Financial technology stock DH Corp. seems to have shaken off the aftermath of an October U.S. short seller’s research report accusing the company of engaging in accounting tricks to cover up declining financial results.
We placed DH Corporation (TSX─DH) on ‘hold’ in November while we assessed a report by a U.S. hedge fund firm that claimed that DH’s management had engaged in accounting tricks. After finding nothing to support this claim, we subsequently made the stock a ‘buy’ again in December.
Key insiders at DH also dismissed the report by reaching into their pocket books. Shortly after the report was published in late October, they purchased a total of nearly 60,000 shares at a value of more than $2 million in just a few days.
DH Corp. is a leading financial technology provider to global financial institutions. The company provides lending, payments, integrated core and global banking solutions to nearly 8,000 banks, specialty lenders, community banks, credit unions and governments and corporations.
This FinTech stock is growing by acquisition
DH’s financial performance in 2015 reflected its acquisition of Fundtech, a leading provider of financial technology to banks and corporations of all sizes in the Americas, EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific) regions.
For the nine months ended Sept. 30, 2015, DH made $172.2 million (adjusted), or $1.77 a share, compared with $140.9 million, or $1.74 a share, in the same period of 2014. While the 22-per-cent growth in adjusted earnings was mainly due to the inclusion of Fundtech, earnings-per-share growth lagged, gaining just 1.7 per cent. That’s because additional shares were issued in April 2015 to help fund the Fundtech acquisition.
In recent years, DH has successfully grown its business principally by acquisition. Though the company will continue to seek acquisitions as part of its long-term growth and diversification strategy, its near-term focus will be on the integration of Fundtech, cross-selling and the reduction of leverage. Its long-term goal is to achieve adjusted net income per share growth of eight to 10 per cent.
The stock trades at an attractive 12.7 times its projected 2016 earnings of $2.38 a share. And this high dividend tech stock currently pays an annual dividend of $1.28 a share which yields 4.2 per cent.
Money Reporter, MPL Communications Inc.
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