Tech stocks do not stay expensive forever. Even great businesses can fall out of favour when interest rates jump, budgets tighten, or investors get distracted by the next shiny thing. Sometimes the selling makes sense. Sometimes it overshoots, especially for steady, profitable software companies that do not tell flashy stories. That’s where “undervalued” can show up: not as a broken business, but as a business that keeps doing the work while the share price sulks.
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ENGH
Enghouse Systems (TSX: ENGH) looks like a classic Canadian tech sleeper right now. It’s a profitable software company, it throws off cash, and it tends to buy smaller businesses instead of swinging for the fences. Yet the tech stock has slid from its 52-week high of $27.70 to around $17.97 recently, a drop of about 35%. That kind of move can make investors assume something is “wrong,” when the reality is often just slower growth plus a market that rewards excitement.
At its core, Enghouse sells enterprise software in two main buckets. That’s customer interaction and communications tools, and vertical-specific software for industries like transportation. It aims for recurring revenue, which helps keep things predictable. In fiscal 2025, recurring revenue represented about 69% of total revenue. That matters because it can smooth out the bumps when customers delay projects. If you like tech that feels more like a utility than a lottery ticket, that’s the vibe.
Over the last year, ENGH stock kept paying a quarterly dividend and maintained share repurchases through a renewed normal course issuer bid that runs into May 2026. It also kept using its balance sheet to do bolt-on deals. Management highlighted three strategic acquisitions in fiscal 2025, then followed with the acquisition of Sixbell Telco’s telecommunications division after year-end to expand in Latin America. None of that screams “hypergrowth,” but it does show a steady playbook.
Into earnings
Now for the earnings reality check. Fiscal 2025 revenue came in at $498.9 million, basically flat year over year. Net income was $73.7 million, and diluted earnings per share (EPS) were $1.34, down from $1.47 the year before. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $127.6 million, with a 25.6% margin, and the company finished the year with $269.1 million in cash and short-term investments and no external debt. That balance sheet strength is not a small thing in tech. It gives Enghouse options when competitors feel squeezed.
What about valuation? This is where the “down 35%” move starts to look interesting. On common market screens, Enghouse recently showed a trailing price-to-earnings (P/E) around 13.6, with price-to-sales around 2 and price-to-book around 1.6. Those numbers look more like a mature industrial company than a software name, which is exactly why patient investors pay attention. If Enghouse simply keeps profits stable and buying back shares, that valuation can do some of the heavy lifting.
The future outlook is not a moonshot, and that’s fine. Management framed fiscal 2026 around strengthening recurring revenue, improving efficiency, and pursuing acquisitions in a market it sees as offering attractive opportunities. The near-term catalysts are boring but powerful. Those include cost discipline showing up in margins, more recurring revenue in the mix, and smart deals that plug into the existing product suite. Meanwhile, investors can collect ample income from its dividend, even with $7,000.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| ENGH | $18.33 | 381 | $1.20 | $457.20 | Quarterly | $6,980.73 |
Bottom line
If you want a Canadian tech stock you can buy and hold for decades, Enghouse fits the “quiet compounder” profile. The tech stock is down, the valuation looks grounded, and the business still generates cash with a clean balance sheet. It won’t win every year, and it won’t trend on social media. That might be the best part.
