Sometimes the best long-term stocks may not look exciting at first. In fact, they can look a little worrying, especially after a big drop in their share price. But when a profitable company with plenty of cash and no debt sees its stock fall sharply, income investors may want to take a closer look.
That is the case with Enghouse Systems (TSX: ENGH) right now. ENGH stock has fallen about 36% over the past year, which has pushed its dividend yield close to 7%. While its recent results show some mild pressure, the company’s steady recurring revenue, careful cost control, and smart acquisition strategy suggest this could be a strong buy-and-hold opportunity. Let me explain why.
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Enghouse Systems stock
If you don’t know it already, Enghouse Systems is a Markham-headquartered software firm. It provides essential software solutions for contact centres, video communication, healthcare, telecommunications, public safety, and transit systems. The company operates through two main divisions, the Interactive Management Group and the Asset Management Group.
Despite the broader market rally, ENGH stock has plunged nearly 36% over the last year to currently trade at around $18 per share. That gives it a market cap of about $1 billion. After the recent decline, the stock offers a 6.8% annual dividend yield, paid quarterly.
Even though investors have been cautious, Enghouse continues to generate profits and solid cash flow. Let’s take a closer look.
Steady financial performance
For its fiscal 2025 (ended in October), Enghouse reported revenue of $498.9 million. That was slightly below the $502.5 million it generated in its fiscal 2024. In the fourth quarter, its revenue came in at $124.5 million, largely unchanged on a YoY (year-over-year) basis.
While its overall revenue growth appeared to be paused in the latest quarter, the quality of that revenue reflected strength. Notably, the company’s recurring revenue, including software-as-a-service and maintenance contracts, reached $348 million, reflecting about 69% of total revenue for the year. This stable stream of recurring income helps make its results more predictable, even during uncertain economic periods.
Meanwhile, Enghouse’s profitability remains strong. In the latest fiscal year, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was at $127.6 million, giving the company a healthy EBITDA margin of 25.6%.
A strong balance sheet and reliable dividend
One of the most attractive parts of the Enghouse story is its balance sheet. At the end of October 2025, the company held $269.1 million in cash and cash equivalents and had no external debt. That balance sheet strength is not common in the software industry. It gives Enghouse flexibility during slower growth periods and allows it to invest when opportunities arise.
During fiscal 2025, the company generated $129.5 million in operating cash flow before working capital changes and taxes. This cash flow is sufficient to support new acquisitions and its dividend payments.
More reasons to consider this undervalued stock now
Enghouse is currently focusing on growth by expanding its existing operations and by making carefully selected acquisitions. In fiscal 2025, the company completed three strategic acquisitions to broaden its geographic reach and strengthen its transportation and communications software offerings. After year-end, it also acquired Sixbell Telco’s telecommunications division, expanding further into Latin America.
Because Enghouse carries no external debt, it can make these acquisitions without putting strain on its finances. Over time, this strategy has helped the company steadily grow its software portfolio while staying profitable.
Given these strong underlying fundamentals, the recent 36% drop in its share price seems more connected to short-term earnings pressure and broader weakness in technology stocks than to any serious problem with the business itself.
