The small cap Canadian software stocks we’ve discovered have gross margins in excess of 70% in their last fiscal quarter, compared with the industry average of 58.3%
SmallCapPower | February 12, 2020: Gross margin is a company’s net revenue minus its cost of goods sold. In other words, it is the sales revenue a company keeps after incurring the costs associated with producing the goods it sells. The higher the gross margin, the more capital a company retains on each dollar of sales, which it can then use to invest in the business (capex), pay dividends, or pay off lenders. Today we have uncovered four Canadian software stocks with the highest gross margins in their latest fiscal quarter. For reference, the average gross margins of our sample of 33 Canada-listed technology/software companies is 58.3%.
*Share prices as at February 10, 2020, data obtained from S&P Capital IQ
Docebo Inc. (TSX:DCBO) – $16.60
Technology – SaaS
Docebo is a cloud-based vendor of Enterprise Software as a Service (SaaS) solutions, particularly in the area of employee and customer training. Docebo helps companies develop their most important resource: people. Organizations are under pressure to find great people, train them, and be constantly upgrading their skills in a changing business environment. Some of Docebo’s top corporate clients include Uber Technologies, Netflix, Starbucks, L’Oreal, Heineken, and Capital One.
- Market Cap: $472.3M
- 30-Day Return: -2.5%
- 90-Day Return: +3.8%
- 90-Day Average Trading Volume: 11,620
- Gross Margin: 80.3%
Sylogist Ltd. (TSXV:SYZ) – $9.27
Technology – ERP Systems
Sylogist is an Enterprise Resource Planning (ERP) solutions company in North America. It focuses on software solutions in the education, government and not-for-profit sectors. It offers solutions comprising of accounting and financial management, award and budget management, payroll and human resources, analytics and decision support, reporting, deposits and loans, and field connect products. The Company derives over 70% of its revenues from the U.S. market and ~70% of these revenues have also been recurring in nature.
- Market Cap: $220.4M
- 30-Day Return: -1.6%
- 90-Day Return: -7.4%
- 90-Day Average Trading Volume: 19,500
- Gross Margin: 78.6%
Kinaxis Inc. (TSX:KXS) – $114.48
Technology – SaaS
Kinaxis is a vendor of SaaS solutions for supply-chain planning. Its software provides customers with a control tower view of their supply chains, highlighting issues that may affect their ability to meet customer demand. It also allows customers to perform scenario analysis, allowing them to determine the impact that different decisions might have on their operations.
- Market Cap: $3,022.6M
- 30-Day Return: +5.7%
- 90-Day Return: +12.7%
- 90-Day Average Trading Volume: 67,280
- Gross Margin: 75.4%
Enghouse Systems Limited (TSX:ENGH) – $54.82
Enghouse Systems develops and sells enterprise-oriented applications software worldwide. The Company operates through two main business segments: Interactive Management Group and Asset Management Group. The Interactive Management Group segment provides customer interaction software and services. Its technologies include contact center, attendant console, interactive voice response, dialers, agent performance optimization, and analytics that support various telephony environments. The Asset Management Group segment offers a portfolio of products to telecom service providers, utilities, and the oil and gas industry. Its products include operations support systems, business support systems, and mobile value-added services solutions, as well as data conversion services.
- Market Cap: $3,013.8M
- 30-Day Return: +5.8%
- 90-Day Return: +42.0%
- 90-Day Average Trading Volume: 104,360
- Gross Margin: 70.4%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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