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STINGRAY WAY TOO PRICY AT CURRENT LEVELS
4/25/2018 4:04:46 PM
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Wealth Builder
Gordon Pape writes on common-sense wealth-building strategies.



By Gordon Pape  | Tuesday, January 23, 2018


BUILDING WEALTH WITH GORDON PAPE
 

Q – I would like to know more about Stingray Digital Group Inc. (TSX: RAY.A). This company claims to be the world leader as a streaming music provider and a multitude of music services. More than 80% of revenue is recurrent. Last year Caisse de dépôt et placement du Québec increased its ownership, and recently the CEO/founder increased his ownership substantially. The stock pays a dividend and is increasing it. The shares keep moving up. I would certainly appreciate an opinion from you on this highly performing company. Thank you. – Pierre D.

A – There seems to be a fair amount of interest in this Montreal-based company judging by the number of questions we have received. You may not know it, but you probably have its service on your TV set – Stingray provides the content for a large number of music channels in the upper ranges of your band.

As our reader points out, the stock has been a strong performer recently. After falling as low as $7.19 last June, the shares have moved higher and closed on Jan. 19 at $10.01.

The stock has a trailing 12-month price-earnings ratio of 124, which is pricy by any standard. The company is growing, but not by enough to justify that level of p/e. Second-quarter 2018 revenue (to Sept. 30) was up by 24.7%, which is a nice bump although not enough to support that level of investor enthusiasm. Recurring revenue (the best kind for any business) was 85% of total revenue, and that, of course, is a real plus.

Adjusted net income for the quarter was $5.4 million ($0.10 per share) compared with $5.4 million ($0.11 per share) the year before. Free cash flow was $6.8 million, up from $5.4 million last year. The company pays a dividend of $0.19 per year for a yield of 1.9%.

The company appears to be solid, and its revenue looks secure. However, as mentioned, it looks expensive at this level. As a result, I would not recommend buying at this time, but it’s worth keeping an eye on the shares. If they pull back below $9 you may want to talk to your advisor to see if it’s suitable for your portfolio. – G.P.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investornewsletters, which are available through the Building Wealth website.

For more information on subscriptions to Gordon Pape’s newsletters, check the Building Wealth website.

Follow Gordon Pape on Twitter at https://twitter.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.

Notes and Disclaimer

© 2018 by The Fund Library. All rights reserved.

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.

BUILDING WEALTH WITH GORDON PAPE
 

 
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