Q&A With Gordon Pape: Assessing The Stingray Stock

A pile of grey question marks with one red one at the top of the pile.

Stingray music is everywhere. Is the company a good investment?

Q – I am wondering whether you have had a chance to look at Stingray Digital Group (TSX: RAY.A) recently, as it has had a significant pullback in the past month or so from its high of over $9. It dropped to $7.31, I believe, the other day and a buying opportunity may be upon us (it has, in fact, rebounded back up to almost $8 since then). Stingray’s music packages seem to be almost everywhere you look these days and the company frequently announces new contracts obtained. Its future looks bright, it would appear on the surface at least. – Doug H.

A – Stingray, which is based in Montreal, provides streaming music service in 156 countries, reaching an estimated 400 million households. In Canada, it offers over 200 channels that feature Canadian artists in all genres and all eras.

It’s an attractive business and the company is profitable, reporting earnings per share of $0.33 for the first nine months of fiscal 2017 (to Dec. 31). It even pays a small dividend of $0.045 per quarter.

Unfortunately, the company is not showing much growth, which is what investors are looking for these days in the technology sector. Sales for the first nine months were up 16.7 per cent year-over-year. That may seem impressive but in the high tech world it makes Stingray look like a laggard. Net income for the period fell 42.6 per cent to $6.1 million.

Those aren’t the kind of numbers that would get me excited and the p/e ratio of 43 looks excessive. You can take a flyer on this if you wish but I think there are more attractive high tech opportunities out there.



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