year, rising approximately 45%. It also has issued an excellent Q2 report in which revenues increased by 58% from CAD89.2 million to CAD140.9 million, while EBITA rose from CAD26.6 million to CAD46.2 million, an increase of 74%, compared to the prior year. Similarly, EPS rose by 63% from 0.30 to 0.49. The acquisition of Dialogic, on January 2, 2020, is one of the key drivers that caused the revenue of Interactive Management Group - one of the two business segments of Enghouse - to go up by 101.9% from the same period in the previous year. However, the Q2 report stated that the COVID-19 pandemic can adversely affect the financial performance of the company due to the uncertain economic conditions.
Source: 2iQ Research
What stands out here is that the CEO and Chairman of Enghouse, Stephen Sadler offloaded 237,000 ENGH shares worth CAD18.3 million within the first three weeks of July 2020. He had earlier sold another 480,800 ENGH shares in June 2020. Overall, the insider has sold CAD51.9 million worth of ENGH stock in two months. This suggests that Mr Sadler sees limited upside to the share price at the moment. Similarly, he had sold CAD6.6 million worth of ENGH stock in January 2020, which is when the share price fell from 50.81 to 36.61 (-38.7%) within 55 days after selling the stock. Considering this large insider sale, and the fact that other three Enghouse insiders sold stock in July, we believe caution is warranted towards Enghouse shares right now.