Spok (SPOK) provides healthcare communication solutions in the United States, Europe, Canada, Australia, Asia, and the Middle East. They offer subscriptions to one and two-way messaging services, voicemail, and equipment loss or maintenance protection services. They serve over 2,200 health care facilities and 83% of their revenue is re-occurring in nature. The current market cap is $271 million with the stock price at $13.60 a share.
Valuation and Metrics
The trailing twelve month PE ratio is 8. Price to sales ratio is around 2. I find this to be a compelling valuation in the current market. Free cash flow has been positive since 2019, except for 2021 which was driven by unusually large capex.
The company has been profitable since the second quarter of 2022. In 2019 to 2021 net income was negative. I didn't look at any years before 2019.
Return on equity has been trending upward the past few years. The current ROE is 13% for Q2 2023.
Strong Dividend History
From 2018 to 2021 the company payed $.50 in dividends per share. In 2022 the dividend was raised to $1.25 per share.
In the years prior to 2018 the company made a total of $467 million in dividend payments.
The current quarterly payments are $.3125 per share.
With the stock at $13.60 a share the dividend yield is 9% well above the risk free rate.
In addition to shareholder friendly dividends the company also has a history of returning value through share repurchases. In 2018 and 2019 they spent a combined $40 million on sharebuybacks.
Industry Long-term Outlook
The prospects for health IT is strong.
Gobal healthcare information system market size was valued at USD 406.4 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 13.3% from 2023 to 2030. Rise in healthcare expenditure and advancements in its IT infrastructure are some of the primary drivers boosting the market. High demand for remote patient monitoring is also significantly driving its adoption rate.source: https://www.grandviewresearch.com/industry-analysis/healthcare-information-system-market
Other sources share similar growth rates. While the company has not experienced rapidly growing sales the industry growth does provide good defensive stability. The nature of the business doesn't require large debt loads and margins are healthy and stable. This lends to the prospect of meeting future dividend payments.
Technical Analysis
The stock price has been uptrending since the summer of 2022. It formed a base and recently broke out to a new 52 week high on earnings.
It has good short-term technicals with a clean bull flag on the daily chart highlighted in red.
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Full disclosure: I have no position at the time of writing. I many take a long position in the future.