There are not many companies on the Toronto Stock Exchange that can say they have zero debt, nearly $270 million sitting in the bank, and a dividend that keeps climbing year after year. Enghouse Systems (TSX: ENGH) checks all three boxes, yet the TSX tech stock is down roughly 80% from its all-time highs.
That kind of disconnect between financial strength and stock price does not come around often. And for long-term investors willing to look past some short-term pain, this may be one of the most compelling setups on the TSX today.
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Why Enghouse stock is down 80%
Enghouse is a software company based in Markham, Ontario. It builds and acquires software products across two main business segments.
- The first is the Interactive Management Group (IMG), which focuses on contact centre and video communications software.
- The second is the Asset Management Group (AMG), which serves telecommunications and transportation customers.
In the second quarter of fiscal 2026, Enghouse reported revenue of $114.3 million, down about 8% from $124.8 million in the same period a year ago.
Recurring revenue, which includes software-as-a-service (SaaS) and maintenance contracts, came in at roughly $79 million for the quarter.
The contact centre market, which drives the bulk of Enghouse’s IMG revenue, has faced intense disruption, and several large competitors have entered financial distress or receivership.
Meanwhile, smaller business customers that Enghouse typically serves have been struggling with a tougher economic environment, particularly in Europe and the United States.
CEO Stephen Sadler was candid about the challenges on the company’s most recent earnings call: “We’re generally in that medium-sized accounts or small business accounts. And they’re struggling more in this market.”
The bull case for the TSX dividend stock
Enghouse has three potential catalysts that long-term investors should watch.
First, the company is actively buying back its own shares. CEO Sadler believes its own stock is a better value than most of the acquisition targets it is seeing in the private market right now. Share buybacks at these prices would be meaningfully accretive for existing shareholders.
Second, the competitive landscape in contact center software is changing fast. Several large, well-funded competitors have run into severe financial difficulties. As Sadler put it on the earnings call, Enghouse is “one of the few that have good cash flow and make money and have money and no debt.” When weaker rivals eventually exit or collapse, the customers they leave behind have to go somewhere. Enghouse is in a strong position to absorb that business.
Third, Enghouse’s AMG segment, covering networks and transportation, has held up well. The transportation segment has returned to profitability and is now growing, with two large contracts rolling out in the Nordic region. The network’s business serves major telecom companies and provides stable, recurring revenue from large customers.
The TSX tech stock is a top buy
Enghouse carries no external debt and ended fiscal Q2 with $269.7 million in cash. Comparatively, its market cap is around $860 million.
Its operating cash flow stood at $28.7 million in Q2, up from $25.5 million in the year-ago period.
The company’s ability to grow cash flow while revenue shrinks speaks to how tight management has run costs. Notably, operating expenses dropped by roughly 13.5% year over year.
Enghouse just raised its quarterly dividend to $0.31 per common share, payable Aug. 28, 2026. The company has a long track record of raising its dividend year after year, a sign that management is confident in the business’s underlying cash generation.
Enghouse is projected to reduce its free cash flow from $103 million in fiscal 2025 to $89.5 million in fiscal 2026. However, FCF is forecast to expand to $116.3 million in fiscal 2028.
Comparatively, the TSX dividend stock has an annual dividend expense of $67 million, which is sustainable.
If Enghouse stock is priced at 10 times forward FCF, it could surge 35% within the next 18 months. If we adjust for its dividend yield of 8.2%, cumulative returns could be close to 50%.
