Who said ‘buy and hold’ is dead? SmallCapPower.com takes a look at some Canadian companies that have rewarded patient investors that have held its shares over the past decade. Examining what has made these companies successful will hopefully help one find the next big winning stock for their portfolio. All share price returns represent cumulative 10-year percentage gains as of April 23, 2014.
Computer Modelling Group Ltd. (TSX: CMG): 2,439.6% share price increase
Oil & gas exploration and extraction is a multi-billion dollar business, one in which we all depend on to maintain our current standard of living. Seeing that these oil & gas wells have a finite amount of the resource, energy firms have been turning increasingly to technology in order to squeeze every possible drop out of their existing fields.
Enter companies such as Computer Modelling Group. CMG is focused on the development and delivery of reservoir simulation software to assist oil and gas companies in determining reservoir capacities and maximizing potential recovery. The company has 540 clients in more than 56 countries.
In fiscal 2013, CMG recorded its 11th consecutive year of double digit growth in its recurring revenue base as a result of the licensing of its software. This provides revenue that occurs for a fixed term or in perpetuity. More than 80% of its software license revenue came from annuity and maintenance contracts, which are generally recurring.
Software licensing can be extremely lucrative as illustrated by the success of a company such as Microsoft, which has enjoyed profit margins as high as 92% in recent years from that particular business division.
Over the last five years, CMG has had an average annual operating profit of 50% and during the past two years its net income has been about 38% of its total revenue.
CMG also receives revenue from its global training and support network and the number of scheduled courses it delivered increase 29% from 2012 to 2013. The company has managed to maintain as well as increase its customer base over the years by targeting 20% of its total annual revenue to Research & Development. In fact, more than half of its employee are involved in R&D.
From 2003 to 2013, Computer Modelling Group’s revenue surged 513% to $68.6 million, while its net income during that period soared 933% to $24.8 million.
CMG has also rewarded its shareholders with an 1800% increase in its dividend since 2004 (taking stock splits into consideration) as well as through share buybacks.
Read about our previous Top Performing profiled company which had a 1924% EARNINGS INCREASE here >>
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